Provide Incentives for Communities to Remove Exclusionary Barriers to Housing Production

Policy Perspectives on Infrastructure MIT School of Architecture and Planning Policy recommendations convened by the MIT Norman B. Leventhal Center for Advanced Urbanism July 2021

Provide Incentives for Communities to Remove Exclusionary Barriers to Housing Production

By Jeff Levine

Summary

The United States is facing a widening housing supply gap. To address this issue, the American Jobs Plan should dedicate $100 million per year to provide incentives for communities to create locally designed approaches to increase housing production. The Plan should also dedicate $1 billion per year to fund additional housing rehabilitation and production through existing federal programs. These funds should be provided to communities interested in revising their local zoning codes to remove outdated requirements, and for federally funded research on best practices that can be applied to these efforts.

In addition, as the Biden administration resumes the Affirmatively Furthering Fair Housing requirements, the regulations should be updated to make the rules more effective at removing exclusionary housing policies.

These strategies would help address the American Jobs Plan’s efforts to build and rehabilitate more than 500,000 homes for low- and middle-income homebuyers and eliminate exclusionary zoning and harmful land-use policies. While the focus of this housing production will be on multifamily housing, part of this need can also be met with additional single-family homes. Similarly, while one focus may be housing at those below median incomes, providing more market-rate units can also improve the overall market and improve affordability.

Scope of Problem and Current Approaches

According to the Federal Home Loan Mortgage Corporation, there is a deficit of 3.8 million housing units in the United States, up from 2.5 million housing units in 2018. In addition, the production of smaller units that offer an option for those entering the housing market has significantly declined since 2008.

In addition to economic impacts, the housing supply shortage creates inequities. The Urban Land Institute notes high housing costs worsen racial and socioeconomic disparities. Current local zoning rules contribute to segregation, gaps in home ownership rates, and lack of housing choices for Americans.

In some communities these exclusionary zoning rules may be intentional. In others, they are the result of outdated zoning that communities have lacked the technical capacity or resources to update. While single-family zoning is the most obvious limit to housing production, there are others. Seemingly minor obstacles to housing production in zoning, such as large minimum lot sizes, large setbacks, and high parking requirements can significantly deter housing developers.

A 2019 study of the Boston region found that the zoning in most of the 100 communities studied had significant limits to housing production. Very little land is zoned for realistic use as multifamily housing.

Decisions to allow multifamily housing tend to be made on a case-by-case basis. Finally, current zoning requirements tend to encourage housing production on the peripheries of our communities, contributing to transportation expenses, environmental impacts, and social isolation of residents.

This phenomenon is not limited to large cities. A recent study in Portland, Maine, found that while local rules often technically allow multifamily housing as a use, a variety of additional requirements make building such housing very challenging. The requirements include large minimum lot sizes, high parking requirements and large setbacks. Over 60 percent of the land is in zones that permit the use, but less than 5 percent of the land is realistically available for multifamily housing.

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In short, local zoning codes significantly limit fair housing opportunities. Some of these zoning limits are intentional, but others are not. Regardless, the federal government should seek to address these limits through a combination of technical assistance and direct financing.

Recommendations The federal government should provide direct incentives for housing choices in American communities, as well as significantly increase its investment housing production.

Many communities are still using a modified version of their original zoning ordinance, which may have been written 75 or even 100 years ago. Those rules have often been made more restrictive over the years, without factoring in the negative impacts of limiting housing on the economy and equity.

These zoning restrictions mean that when new housing development is built, it often doesn’t match the actual housing need. Walkable, mixed-use neighborhoods with a variety of housing types are popular, so popular that many are expensive and considered “gentrifying.” The federal government can provide financial and technical assistance to communities to look at changing their zoning to allow for housing choices.

While some communities will welcome an opportunity to remove regulatory barriers to housing production, other communities may be intentionally limiting it. Existing financing sources for housing production should be expanded and more closely tied to addressing regulatory barriers.

To achieve these goals, I recommend the following federal actions: Legislation: Provide $90 million a year in competitive funding for communities’ efforts to explore how their existing zoning prevents them from offering housing opportunities. This funding would be sufficient for 1,000 communities each year to hire land use and housing policy experts to conduct audits of their zoning codes, and assess the housing needs of the community to determine strategies to better align policy and need.

Legislation: Provide $10 million a year in funding for federal research and assistance on a range of tools that could be applied to support local zoning reform efforts. Regional planning agencies and local universities would use these funds to take national best practices, such as form-based codes, and determine how they can be applied in local contexts under state laws. This level of funding would allow one project in each state every year.

Legislation: Increase funding for the Department of Housing and Urban Development (HUD) HOME Investment Partnerships and Community Development Block Grant programs from $4.75 billion to $5.75 billion a year, with the additional $1 billion provided to communities that are taking steps to allow for housing choice. This funding would be sufficient for renovation and construction of over 10,000 additional housing units a year, and would only be available to communities that provide for housing choices. Other communities would still be able to access the base $4.75 billion.

Agency implementation: The Biden Administration is committed to bringing back the HUD Affirmatively Furthering Fair Housing regulations. In doing so, it should revise the regulations to provide mechanisms to address zoning restrictions to fair housing. This tool can provide communities with an impetus to explore how their codes can limit fair housing options.

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Additional Links Federal Home Loan Mortgage Corporation (2021). Housing Supply: A Growing Deficit.

Greater Portland Council of Governments (2021). Multifamily housing and land use regulation.

Massachusetts Smart Growth Alliance, et al (2019). The state of zoning for new multifamily housing in greater Boston.

Urban Land Institute (2021). Terwilliger Center 2021 Home Attainability Index.

About the Author

Jeff Levine, AICP Lecturer of Economic Development and Planning, MIT Department of Urban Studies and Planning jrlevine@mit.edu

About policy perspectives on infrastructure

Policy perspectives present responses from faculty in MIT’s School of Architecture and Planning to the American Jobs Plan.

The effort was convened by the MIT Norman B. Leventhal Center for Advanced Urbanism.

MIT School of Architecture and Planning sap.mit.edu At the MIT School of Architecture and Planning (SA+P), we believe that humanity’s toughest problems occupy the same ground as their solutions: the space between people and their environment. This is our territory. From the day MIT opened its doors and introduced Course 4 as the nation’s first academic program in architecture, our faculty, students, and alumni have explored the human landscape to discover—and deliver—better futures.

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MIT Norman B. Leventhal Center for Advanced Urbanism lcau.mit.edu Urban environments constitute one of the most complex societal challenges of today’s world. The LCAU seeks to drive collaborative, interdisciplinary research focused on the design and planning of large-scale, complex, future metropolitan environments, to advance urban scholarship and practice that makes cities more equitable, sustainable, and resilient by design.