Congress' $1.7 Trillion Spending Bill Includes a Baby 'YIMBY' Grant Program

It needs some work.

Tucked inside the $1.7 trillion, 4,000-page spending bill Congress is expected to vote on this week is a Yes in my Backyard or YIMBY grant program that will pay jurisdictions for removing barriers to affordable housing production. That's the hope anyway.

The bill provides the U.S. Secretary for Housing and Urban Development (HUD) with $85 million to dole out on a competitive basis to jurisdictions for "the identification and removal of barriers to affordable housing production and preservation."

The secretary, currently Marcia Fudge, would have wide discretion to select grant awardees based on their demonstrable "progress and commitment to overcoming local barriers" to affordable housing production and preservation and "acute demand" for affordable housing among a jurisdiction's lower-income residents.

This is the latest iteration of a long-running idea among supply-side housing reformers to use federal funds to incentivize reforms of local zoning codes and regulations that unduly limit housing production.

Federal lawmakers have introduced a long list of bipartisan bills that proposed some form of the idea, although none have passed.

President Joe Biden has expressed support for the idea since the 2020 campaign trail. In its Housing Supply Action Plan from May 2022, the White House also said it would retool discretionary transportation grant programs (worth a collective $6 billion) to incentivize liberalizing zoning reforms.

It's an idea that has won support from some free marketers; if the federal government is going to spend money on housing, why not use it to incentivize some deregulation?

Unfortunately, neither the language included in Congress' spending bill nor the performance of those retooled transportation grant programs suggests the proposed $85 million YIMBY grant program will purchase much deregulation.

For starters, the bill would provide money to jurisdictions for identifying and removing barriers to affordable housing production. Once given, the money could be spent on improving "housing strategies," implementing "housing policy plans," and facilitating affordable housing production.

Taken together, that sounds like the program would pay jurisdictions just for drawing up plans for improving housing production, an approach that some housing economists have argued is ineffective.

"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," said Emily Hamilton, an economist and housing researcher at George Mason University's Mercatus Center, in 2020 Congressional testimony.

That risk is reinforced by the fact that lots of government planning entities that don't actually approve new housing or enforce restrictions on development would be eligible for grant awards under Congress' proposal.

The risk is the program would just become a subsidy for routine planning activities. That risk is potentially mitigated by language directing the HUD secretary to provide grants to jurisdictions that demonstrate "progress and commitment" to overcoming local barriers to housing production.

That sounds like it could require locales to show that they've actually done something to deserve a YIMBY grant beyond just talking a good game about housing reform. Given the competitive nature of the program, one would hope that the HUD secretary chooses recipients that have demonstrated the most progress.

The trouble is the discretionary transportation programs the Biden administration said it would retool for zoning reforms were also competitive. The administration had wide discretion to decide who got them, and they were very public that they wanted them to go to zoning reformers.

But there's basically no indication zoning reform played any role in who got those grants. Plenty went to state transportation departments that don't regulate or approve housing. Some went to cities like San Francisco, where local politicians are actively hostile to zoning reform.

An optimist could argue that a program created to reward zoning reformers will end up awarding grants in a more targeted way to more deserving recipients. The best way to ensure that happens would be to statutorily require it.

Hamilton has suggested that an ideally crafted YIMBY grant program would restrict eligible recipients to local governments that actually issue building permits and prioritize grantees that issue a lot of building permits. Pay for results, not plans, in other words.

It's possible that's what the baby YIMBY grant program will end up doing. But there's nothing in the language of Congress' spending bill that will require it to be so effective.