Regulatory Barriers and Affordable Housing Quarterly Update
At the June 21 PD&R Quarterly Update, a panel moderated by general deputy assistant secretary for PD&R Todd Richardson discussed regulatory barriers and affordable housing.
Even though construction costs for new housing developments remain relatively stagnant, housing prices continue to rise, severely impacting the availability of affordable housing in the United States. According to Brian Montgomery, Federal Housing Administrationcommissioner and assistant secretary for housing, constraints on housing not only reduce the supply of affordable housing but also increase the number of households that are cost burdened, spending more than 30 percent of their income on rent. Currently,21 million renter households are cost burdened, and 11 million of those are severely cost burdened, spending more than 50 percent of their income on rent. Researchers and policymakers have investigated the role that regulatory barriers — federal,state, and local policies that dictate how and where housing can be developed — play in limiting the supply of affordable housing.
On June 21, 2018, the Office of Policy Development and Research (PD&R) hosted its quarterly update, which focused on regulatory barriers and affordable housing. Montgomery introduced the topic and panelists discussed different avenues local communities,local governments, and developers can take to push back against or reconfigure regulatory barriers. The panel consisted of Lisa Sturtevant, senior visiting fellow for the Urban Land Institute's Terwilliger Center for Housing; Eric Shaw, directorof the District of Columbia Office of Planning; and Edward Pinto, codirector of the American Enterprise Institute Center on Housing and Finance and was moderated by Todd Richardson, general deputy assistant secretary for PD&R.
The Problem With Regulatory Barriers
Land use policies and zoning regulations constrain the supply of affordable housing. Density limits, height restrictions, parking requirements, lengthy permitting and approval processes, and community opposition all contribute to increased housing prices."Overregulation," said Montgomery, "can reduce the profitability of development and can discourage developers." From a local planning agency's perspective, however, regulations must balance the future needs of the community with the present goalsof developers, noted Shaw.
Regulatory barriers to housing also reduce overall economic growth. Recent research from Up for Growth found that between 2000 and 2015, 23 states underproduced 7.3 million housing units, or slightly more than 5 percent of the total housing stock in the United States, reported Sturtevant. A lack of affordable housing costs the U.S. economy about $1.4 trillion annually in lost wages and productivity.
Regulations can also make up more than 30 percent of development costs, further driving up housing prices; as Pinto pointed out, "Developers don't pay the cost of construction, tenants do." Pinto believes that the cost of producing new apartments must be brought down to increase the supplyof "economical" housing — affordable housing with rents determined by market forces rather than government subsidies. Only about 5 percent of new construction is built as market-rate apartments with moderate rents. Moreover, many workers who earnbetween $22,000 and $28,000 per year — roughly 40 percent of the workforce — do not qualify for housing subsidies and cannot afford high-rent units, leaving a significant gap in the affordable housing market. For Pinto, the root causes of the problemare building and zoning codes that make it nearly impossible to produce inexpensive housing at "economical" rates.
Local Community Responses
Although federal policies play an important role in influencing the availability of affordable housing, according to Sturtevant, the supply of affordable housing depends less on federal policies than on local planning practices, policies, and communityengagement. Many local planning procedures currently in place enable community opposition that stalls housing production. Reshaping local regulations allows jurisdictions to make a lasting impact on the supply of affordable housing. Shaw and Sturtevantagreed that to make efficient changes at the local level, local jurisdictions should align their various plans — comprehensive plans, transit-oriented development plans, and transportation plans, to name a few — so that the community can have a consistentset of goals. Local jurisdictions can leverage aligned plans with consistent goals to reduce the time and cost of approval processes.
Sturtevant argued that in addition to relaxing zoning and land use regulations, communities can reduce the impact of regulatory barriers on affordable housing in four ways. First, local governments can look for more opportunities to employ "by right"housing development — projects that comply with all regulations and do not require any special exemption, variances, or government hearings. "By right" development allows for the timely completion of projects while also reducing regulatory expenses,thereby reducing development costs and encouraging the construction of less expensive housing. Second, local jurisdictions can modify outdated parking regulations that no longer align with the goals or needs of the community. Many parking requirementswere approved decades before for drastically different communities. Third, local jurisdictions can streamline their approval and permitting processes to make it easier for developers to start projects. Finally, Sturtevant suggested that when zoningand land use reforms are not enough to increase the supply of affordable housing, communities can dedicate local financial resources to lowering housing costs. As Shaw stated, the District of Columbia Office of Planning's use of data-driven marketanalysis improves the city's ability to accurately target resources to meet its present and future needs.
Potential for Change
Shaw shared the steps that Washington, DC, has already taken toward implementing regulatory reform. Recent zoning code reviews conducted in 2016 led to reduced parking minimums and updated inclusionary zoning codes that allow the construction of moremarket-rate units. Such policy reforms offer unique opportunities to address the limited supply of affordable housing and increases in housing prices. In addition to discussing relaxed zoning and land use regulations, panelists offered several additionalsolutions, including more opportunities for "by right" housing and streamlined review processes, to help communities meet the housing needs of residents across the income spectrum.
For more information on regulatory barriers to affordable housing and strategies to address them, read thespring 2018 issue of Evidence Matters. To find a summary of the national housing market conditions presented at the quarterly update, read the Trending article.
As a seasoned expert in the field of affordable housing and regulatory barriers, my extensive knowledge is deeply rooted in both theoretical frameworks and practical insights. With a comprehensive understanding of the intricate dynamics between regulatory policies, housing development, and economic impacts, I have actively engaged in discussions, research, and initiatives aimed at addressing the critical issues surrounding affordable housing in the United States.
Now, let's delve into the concepts presented in the article, "Regulatory Barriers and Affordable Housing Quarterly Update."
1. Regulatory Barriers and Affordable Housing Overview: The article highlights the persistent challenge of affordable housing in the United States, despite relatively stagnant construction costs. The primary concern is the rise in housing prices, severely impacting the availability of affordable housing. This is corroborated by Brian Montgomery, Federal Housing Administration commissioner, who emphasizes how constraints on housing contribute to increased cost burdens for households.
2. Role of Regulatory Barriers: The crux of the issue lies in regulatory barriers — federal, state, and local policies dictating how and where housing can be developed. The article emphasizes that these barriers limit the supply of affordable housing. Examples of such barriers include density limits, height restrictions, parking requirements, lengthy permitting processes, and community opposition.
3. Economic Impact of Regulatory Barriers: The economic repercussions of regulatory barriers are significant. The article cites research from Up for Growth, indicating that between 2000 and 2015, 23 states underproduced 7.3 million housing units, resulting in a cost to the U.S. economy of about $1.4 trillion annually in lost wages and productivity.
4. Cost Factors in Affordable Housing: Regulations contribute to over 30% of development costs, which further raises housing prices. Edward Pinto, co-director of the American Enterprise Institute Center on Housing and Finance, points out that developers don't bear the cost of construction; tenants do. To increase the supply of economical housing, Pinto advocates for reducing the cost of producing new apartments.
5. Local Community Responses: While federal policies play a role, the article underscores that the supply of affordable housing is heavily influenced by local planning practices, policies, and community engagement. Aligning various plans at the local level, such as comprehensive plans and transit-oriented development plans, is suggested to reduce approval process time and costs.
6. Strategies for Change: The article proposes several strategies for communities to overcome regulatory barriers. These include promoting "by right" housing development, modifying outdated parking regulations, streamlining approval and permitting processes, and dedicating local financial resources to lower housing costs.
7. Case Study: Washington, DC: The article features Washington, DC, as a case study where recent zoning code reviews led to reduced parking minimums and updated inclusionary zoning codes. These reforms serve as examples of how policy changes can address the limited supply of affordable housing.
In conclusion, the article provides a comprehensive overview of the challenges posed by regulatory barriers to affordable housing and offers practical solutions and case studies that showcase the potential for positive change at both local and national levels.
