Housing Policy

New Bill Would Tie Federal Transit Funding to Local Zoning Reforms

Local governments that remove development restrictions near transit would have a better chance of scoring federal transit funding grants.

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A new bill would tie federal transit dollars to looser local zoning rules. The Build More Housing Near Transit Act, introduced last week by Rep. Scott Peters (D–Calif.), would expand the rating criteria the U.S. Department of Transportation uses to evaluate grant applications for its New Starts program, which funds large transit projects. The idea is to encourage localities to adopt looser rules on development near transit, thereby reducing housing costs.

"We have a housing crisis in San Diego and the federal government has done little to address the magnitude of the problem," Peters said in a statement. His bill, he argued, "will maximize federal investment in transit and increase housing options for families across the country."

New Starts applicants currently must show that they have a "stable and dependable" source of local financing for their transit project before the feds will agree to partially fund it. Peters' bill would add another precondition: "a commitment of local land use policies to accommodate affordable and market-rate housing development associated with the project."

This commitment could be demonstrated in several different ways. The local government could exempt developments near transit from requirements to add parking spaces. Or it could deny bureaucrats the discretion to reject a project. Or—on a less market-friendly note—the transit agency could own the land near new stations.

The bill is endorsed by the American Planning Association and by a slew of housing and transit advocacy organizations. It's similar in concept to another bill introduced by Sen. Todd Young (R–Ind.), the Yes In My Backyard (YIMBY) Act. Young's legislation would require governments applying for federal housing dollars to either ditch some restrictions on development or justify why they are keeping their current land use regulations in place.

Some scholars have criticized the idea of tying federal housing funding to zoning reform, arguing that the approach is ineffective. They point out that the most restrictive jurisdictions are generally wealthy suburbs that don't receive a lot of federal housing dollars.

Linking zoning reform to transportation dollars, therefore, might be a better incentive. Sen. Cory Booker (D–N.J.) has suggested something similar. At the state level, California Gov. Gavin Newsom has floated the idea of tying state gas tax revenue to local housing reform.

But there are still reasons to think that Peters' bill wouldn't lead to more affordable housing.

"Transit, when it is done well, is an amenity, and housing prices go up," says Baruch Feigenbaum, a transportation expert at the Reason Foundation (which publishes this website). So increasing land values could make affordability issues worse, not better.

Peters' bill also raises federalism concerns, Feigenbaum says. "Saying we aren't going to give you transit funding if you don't do the type of land use we want seems a little heavy-handed to me."

Other pro-market scholars have been less critical.

Salim Furth, an economist at George Mason University's Mercatus Center, argues in a recent blog post that the bill would make for more rational transit investments, writing that "transit is planned by one bureaucracy and land use is regulated by another one. The Peters bill would force the transit bureaucracy to at least find out what the land use regulators are doing before laying down millions of dollars' worth of train tracks."

The New Starts program does already take into account some land use questions, including how much affordable housing is located near proposed transit stations and whether land nearby is zoned for higher densities.

It's encouraging to see federal officials take a greater interest in housing affordability. Still tying federal transit funding to local zoning reform seems like a blunt and invasive way of tackling what is essentially a local problem.

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  1. It’s encouraging to see federal officials take a greater interest in housing affordability. Still tying federal transit funding to local zoning reform seems like a blunt and invasive way of tackling what is essentially a local problem.

    First sentence is bullshit. It is not encouraging at all that the feds are taking any interest at all in local matters.
    Better to just abandon all that federal funding period. Let locals determine their own funding.

    I don’t know if anyone has done any kind of economic analysis on this kind of funding, but my instinct is that “free” money like this distorts pricing and may well be a contributing factor in locals ducking responsibility for their bad zoning practices.

    1. “I don’t know if anyone has done any kind of economic analysis on this kind of funding, but my instinct is that “free” money like this distorts pricing…”

      Bet on it!

    2. There’s “better”, sure, but this is where the votes are, and I like a divide-and-conquer strategy. Make the redistributionists decide between loosening some zoning rules and foregoing redistribution.

      Not only that, but it’s propaganda by deed. The increase in building caused by the loosening of zoning will serve as an example to show that non-governmental solutions to the housing problem are possible. It will also show that rules that are too strict are inhibitory.

      1. I understand your idea, and it is not entirely without merit. But I would still rather see the feds stay out of it. Instead of spending billions on grants to “favored” local governments: just give the tax money back to the individuals and companies who actually build housing and also to those who live in it. Unlike tsunamis, earthquakes, and other disasters, San Diego and the State government created this one — Why put me on the hook for it?

  2. “‘We have a housing crisis in San Diego and the federal government has done little to address the magnitude of the problem.”‘

    ONE QUESTION: Why in the hell should a housing problem in San Diego be a FEDERAL problem? Just sayin…..

    1. Mr. Peters is expecting the federal government to fix things that local and state governments have fucked up?

      Such a precious child- bless his heart.

      1. Yep. And, of course, it can be claimed that federal government housing programs, themselves, have also contributed to the problem. The gov’t screws things up, at all levels, so .., MORE government!

  3. But they will still keep Davis Bacon and a slew of other federal regulations running because why?

  4. I prefer man-to-man to zoning.
    It takes a lot more talent.

    1. Don’t underestimate the effectiveness of “junk” defenses like the box-and-one or triangle-and-two.

  5. What is with this no parking thing? Future maintenance costs will skyrocket, or HOA special assessments. Most decent contractors in our valley refuse to go into the private wealthy resort areas on the main streets without parking, without spots out front or pull in driveways (they can easily name their price). I assume that carrying ladders, materials, new windows, roofing materials via rickshaw down crowded streets sucks. Some contractors do go into these non-parking areas but are charging up to 3x-4x the price of a pull in driveway or single family. Pay now or pay later. Wait, progressives will push the maintenance costs onto the taxpayer, thats the ticket. Its all affordable!!

  6. Leave it to the Koch-funded, anti-transit “Reason” Foundation to come up with the concern troll.

    To clear up the obfuscation: revising zoning so as to promote transit-oriented development is a pro-market approach to the issue. By reducing restrictions on what private landowners can do with their land, they allow those owners to build what the market demands – whether that means denser apartment dwellings with fewer parking spaces per unit or not. While it is true that people like living near transit, and this increases land values and rents, this again is just what free markets do. The increase of attractive housing supply near transit means that there is more supply opened up for other, down-market renters and owners, who can still benefit from being located nearer to transit corridors.

    Transit-oriented development is the smart way to manage land in urban areas and to spend federal transportation dollars in a way that will maximize economic impact and, so, tax revenues. It loosens restrictions on land owners and provides renters what they want. It is about as win-win-win as you could hope for. The Reason Foundation’s concern troll over gentrification should be ignored as the anti-transit Trojan horse that it is.

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