Biden’s housing diversity push: Promise, but peril

Conservatives might not expect the Biden administration to adopt housing policy priorities once promoted by the late Jack Kemp, who served as secretary of Housing and Urban Development (HUD) in the George H.W. Bush administration, but it has happened. A $5 billion initiative in President Biden’s infrastructure bill would establish a competitive grant program to reward localities that take concrete steps to eliminate needless barriers to affordable housing.

The target is so-called exclusionary (large-lot) zoning and other regulations that limit new housing construction and raise prices by prohibiting the subdivision of land “into individual parcels of less than a specified, relatively large lot size,” such as an acre or more. The proposal echoes the insights of Kemp and his 1991 Advisory Commission on Regulatory Barriers to Affordable Housing, which lamented the “negative impact of overregulation … on affordable housing.”

Biden’s HUD Secretary Marcia Fudge proposes to break this longstanding obstacle to affordable housing through financial incentives tied to zoning deregulation. To qualify this “separate pot of money,” with no restriction as to use, whether for transportation, parks or schools, cities need to demonstrate that they are discontinuing some of their exclusionary zoning requirements.

While this approach — described in at least one report as “purely carrot and not stick” — is promising, it also risks sending inadvertently a counterproductive message through a federal housing diversity inducement that implies new housing types are something localities would otherwise not want. 

There is no doubt that local zoning deregulation is needed. Current regulations limit construction of a wide variety of affordable housing that could be built on small lots. Think of two- and three-family homes, townhouses and duplexes, once common in American cities before stringent zoning regulations stopped this type of housing that had fostered homeownership and upward mobility for buyers.

Years ago, housing type diversity and small houses on small lots had been the norm: row houses in Philadelphia, three-family homes in Boston, “doubles” in Chicago, bungalows in Oakland. Americans had a formula for affordability — but lost it, in no small part because affluent homeowners chose to protect their property values by limiting new supply through restrictive zoning.

Since World War II, American localities have seen larger lots and single-family zones dominate and become the norm. In his 2018 analysis of 37 suburbs in California, Connecticut and Texas, Yale Law School professor Robert C. Ellickson, an expert in property and urban law, found that municipalities had set aside 91 percent of land exclusively for detached houses. In his words, they had a “zoning straitjacket.” He separately found that 99.7 percent of land zoned for single-family homes in 1970 in Massachusetts remained that way 30 years later.

The Biden administration’s plan is a far better approach than the Obama-era’s Affirmatively Furthering Fair Housing (AFFH) rule, which threatened to cut federal community development funds to communities with insufficient low-income housing. But there is nonetheless a risk in sending the implicit message that localities must be paid to accept housing diversity. In addition, affluent communities, where zoning is the most restrictive, are unlikely to be swayed by money and thus unlikely to sign up. Worse still, Secretary Fudge has signaled that she wants to bring back the Obama-style AFFH rule, which can be characterized as “all stick and no carrot” — the threat of a cutoff of federal funds for local rules and services believed to pose barriers to integration. The Biden message is decidedly mixed. 

There are thousands of local zoning and planning boards across the country. Officials on these boards, many of them volunteers, will be the ones deciding whether to allow smaller homes on smaller lots, whether to allow accessory dwelling units (“granny flats”), whether to relax parking requirements in our work-from-home era, whether to allow shopping malls to be repurposed for housing. They will have to be convinced that such changes are a plus for their communities, and not something for which they should be paid to accept. 

A growing movement decrying a “missing middle” in housing is already pointing in this direction. It has enlisted some builders to its cause. Proponents of this movement emphasize that less restrictive zoning can make it possible for young adults to live in the communities where they grew up and for teachers, police and firefighters to live in the communities they serve. These sorts of ideas are much more likely to tear down zoning walls than financial incentives.

In addition to the grant program, let’s hope that HUD also promotes model zoning approaches aimed at influencing local boards, instead of coercing them. This is, after all, how zoning regulations were created: by public-minded citizens who thought they would improve their communities by separating residential and industrial land uses. Their well-meaning efforts have gotten out of hand — and it will be up to the communities themselves to change course.

Howard Husock is an adjunct fellow at the American Enterprise Institute and an executive senior fellow with the Philanthropy Roundtable.