Joe Biden's Use of Transportation Dollars To Incentivize Zoning Reform Is a Big Flop

Little, if any, of the $2.2 billion in RAISE grants have gone to jurisdictions proactively deregulating housing construction.

Going back to the 2020 campaign trail, President Joe Biden has endorsed the idea of using federal dollars to encourage states and localities to remove regulations and red tape on new housing construction.

In May, the White House seemingly put some money where its mouth was when it released its wide-ranging Housing Supply Action Plan. The plan included an announcement that jurisdictions that had adopted policies promoting density and zoning reforms would be looked on more favorably for $6 billion in transportation grants.

Then, earlier this month, the U.S. Department of Transportation (DOT) announced the recipients of $2.2 billion of that zoning reform-linked grant money from the Rebuilding American Infrastructure with Sustainability and Equity (RAISE) program.

The results were disappointing.

"I didn't see any evidence that localities' zoning policies or housing market outcomes were determining where these grants were going," says Emily Hamilton, a senior research fellow at George Mason University's Mercatus Center.

The RAISE program has its origins in the post-Great Recession stimulus bill passed under the Obama administration. It gives the executive branch a huge amount of discretion to set criteria for who gets awards. Successive presidential administrations have largely used it as an alternative for earmarks, showering money on local projects with little national relevance in swing districts and favored constituencies.

The program got a $7.5 billion funding boost in the $1.2 trillion infrastructure law that Biden signed into law in November 2021.

In January, the administration released a call for grant applications that asked applicants to describe how their proposed project would support "location efficient housing," "fiscally responsible land use," "locally driven density restrictions," and other factors that could plausibly be interpreted as asks about local zoning policies. But those were pretty vague asks. They also came sandwiched between a bunch of other non–land use factors applicants' projects would be evaluated on.

The result is that it appears few if any grants were awarded to applicants who adopted, or promised to adopt, zoning reforms. The word "zoning" doesn't get a mention in the DOT's summary of each of the 166 projects that received grant awards.

A few do seem marginally connected to the kinds of development urbanist zoning reformers would like to see more of.

The DOT says that a $14 million award for a highway redesign project in Dunlap, Tennessee, will encourage "concentrated, higher-density development" in the small city's downtown. A $2 million award to the Chittenden County Regional Planning Commission in Vermont will pay for a comprehensive transit-oriented development plan in the state's rural northwest. Transportation improvements connected to the redevelopment of Baltimore's Penn Station—which includes plans for 1.6 million square feet of mixed-use residential, retail, and office space—also received a $6 million RAISE grant.

Nevertheless, federal funds have long supported various mixed-use development projects. That's distinct from supporting local governments who've adopted reforms that make private development easier and less regulated.

Worse still, jurisdictions that have done everything in their power to make development more difficult also managed to receive RAISE grants.

San Francisco is currently being investigated by the state for its willful strangling of new development. That didn't stop the DOT from giving the city's transit agency a $23 million RAISE grant for a road diet and safety improvements along the city's Howard Street. (The maximum allowable grant is $25 million.)

If the nation's NIMBY (not in my backyard) capital can still receive one of the largest RAISE awards, one has to wonder how much of an incentive the program really offers to localities to reform their zoning codes.

On the flip side, a concern I've raised about the potential for the zoning reform language inserted into the RAISE program to encourage localities to adopt counterproductive inclusionary zoning policies—which can require developers to include below-market-rate units in their projects—also appears overblown.

Instead, it appears the inclusion of zoning reform in the RAISE grant program hasn't had much of an effect at all on which jurisdictions receive money from the program. Like past years, RAISE grants have instead gone to a smattering of port improvements, complete street projects, multimodal improvements, and more.

In short, it's the same old pork.

Hamilton suggests the best possible way to structure a zoning reform program would be to reward jurisdictions based on housing market outcomes. Cities that permit a lot of housing and see housing costs stay relatively affordable as a result would be the ones receiving federal grants.

The Trump administration flirted with doing something along those lines as part of its rewrite of fair housing regulations governing Community Development Block Grants. It ultimately dropped those plans as part of Donald Trump's campaign-trail embrace of NIMBY rhetoric and policies.

Hamilton says that creating a truly effective program that incentives local zoning reform is going to require action from Congress.

There are a number of other proposed grant programs and reforms that would use federal money to incentivize local zoning reform. As part of its budget request for the Department of Housing and Urban Development (HUD), the White House has proposed creating a $10 billion program that would both cover the costs of adopting zoning reforms and reward jurisdictions that implement said reforms.

Senate Democrats, as part of their FY 2023 appropriations bill, have similarly proposed creating a $200 million Yes in my Backyard (YIMBY) incentive program that would, per the National Low Income Housing Coalition's analysis, "reward jurisdictions that make reforms to remove barriers to affordable housing production."

Restrictions on new housing construction are a primary contributor to America's growing housing shortage. Getting rid of those restrictions would return rights to property owners and lower housing costs.

The idea that the federal government should encourage deregulation at the state and local level is gaining currency among both Republicans and Democrats, free marketers and progressives. Some libertarians could reasonably oppose the idea on the grounds that the federal government already spends way too much money period.

If these programs are going to exist, you'd want them to be effective at least. Thus far, it appears the zoning strings attached to RAISE grants haven't been.