House Democrats Note the Need for Zoning Reform, But Offer the Wrong Solution

As big cities and residents nationwide struggle to keep up with soaring housing costs, there is a near universal understanding that more must be done to increase the availability of affordable housing. Some believe that more government spending and regulation are viable proposals to increase the supply of housing. However, these solutions have been tried for years and have generally failed to keep prices in line with inflation. Instead, policymakers should try something radically different: get the government to stop preventing people from building housing.
It sounds unbelievable, but for decades local governments have put up complicated roadblocks that make it difficult for people and businesses to use their land for the most efficient use. These government-manufactured barriers include exclusionary land use requirements, exorbitant building fees, stringent environmental laws, and even minimum parking lot space per apartment unit. Burdensome regulations make it costly to build high density housing units, which prevents the supply of housing from reaching an equilibrium with housing demand. This imbalance ultimately puts upward pressure on housing prices in the housing market.
Further, even when developers do build, higher construction costs simply get passed along to residents and homebuyers in the form of higher sales and monthly rental prices, thereby making housing less affordable.As the previous administration highlighted in a 2019 Executive Order, “these regulatory barriers increase the costs associated with development, and, as a result, drive down the supply of affordable housing.” 
Thankfully, it seems the problem of restrictive zoning transcends the political spectrum, which makes it possible for some movement by the federal government to address it. In fact, the Biden White House Council of Economic Advisors in June released a blog on zoning, writing “exclusionary zoning laws enact barriers to entry that constrain housing supply, which, all else equal, translate into an equilibrium with more expensive housing and fewer homes being built.” Afterall, high housing costs take a big chunk out of the pockets of lower-income Americans and generally harm the economic competitiveness of big cities - which is the core geographic constituency of the Democratic Party.
It seems this message was received among Democrats in Congress, which to their credit, included a section on zoning reform in the “Build Back Better” reconciliation bill. Their multi-trillion dollar spending bill contains many dubious spending provisions, from cancelling the debt of the broken flood insurance program, to hundreds of billions of dollars for more government-built housing and more. Tucked-in to their massive spending bill is a section for the Department of Housing and Urban Development to create a new “Unlocking Possibilities Program,” which would provide grant funding for localities to develop and substantially improve housing strategies. The Program is appropriated $1.75 billion over ten years to address zoning.
Of course, it is welcomed news that the majority party recognizes the need to address the severe inefficiencies caused by restrictive zoning, but their solution, as written, is flawed. First and foremost, this new spending is not offset so it will add to the already ballooning federal debt. Second, the provision leaves HUD with significant discretion on how they award these grants payments to localities, meaning the secretary can unilaterally decide who gets funding and who doesn't. Finally, the guidelines of this program are extremely vague; localities just have to submit their plan and be awarded new federal dollars and are not obligated to follow through on their housing reform plans, which could just end up wasting these taxpayer dollars.
A better, more reasonable and fiscally responsible approach, as NTU suggested ahead of the committee’s passage of their bill, is to strike the funding section and replace it with the bipartisan Yes in my backyard (YIMBY) Act. This bill, authored by Reps. Hollingsworth (R-IN) and Kilmer (D-WA) is a much-needed step towards eliminating discriminatory local land-use policies without adding more burdens on taxpayers and the federal government. NTU was proud to endorse this bill earlier this year because it is a sensible solution to a pressing issue facing millions of Americans.
Unlike the $4.5 billion grant program, the YIMBY Act requires localities to detail their rationale for choosing not to cut harmful land use regulations in order to receive Community Development Block Grant funding. By tracking the progress, rather than giving money to localities just to plan reforms, it can help ensure transparency on what steps local governments are taking towards eliminating burdensome zoning regulations.
The solution put forward by House Democrats is flawed and will likely lead to a waste of billions of dollars - all the while not improving the housing affordability situation. Taxpayers deserve a bipartisan solution that protects their interests as much as renters and homeowners. That’s why Congress should reject the “Unlocking Possibilities Program” and instead pass the commonsense YIMBY Act as soon as possible.