A Shelterforce Roundtable on Regulation and Housing Supply: Where the Left and Right Agree (Sort Of)
Last year, the American Enterprise Institute (AEI)—a right-leaning libertarian think-tank—issued a report on how to encourage more development of affordable housing. One of the paper’s authors is a longtime Shelterforce reader, and he forwarded the report to us with a note that started: “While you probably are not a fan of the American Enterprise Institute, I expect you’ll find this paper interesting.” He was right on both counts.
The question of regulation and permitting of development is one that crosses usual political lines. In the current political climate, we should be very clear that regulation is not inherently bad, and many regulations have been responsible for our country having breathable air, drinkable water (in some places), and basic levels of safety and equal opportunity. But regulation is also not inherently good—Shelterforce readers are well aware of the effects of redlining and exclusionary zoning, for example.
We gathered some people who have done a lot of thinking and studying of these issues (including Charles Wilkins, the co-author of the aforementioned report) to discuss what it might look like to actually remove obstacles that get in the way of developing less expensive housing options responsibly. What’s possible? What are the trade-offs?
Joining us were Ingrid Gould Ellen of the Furman Center at New York University; Jamaal Green of Portland State University; Rosanne Haggerty of Community Solutions; Rick Jacobus of Street Level Advisors; Greg Maher of the Leviticus Alternative Fund; Alan Mallach of the Center for Community Progress and a National Housing Institute senior fellow; and Charles Wilkins, a consultant and co-author of the AEI paper.
By Miriam Axel-Lute Posted on March 30, 2017
Shelterforce: What regulations bother you most?
Ingrid Gould Ellen: Regulations can and do often address important health and safety concerns. We should balance that potential benefit against the likely reduction in housing supply, and the increase in cost that the regulation will impose. There’s no simple formula.
Alan Mallach: All regulations have some reason. I think zoning has the least health and safety benefits because of its historically exclusionary character. When you get into building codes and things like parking, every single one of them has some kind of justification. Yet, there are trade-offs. Every regulation has a reason, and yet every regulation also brings with it some kind of a downside.
Rosanne Haggerty: [As far as] building codes, there is plenty of evidence that anything that is in excess of structural safety, fire safety, and reasonable light and air standards adds cost without creating offsetting benefit. Other countries are doing [a lot] in terms of innovation, building typologies, and flexibility and adaptability of space as household occupancy needs change over time. That’s an area where there could be more agreement.
Gould Ellen: People talk about building codes more often than they talk about occupancy codes. I think it’s actually harder to justify occupancy codes. If people want to live in tighter spaces and with a larger household in order to save on their housing cost, or to live in a more accessible location, then it’s not clear to me that we should be interfering with that decision. Obviously, if you have 30 people living in a two-bedroom apartment, there’s going to be some concern. But we have no evidence that modest levels of what we would officially call “crowding” are detrimental to health or well-being.
Mallach: Zoning and building codes do tend to overlap a little bit. For example, you can find a zoning ordinance that will say a two-bedroom has to have a minimum of 1,200 square feet of usable floor space, or parking. So zoning isn’t just about the density.
Rick Jacobus: Talking about health and safety is a little bit missing the bigger picture challenge. The biggest savings [have] less to do with health and safety and more to do with the character and quality of the building. If we were to go through and remove the problematic requirements, the majority would be things that weren’t about the health and safety of the people living there, but were about [the] impact [the] building [has] on the surrounding neighborhood. We’ve regulated a kind of upper-middle-class standard into both the zoning and building codes in a lot of places [so that] it’s very hard to build a modest building. The reason isn’t because modest buildings are unsafe or unhealthy. It’s because they don’t improve the value of the surrounding buildings, and everybody showing up for those discussions is thinking about their own building.
The thing I liked about Charlie’s piece for the American Enterprise Institute was that they said, “The problem is us.” [It] isn’t regulation in some abstract sense. We all are exercising our power over development in our own interest, and we lose the bigger picture.
Mallach: And that usually comes down to zoning.
Charlie Wilkins: If you’re talking about having the market make a difference in the supply of economical housing, then what you need to attack is cost. All the things we do to regulate development add cost. The bottom line is how much the local government cares about solving that problem. If the local government cares more about maintaining the status quo than about providing economical housing, then everything continues as was, and the market isn’t going to build anything that people at the low-middle end of the workforce can afford. And I should also mention that it’s not “zoning and building code,” per se, because there is no land on which anybody can build apartments as of right.
But if the local government does care, then [it] can intervene in specific projects and help with height restrictions, density, setbacks, parking requirements, and things like that.
When you have an occupancy plan, and then, over three to five years, you have to get the rest of the entitlements you need, and at every stage of the process there’s somebody who is adding cost to your project as the price for their approval, that’s [a] problem.
Mallach: I don’t understand why you don’t think that’s zoning. The essence of the problem is if you don’t have a significant amount of land zoned as-of-right for this type of use to begin with, then most of the other issues become matters of spinning wheels.
Gould Ellen: Charlie, were you trying to make a distinction between what was absolute rules versus more procedural delays?
Wilkins: Yes. In the abstract, you can build apartments in Atlanta. In the specific, you cannot build an apartment anywhere in Atlanta unless you go through five years of torture and increased cost.
Jacobus: I was going to suggest that, in addition to the regulations, there’s a process cost embedded in the regulation. You need to have sprinkler systems and you need to have fancy design on the outside of your building, but if you can have that be built into the code and clearly available to you by right, without having to go through such a long process, that would save an enormous amount of time and lower your cost of capital as well because there would be less risk.
Gould Ellen: Couldn’t a state require that localities, when considering any potential new land use regulation, produce a housing impact statement that would estimate the amount of lost square footage that a regulation is imposing? How much less housing can you build now that this regulation is in place? That helps legislatures and policymakers weigh that cost against the potential benefits of the regulation.
Wilkins: How did we evolve politically to the point where the scale is tilted toward over-designed buildings that cost too much, then rent for more than tenants can afford? How do their interests get factored in as opposed to the interests of the homeowners who already live and vote in the town, and who are dominating the conversation?
While frustration with unintended consequences of regulations seems to cross political ideologies, so too does the commitment to community input and control. That manifests in homeowners being exclusionary, but you also have lower-income and marginalized communities that have suffered from urban renewal and similar disruptions—the idea of taking away community input on planning or development projects is not going to resonate with them either.
Jacobus: A city that wants to do this can learn a lot by working with one development [to] cut costs, but that’s dodging the big political challenge, which is when people rail about regulation as the problem. You hear it at city councils all the time: someone gets up and says, “We just need to cut the regulations, and then we’ll build more, make the economical housing more possible.” But where is it going to go? It’s really easy to say, “Yeah, we don’t really need all these regulations.” But the problem is, when you talk about it on my block, suddenly we need them.
I don’t know if you all are imagining these less-expensive, less-fancy buildings being clustered in certain neighborhoods, or being distributed across the city. It makes a difference, in terms of what that strategy looks like.
Mallach: I don’t think that this can be done through individual municipalities cutting deals with individual developers. That’s not going to address the systemic issues, and it raises questions of favoritism.
If you go to a typical suburb, you see lots of buildings that are the size, appearance, and mass of multifamily housing, but they happen to be office and commercial buildings and hotels. There are large parts of these communities, especially along arterial roads, where you could build thousands and thousands of multifamily units without affecting the character of established single-family neighborhoods. That would be something you could approach more easily. Of course at the other end, in a place like San Francisco, the land costs are already so insane that it’s going to be incredibly difficult to do economical housing under any circumstances.
Gould Ellen: It’s no longer homeowners, it’s also renters [who] don’t want the development next door, and largely for different reasons. They’re afraid that it’s going to be luxury housing that’s going to increase their costs. We need more housing [that] will reduce price pressures. The challenge is people don’t want it near them. If we could assure people that the burden of development will be shared more broadly, there might be a way to allow the market to respond.
Jamaal Green: Does the local government actually have a desire to build this housing? In many areas, that desire is not there at all, generally because the popular constituency is dominated by homeowner groups. The idea of having a housing impact statement only matters if there’s a desire to build more housing. While people may realize that we need more housing, there’s not a huge popular upswell across the country to actually build more.
Greg Maher: [In] San Francisco, a report [showed that] only 13 percent of families have children in the city. There’s a hollowing out of a lot of villages and towns in Westchester County of young people. Affluent and semi-affluent parents know that their kids can’t live in their communities any longer, even though they have a lot of resources. Is that going to start to maybe turn the tide a little bit against “Don’t let the door hit you in the butt while I close it?”
Mallach: I’ve been waiting for that for a long time. I started working on exclusionary zoning issues back in New Jersey a long time ago, and none of that ever got traction. I’m not wildly optimistic.
Jacobus: I’m more optimistic than Alan. I feel like there’s a growing political will to do something, and that what we lack is a large enough agenda of what to do. Inclusionary zoning has been taking off, and it’s great to see so many cities thinking hard about how to do some small portion of low-income housing. But we need a strategy for the whole market. The two aren’t mutually exclusive, but we don’t really have a way of zoning for moderate-cost housing. We need to set aside some land, and we need to make the rules appropriate for the kind of housing that we’re talking about.
Gould Ellen: Do you think people would be more sympathetic to the idea of the need for moderately priced, multifamily housing to allow older adults to age in place in their communities?
Green: No. Without a larger political organizing project, at multiple levels, folks will generally continue to vote defensively. A lot of the living and aging in place stuff, at least on the building side, is very much about [retrofitting] your own home. It hasn’t necessarily [turned into] planning a city that is friendly to people of all ages and all types. That requires a set of harder questions around the availability of transit, affordable housing, and other kinds of things that planners have been talking about for over a century. I do not want to assume some kind of growing consciousness or innate goodness on the part of the American people.
Jacobus: I’m going to stand up for innate goodness. People want to find a solution to this problem. Broadly, the vast majority of urban Americans want more affordable housing. But what they get asked over and over again is, “Can we put this building in your neighborhood? Can we cut corners here? Can we have less parking?” [Then] they don’t want it very much. We need a way for them to turn that little bit of want into a broad social agreement, and not a project-by-project fight.
Haggerty: Have we thought about reframing the package of amenities to essentially shift people’s mindsets about what they’re getting? We’ve always found that if the building is well designed and it’s understood that there’ll be 24-hour property management and oversight, people come around to those investments in their community.
Jacobus: What you’re [proposing is] subsidized projects, and what Charles is proposing is market-rate projects that aren’t beautifully designed, and don’t have all of those amenities that we like to talk about in our subsidized stock now.
Mallach: If you go back to right after World War II, hundreds of thousands of plain-vanilla garden apartments were built in the inner and middling suburbs of almost every city in the United States, as well as a fair number in the cities themselves. These units are, for the most part, still in decent shape, and providing either fairly affordable rental housing or they’ve become condos, which is typically the least-expensive homeownership opportunity in their respective areas. That’s the sort of thing we’re looking to try to recreate.
Haggerty: When [people] resist the kind of buildings that you’re describing, that’s not what they’re picturing. They’re picturing something that is going to be indifferently managed, that looks like it doesn’t belong here. Is there a way to be smarter about differentiating the kind of housing you’re describing from what we know is triggered in people’s minds when they hear “deeply subsidized,” or “more affordable” market-oriented housing?
Mallach: [There’s] no guarantee [that even] if you have developers putting up stuff with their money, and making a long-term financial commitment to the project, they’re going to maintain it.
Jacobus: We did such a terrible job in the ’60s and ’70s with design on those buildings. They’re still around and affordable because they’re really ugly. We could do a better job. Part of this dynamic is people in every single neighborhood, regardless of income level, want their neighborhood to move upmarket. They use design and the development process as a way to socially engineer their neighborhoods. What they don’t want is buildings that look like they would be affordable, and not just to low-income people, but to even moderate-income people. No matter how well designed the buildings are, if you can tell that they’re less expensive, there’s going to be some resistance to them.
Wilkins: If you consider how big an investment [a] home is, and the economic fact that you can’t diversify it, you have to have some sympathy.
Jacobus: Totally. We can’t make policy on the assumption that we somehow cure the human reaction to that. People are going to protect their perceived neighborhoods, and we have to work with that.
Gould Ellen: We have to at least have some level of oversight and decision-making authority at a higher level of government.
Mallach: California has adopted all kinds of statutes, designed with greater or lesser degrees of success, to try to get municipalities to zone for, accommodate, and deal with affordable housing. The trick is finding the balance, in terms of what is an appropriate level for the state government to essentially override local zoning and other regulations, while not running roughshod over people’s ability to be part of decisions in their communities, or more or less arbitrarily requiring stuff to go where it really doesn’t belong.
Jacobus: I don’t think state government is the answer by itself; [it’s] a piece of the answer. But there is a political equation that we haven’t solved around support for the idea of more modest-cost housing. If we could get a broader coalition in favor of it, it would be easier for the state or even the local government to make more modest-cost housing possible. I don’t think we should even want to get to the point where people don’t have some degree of local control. We need a broader coalition pushing on the other side that says local control often results in less affordability, and we all have an interest in affordability, so let’s counterbalance that.
Gould Ellen: It seems like that would be easier. You get some kind of state legislation that would assure localities that they’re not the only ones shouldering this burden.
Mallach: What’s interesting is that this is something that people have been engaged in since the ’60s and ’70s. If you look at the history, half a dozen or more states have enacted laws like the Massachusetts “anti-snob zoning act” [and] the New Jersey Fair Housing Act. But it’s always been seen as a very narrow carve-out for units that were explicitly affordability-controlled [and] means-tested. It’s never been approached as a vehicle for reducing the regulatory burden, so people could simply build housing that was less expensive.
Jacobus: One thing that changed since the ’60s and ’70s is the availability of sprawl development. In the ’70s people were building way out on the edges, where there were no pesky neighbors to complain. And now, we’ve more or less shut down that pipeline so any development is going to be in somebody’s backyard.
There’s this rising interest in [taking] some housing subsidy and [using] it for moderate- or above median–income households. That seems like a tragic development. The idea that the problems of people at 150 percent of median income are “affordable housing problems” is really confusing. They shouldn’t need subsidies. The market should be able to provide that. But we haven’t taken that on as a separate problem.
We need to keep some large share of the housing stock permanently affordable, and at a below-market cost. But there’s this huge middle where we need the market to do it, and we don’t need to price-restrict them, we need them designed and zoned in a way that’s going to be economical.
Mallach: I agree.
Wilkins: A potentially comparable context is Chevrolets and Fords. Nobody regulates prices on them, but at the same time we don’t forbid Chevrolet and Ford from building vehicles [with different price ranges].
Mallach: If you were able to create an unlimited supply of housing at affordable prices, all of which had adequate amenities in terms of access to jobs, transit, and so forth, then the analogy with the automobile industry would be precise. But in most markets, the land supply is constrained. One of the critical issues is to have enough land [on which] people can build a quantity of moderately priced housing to the point where you are adjusting the market to accommodate a more or less long-term, middle-income segment.
[Cities in Texas] do a pretty good job in this respect. You can buy or rent housing at, for the most part, prices that people in the middle-income range can afford. It doesn’t help the low-income population, but at least it helps the people in the middle, because of the relative lack of restraints on development, as well as the huge availability of flat, dry, easily built land, and the availability of infrastructure.
Maher: One of the things to think about is [whether] there’s some companion incentive for developers to take on a project where the upside for them might be lower than if they did higher-cost, upmarket development.
Jacobus: We don’t have to pay Ford extra to build the Ford Focus. The profit margin has got to be lower on the more economical cars, but the volume is greater. And they are incentivized to do it by the basic structure of the market.
Maher: I don’t think so. We know the market will not solve the affordable housing issue. Housing units have been created at a record pace over the last five years. Capital flows freely and it will flow toward the highest return, if you’re one of the few people willing to be a developer.
Jacobus: If it was possible to build middle-income housing, the profit margin doesn’t have to be greater than high-end housing in order for people to do it. We’ve done it at various points in the past. [A] high share of the housing that gets built now is luxury housing, but back in the ’60s and ’70s, it was a very low share, and it was probably still more profitable then.
Mallach: The amount of housing that is being built now looks like a huge amount relative to what was being built from 2006 to 2013. But a huge amount of it reflects pent-up demand because no housing was built in most parts of this country for seven or eight years. So it’s understandable that it’s going to be predominantly luxury housing, because as long as the supply of land and the opportunities to develop are constrained, people are going to go to the highest level they can.
Gould Ellen: We haven’t let the market try fully because of all of the regulatory barriers. Though it’s really important to underscore that the market is not going to build housing for low-income, very low-income, and extremely low-income households. There’s still going to be a need for subsidy.
Maher: That’s the whole point I was making.
Jacobus: Even building more middle-income housing isn’t going to solve that problem, or even make a very big dent.
Mallach: Not really, because the basic minimum cost of what it takes to provide a unit on the market, when you throw in maintenance, taxes, and a return on the cost of acquisition, is simply not going to reach the extremely low-income population.
Jacobus: But if we build a greater share of our housing as middle-income housing, it would benefit those lower-income people slightly more than building all luxury housing.
Gould Ellen: It would. Some of it would filter down.
Mallach: Absolutely. And also, it would mean that the cost of providing subsidies such as housing vouchers would be significantly reduced because you’d now have more substantial, moderately priced stock to use those vouchers in.
Haggerty: In two projects we’ve been involved with they were redeveloping a whole block as part of satisfying affordability requirements that came with the land. [We built] 217 units of supportive and mixed-income [housing] surrounded by luxury townhomes and condos. Everyone knew what they were getting into. Sales were unimpeded. When you’re creating something new, you have a lot more flexibility than when you’re inserting something into a settled context.
Right now we don’t yet have a coalition that has agreed on the agenda that we would need. Can we create some models that might help?
Gould Ellen: I’m just not optimistic at the local level. There is a recognition that half of the renters in this country are rent-burdened. But people don’t want the solution in their backyard.
Jacobus: I suspect it’s not one answer. It’s this huge, long list of things that all have to happen at once. The political compromise is the first step. The affordable housing field and also the advocacy community has sort of washed its hands of the market. The market, no matter what it does, isn’t going to eliminate the need for subsidized housing for low-income folks. But if we work together, we have a much better chance of creating market conditions that are more favorable to affordable housing.
Haggerty: How could we enable living arrangements that may be non-traditional, and densification schemes within housing that already exists? Because that is where the market could actually be released in creative ways.
Parking gets mentioned often. It makes sense to reduce parking requirements if there’s sufficient pedestrian and transit infrastructure. But usually the folks who are advocating for reducing regulations are also opposing funding for transit. How do we align those interests?
Wilkins: Maybe people who are going to live here don’t have as many cars, or their cars aren’t as wide, as the assumptions that underlie the standard parking requirement for this zoning category. Whatever the standard formula for parking is may be wrong in the context of these tenants.
Gould Ellen: A lot of municipalities require more parking than is probably going to be demanded or needed. But your point about infrastructure requirements is really important. A lot of the concerns about increased density we might dismiss, but some of them may be valid, and planners and policy folks [need to] make sure that investments in infrastructure are [made] to accommodate the additional density.
Miriam Axel-Lute is editor of Shelterforce and associate director of the National Housing Institute. Her email is miriam at nhi dot org.