Why is housing supply so low?

Experts say one of the biggest constraints to new housing development and inventory is local zoning that often restricts density and places additional costs on an already pricey construction environment. That's why a pair of U.S. Senators — along with a growing number of industry trade organizations — is seeking changes at the federal level that would check local zoning across the nation and help deliver much-needed new housing.

The 'Yes In My Backyard Act'

During a web panel this week hosted by U.S. Senators Todd Young (R-Ind.) and Brian Schatz (D-Hawai'i), the pair — along with a panel of housing experts — discussed a bill that would take action at the federal level to tame local zoning that so often ties up new housing supply. 

Dubbed the Yes In My Backyard Act, or "YIMBY Act," the bill would require Community Development Block Grant recipients to report to HUD the actions they are taking to eliminate "discriminatory land use policies." Some actions outlined in the bill include expanding higher density zones and allowing the use of manufactured homes in single-family zoned areas. 

The bill was first introduced in 2019 and received support in the U.S. House in 2020, but has yet to pass in the Senate. The bill has also received support from key industry trade groups such as the National Association of Realtors, the Mortgage Bankers Association and the American Institute of Architects. 

How zoning has hampered housing supply

Single-family zoning is just one factor suppressing housing supply, panelists said. Developers have been unable to deliver enough supply to meet the demand for housing, contributing to rising home prices. And then there's the lengthy and expensive entitlement process for multifamily development that further discourages builders from higher density projects. 

"These exclusionary zoning laws not only limit the supply of new homes, but also indirectly place taxpayers on the hook for the associated unnecessary costs," Senator Young said during the presentation. "I respect the rights of states and localities to govern their own zoning policies. However, it becomes problematic when those very policies lead to inefficiencies that national taxpayers must in the end bear."

Senator Schatz argued that single-family zoning is not simply a barrier to affordability, but a policy with roots in discriminatory housing practices. "The housing shortage didn't happen overnight," said Schatz, but "is the product of decades of broken and racist housing policy, particularly zoning laws, restrictive covenants and land use regulations." And that legacy, Schatz suggested, has meant that "homeownership is increasingly out of reach for more and more people."

'Pro-growth' approach requires removing regulatory barriers

Young pointed to bureaucracy and "red tape" as core issues to development: "Overregulation drives up costs and it creates barriers that are counterproductive to our goals," he said, adding that the YIMBY Act "encourages localities to adopt more pro-growth zoning practices."

Schatz echoed the remarks, adding that fixing the housing shortage "starts at an obvious place" — building more housing. "That means eliminating unnecessary barriers and legalizing the types and the amounts of housing people want and people need," he elaborated. And while zoning typically functions at the state or local level, Schatz said "the federal government has a role and responsibility to help to encourage reform as best as it can."

Act lays out specific policies to encourage development

Other land use policies recommended in the YIMBY Act include reducing minimum lot sizes, allowing multifamily housing in office and light manufacturing districts, creating transit-oriented development zones, encouraging the use of prefab housing, and reducing — or outright eliminating — minimum parking requirements. 

But in order to make these changes a reality, local elected leaders have to adopt a growth mindset, Schatz said.

"To the extent that I'm useful, it's in precipitating and incentivizing local units of government to rethink what they're doing and to think in terms of abundance," he explained. "If the American Dream includes a home, it does not include preventing someone else from having one."

By: AJ LaTrace