Introduction and summary
The United States faces a growing housing affordability crisis that is the result of many years of policy inaction at all levels of government. Nationally, a little more than 45 million households rent.1 According to recent data from the U.S. Census Bureau, 21.8 million households spend at least 30 percent of their income on rent and, within this group, 11.2 million spend at least 50 percent on rent.2 This means that 48 percent of all rental households are considered cost burdened, with a distressingly large share facing an extreme cost burden.
The numbers are also daunting for individuals and families trying to achieve the dream of homeownership. Prospective buyers face the twin challenges of higher interest rates and the need to save for a down payment. A recent study by Harvard University found that the monthly cost—including property taxes and insurance—of owning the median-priced home in America is now $3,000.3
Median rents4 and the all-in cost of homeownership are the highest in large metropolitan areas with strong employment growth. This creates a paradox: The regions with the greatest overall economic opportunity have the most formidable barriers to finding an affordable apartment or becoming a homeowner. In order to avoid high housing costs, many workers live far away from their jobs, where prices are lower, and suffer the burden of a daily supercommute. For people living in less dynamic regions, housing costs in top employment markets are enough to dissuade them from relocating. Persistent worker shortages, an inability to build intergenerational wealth through homeownership, and a growing sense that the American dream is slipping away are just a few of the consequences of the ongoing housing crisis.
The regions with the greatest overall economic opportunity have the most formidable barriers to finding an affordable apartment or becoming a homeowner.
A significant contributing factor to this crisis is local governments’ adoption of zoning ordinances that artificially restrict the supply of new housing—particularly affordable housing—below what the market would otherwise provide. Reforming local zoning regulations to accommodate more housing is an important and often overlooked pathway to easing the housing cost burden over time. Overhauling local zoning can take many forms, including allowing taller apartment buildings along high-frequency transit corridors, eliminating or reducing minimum parking requirements, and permitting the construction of accessory dwelling units, among other changes.
The benefit of these reforms is that they can promote the construction of additional housing units without the need for public subsidies. However, removing barriers to the production of housing—both market-rate and income-restricted—will not alone be sufficient to provide safe, healthy, and affordable housing to everyone. Reforming land use and zoning rules is not a substitute for federal, state, and local programs that fund the construction, renovation, and maintenance of low-income housing units. Rather, it is an important complement to existing programs and proposals for new reforms that provide targeted subsidies intended to benefit residents facing the greatest economic need.5
Given the untapped capacity of land use and zoning reform to unleash the construction of new housing units, the federal government should encourage local political subdivisions that control land—including cities, counties, and townships—to undertake substantial structural reforms. Zoning emerged as an important new power of local government in the early 20th century but has been abused over time. To combat this abuse, the federal government should create a new federal program known as Building Opportunity to provide significant, flexible funding to local jurisdictions that undertake significant land use reforms.
This proposal builds on the Biden-Harris administration’s 2022 Housing Supply Action Plan and the U.S. Department of Housing and Urban Development’s (HUD) Pathways to Removing Obstacles to Housing (PRO Housing) program, which provides grants to state and local authorities to “identify and remove barriers to affordable housing production and preservation.”6 The PRO Housing program specifically calls out “restrictive regulatory, zoning, or land use policies” and “outdated procedures or permitting processes” as important barriers.7
The theory of change underlying this proposal is that the fundamental obstacle to zoning reform is local political opposition, not a lack of technical planning capacity. It is true that zoning regulations are complex and altering them across an entire community is a time-consuming endeavor that may require additional staff or assistance from outside consultants. Yet localities frequently hire consultants, and these costs, while meaningful, are modest compared with other undertakings such as infrastructure development. The real barrier to change comes from entrenched local political actors seeking to maintain the status quo. The widely used acronym NIMBY (not in my backyard) wasn’t coined for nothing; in many communities, residential zoning rules have hardly changed since they were first adopted in the 1920s.
In many communities, breaking the political logjam will require an incentive. The Building Opportunity program would provide a substantial reward to localities that commit to a deep redesign of their zoning regulations to accommodate more housing of all sizes and types. The federal funds would be flexible, allowing the recipient to spend them on a wide variety of local needs. Thus, the Building Opportunity program provides local elected officials with a value proposition: Do the hard work of pushing through zoning reform and, in exchange, receive significant, flexible federal funding to make real community improvements. Eligible uses of federal Building Opportunity funds would include affordable housing, drinking water, wastewater, public transit, public parks, broadband internet, and economic development, among others.
Emergence of zoning
The authority to regulate land use is a substantial power of local government. Through the enactment of a land use and zoning regulations, local political subdivisions such as cities may proscribe the use (e.g., residential, commercial, industrial, recreational, or agricultural) to which a parcel of land may be employed, as well as the height, bulk, and setback distance, among other features, of any structures on the parcel.
American cities in the late 19th and early 20th centuries were loud, overcrowded, and polluted riots of largely unregulated economic activity. Zoning arose in response to these conditions as a way to protect property owners—both residential and commercial—from loss of value. Prior to the introduction of zoning as a legal tool, incumbent property owners faced the constant threat of a new building or industry moving in and undertaking activity that harmed their businesses or caused their property values to fall. Zoning ordinances provided a legal tool to disallow jarringly incompatible land uses and obtrusive structures that caused economic harm. In 1926, the U.S. Supreme Court ruled in Village of Euclid v. Ambler Realty Co. that zoning regulations were constitutional on the grounds that they broadly advanced “public health, safety, morals, or general welfare.”8
The Supreme Court agreed with the argument that the twin developments of rapid urbanization and industrialization required the state to assert more control over private property and economic relations than would have been tolerated in previous eras. Justice George Sutherland delivered the majority opinion in Euclid, stating: “Until recent years, urban life was comparatively simple; but with the great increase and concentration of population, problems have developed, and constantly are developing, which require, and will continue to require, additional restrictions in respect of the use and occupation of private lands in urban communities.”9
In a separate case over zoning, the Illinois Supreme Court had found that land use regulations were necessary “to meet the changing conditions” of modern urban life.10 The Illinois court connected zoning with specific public benefits: “The establishment of such districts or zones may, among other things, prevent congestion of population, secure quiet residence districts, expedite local transportation, and facilitate the suppression of disorder, the extinguishment of fires, and the enforcement of traffic and sanitary regulations.”11 The Illinois court’s finding justified the use of state police powers by connecting zoning to the amelioration of well-established public policy challenges. In the 1920s, U.S. Secretary of Commerce Herbert Hoover enthusiastically promoted zoning and published a widely read pamphlet entitled “A Standard State Zoning Enabling Act.”12 Hoover argued that zoning was necessary to “protect homeowners from business and factory encroachment into residential areas.”13
The power to control land use was a fundamental governmental reform of the late Progressive Era. The justifications put forth in defense of zoning focused on seemingly race- and class-blind issues like improving fire suppression, protecting property values, and reducing congestion, pollution, and communicable disease transmission.14 However, the power to regulate land use has often been deployed in discriminatory and exclusionary ways.15 For instance, under the leadership of Harland Bartholomew, St. Louis became one of the earliest adopters of zoning in 1918. Planners made sure to draw their zoning maps so that industrial production and less desirable establishments such as nightclubs, pool halls, and liquor stores were intentionally located in and around Black neighborhoods.16 Discrimination did not give rise to land use and zoning. However, once conceived and validated by the courts, land use and zoning served as an efficient new legal tool to reinforce existing patterns of race- and class-based discrimination.
The justifications put forth in defense of zoning focused on seemingly race- and class-blind issues … However, the power to regulate land use has often been deployed in discriminatory and exclusionary ways.
One of the most pernicious long-term consequences of zoning regulations has been to inhibit the construction of sufficient housing in many communities by designating a large share of urban land for single-family homes on substantial lots. This approach to zoning makes it much harder to produce a diverse housing supply that offers residents affordable choices across the income spectrum. The outsized preference for single-family housing cuts across city size. Single-family units make up 71 percent of the housing supply in Fort Worth, Texas; 78 percent of the supply in Montgomery, Alabama; and 84 percent of the supply in Joliet, Illinois.17 Research shows that these percentages are not outliers: Many cities across the nation have similar single-family home shares.18 As a point of comparison, only 35 percent of residents of the European Union live in a detached or single-family house.19
The exact zoning labels and restrictions applied to residential areas vary by city. But when a high percentage of urban land is reserved for single-family homes, the approach is typically deemed exclusionary because it prohibits other housing types—including accessory dwelling units (ADUs), which are defined as a smaller secondary residential unit with complete living amenities located on the same lot as a primary residence, duplex, fourplex, and larger apartment building.20 And exclusionary zoning tends to concentrate poverty—defined as occurring in any census tract or group of tracts where 40 percent or more of the residents fall below the federal poverty line in the central city or certain targeted pockets of outlying areas.21 Concentrated poverty hurts children and reduces access to opportunity. As the White House Council on Economic Advisers notes, “Because exclusionary zoning rules drive up housing prices, poorer families are kept out of wealthier, high-opportunity neighborhoods.”22 And neighborhoods matter greatly: Research looking at data over more than two decades shows that “neighborhoods can have significant causal effects on children’s long-term outcomes, including their earnings.” 23
In light of this troubling history, it may be tempting to think that the solution is to eliminate zoning altogether. As far back as 1972, the libertarian scholar Bernard Siegan put forward the idea of repeal in Land Use Without Zoning, and the concept has gained some steam as of late.24 Yet returning to a pre-zoning era would bring its own negative consequences and risk sparking a political backlash resulting in even less overall housing production. Zoning remains an important tool for local communities to shape their future development. The solution is to retain the central benefit of zoning—the separation of deeply incompatible uses—and to remove unnecessary barriers to more housing and inclusive growth. The status quo is not sustainable or desirable. The time has come for substantial reform.
Cost of land use restrictions
The cost of new housing in a given area is a function of multiple factors, including land, labor, materials, taxes, and regulations, among others. For years, economists have built mathematical models to estimate the share of housing cost attributable to each of these factors. Though no two models reach the exact same conclusion, economists generally agree that regulatory barriers to housing production are a significant source of price increases over time.
The amount of land within a metropolitan area that is available for housing development depends on both geography and land use policy—the difference being that land use regulations can change while geography cannot. The combination of these two variables substantially accounts for the elasticity of housing supply in a given metropolitan region. On average, regions with few geographic and regulatory restrictions have a more elastic housing supply and lower home prices than more constrained or inelastic regions.
In a highly influential 2010 study, economist Albert Saiz found that, “The large variance in housing values across locales can indeed be partially explained by man-made regulatory constraints.”25 A more recent study by Sean Becketti and Elias Yannopoulos—two economists in the housing research group at Freddie Mac—similarly found that, “Not only have house prices been more volatile in inelastic cities, but house prices have grown 75 percent faster in inelastic cities than in elastic cities for the last 3-1/2 decades.”26 Housing prices only tell part of the story. To get a more complete picture, it is important to look at changes in wages, since it is the ratio of earnings to housing prices over time that captures the pressure and unaffordability of an area. Becketti and Yannopoulos found that the ratio has increased in inelastic metro areas over the past 35 years, meaning housing has become less affordable: “However, growth in median family income has been only marginally higher in inelastic cities. As a result, cities such as San Francisco, New York, and Seattle have become more and more expensive, making it more and more difficult for middle-income workers to relocate to these high-growth areas.”27
Cities cannot change their geographic constraints—features such as rivers, lakes, wetlands, and steep terrain—but they can reduce the regulatory strictures on housing construction. The persistently high cost of renting or purchasing a home has opened the door to grassroots action in support of zoning reform.
Grassroots reform
Cities across the country have started to amend their zoning codes to permit more housing and to lower the costs of housing development by reducing or eliminating certain mandates such as lot size and parking minimums. These types of changes may not seem all that substantial, but they can have a significant effect on the number and cost of new residential units.
Industry research from 2021 found that the median cost of a single structured parking space (i.e., one within a separate deck or below a building) was $25,700.28 Both the space required for parking and its construction costs can limit the number of new units built over time or increase the cost to rent or buy spots. More than 50 cities of all sizes have eliminated parking minimums,29 including Anchorage, Alaska; Gainesville, Florida; Raleigh, North Carolina; and Branson, Missouri, to name only a few.30
Other cities have gone even further by paring back or eliminating single-family only zoning. Importantly, the elimination of single-family only zoning does not preclude the construction of single-family homes. This land use change simply means that other housing types are also permitted by right within areas previously reserved for only single-family homes.
For instance, Minneapolis has enacted two important zoning reforms in recent years. First, in 2015, the city enacted a law eliminating parking requirements for multifamily buildings with between three and 50 units located near high-frequency transit.31 The city defined “high frequency” as transit service every 15 minutes or less. Moreover, the city reduced parking requirements by 50 percent for larger multifamily buildings. Second, in 2019, Minneapolis adopted a new comprehensive plan that eliminated single-family zoning citywide, along with other changes to spur housing construction.32 Prior to this change, 70 percent of the city’s total land area was zoned single-family. The updated zoning now allows for the construction of triplexes in these areas.33
The state of Florida passed the Live Local Act in 2023, later amending it in 2024. With respect to local land use, the bill includes a limited preemption of local zoning laws. Specifically, the Live Local Act requires that cities and counties “authorize multifamily and mixed-use residential as allowable uses in any area zoned for commercial, industrial, or mixed use if at least 40 percent of the residential units in a proposed multifamily [rental] development are rental units” that will remain available for “at least 30 years.”34 Moreover, the bill increases the allowable density of new developments with affordable units: “[A] municipality may not restrict the floor area ratio of a proposed development authorized under this subsection below 150 percent of the highest currently allowed floor area ratio.”35
In 2021, the City of Charlotte, North Carolina, adopted a comprehensive long-range plan that calls for eliminating single-family only zones. Since the adoption, the city has begun amending its Unified Development Ordinance (UDO) to conform to the plan. Charlotte’s stated goal is to provide a “diversity of housing options by increasing the presence of middle density housing (e.g. duplexes, triplexes, fourplexes, townhomes, ADUs, and other small lot housing types) and ensuring land use regulations allow for flexibility in creation of housing within neighborhoods.”36 The city is continuing to amend the UDO to permit greater housing options. For example, the city is currently debating the inclusion of language that would add a new compact residential development option and make it easier to construct triplexes in certain areas.
These examples, which are only a sample of reforms occurring nationwide, are a great start. But the trickle of reform needs to become a flood. One way for this to happen is for the federal government to incentivize local jurisdictions to reduce the regulatory barriers to new housing construction with a combination of community development funding and financing.
Incentivizing zoning reform
Updating zoning codes is both a technical and political challenge. To transform an ossified community hostile to abundant housing into one that welcomes housing of all types is a major lift. The federal government can help to improve the value proposition of reform by offering a mix of flexible funding and financing in exchange for substantial local reforms.
The Building Opportunity program would be a competitive program run by HUD in cooperation with other federal departments and agencies. Eligible entities would include any local political subdivision with authority to regulate land use. Local jurisdictions would submit an application to the secretary of HUD detailing a plan for substantial zoning and permitting reform. Applications would be scored based on four criteria:
- Total housing (40 percent): The applicant would calculate the maximum theoretical housing production allowed by right (i.e., not requiring discretionary or legislative approval by a local board or city council) under the amended zoning code compared with the existing code.
- Share of affected land (10 percent): The applicant would calculate the percentage of local land, excluding streets and other rights of way, affected by the proposed zoning code changes.
- Density along transit corridors (30 percent): The applicant would calculate the maximum theoretical housing production allowed by right on high-frequency transit corridors, defined as those offering fixed-route service with 15-minute headways during peak periods.
- Permitting times (20 percent): The applicant would propose a standard schedule for reviewing and approving new housing units of all types. In addition, the applicant would commit to reporting on both the number and approval period for at least five years following receipt of federal assistance.
Phased award: Federal awards would be phased in over time. Following selection by the HUD secretary, an applicant would receive an initial award that would fund up to 80 percent of the cost of hiring or contracting the technical assistance needed to carry out the proposed reforms. Applicants would have up to 18 months to adopt an updated zoning code that substantially conforms to the proposal submitted to HUD. The secretary would have the final discretion as to whether the reformed code was sufficiently in keeping with the commitments made in the application. Following a determination of substantial conformity, the secretary would authorize the disbursement of the remaining funding and financing award.
Local groups: Local jurisdictions competing for Building Opportunity assistance would be grouped by population: 1) localities with less than 100,000 residents; 2) localities with 100,000 to 500,000 residents; and 3) localities with more than 500,000 residents. The first two groups would each receive 30 percent of Building Opportunity funds, while the largest localities would receive 40 percent. The selection criteria would apply to all three groups equally.
Funding: The Building Opportunity program would provide $2 billion annually over five years, or $10 billion total. Of this annual amount, $100 million would be set aside per year for technical assistance grants, with priority for smaller jurisdictions.
Eligible uses: A key feature of the Building Opportunity program would be flexibility. Every community has a unique set of needs, and localities selected for an award would have the ability to choose what form they want the federal assistance to take from a list of existing programs. The Building Opportunity funds would take on the eligibilities and regulations of the underlying programs once the applicant made their choice. For instance, if an applicant chose to allocate half of their award to HUD’s HOME program, then 50 percent of the Building Opportunity award could be spent in accordance with the regulations—such as eligible projects and local match requirements—governing the HOME program. The full list of programs includes:
- Administration: Up to 5 percent of the award could be used for the cost of full-time public administrative staff or consultants for a period of up to five years to defray the cost of accelerating permit reviews and approvals.
- Environmental Protection Agency: Grant funding or financing for projects eligible under the recipient’s Drinking Water State Revolving Fund or Clean Water State Revolving Fund programs
- Federal Transit Administration: Section 5309 (urban) or Section 5311 (rural) or Section 5339(a) for Bus and Bus Facilities or the Ferry Program
- HUD: Economic Development Initiative; Green and Resilient Retrofit Program; HOME Program; Housing Choice Vouchers (Section 8)
- U.S. Department of Commerce: Broadband Equity Access and Deployment; Economic Development Administration
- U.S. Department of Transportation: Transportation Infrastructure Finance and Innovation Act loan credit risk premium
- U.S. Department of the Treasury: low-income housing tax credits
These programs cover a wide range of projects and activities intended to increase the supply of affordable housing, stimulate local economic development, and improve community infrastructure and essential services such as public transit, water, and broadband internet, among others. For local elected officials who want to tackle persistently high housing costs, the Building Opportunity program offers a substantial benefit in exchange for undertaking the difficult work of adopting land use reforms.
See also
Conclusion
The emergence of zoning as a power of local government represented a progressive reform in the early 20th century. Through zoning regulations, local officials could avoid jarringly incompatible land uses that reduced property values and forced people to tolerate the noise, pollution, and disruptions caused by industrialization and manufacturing. Yet the power to control land use has also been deployed in discriminatory and exclusionary ways. Many communities have locked up too much of their land with single-family-only zoning that artificially reduces housing supply, pushing up monthly rents and home prices. The federal government can help to stimulate housing construction by encouraging local governments to roll back the most restrictive parts of their zoning ordinances. More permissive zoning will not alleviate the housing crisis overnight, but it will allow private developers to build more housing, revealing how much of the current deficit can be resolved by market actors and how much remains for governments at all levels to subsidize.