“Over the course of the pandemic, home prices have skyrocketed; the underlying issue is simply that there are not enough homes for the people who need them (in particular in the places where people need to live for their jobs). This supply crisis is forcing a growing number of people to bid on a small number of available homes, thus increasing prices.
But not all “housing investments” are created equal. Generally, there are two ways you can attack an affordability crisis: 1) You work to make the item itself less expensive (supply-side policies), or 2) You give people more money to be able to afford the item (demand-side policies).
Both have their place in policymaking. But if you pursue demand-side policies when you are facing a massive supply shortage, you end up increasing prices, not decreasing them. And the nation is facing an estimated 3.8 million unit shortage.”
“The major constraint on building housing in the places where people are demanding it the most is zoning laws. These laws restrict what kinds of homes can be built and where, and regulate the size of homes to the point that smaller or “starter” homes are becoming incredibly scarce. For instance, a law mandating that lots of land be no less than 4,000 square feet means that starter homes (smaller than 1,400 square feet) are illegal. The history behind these laws is complicated, but essentially they are a way for some homeowners to block change in their communities, and in their original form were a tool of segregationists.
Beyond even small, single-family homes, it is illegal in most of the United States to build duplexes or small apartment buildings that could bring down the cost of housing. The White House has repeatedly acknowledged this problem, but in the Build Back Better bill, Democrats have metaphorically thrown up their hands, abrogating responsibility for the driving forcebehind skyrocketing home prices.
The best way to have tackled this problem would have been to tie the dollars in the bipartisan infrastructure framework to zoning reform. Iowa law professor Greg Shill suggested tying existing highway dollars to zoning reform, quipping that “there’s no reason Iowans should be subsidizing a highway from Silicon Valley to SF when the Valley makes it illegal to build homes under $1M.”
Essentially, if California wants federal dollars to build highways or transit, it’s going to need to reform policies like parking minimums and minimum lot sizes to get it. Instead, states are being handed money from the federal government to construct transportation networks that exclude large swaths of the American public from using them.
The federal government has held highway funding hostage for other reasons in the past — notably was the 1984 National Minimum Drinking Age Act, which “requires that States prohibit persons under 21 years of age from purchasing or publicly possessing alcoholic beverages as a condition of receiving State highway funds.” President Ronald Reagan also conditioned highway dollars on setting a national minimum speed limit; this was later repealed, which one study shows may have cost over 12,500 lives
If Democrats are serious about attacking housing inflation, they should put real money into incentivizing states to hold localities accountable. States are ultimately in control of local zoning policy “