How State and Local Governments are Responding to the Affordability Crisis
The country is in the midst of a housing affordability crisis. As our recent State of the Nation’s Housing report points out, cost burdens remain near record highs for low-income households, and burdens are growing for households higher up the income scale as well, which has added to the growing throng demanding action on affordability. With limited federal action, voters and policymakers in many states and localities are taking action to improve affordability in their jurisdictions. This has resulted in a predictably varied landscape of state and local policies, the most recent of which fall into three broad areas: funding for more affordable housing, regulation reform to allow more housing, and funding to provide services for those hurt most by the lack of affordability.
Raising Funds to Build and Preserve Affordable Housing
There was a flurry of ballot measures in the 2018 midterm elections aimed at increasing funding for affordable housing on the state and local levels. As mentioned in our State of the Nation’s Housing report, one of the most substantial measures approved by voters was Proposition 1 in California, which allocated $4 billion in bonds for housing programs for low-income residents. Many localities passed similar measures, albeit on a smaller scale. Several cities and counties turned to ballot measures to approve bonds to fund affordable housing efforts, including several counties in the Portland, OR metropolitan region ($652 million), Austin, TX ($250 million), Berkeley, CA ($135 million), Charlotte, NC ($35 million), and Chapel Hill, NC ($10 million). While a majority of voters also supported substantial bond measures in San Jose, CA ($450 million), Santa Rosa, CA ($124 million), and Santa Cruz, CA ($140 million), these measures did not garner the two-thirds majority support required. Smaller cities turned more to taxes or fees to fund affordable housing, including in East Palo Alto, CA (commercial office tax, estimated $1.7 million revenue), West Marin, CA (hotel tax, est. $1.3 million), Telluride, CO (property tax, est. $554,000), and Bellingham, WA (property tax, est. $4 million). Not all states rely as directly on ballot measures, however, including Massachusetts, where the state legislature approved $1.8 billion in bonds in 2018 for the production and preservation of affordable housing.
Easing Restrictions on Development through Zoning Reform
Restrictive zoning and other stringent land-use regulations are also a major source of the high cost – and even prevention – of new housing development. In a report released last year, the National Multifamily Housing Council estimated that regulation accounts for over 30 percent of the costs of multifamily housing development. Reforming these regulations and changing zoning to open more areas to incrementally higher density has become a new priority, especially for those in the ‘yes in my backyard’ (YIMBY) movement. Minneapolis made big waves on this front, approving a comprehensive plan in 2018 to allow duplexes and triplexes in areas currently exclusively zoned for single-family housing (it is worth noting that the plan passed, but the zoning change has yet to be made). Oregon’s state legislature later took a similar action on a larger scale, enacting a law last month that requires cities with more than 25,000 residents to allow an array of denser housing types, in addition to requiring cities with at least 10,000 residents to allow duplexes in single-family zoned areas. Enabling more types of housing was also the goal of the County Council of Montgomery County, Maryland when it adopted a zoning change in July of this year removing many barriers to building accessory dwelling units (ADUs). And late last year, San Francisco’s city council eliminated minimum parking requirements, which is expected to make housing development easier and less expensive (Minneapolis also included this policy in its comprehensive plan).
Not all places agree on the correct approach, however. For example, when Nashville attempted to require more affordable housing through an inclusionary zoning policy in 2016, the state legislature of Tennessee in 2018 enacted a law banning all inclusionary zoning policies, overruling Nashville’s law and preempting any other locality from following suit. This is one of many state preemptions of policies designed to promote affordable housing.
Increasing Funding for Preventing Homelessness and Providing Services
Homelessness is becoming increasingly visible in some areas as unsheltered homelessness grows, even while overall homelessness declines, and this may be contributing to the rising pressure to create and preserve affordable housing. In California, where 33 people per 10,000 residents are experiencing homelessness (nearly 130,000 people) and nearly 70 percent of those people are living outside of homeless shelters, voters approved Proposition 2 in 2018, allocating $2 billion in revenue bonds towards homelessness prevention initiatives. San Francisco voters also passed a substantial ballot initiative to increase the gross receipts tax on businesses in the city earning more than $50 million per year (mostly applying to technology companies), with an estimated revenue of $250-300 million per year for homelessness prevention and services. Voters in Oakland, CA passed a tax on vacant or rarely-used properties, expected to raise $10 million over 20 years, and voters in Berkeley, CA passed a measure increasing the real estate transfer tax, expected to raise $6 million per year for homelessness services.
Barriers and the Road Ahead
The affordability crisis is being felt across the country, and while these types of alleviating efforts are underway in many communities, many challenges remain. The effects of local opposition, often fueled by not-in-my-backyard (NIMBY) sentiments, are still posing substantial barriers to efforts to expand affordable housing in many areas, as are the effects of state preemption. Without more leadership from the federal government, states and localities may look to one another for lessons on tackling this crisis, but many more might not act, resulting in an uneven landscape for homeowners and renters struggling with high costs across the country.