"Promoting housing affordability by combating exclusionary housing policies"

 

CFC # 41863 (Combined Federal Campaign) 

 

 

            “Housing is a necessary of life.”

United States Supreme Court

Block v. Hirsch, 256 U.S. 135, 156 (1921)

(per Justice Oliver Wendell Holmes, Jr.)

 

Despite the general recognition of the crucial importance of a good home to human development, tens of millions of low- and moderate-income Americans do not have the opportunity to buy or rent decent housing in wholesome neighborhoods. 

Among the biggest barriers to those opportunities are exclusionary governmental housing policies (“regulatory barriers to housing affordability”), such as exclusionary zoning. "State and local regulations are among the principal culprits behind the nation’s persistent affordability problems,” according to the Harvard University Joint Center for Housing Studies.

Examples of exclusionary zoning are the widespread requirements for large lots and home sizes in American suburbs—where most jobs now are located, and where almost all new urban jobs are being created. Other exclusionary housing policies include costly, high-end building, housing, and subdivision code requirements that are unnecessary for health and safety; and protracted, unduly expensive permitting procedures.

Such regulatory barriers often nullify reasonable efforts to increase the supply of moderately-priced housing. In other cases they increase the cost of that housing tremendously. Rigorous economic research has found that such barriers have caused prices for basic houses to be 40-50 percent above the costs of construction in most of the major metropolitan areas studied, across the United States. In certain high-opportunity metros (including Pacific Coast metros such as Los Angeles, San Francisco, and Seattle), prices exceed construction costs by several times that amount. For more, click on ECONOMIC EFFECTS OF EXCLUSIONARY HOUSING POLICIES.

Similar problems with unjustified regulatory barriers pose the biggest obstacles to housing affordability worldwide. For more, click on McKINSEY REPORT ON MEETING GLOBAL HOUSING AFFORDABILITY CHALLENGE.

The Equitable Housing Institute (EHI) is a charitable organization that focuses on eliminating exclusionary housing policies in the United States, in order to reduce homelessness and poverty. EHI is the only national organization focused primarily on removing those barriers for all low- and moderate-income Americans.

EHI’s primary tools are education and public policy advocacy. During its first five years (2008-2013), its advocacy was a catalyst in the addition to local housing plans in its home county of more than one additional affordable unit per day, and more than eight additional housing units per day overall (on average). (EHI’s headquarters is in Fairfax County, Virginia, in the Washington, DC, region).) For more, click on ABOUT EHI. 

Nationally, EHI’s website provides information on many aspects of exclusionary housing policies and ways to remove them. EHI also has advised people in various regions of the United States regarding specific issues in their areas.

EHI “holds one of the keys [to] the goal of more integrated communities and schools,” and is an “obvious candidate for funding,” according to Inside Philanthropy magazine.  “With its detailed research on housing law, and its ability to help municipalities take a hard look at their assumptions and priorities, EHI has an important role to play in the fight for fair housing.”  For more, click on Inside Philanthropy urges funders to support EHI.

 

EHI NEWS

What will the Trump Administration do about regulatory barriers to housing development, affordability, and homeownership?

 

Although the 2016 Presidential election was based largely on the economy, housing policy was basically absent from the rhetoric. However, President-elect Donald Trump discussed housing policy in a speech before the National Association of Home Builders (NAHB) in August.
“The housing and homebuilding business is the biggest business in the U.S.,” he told the NAHB. Trump, whose career has been in real estate—largely as an investor in hotel and multifamily housing development—added: “What’s happening with regulations is horrible. You’re being driven wild with regulations.”

Reducing barriers to mortgage credit

Trump decried the decline in the U.S. homeownership rate, which recently dropped to a 51-year low. “That’s the American Dream right there folks,” he said. “It’s homeownership.” He called the decline “a pretty sad thing.”

Trump criticized the lack of mortgage credit available to many Americans, and the negative impact of the current regulatory environment on mortgage lending. “It’s impossible for people to go get mortgages,” Trump said. “Unless you have a lot of money in the bank, you can’t borrow. It’s impossible with Dodd-Frank. I know people that can’t get houses.” Thus, Trump suggested that part of his strategy to “Make America Great Again” would be to boost the homeownership rate through demand-side policies, such as financial deregulation.

Reducing barriers to housing development and construction

“There’s no industry, other than probably the energy industry that is more overregulated than the housing industry,” Trump told the NAHB. “Twenty-five percent of costs to build a house are regulations. I think we should get that down to 2%.”

The 25 percent figure Trump cited was based on a May 2016 NAHB report that concluded that “regulations imposed by government at all levels account for 24.3% of the final price of a new single-family home built for sale.” Those costs are NAHB’s estimates of average fees and other regulatory requirements nationwide on home builders during:

  • land development (such as the costs of seeking zoning/subdivision approval, of complying with changes in development standards, and of land the developer feels constrained to give away to the local government (“dedicate”) for public uses (roads, parks, etc.) in order to facilitate development approval; and
  • construction (such as permit, hook-up, impact fees, and changes in building and housing codes and standards over the past 10 years).

Trump did not explain how to reduce regulatory costs to 2%, and there are serious obstacles to doing so. For example:

  • As Stan Humphries—chief analytics officer and chief economist at Zillow Group (a major, online real estate database company)—puts it, “there [is] some housing regulation that’s desirable,” such as regulations concerning clean water, energy efficiency and fire prevention; and
  • Most regulatory costs of housing development and construction are imposed by state and local governments, which the federal government cannot nullify, generally speaking.

However, the federal government actually could prohibit state and local regulatory barriers to housing development that adversely affect interstate commerce. There now is a strong, evidentiary basis for concluding that those regulatory barriers are adversely affecting interstate commerce. Therefore, the federal government could prohibit them under the Commerce Clause of the U.S. Constitution. For more, please click on TRUMP ADMINISTRATION AND REGULATORY BARRIERS IN HOUSING SECTOR.

 

Obama Administration issues Housing Development Toolkit

focused on exclusionary zoning and other regulatory

barriers to housing development—and on solutions

 

In late September 2016, the Obama Administration issued a Housing Development Toolkit. It focuses on the devastating impacts of regulatory barriers (primarily in the form of local exclusionary housing policies), regarding the adequacy and affordability of housing in America. The Toolkit also discusses various action steps that states and local jurisdictions can take to reverse those impacts.

The Toolkit follows on President Obama’s recent statement that: “"We can work together to break down rules that stand in the way of building new housing and that keep families from moving to growing, dynamic cities." (President Barak Obama, remarks to the U.S. Conference of Mayors, January 21, 2016) The Toolkit explains in some detail that:

  • Since at least 1980, local barriers to housing development (such as exclusionary zoning) have intensified, most noticeably in the high-growth, metropolitan areas that increasingly fuel the national economy.
  • During the same period, average house prices nationwide have escalated, while average housing construction costs have remained about the same (adjusted for inflation).
  • The consequences include over 5 million more very low-income households (those earning 50% or less of their area’s median income) having to pay more than half their income on rent—just in the last 10 years.
  • There is compelling evidence that such regulatory barriers are aggravating economic inequality and interfering with the nation’s economic growth, by preventing workers from moving to high-growth regions for better jobs and careers.
  • The problem of unjustified local barriers to housing development is now being felt in smaller cities and non-coastal locations—not just the major metropolitan areas on the East and West coasts that have garnered most of the attention to date.
  • Such barriers help perpetuate discrimination against low-income renters, increase homelessness, and undercut the effectiveness of HUD’s housing assistance programs.

Among the many remedial steps the Toolkit discusses, that already have been taken by some state and/or local jurisdictions, are: (a) relaxing zoning restrictions on building densities and heights, unit sizes, and parking minimums; (b) making better use of vacant urban land for housing; (c) streamlining housing permit processes and time frames; (d) requiring the inclusion of some lower-priced units in large, new multi-family developments, in return for increased density, which allows the construction of extra market-rate units and prevents economic loss to the developer due to the lower-priced units; and (e) tax incentives to developers to build more lower-cost units.

The White House Toolkit is the latest of numerous direct, Presidential initiatives—by Presidents of different political parties—to address the growing problems. EHI has been sending the same, consistent message as those Presidential initiatives since its founding in 2008—and has had some notable successes.

For more, click on 2016 WHITE HOUSE TOOLKIT. To access the White House document, click on: https://www.whitehouse.gov/sites/whitehouse.gov/files/images/Housing_Development_Toolkit%20f.2.pdf.

Rent increases continue lower in EHI’s local emphasis area—the Washington, DC, region—than in other major metropolitan areas

 

Rent increases (“rent growth”) for housing in the Washington, DC, metropolitan area continued well below the national average, for the year ending in October 2016, even though rent growth nationwide was decelerating mildly. During that period, DC-area rent growth was:

  • about half the national averages of 5.7% overall and 6% for “renters-by-necessity” (which includes Americans who lack the wealth to buy homes, such as low- and moderate-income people), and
  • the lowest of all but one of the nation’s 30 largest metros.

(Those figures were reported by Yardi Matrix, a major, commercial real estate research and data platform focused on the apartment market industry.) The lower-than-average rent growth in the DC area, a trend now in its fourth year, is gratifying to EHI, because the DC region is where EHI has concentrated its local advocacy. For example, during EHI's first five years, one affordable housing unit per day was added to local plans in its home county (Fairfax County, Virginia), following EHI's advocacy,. For more, click on EHI's FIRST FIVE YEARS

The recent trend in the D.C. region is a dramatic change. Nowhere did rents rise faster, between 1980 and 2014, than the D.C. region—where they climbed 86 percent (adjusted for inflation), while renters’ incomes rose only by an inflation-adjusted 33 percent (according to a major new analysis by Apartment List). The new, lower rent growth in that region is especially helpful to low- and moderate-income people, because most of them rent, and housing costs generally consume much more of their incomes.

It also bears noting that the DC region is bucking the national trend toward less affordable home purchase prices. Home prices became less affordable in 63% of counties nationwide, for the year ended in September 2016—according to RealtyTrac. But the situation was much better in the DC area. While the District saw a 4 percent decline in affordability, Montgomery County and Arlington County each saw a 5 percent improvement in affordability from third quarter 2015 to third quarter 2016. Fairfax County saw a 2 percent improvement, and Alexandria saw a 1 percent improvement.

As to the rental market, DC-area housing demand fundamentals continue quite strong. Yardi’s observations about the recent deceleration in rent growth nationwide appear fully applicable to the DC area:

The deceleration is far from being a sign that the sector is overheated. Fundamentals in most markets continue to be strong. Occupancies of stabilized properties are not far from cyclical highs, while the growing population coupled with strong job numbers is producing above-trend household formation that leads to demand for apartments. Some 26 of our top 30 metros are above the 2.3% long-term average for rent growth, and we expect that to continue in most markets.

To read EHI’s full update, click on DC-AREA RENT INCREASES CONTINUE MODERATE THROUGH OCTOBER 2016. To access background information on recent rental cost trends in DC and nationwide, click on EHI HELPS ITS HOME REGION TO MUCH-IMPROVED RENTAL HOUSING COST RECORD (June 2016)

 

Loudoun County (Virginia) needs major housing growth to meet challenge of Metrorail

 

The Washington, DC, area’s Metrorail (commuter rail) system is coming to Loudoun County, Virginia. Metrorail brings opportunities for needed housing growth, along with the additional commercial growth that Loudoun seeks. The County is planning for new development near the two stations, which currently are scheduled to open in late 2019.

EHI has studied Loudoun’s housing needs related to Metrorail and completed an extensive report on November 4, 2015. To read it, please click on Loudoun County’s Metrorail-Related Housing Needs.

Loudoun County’s Dept. of Planning and Zoning’s (DPZ) presented its draft land use plan for the Metrorail areas (“Silver Line Small Area Plan”) at a public workshop on June 29. DPZ forecasts enough housing units by 2040 to balance the tremendous number of new and existing jobs in those areas. DPZ’s approach is consistent with the public’s input on the Metrorail planning, with good planning principles, and with the facts on the ground—as documented in EHI’s report mentioned above, which EHI submitted to DPZ in November 2015. For specifics on DPZ's draft plan and on many other recent developments in Loudoun's Metrorail-area planning, please click on Loudoun Metrorail-area planning update--June 2016

 

U.S. Supreme Court rules that housing practices with

disproportionate, adverse impact on minorities may violate

federal Fair Housing Act, regardless of intent

 

On June 25, 2015, the U.S. Supreme Court ruled that the federal Fair Housing Act (“FHA,” 42 U.S.C. § 3601 et seq.,) prohibits housing practices that have a disproportionately adverse effect on members of minority groups—unless those practices have a justifiable purpose and properly limited scope. Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project (ICP), No. 13–1371 (June 25, 2015).

In a 5-4 decision, the Court held that discriminatory intent is irrelevant to whether such a “disparate impact” violation exists. The Court also explained what a litigant must show in order to prove, or, conversely defend against, an alleged violation. The Court’s decision applies both to government officials and private persons.

The FHA’s prohibition on practices that have such a “disparate impact” is an important basis for challenging exclusionary housing policies, because those policies often have much greater adverse impacts on minority group members than on the overall population. The Court stated:

These unlawful practices include zoning laws and other housing restrictions that function unfairly to exclude minorities from certain neighborhoods without any sufficient justification. Suits targeting such practices reside at the heartland of disparate-impact liability.

(Slip op. at 17) The Court’s opinion, authored by Justice Kennedy, clarified the elements of a disparate impact housing violation, which had been stated somewhat differently by certain lower courts. The Supreme Court essentially adopted the statement of those elements in the recent rule issued by the U. S. Department of Housing and Urban Development (HUD), regarding such cases.Implementation of the Fair Housing Act’s Discriminatory Effects Standard: Final Rule, 78 Fed. Reg. 11460 (2013) (codified at 24 CFR §100.500).

HUD’s formulation involves the same kind of burden-shifting approach the Court has formulated for other anti-discrimination laws, such as Title VII of the Civil Rights Act of 1964 (equal employment opportunity). Thus, a person complaining of alleged housing discrimination (“plaintiff”) has the initial burden of proving “that a challenged practice caused or predictably will cause a discriminatory effect.” 24 CFR §100.500(c)(1) (2014).

If a plaintiff makes that showing, the burden shifts to the defendant to prove “that the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests.”Id., §100.500(c)(2). If the defendant makes its showing, the plaintiff still can “prevail upon proving that the substantial, legitimate, nondiscriminatory interests supporting the challenged practice could be served by another practice that has a less discriminatory effect.” Id., §100.500(c)(3).

To see the Supreme Court decision and/or HUD rule in their entirety, click on the hyperlinks above. 

EHI report shows how exclusionary housing policies are linked to deficiencies in low-income children's health, education, and general development

 

Many studies have found that housing problems—such as unsafe and unhealthful conditions, unaffordable housing costs, and neighborhoods isolated from high-performing schools and health facilities—are linked to increased developmental problems among low-income children. (Those children live in households that have incomes of 80 percent or less of their area’s median income.) Among the aspects of development involved are children’s health (physical, mental and emotional), safety, educational achievement, and general cognitive and behavioral development.

Because exclusionary housing policies raise major barriers to the production and preservation of adequate amounts of suitable housing, those policies:

  • substantially increase the number of low-income children who must live in unsafe, unhealthful, and/or overcrowded housing conditions, and in decaying and/or unsafe neighborhoods;
  • isolate many such children, and their neighborhoods, from most economic opportunities, and from high-performing schools and health facilities; and
  • raise housing prices (by 20 to 50 percent in many major metropolitan areas), making those prices unaffordable to low- and moderate-income families with children—thus causing economic instability in those families, and many involuntary, disruptive moves (usually to poorer neighborhoods).

EHI has prepared a memorandum summarizing how exclusionary housing policies aggravate housing problems that have been linked to those adverse effects. (To access EHI’s memorandum in its entirety, please click CHILDREN'S DEVELOPMENT & XHPs.) EHI concludes that eliminating exclusionary housing policies is a crucial step toward improving low-income children’s development.

EHI’s analysis is based on an important new report by the U.S. Department of Housing and Urban Development (HUD) that summarizes in detail existing studies of housing and children’s development. (HUD PD&R, Evidence Matters: Housing’s and Neighborhoods’ Role in Shaping Children’s Future (Fall 2014) (“HUD 2014”), posted at: http://www.huduser.org/portal/periodicals/em/EM_Newsletter_fall_2014.pdf).  

 

OTHER RECENT ARTICLES

 

  • EHI analyzes whether Congress has Constitutional authority to prohibit unwarranted state and local regulatory restrictions on housing supply, if those restrictions affect interstate commerce—as a number of recent studies indicate they now do. For more, click on INTERSTATE EFFECTS OF RBHAs (2014)
  • EHI responds to Wall Street Journal article on new exclusionary policies in certain suburbs of Phoenix and Denver. For more, click on WSJ on new exclusionary policies.
  • One affordable housing unit per day is added to plans in EHI's home county, following EHI's advocacy, during its first five years (2008-2013). For more, click on EHI's FIRST FIVE YEARS.

 

Equitable Housing Institute

P.O. Box 1402

Vienna, VA 22183