What Biden’s plan to tackle housing prices is missing

Voters, frustrated by astronomical rents and home prices, might be ready to force local governments to do something about the state of the housing market.

Whether President Joe Biden feels the same is another question.

According to a new poll by Vox and Data for Progress, a majority of likely voters say they’d support withholding federal money from cities and states that prevent more affordable types of housing from being built.

More specifically, 54 percent back withholding infrastructure dollars from local governments unless they “stop making it illegal to build multifamily housing,” while just 32 percent wouldn’t. In other words, the idea is popular by a 22-point margin.

That’s a big deal, because local governments, through zoning laws and ordinances, dictate where and what homes can be built. And many of them are wielding this power to artificially constrain the supply of housing, thereby driving up rents and home prices for everyone.

Bans on duplexes, fourplexes, accessory dwelling units, and apartment buildings ensure that the only homes that get built are single-family residences that are necessarily more expensive. The laws that dictate this are referred to as “exclusionary zoning.” To estimate the impacts of these policies, one study looked at Silicon Valley, where demand to live surged starting in the 1970s (but population between 1970 and 2010 “grew at less than half the rate that California did”). At the time, house prices there were only slightly above the national median. But its suburbs undertook a “multifaceted” effort to restrict the types of homes that could be built and “limit further densification.” Now, half a century later, house prices in Silicon Valley are “commonly ten times the national median.”

The poll — which surveyed 1,207 likely voters and has a margin of error of 3 percentage points — found 63 percent of renters are in favor of withholding the money if governments don’t adopt “policies that encourage the building of new housing.” And while 50 percent of homeowners supported the policy, enough homeowners oppose development in their neighborhoods that it often doesn’t get built. The importance of federal or state policymaking on issues like these is that it would ensure that policies with large economic benefits but small numbers of empowered opponents at the local level don’t get derailed.

In the poll, the greatest degree of opposition comes from Republicans, but even that is a minority opinion — just 44 percent said they opposed the policy.

Despite the popularity of this approach, it’s one the Biden team (so far) has not elected to take.

Biden’s plan for dismantling exclusionary zoning is too nice

Biden has taken a major step forward in defining exclusionary zoning as a problem. But his plan doesn’t engage with how baked in these laws are in some communities.

As part of the $2 trillion infrastructure package the administration introduced last week, Biden proposed a “purely carrot and not stick” program to allocate $5 billion to a new competitive grant program that “awards flexible and attractive funding to jurisdictions that take concrete steps to eliminate such needless barriers to producing affordable housing.”

The approach is similar to President Barack Obama’s Race to the Top program for education, which also set aside a few billion for states to compete over. And in some ways, modeling zoning reform similarly to education reform makes sense — both have been designated as local issues, and a lot of the infrastructure for direct reform exists at the local level.

J. Scott Applewhite/AP Photo

However, while with education everyone has the same goal of “better schools” or “better-educated children” even if they disagree on methods, not everyone agrees with the goal of ensuring abundant housing.

At the local level, cities and suburbs (often with a high proportion of Democratic voters) have enacted policies and procedures that drive up the cost of housing, often due to aesthetic preferences for single-family homes and the people who usually reside in them.

“I don’t think that this grant program is going to lead to very many meaningful things,” Michael Andersen, senior researcher at the Sightline Institute, told Vox.

The reason? Many of the most exclusionary localities are uninterested in the extra money changing these rules would give them. After all, they’ve already left potentially billions on the table: According to a 2015 study by University of Chicago economist Chang-Tai Hsieh and UC Berkeley economist Enrico Moretti, researchers find that because metropolitan areas have made it prohibitively expensive for middle- and low-income Americans to move to high-productivity areas, US aggregate economic growth was lowered by more than 50 percent from 1964 to 2009.

“It doesn’t mean it’s a bad idea; it just means that it’s limited in its ability to impact change,” Yonah Freemark, senior research associate at the Urban Institute, told Vox. “The fundamental problem we’re facing is the cities and suburbs that are most interested in excluding people are also the ones that are least needing of additional grants to pay for things.”

If Biden and his administration want to truly “eliminate exclusionary zoning,” as they claim, they’ll need a stick to go along with their carrot.

The stick

The idea for the “stick” is pretty straightforward: Rather than just telling states and localities they can get access to an extra pot of money if they choose to reform, tell them they’ll miss out on a much bigger pot, and one they may routinely count on, if they don’t.

In short, places that are intentionally restricting growth and discriminating based on economic status should have transportation funds withheld until they change them.

The idea of using transportation funds to incentivize zoning changes is not foreign to the Biden team. On the campaign trail, the now-president endorsed making large annual grants like the Surface Transportation Block Grant (STBG) contingent on developing “a strategy for inclusionary zoning.” STBG allocated over $12 billion to grantees in 2020.

It wouldn’t be a panacea: There are concerns that it’s actually the cities that are more open to home building that are more dependent on these grants, so a policy like this would miss out on the biggest offenders.

For example, many experts have proposed making receipt of the popular Community Development Block Grant (CDBG) contingent on reforming local zoning codes. Research by Jenny Schuetz at the Brookings Institution casts doubt on how effective this will be. She looks at both California and New Jersey and finds that in the former, “only 17 percent of the most exclusive communities receive any CDBG funding.” And New Jersey? Zero of the most exclusive communities receive CDBG funding.

But now Biden is poised to allocate billions in transportation funding to states. Even if the localities within these states don’t care if they receive funding, individual states sure as hell do.

States care a lot about the general economic outlook and growth of their metro regions, whereas local officials are sometimes captured by the interests of local homeowners to the detriment of the broader region. Creating incentives and showing states how they are allowing localities to inhibit growth could spark a lot of change through state legislatures.

“Exclusionary zoning is a product of [the permissiveness of] state law, and if we can get states to address that through funding incentives, I think that that could lead to some real change at the local level,” Phil Tegeler, executive director of the civil rights group Poverty and Race Research Action Council, told Vox. “Local governments have no inherent authority that’s not granted to them by state government.”

Politically, doing something like this could be dicey. While Biden has staked out a clear opposition to exclusionary zoning, many of the most exclusive places are run by Democrats who disagree or have their hands tied by empowered homeowners. For example, in California, the lobbying arm of some homeowners helped block a bill that would have removed bans on fourplexes near transit stations.

“No single local government could even solve [the housing crisis] if it wanted to and therefore has no incentive to try because it’s politically difficult to try,” Andersen tells Vox. “Whereas at the state level or at the federal level, we can start to say this is an economic problem for everybody, so we should be taking actions at the state and federal levels to move the scale.”