The White House Offers More Money, Less Detail on Its Idea for 'YIMBY Grants'

The Biden administration wants to give $5 billion to jurisdictions that deregulate their housing markets.

The Biden administration is still spotlighting the ways state and local regulations are inflating the cost of housing. It's also giving less and less detail on how exactly it intends to incentivize those jurisdictions to cut that red tape.

On Wednesday, the White House released a fact sheet on the housing components of its $2.3 trillion American Jobs Plan, which proposes $213 billion in direct spending on housing programs plus another $100 billion in tax credits.

"If we want the United States to remain the greatest nation in the world, then we must first take care of home in the most literal sense," said Housing and Urban Development (HUD) Secretary Marcia Fudge at an event in Kansas City, Missouri, yesterday. "To pass an infrastructure plan that fails to expand affordable housing and to revitalize our communities would be akin to building a road that leads to nowhere."

Most of the administration's proposed new spending would go toward beefing up existing housing programs.

The White House is proposing some $55 billion in additional tax credits for the U.S. Treasury's Low-Income Housing Tax Credit program, $35 billion for HUD's HOME Investment Partnership grant program, and $45 billion for the Housing Trust Fund, which mostly funds rental housing initiatives.

Tucked away in all this spending are calls for a new program that would award $5 billion in "flexible and attractive funding to jurisdictions that take concrete steps to reduce barriers to affordable housing production." The White House fact sheet lists some specific barriers: minimum lot sizes, mandatory parking requirements, prohibitions on multifamily housing. This language—minus the explicit $5 billion price tag for the program—is nearly identical to an earlier fact sheet the White House released in April.

"Cities need to demonstrate that they are taking down some of their exclusionary zoning requirements and then they will be able to access this separate pot of money for whatever they want to use it for—transportation, parks, schools," an administration official told Vox last month when describing how this new program would work.

That sounds similar to a component of the American Housing and Economic Mobility Act, which Sen. Elizabeth Warren (D–Mass.) introduced in 2018. That bill would have created a $10 billion program to reward states and local governments that have adopted, or plan to adopt, a menu of policies aimed at increasing affordability.

The policies jurisdictions could embrace to qualify for this money include some free market reforms, such as legalizing accessory dwelling units, alongside more dubious ideas, like mandating that new private housing development include affordable units. Money awarded under this program could then be spent on schools and public works, among other things.

Another version of these "YIMBY grants" is found in a bill introduced by Sens. Amy Klobuchar (D–Mass.), Tim Kaine (D–Va.), and Rob Portman (R–Ohio).

Their Housing Supply and Affordability Act would give out $1.5 billion over five years in grants for states and localities that create housing policy plans aimed at increasing the supply and affordability of homes and reducing the barriers to housing development. Money awarded via that bill could only be spent on creating or implementing these housing policy plans.

Klobuchar and Portman's bill originated as an idea in President Barack Obama's administration, which Joe Biden then explicitly endorsed on the campaign trail.

Reporting from Bloomberg's Kriston Capps suggests that the $5 billion program in Biden's American Jobs Plan would pay for these implementation grants as well as less restricted awards of the type included in Warren's bill.

Biden's campaign platform also endorsed a 2019 proposal from Sen. Cory Booker (D–N.J.) and Rep. Jim Clyburn (D–S.C.) that would condition federal housing and transportation funding on adopting affordable housing strategies. But this idea has not yet appeared in any American Jobs Act materials.

Other than the topline $5 billion figure, a lot of details still need to be hashed out, says Mike Kingsella, executive director of Up for Growth Action.

"The White House is setting the direction, it's going to be up to Congress and the relevant committees to draft the language," he tells Reason, adding that his organization is pushing for the Klobuchar-Portman bill to be incorporated in the final legislative version of the American Jobs Plan.

That bill "has the broadest support, has been introduced, and is based on the Biden housing plan from last year," he says.

This can all come across as a lot of regulatory and legislative minutia. But the effectiveness of any potential YIMBY grants will really hinge on these details of how this money is awarded and who it goes to.

"The big limitation is that the wealthiest, most exclusionary jurisdictions aren't going to be swayed by a federal grant to change their policies," says says Emily Hamilton, a housing policy researcher at George Mason University's Mercatus Center. "Given that, it's really important that the federal government actually target these grants at jurisdictions that actually do land-use planning and permitting."

That would mean restricting these grants to municipalities generally, she says. They're the governments responsible for writing zoning codes and approving individual housing projects. The grants in both the Klobuchar-Portman bill and Warren's bill, by contrast, could go to states as well as cities and counties.

Most of the current proposals swirling around Congress and the White House would reward jurisdictions for reforming their planning codes, or at least planning to reform them. Instead, Hamilton suggests conditioning that money on the actual rates—and price points—of new construction.

Grants should go to "those localities that are actually making it feasible to build more, lower-cost housing rather than localities that are making changes to planning documents but maintain barriers that stymie that housing construction," she argues.

Of course, all the other spending in the American Jobs Plan could drown out any incentive even the best-designed YIMBY grant program would create for local governments to peel back their onerous land-use rules. Why would a city get rid of its prized single-family zoning to qualify for a conditional federal grant when it also stands to get some far larger pots of federal money that aren't conditioned on doing anything at all?