At present, there is a shortfall of more than 1.5 million affordable housing units in the United States (see Overcoming the Nation’s Daunting Housing Supply Shortage, Urban Institute, 2021). As a result of the housing shortage, families pay more for housing and have less savings. They struggle to attain homeownership and find it difficult to access jobs. Local land use regulations and zoning rules contribute to the national housing supply crisis by artificially limiting housing construction and increasing costs. This article will summarize the impacts of restrictive land use policies and outline reforms that state and local governments may adopt to increase the supply of affordable housing. Much of the information in this article is taken from a study by The Department of Housing & Urban Development (HUD) and published by the HUD Office of Policy Development & Research.
Relevant Research
Restrictive land use and zoning laws are major drivers of the national housing shortage. Short-sighted local policies increase the cost of housing, limit economic growth, accelerate climate change, and maintain residential segregation.
According to "The Impact of Building Restrictions on Housing Affordability," (Wharton Real Estate Review 7: 5-14, by Edward Glaeser and Joseph Gyourko), the relationship between restrictive land use and zoning regulations and housing prices is especially significant in areas with higher demand. The greatest impact is on lower-income renters and starter homes for first-time homebuyers.
Recent research has demonstrated how restrictive zoning limits a worker’s ability to move to regions experiencing job growth, which has stunted national economic productivity and growth. (See "Housing Constraints and Spatial Misallocation", American Economics Journal: Macroeconomics 11 (2): 1-39, by Chang-Tai Hsieh and Enrico Moretti). This lack of affordable housing also limits a worker’s ability to find housing near employment centers. This creates longer commutes and limits the ability of employers to attract workers. This forced living in car-dependent locations increases transportation costs and carbon emissions.
Many places use zoning restrictions to limit the types of housing that can be built to keep lower-income, often Black and brown, households from moving in. This forced segregation has well-documented negative outcomes for children, and
segregation via land use and zoning codes reduces access to neighborhoods that are associated with improved resident trajectories, negatively impacting regions’ household incomes, educational attainment, public safety, and health outcomes. In short, restrictive zoning can have Fair Housing Act implications.
Innovation is Occurring
In response to increasing housing affordability pressures and the widespread recognition of the role that restrictive zoning has played—and continues to play—in driving up housing costs and perpetuating segregation, cities, and counties across the country are taking a hard look at their zoning laws and adopting reforms that can help increase housing supply.
While local governments play the most significant role in regulating land use, state governments are beginning to play a role in land reform. Importantly, state governments are more insulated from the "not in my backyard" pressures that often dominate local politics; states typically have broad authority to set the rules by which local governments can regulate land uses, and they can create accountability mechanisms to incentivize local, pro-housing reforms. When combined with incentives and subsidies to enhance affordability, land use, and zoning reforms can significantly impact housing affordability. The most common local reforms being used to increase affordability include the following:
After legalizing up to four units of housing, Minneapolis, Minnesota, and Portland, Oregon, both saw increases in permits for duplexes, triplexes, and other newly allowed housing types. Portland also allows developers to build up to six units per lot if a portion of those units is reserved for tenants with lower incomes. Maine and California both legalized building two units on lots previously zoned as single-family, the latter of which could enable 700,000 new market-feasible homes. Oregon and California have enabled denser multiunit housing in certain areas of cities, including near transit.
A 2021 Massachusetts law incentivized hundreds of municipalities served by the Massachusetts Bay Transportation Authority to create at least one higher-density multifamily zoning district by right within walking distance of public transportation.
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