Joe Biden Takes Another Stab at Zoning Reform

The administration is proposing to spend $10 billion over ten years incentivizing local and state governments to remove regulatory barriers to new housing construction.

Two years into his administration, President Joe Biden has thus far failed to eliminate "the suburban lifestyle dream"—something former President Donald Trump often said he was plotting to do. But a new proposed grant program from the White House aims to make that dream a little more affordable by encouraging localities to eliminate regulatory barriers to new home construction.

The language of the latest proposal has excited some zoning reformers who want to see the federal government take a more active role in reducing local restrictions on housing supply. But previous ideas from the administration have been watered down and stalled in Congress.

Tucked away in the congressional justification of Biden's budget request for the U.S. Department of Housing and Urban Development (HUD) is a proposed 10-year, $35 billion Housing Supply Fund, with $10 billion of that dedicated to grants to "reduce affordable housing barriers."

America is short some 3.8 million homes, reads the HUD budget document first reported on by Route Fifty, resulting "in rental units and homeownership being unaffordable, and often unattainable for millions of Americans." The department pins some of the blame for this housing deficit, and attendant higher housing costs, on "local regulations, zoning policies, and insufficient infrastructure."

As a solution, HUD is proposing to give some of that $10 billion to states and localities that adopt "housing-forward policies and practices to remove barriers to the development of affordable housing." That money could then be spent on "street improvements, traffic control measures, and water and sewer lines." That money could also be available to jurisdictions to cover the planning costs that go into adopting "housing-forward" policies.

"We know local and state leaders are critical to enabling housing development," a HUD spokesperson tells Reason. "The proposed fund will provide incentives to leaders taking the steps necessary to streamline production in order to reduce the time and cost to build."

The department spokesperson specifically named California and Massachusetts as two states that "have made significant strides in lowering barriers to production through their regulatory infrastructure."

Last year, the California Legislature passed laws legalizing duplexes on formerly single-family-zoned land statewide and streamlining the ability of local governments to zone for smaller apartment buildings in urban areas. Massachusetts implemented a new law this year that requires localities to allow apartment buildings near transit stops.

The idea behind HUD's latest proposal, says Mike Kingsella of Up For Growth Action, is to provide money on the front and back ends of the zoning reform process.

Providing grants to localities that initiate zoning reform, he says, would be helpful for fast-growing cities like Austin, Texas. There, almost any new development bumps up against the limits of the city's current, decades-old zoning codes.

"It's really resource-intensive to take an old zoning code like that and modernize it with a lens toward eliminating barriers," he tells Reason. Federal money can incentivize cities like that to undertake a wholesale rewrite.

Even when jurisdictions do adopt planning reforms aimed at deregulating housing production, individual projects can still face opposition from local activists worried about clogged streets and overcrowded parks and schools.

With federal money available for the "production of infrastructure that supports community growth," Kingsella says Biden's proposal is about "taking arguments off the table" when it comes to localities adopting zoning reforms.

The proposal is a combination of two previous federal zoning grant programs that were previously floated in Congress.

The first is the technical assistance grant program included in the Housing Supply and Affordability Act, first introduced by Sens. Amy Klobuchar (D–Minn.), Rob Portman (R–Ohio), and Tim Kaine (D–Va.) in March 2021. Their bill would provide $1.5 billion over five years to jurisdictions to develop and implement housing plans that reduce barriers to affordable housing.

The second is a program included in Sen. Elizabeth Warren's (D–Mass.) Housing and Economic Mobility Act, first introduced in 2018. That bill would have made $10 billion in incentives available to jurisdictions that adopted local land use reforms (not all of which would have to be deregulatory). Grantees could then use that money on a whole host of activities, whether that's fixing up schools or building new parks.

A HUD spokesperson says that it's too early in the process to estimate how much of that $10 billion would fund technical assistance grants and how much would go toward jurisdictions that had already adopted reforms.

"We have left room in the proposal to reward those who have taken significant steps as well as encourage those who have just begun to assess the impact of their policy and practices on the availability of quality, affordable housing for their residents," they tell Reason.

A third tactic of conditioning existing federal transportation and housing spending on localities adopting zoning reforms was endorsed by Biden on the campaign trail. It thus far hasn't worked its way into any of the president's proposals since he took office.

Neither Warren nor Klobuchar's bills have gone far in Congress on their own. The Biden administration has also been trying to attach some sort of zoning grant program to its big spending initiatives without much success.

In March 2021, the White House proposed a competitive grant program to reward localities that take "concrete steps" to reduce barriers to new housing—specifically naming apartment bans, large minimum lot sizes, and parking minimums—as part of Biden's American Jobs Plan. A June 2021 White House document put a name and a number on the idea: a $5 billion Unlocking Possibilities Program.

Eventually, a scaled-down $1.6 billion Unlocking Possibilities program was included in the Build Back Better Act. But housing policy experts criticized the legislative language creating that program as much too broad. Instead of rewarding localities for eliminating harmful regulations, it dolled out money to do run-of-the-mill urban planning.

"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."

The Build Back Better Act has officially stalled in Congress—and with it the Unlocking Possibilities Program. Now, the Biden administration is trying again with its request for a Housing Supply Fund.

Furth tells Reason that the latest language in the White House's budget proposal is much more encouraging.

"I think this is really well-conceived," he says. "Instead of targeting [just] planning, which can never guarantee an outcome, it is targeting things that potentially really can ease the growing pains of removing barriers to housing."

There are ways to make these programs more targeted still.

Emily Hamilton, another Mercatus researcher, has suggested that federal zoning grants only be made available to jurisdictions that issue building permits and that funding only go toward places that are actually issuing lots of permits for new housing.

Biden's proposal doesn't condition grants on market outcomes. It also makes money available to states, which typically don't issue building permits.

Furth says targeting outcomes like that is ideal, but not necessary for the $10 billion program that Biden is proposing. The relatively small amount of proposed funding and the growing number of localities getting serious about eliminating housing barriers make it more likely that money will flow to jurisdictions adopting the best reforms, he says.

Still, Furth cautions that everything hinges on what Congress does.

"We know that there's a huge gap between budget proposals and what becomes law," he says.

Kingsella says the inclusion of this grant program in the budget proposal makes it more likely that zoning reform might pass.

"We're talking about must-pass legislation. Congress is going to have to pass a budget," he says. "The exciting element around this proposal is the president and HUD has made it clear that housing production and the elimination of exclusionary housing and land use policies remain a very important and high priority."

Obviously, the administration's proposal is not perfectly, or even particularly, libertarian. It still involves new federal spending. Additionally, only $10 billion of the $35 billion Housing Supply Fund would be aimed at incentivizing local deregulation. The other $25 billion would go toward subsidizing the construction of housing that, per HUD, "is not currently incentivized by the market."

Given the damage that local restrictions on housing supply have caused to housing affordability, however, this is one area where the federal government could potentially play a constructive, deregulatory role.