Partners (Number 3, 2004)
Partners (Number 3, 2004)
|Identifying Regulatory Barriers to Affordable Housing|
Housing prices nationwide have increased dramatically in the past 15 years. A number of factors have contributed to the rising prices, including federal, state, and local regulations that affect land and housing development.
While many regulations provide important public benefits, others are outdated, excessive, unnecessary, or exclusionary. Obstructive regulations have contributed to rising housing costs and created roadblocks to affordable housing in urban and suburban communities.
What are regulatory barriers?
Regulations that affect housing prices occur in several categories, as a component of building codes, environmental stipulations, land use and zoning, impact fees, and administrative processes. The point at which a regulation becomes a regulatory barrier is not always clear. Regulations that raise housing costs should, however, serve a greater public purpose. The policies that raise concern are those which disproportionately impact low- and moderate-income individuals by deliberately or indirectly prohibiting or discouraging affordable housing, with little compensating public benefit.
NIMBYism. Some regulatory barriers are used to support the “Not In My Back Yard” mentality, or NIMBYism, which underlies resistance to affordable housing, particularly in suburban communities. Residents fear that affordable housing in the neighborhood will lead to lower property values, increased congestion, and higher taxes to support increased public service demands by the residents of this housing.
To discourage affordable housing, communities employ exclusionary zoning tactics, including large minimum lot requirements or density limitations that restrict multi-family housing development. Alternative forms of affordable housing such as accessory dwelling units and manufactured housing are often prohibited by zoning codes.
Some communities impose high architectural standards or require developers to include attractive amenities that increase the costs and demand for housing in a community.
Outmoded building codes are another barrier to affordable housing. Building codes designed to regulate new construction create an expensive and unrealistic burden on developers interested in rehabilitating existing buildings.
Smart growth. “Smart Growth” principles, including growth boundaries and open space preservation, also create potential barriers to affordable housing.
These policies limit the supply of available land for development, which leads to increased land costs, and most likely, higher housing prices.
If smart growth principles such as revitalizing urban core neighborhoods and increasing housing density are implemented in conjunction with those that limit land supply, affordable housing opportunities could increase. However, approaches that limit growth are often more politically popular.
Impact fees. Many jurisdictions impose impact fees to cover the increased costs associated with new development. In theory, impact fees are supposed to shift the cost of new development to new residents so existing residents are not burdened by higher taxes to support the needs of new residents. However, fees can also be used to discourage affordable housing.
Administrative processes. Complex administrative processes can also become a barrier by significantly increasing housing costs. Developers are often required to work with several different agencies to obtain approval for development, and coordination with these agencies can lead to significant delays in the permitting process. Administrative inefficiency and delays in permitting often increase developer costs and lead to higher housing prices.
National response to regulatory reform
In 2003 HUD launched America’s Affordable Communities Initiative (www.hud.gov/initiatives/affordable communities). This program helps communities identify and overcome regulatory barriers to affordable housing. In addition to dedicating funding for research on regulatory barriers, HUD works with community organizations to build local coalitions for developing innovative solutions to overcome regulatory obstacles.
HUD also encourages reform through its funding process and rewards grant applicants with extra points if their respective jurisdictions have undertaken efforts to alleviate regulatory barriers.
Finally, HUD has created the Regulatory Barriers Clearinghouse (www.regbarriers.org), which provides a national web-based forum to share information about regulatory roadblocks to affordable housing along with solutions for overcoming them.
“HUD is trying to lead by example,” according to A. Bryant Applegate, senior counsel and director of the America’s Affordable Communities Initiative. “We are working with government at all levels to reduce the barriers to affordable housing, so that hard-working families that might otherwise be priced out of a home can share in the American dream.”
State and local government address regulatory barriers
For instance, Florida requires local jurisdictions to plan for affordable housing, and the state is also working with local jurisdictions to create expedited permit processing for affordable housing projects. Other communities have recognized that impact fees create a barrier to affordability and have agreed to waive or reduce these fees for affordable housing.
Some cities are trying to overcome the barriers created by restrictive land use policies and exclusionary zoning. For example, cities that have imposed growth caps are now reevaluating the impact of these restrictions on housing prices and are exempting affordable housing from the cap limits.
Density bonuses are another useful tool for surmounting zoning barriers that limit affordable housing. Cities offer density bonuses that allow developers to build more units than permitted by zoning ordinances, provided they include some affordable units. Some communities are addressing zoning barriers by modifying the codes to allow housing in areas zoned for industrial or commercial use with the goal of promoting more mixed-use housing. They are also allowing accessory dwelling units in neighborhoods not currently zoned for this use.
There are many other options available for state and local governments to confront barriers, including building code revisions that adopt national or regional “model” codes to encourage rehabilitation of existing buildings. Implementing streamlined permit processes also reduce costly delays.
While increasing concern exists about the rising cost of housing, along with recognition that regulations can increase prices, regulatory barriers persist in the majority of jurisdictions. This is often because local government and residents prefer not to have new development, particularly affordable housing, that will disturb the status quo.
Local municipalities also have fiscal incentives not to reform regulations insofar as they seek to avoid the tax increases potentially necessary to provide services for new development. Finally, there is a lack of regional planning in many communities, so cities do not usually have to consider the impact of individual regulations on the cumulative housing needs of the region.
Creating awareness is first step toward solution
Demand for regulatory change has traditionally come from builders and developers, and affordable housing advocates have not been engaged in this discussion. Builders, developers, and housing advocates must join together with local businesses, real estate professionals, and banks to establish broad coalitions. Working together, this coalition can make a stronger case for affordable housing and have greater leverage to encourage states and local jurisdictions to adopt regulatory changes that will increase housing opportunities.
This article was written by Jessica LeVeen Farr, regional community development manager in the Atlanta Fed’s Nashville Branch.