Freer housing is ‘fairer housing’ — HUD should tie funding to looser zoning

America’s housing market is neither free nor fair. As living costs spiral upwards and housing demand outpaces supply for the eighth year in a row, minorities and low-income Americans have fewer choices for where and how they live. As a result, economic segregation is becoming more entrenched while racial segregation persists as fewer Americans move to opportunity. Since 2000, the number of black and Hispanic Americans living in high-poverty neighborhoods has risen by nearly 80 percent. 

Housing and Urban Development (HUD) Secretary Ben Carson is expected to rewrite a rule that would encourage local governments to reform the exclusionary zoning rules that stand in the way of affordable housing. The rule, Affirmatively Furthering Fair Housing (AFFH), was finalized in 2015 under President Barack Obama. It uses the Fair Housing Act to effectively tie HUD funding to whether jurisdictions are actively undoing patterns of racial segregation. 

It’s a worthy aim, yet the AFFH rule did little to loosen the grip of restrictive housing policies that led to residential segregation and disparate opportunity in the first place. Rather than making housing more accessible to right the wrongs of redlining, it was simply more paperwork for cities and the consultants who authored hundreds of pages of toothless assessments. 

Fair housing policy should protect Americans from discrimination when purchasing or renting a home — but it also means making sure they can afford that home. This goal cannot be achieved without reforming exclusionary land-use regulations that prevent new housing from being built, such as density limits or minimum lot sizes. Communities instead can counter discrimination by expanding the affordability and availability of housing. This should be central to HUD’s evaluation of fair housing. Reducing zoning regulations alone is estimated to lower differences in racial segregation between neighborhoods by more than a third.

While HUD’s AFFH reform has yet to be issued, early signs indicate that it will indeed tie Community Development Block Grant (CDBG) funding to the affordability and availability of local housing markets. This should be applauded. These funds, which allow local leaders wide discretion in spending, are meant to benefit low- and middle-income neighborhoods. Nearly 1,300 states, counties, cities and towns receive CDBG funds to pay for things such as infrastructure upgrades and redevelopment projects, and these flexible dollars enjoy a broad popularity among the local leaders. But if those same communities have restrictive — and de facto segregationist — zoning and land-use rules impoverishing their residents, what good are these dollars? 

In the future, these grants could be conditioned on, say, whether communities with high housing demand are allowing more homes to be built. Localities could demonstrate progress by streamlining “by right” housing approvals that avoid onerous discretionary review processes. By setting clearly defined metrics of housing availability and affordability, community reporting can be simple and outcome-based, with mayors competing for federal dollars and national prestige. 

Ideally, more than just CDBG funds would depend on increasing housing supply. Transportation funding would be a natural next step. Other agencies could score their funding based on AFFH performance, which Secretary Carson is equipped to encourage as chair of the White House Council on Eliminating Barriers to Affordable Housing Development. A similar proposal to tie housing to transit has been put forward in bipartisan legislation by Rep. Scott Peters (D-Calif.). 

To be clear, zoning reform should not be enacted at the federal level. State and local leaders are responsible for ensuring their land-use regulations do not stand in the way of markets offering a greater supply and variety of housing wherever there is a demand for it. But as an increasing number of prosperous localities exclude poor and middle-income Americans, many of whom are minorities, by dint of their inflated housing prices, there are fewer incentives for these jurisdictions to open up their doors.

AFFH rule reform will have plenty of detractors, from those on the left worried about gutting the Fair Housing Act to those on the right concerned about local control of land-use decisions. But these concerns are misplaced. The Fair Housing Act is safe; simple rule-making is far from enough to gut it. Local control, too, will be safer under a reformed AFFH rule. The one thing we can’t do is will AFFH away. If HUD says nothing, the courts will say something. Rather, we should allow HUD to focus on things it can measure — housing availability and affordability — while leaving necessary work of land-use reform in the hands of state and local lawmakers.

We cannot repeal the laws of supply and demand in housing. But we can help repeal the regulations behind America’s high housing costs. These onerous land-use restrictions are key to fighting segregation in today’s cities. Now is an opportunity for HUD to use its influence to help roll back exclusionary land-use regulations and seriously address America’s housing affordability crisis for minority and low-income Americans — and, indeed, for all Americans. 

Michael Hendrix is the director of state and local policy at the Manhattan Institute.Follow him on Twitter @michael_hendrix.