Will the Democrats' 'Build Back Better' Bill Do Anything to Fix Zoning?

Will the "Unlocking Possibilities" program be an effective way to spark zoning reforms—or just a subsidy to planning consultants?

President Joe Biden's social spending agenda might get a vote in the House later this week—and with it, a program intended to bribe local governments into repealing their regulations on new housing construction.

The Democrats' Build Back Better Act devotes $150 billion to housing. That includes a new "Unlocking Possibilities" program that would give $1.6 billion over 10 years to states, local governments, and regional planning agencies to spend on "substantially improving" their housing plans, "streamlining regulatory requirements and processes," and "reform[ing] zoning codes", among other activities.

The amount of funding devoted to this program is less, and the potential uses of the money broader, than several previous "YIMBY grant" proposals to be floated by the administration and members of Congress.

In June, the White House called on Congress to create a $5 billion program that would award "flexible and attractive funding to jurisdictions that take steps to reduce needless barriers to producing affordable housing and expand housing choices for people with low or moderate incomes."

In March, Sens. Amy Klobuchar (D–Minn.), Rob Portman (R–Ohio), and Tim Kaine (D–Va.) reintroduced their Housing Supply and Affordability Act. That bill would have spent $1.5 billion over five years on grants to states and localities trying to eliminate barriers to housing development.

In contrast, the current version of the Unlocking Possibilities program authorizes spending on a whole host of priorities not necessarily tied to expanding housing supply.

In addition to "reducing barriers to housing supply elasticity and affordability," grantees could also spend money on developing "local or regional plans for community development," plans for "further[ing] access to public transportation," and "community development strategies related to sustainability, fair housing, and location efficiency."

Eligible government bodies would apply to the U.S. Department of Housing and Urban Development (HUD) for these grants. HUD would be come up with guidance on what this money could be spent on.

Some zoning reform proponents have criticized the breadth of the program and the discretion it gives HUD in selecting grantees.

"There is almost no planning exercise undertaken by any planning consultant or city that would not qualify under this text," wrote Salim Furth, a senior research fellow at George Mason University's Mercatus Center, in The Bridge. "A planning consultant could hardly ask for a more perfectly targeted subsidy."

Mike Kingsella, of the advocacy group Up for Growth Action, counters that while HUD is given wide discretion in coming up with criteria for awarding these grants, the legislative language makes it "crystal clear" that the money is to be spent on plans aimed at increasing housing supply.

That language and the competitive nature of the grant program—in which no jurisdiction is entitled to the money and instead will receive awards based on how closely their application matches HUD's criteria—will ensure the money actually goes to governments that are serious about reforming their zoning codes, he argues.

While "the devil is in the details," Kingsella tells Reason, "it would unreasonable to expect that any HUD would be able to draft grant guidance that contradicts that legislative intent" of giving grants to jurisdictions trying to repeal regulations that stifle housing supply.

Another criticism of the Unlocking Possibilities program—and the Housing Supply and Affordability Act before it—is that they pay for paper promises and not results.

"A successful zoning reform program must reward localities for the right outcomes, namely permitting abundant housing construction," said Emily Hamilton, another Mercatus researcher, in testimony last year before the House's Committee on Financial Service. "Past experience shows that plans to improve housing affordability often sit on local government shelves without actually leading to any zoning changes or new housing."

And even when seemingly positive reforms are implemented, they can prove disappointing.

Furth gives the example of Minneapolis, which eliminated single-family-only zoning in 2020, allowing triplexes to be built on residential land citywide. But that reform has produced little new housing, because the city kept its rules requiring triplexes to be the same size as the single-family homes they might replace.

A program that rewards governments for just planning for more housing might give Minneapolis a big grant for saying it wants to get rid of single-family-only zoning. One that rewards jurisdictions for the new housing that's actually constructed might encourage the city to cut the extra red tape that limits that reform's effectiveness.

Hamilton also says that grants should only go to jurisdictions that actually issue permits for housing. Both the Unlocking Possibilities program and the Klobuchar bill give money to states and regional planning organizations that generally don't approve new construction.

Libertarians, of course, will object to the idea of any new federal spending, period. That's fair enough. On the other hand, if the federal government is going to spend money on housing affordability anyway, at least some of those funds might as well create an incentive to repeal rules that shouldn't exist.

In a recent White House seminar on zoning reform, Oregon House Speaker Tina Kotek (D–Portland)—who authored the law abolishing single-family-only zoning almost everywhere in the state—argued that local governments need incentives as well as mandates if they are to embrace reform.

"Put money on the table, don't just tell them what to do," said Kotek.

The federal government, unlike the states, can't tell local governments what to do with their zoning codes. But it can put money on the table. We'll have to wait and see if that money does any good.