How deregulation can help solve our housing shortage
A recent Wall Street Journal article painted a grim picture of the housing market.
“Construction of new housing in the past 20 years fell 5.5 million units short of long-term historical levels, according to a new National Association of Realtors report,” the Journal reported, and “from 2010 to 2020, new-home construction fell 6.8 million units short of what was needed to meet household-formation growth and replace units that were aging or destroyed by natural disasters.”
A large part of the problem: For years, local governments have erected unnecessary barriers that stand in the way of homeowners, homebuyers, and homebuilders using their land as they see fit, driving up prices for all Americans.
That’s why a bipartisan group of lawmakers took action to introduce the YIMBY Act in the Senate and House. The bill would discourage exclusionary land-use policies and remove barriers to making housing more affordable.
For too long, restrictive policies have been the result of a “Not in My Backyard” attitude. We want to replace that with a “Yes in My Backyard” way of looking at housing.
The bill would make receipt of Community Development Block Grant funding to localities conditional on recipients’ reporting to the Department of Housing and Urban Development (HUD) the progress they are making on eliminating burdensome permitting requirements and restrictive zoning policies such as limits on duplexes, multifamily housing, and manufactured housing.
The bill is a first step toward empowering communities to pursue economic prosperity by cutting these regulations.
We know that a HUD reporting requirement won’t by itself knock down barriers to new housing that have been decades in the making. But it would provide useful information on the scope of the problem, increase accountability of local leaders who fail to make progress on removing restrictive policies, and provide the federal government with a platform for encouraging more policies that accommodate additional housing development.
House passage of a similar bill last year showed there is a growing acknowledgement across the ideological spectrum that barriers in housing markets are getting in the way of people achieving their American dream.
Land-use regulations have long constituted a system of government-enforced restrictions on the development and uses of property, usually at the local level. These top-down land-use mandates include de facto bans on building apartments through zoning, unnecessary requirements on minimum lot sizes or parking, rent control, or design and use regulations that limit home-based businesses, accessory dwelling units, or manufactured housing.
These kinds of restrictions became common in the U.S. in the early 20th century. New York City imposed one of the first zoning codes in 1916. In the years since, these restrictions have spread across all 50 states, wiping out affordable-housing opportunities for millions.
As the White House Council of Economic Advisers explained in February 2020: “We find that a key driver of the housing unaffordability problem is the overregulation of housing markets by State and local governments, which limits supply. By driving up home prices, overregulation adversely affects low-income Americans in particular, who spend the largest share of their income on housing.”
The Biden administration’s economic team echoed this concern, noting last month that exclusionary zoning laws “translate into . . . more expensive housing and fewer homes being built,” with “a profound impact on social welfare because where a family lives matters.”
A recent National Bureau of Economic Research paper concluded that “regulation appears to raise house prices, reduce construction, reduce the elasticity of housing supply, and alter urban form.” The National Association of Home Builders estimates that regulations contribute almost 24 percent of the price of a new single-family home and more than 30 percent of the cost of multifamily units.
And it’s not just folks who are trying to rent or buy a home who are paying the price. Scholars estimate that land-use regulation reduces gross domestic product by 1.5 percent each year. That’s taking money out of the pockets of every American.
This modest legislation would help us better understand the breadth of the challenge, inform solutions, and ultimately lead to localities’ eliminating barriers that drive up housing costs and decrease housing supply.
Todd Young is a U.S. senator from Indiana. Tim Phillips is president of Americans for Prosperity.