Reports: Burdensome Regulations Are Exacerbating the Affordable Housing Crisis

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Posted: Jul 06, 2018 10:55 AM
Reports: Burdensome Regulations Are Exacerbating the Affordable Housing Crisis

In recent months, a number of reports have called attention to the link between the nation’s affordable housing crisis and burdensome regulations imposed by local jurisdictions on the development of new properties.

According to one such report, released in June by the National Association of Home Builders (NAHB) and the National Multifamily Housing Council (NMHC), “regulation imposed by all levels of government accounts for an average of 32.1 percent of multifamily development costs,” and “in a quarter of cases, that number can reach as high as 42.6 percent.”

The regulatory costs found in the report included fees, development standards, building codes, and the pure cost of delay. 

Last month, the Joint Center for Housing Studies at Harvard University did their 30th anniversary State of the Nation’s Housing report.

That report found that almost one-third of American households, 38.1 million, paid more than 30 percent of their incomes for housing in 2016, making them “cost burdened.” It notes that regulatory barriers, alongside other factors, play a major role in the soaring housing costs behind this finding.

New regulatory barriers have “served to limit the supply of land available for homes and increased the time, complexity, and risks of housing development,” according to the report.

The housing sector “faces significant challenges in the short term” because “labor shortages, rising materials costs, limited land availability, and land-use regulations are all holding down growth in new residential construction.”

According to the study, the critical question in the long term “is whether the home-building industry can supply, and local regulations allow, enough new housing to meet the need for homes affordable to a broad range of households.”

The New Democrat Coalition also put out a report in June which found, in part, that "zoning and land-use regulations are slowing and restricting building of housing" contributing to the rising costs. They also pointed to the increase in the homeless population in West Coast cities as a side effect of the crisis.

A senior Department of Housing and Urban Development (HUD) official told Townhall that in some communities housing affordability is the number one local issue, particularly on the West Coast where it is the topic of fierce debate.

In this case, the HUD official explained, since local government controls much of these land and zoning regulations, “it’s a situation where the locals lead and the federal government plays a support role.”

HUD is focused on encouraging conversations that have people asking what the various local levers are that are affecting the cost of housing.

HUD does feel the effect of the rising housing rates, the official noted that “for those programs that we’re a support player on, when local housing prices go up the amount of subsidy we have to provide per household goes up so in these markets that have become really expensive like Washington, DC our per unit subsidy costs have been rising faster than they have in other places in the country and that means we can’t serve more people.”

In a recent periodical, HUD took a serious look at the impact of local regulation on the affordable housing crisis, including some steps certain states have taken to reduce the regulatory burden.

HUD staffer Regina C. Gray concluded, through an analysis of recent research on the topic, that “to ensure that local and state policies significantly reduce the regulatory cost barriers associated with land and site development standards, policymakers would have to focus on the most significant land use controls identified by researchers: excessive zoning regulations and house size requirements.”

California and Massachusetts are both attempting to do this and have recently put laws in place to reduce some of the regulatory barriers to affordable housing.

In 1969, Massachusetts enacted a law encouraging all cities to set aside at least 10 percent of their housing units as affordable. Then in 2004, the state instituted “a voluntary program offering financial incentives to foster affordable housing production that was the first state-level program of its kind.”

According to Rachel Heller, chief executive officer at the Citizens’ Housing and Planning Association, these laws have been “the most successful tool in Massachusetts to reduce the state’s dire affordable housing shortage, producing more than 70,000 homes by forcing communities to think about how to meet the 10 percent goal. The program has produced far more affordable housing outside of major cities than would have been developed without it.”

The success of the law has made it a model for states such as Rhode Island, Connecticut, and Illinois.

In 2015, California adopted a parking reduction law, allowing “developers seeking a density bonus to request lower minimum parking requirements contingent on constructing affordable housing near transit.” This legislation has reportedly helped cities reach their affordable housing goals.

California has also recently eased regulations on Accessory Dwelling Units (ADUs) or “granny flats” which are secondary dwelling units that help homeowners earn additional income and can also help to fill the affordable housing gap.

While these seem to be positive steps toward solving the affordable housing crisis, there are also new regulations that have been cropping up.

In May, for example, California became the first in the U.S. to require solar panels on almost all new homes.

Brent Anderson, a spokesman for homebuilder Meritage Homes Corp. told Bloomberg at the time that this regulation may be the right answer in the long term but “with home prices having risen as much as they have, I think home buyers would find it a little distasteful to be forced to pay more for solar systems that they may not want or feel like they can’t afford.”

Regulations like these, that have such a significant impact on housing affordability, should be subject to a thorough cost-benefit analysis by local jurisdictions, according to HUD and researchers who are looking at their long-term effects.