We often hear about the disappearance of the dream of home ownership for millions of Americans – especially young people hoping to start a family – in New York, Los Angeles and other major cities. But the problem stretches coast to coast, with Missoula as a telling example of why there is simply are not enough homes to meet demand. The shortage is pushing the cost of existing homes to prohibitive levels for countless low- and middle-income Americans.
The shorthand explanation for the housing crisis is not my NIMBYISM, but the political instrument that makes such hostility effective has a more prosaic description: strict local zoning regulations.
President Biden recently announced Housing Supply Action Plan reflects a growing political consensus on the need for intervention. People of all political stripes can unite around pro-housing reforms to give landowners more freedom to build new homes where they are needed most.
The Biden administration’s housing plan calls for the lack of available and affordable land through exclusionary zoning regulations, such as minimum lot area requirements, parking mandates and bans on multi-family housing, as “one of the most important problems limiting the supply of housing”.
Biden echoes points made by President Donald Trump in a decree 2019 who called strict local and state zoning regulations “the biggest driver of house price growth.” And before Trump, President Barack Obama developed a toolkit in 2016 that said “local policies acting as barriers to housing supply include land use restrictions that make developable land much more expensive than ‘they aren’t inherently so’.
Exclusionary zoning practices reserve large portions of cities for single-family homes and prohibit the construction of denser multi-family homes, such as duplexes and triplexes, which are more affordable by design. Other regulatory layers drive up construction costs and can effectively prohibit multi-family homes where requirements (see minimum lot sizes and parking mandates above) cannot be met in existing space.
In emerging real estate markets such as Montana’s, we see firsthand the pain caused by exclusionary zoning. A pandemic real estate gold rush coupled with low housing inventory has pushed up median home prices in some of the state’s fast-growing cities over $800,000. The organization I lead, the free market Frontier Instituterecently published a Montana Zoning Atlas Report on how exclusionary zoning is making housing shortages worse: More than 70% of prime residential areas in Montana’s most in-demand cities prohibit or outright penalize the development of affordable multi-family housing.
While there is no silver bullet to solving the housing crisis, housing-friendly regulatory reforms would go a long way to expanding housing supply. The small town of Helena, Montana, took this approach in 2020, abolishing minimum lot size requirements and restoring the right of landowners to build townhouses and duplexes as of right in all residential areas. These changes may be a factor that maintains the median house price in Helena relatively affordableat $470,000, compared to high-growth towns in Montana that have strict exclusionary zoning, like Bozeman, where the median list price for homes is $849,000.
Unfortunately, local governments have always resisted such changes. NIMBY driven owner movements can lead formidable political opposition to proposals allowing denser development. Multi-family housing projects are beaten down after outcry from existing owners in a neighborhood. Perhaps because of this political influence, many local government officials still do not seem to believe that regulatory reform is part of the solution, preferring to focus on measures such as controlling rents or increasing funding for housing assistance programs.
Biden’s housing supply action plan will leverage federal grants to incentivize skeptical local governments to reform exclusionary zoning codes. Cities that give property owners the freedom to build denser, more affordable homes to meet the needs of low- and middle-income residents will be rewarded with higher scores in existing federal grant processes.
It will be fascinating to see if federal incentives will be enough to spur stubborn local governments to act on zoning reforms. If city leaders see grants flowing to neighboring towns and villages undertaking reforms, it could have a galvanizing effect.
Let’s hope so. Any sign of movement toward solving the housing shortage in the United States would be welcome. But these daunting regulatory hurdles have taken decades to build and will require years of significant rollbacks if the American dream of homeownership and individual prosperity is to be restored.
This goal is where people on the left and right can find common cause. They just need to put aside the NIMBY temptation and pressure local politicians for responsible reform that will give their fellow citizens a shot at home ownership.