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How President Biden Can Defuse The Housing Crisis

President Joe Biden did not win the 2020 election because of his housing plan, but it can still dramatically improve the lives of millions of Americans. One part of his plan in particular, adopted entirely from a bill written by Senator Cory Booker (D-NJ) and Majority Whip Jim Clyburn (D-SC), has the potential to greatly mitigate the US housing crisis. It must be a top priority for the Biden presidency to enact the Booker/Clyburn plan to tear down regulatory barriers and make housing affordable for average Americans.

Exploding housing costs in the US represent one of the greatest burdens that Americans face today. Across the country, home prices are increasing twice as fast as wages. Contrary to popular belief, the problem isn’t just limited to major cities; median home prices are growing faster than wages in 80% of US counties.The affordability of homes is literally rising away from the buyer’s market, as increases in wages simply cannot keep up with the rapid pace of increased housing costs. At the current rate, the problem will only continue to get worse as more and more Americans watch home values surge past what they can afford to pay.

Even current homeowners are struggling with paying the costs of owning their homes, as around 3 in 10 spend more than 30% of their income on housing, making them officially “cost burdened.” The numbers are even worse for renters, nearly half of whom are cost burdened.  Home costs are taking up ever-growing chunks of Americans’ budgets, making it harder for people to afford other basic necessities and save for their future.

These numbers aren’t surprising, given that the US currently has a historically low number of available houses on the market. There are fewer homes for sale today than since measures began in 1982. Basic economic principles offer a straightforward explanation for the housing crisis: a massive shortage of housing supply (particularly in high-demand metro areas) has led to an explosive increase in prices.  

So why is there such a shortage of housing supply? Zoning restrictions are one of the biggest reasons why new housing isn’t being built even where demand is high. Developers cannot simply buy land and build whatever they want on it; they must first go through a process established by the town or county in which they’re developing. This involves a number of tedious steps: obtaining building permits, ensuring that they meet the zoning designation of the locality, and complying with height limits, among countless others. Communities often purposefully make the development process prohibitively expensive or lengthy to ward off new construction and protect local home values by choking supply. This trend may benefit local residents, but when carried out nationwide, has led to the current national housing shortage.

One of the biggest cost-inflators is “single-family zoning.” Single-family zoning refers to local restrictions that prevent more than one family from living on a lot in a given area.  Neighborhoods with single-family zoning requirements are easily identifiable: suburbs with rows of cookie-cutter houses, white picket fences, and spacious backyards. It’s no coincidence that apartment buildings don’t just spring up in the suburbs; it’s purposeful design. Single-family zoning requirements prevent the building of any kind of dense housing, artificially inflating home prices by significantly limiting the number of people that can live in a high-demand area.

Booker and Clyburn’s solution is extraordinarily simple and addresses the problem directly: allow developers to build more housing.  

The Booker-Clyburn plan would compel local governments to eliminate single-family zoning restrictions, make the permitting process easier, and relax lot size and height limits. These changes would make it easier and legal to build new, denser housing where demand is high, making housing prices more affordable by increasing supply. States would have to comply with these new rules to continue receiving crucial federal transportation funding through the Surface Transportation Block Grants and the Community Development Block Grant.

This solution, adopted by the Biden administration, stands out from all others in that it addresses the problem directly by removing key barriers, rather than simply providing incentives.  The Obama administration established guidelines for localities to follow that encouraged racially inclusive housing policy, and early results were somewhat encouraging but limited.  Indeed, the Obama model serves as an important framework for how the federal government can leverage funding to serve the greater national good; however, the intensifying housing crisis calls for a more robust solution.

Though the Biden plan may raise concerns related to federalism, presidents have already taken similar measures in the past.  For example, the US doesn’t technically have a nationally mandated drinking age, but if any state lowers their drinking age below 21, they lose 10% of their federal transportation funding. That rule was signed into law by President Reagan in 1984, proving that both sides of the political spectrum have been willing to leverage transportation funding in the past. The Booker-Clyburn proposal does not specify a limit to how much funding could be cut, merely saying that the money would be contingent on compliance by states.  Biden will likely face court battles over the constitutionality of the proposal if signed into law.  Notably, though, the Reagan law was challenged and upheld in the Supreme Court three years later, suggesting that Biden has at least some legal standing for such a plan.

If anything, the deregulation of the housing market seemingly fits more into conservative dogma than a liberal one. Conservative leaders often rail against regulations as being overly burdensome excesses of government that inhibit the free market. Housing is arguably no different, so it should be feasible to build some bipartisan consensus around deregulating the housing market. Crucially, the plan leaves implementation up to local authorities, ensuring that control still remains in the hands of locals even as the federal government sets standards.

It’s especially notable that the country’s most unaffordable housing is found in some of the most liberal places in the country: San Francisco, the coast of the Pacific Northwest, and New York City.  Meanwhile, conservative Texas is one of the fastest-growing states in the country in no small part because it’s relatively affordable to live there.

Liberals would do well to take a note from their conservative counterparts and see that excessive regulation is making a staple of basic life security impossible for more and more people.  Conservatives ought to join Joe Biden to support the Booker-Clyburn plan to allow the free market to reign in ballooning housing costs.

It can’t be known how much resistance President Biden will meet from states and local authorities, but judging from the Reagan case, it seems very likely that there will be broad compliance with the law if it gets passed.  Biden has the potential to fundamentally improve the lives of tens of millions of Americans with this plan.  Homeownership is a fundamental part of the so-called American Dream, and it’s a shame that so many Americans can’t share in that because of bad policy.  Voters across the political spectrum should push their representatives and their president to make solving the housing crisis a top priority of this administration.

Photo: Image via Flickr (Teofilo)