"Promoting housing affordability by combating exclusionary housing policies"

 

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“UNLOCKING LAND SUPPLY AT THE RIGHT LOCATION IS THE MOST CRITICAL STEP IN PROVIDING AFFORDABLE HOUSING”—McKINSEY GLOBAL INSTITUTE

A major new report on solutions to affordable housing problems in the United States and around the world declares: “Unlocking land supply at the right location is the most critical step in providing affordable housing.” McKinsey Global Institute, A blueprint for addressing the global affordable housing challenge, 7, 48 (October 2014) (“Blueprint”), posted at: http://www.mckinsey.com/insights/urbanization/tackling_the_worlds_affordable_housing_challenge. That report was unveiled in conjunction with UN-Habitat (the United Nations program focused on urban development issues worldwide).

Unlocking land supply for housing affordability involves governments adopting rules and policies that promote—rather than create barriers to—ample, suitable housing opportunities for low- and moderate-income people, in the right locations. The Equitable Housing Institute (EHI) works for the adoption of the appropriate rules and policies.

The right locations for affordable housing are places “where residents are within reach of jobs, schools, and vital services and where they can become part of the diverse fabric of the city.” McKinsey notes many examples of the fact that “housing built in the wrong location, no matter how well constructed and maintained, will fail.” (Blueprint at 49)

Unnecessary restrictions on housing development and preservation in government regulations and policies—such as local land use planning, zoning, and housing policies—are among the principal culprits behind America’s persistent affordability problems.  The McKinsey report documents the fact that similar regulatory barriers are critical housing issues around the world, and the report focuses on solutions to them.

McKinsey estimates that six mechanisms that have been used around the world for unlocking land supply can combine to reduce the annualized cost of a standard housing unit by an average of 23 percent worldwide. Prominent among those mechanisms (especially in highly-industrialized nations such as the United States) are adjustments of land use rules and policies to permit ample housing development along with commercial development close to rapid-transit routes and other high-opportunity locations.

McKinsey identifies three major levers in addition to unlocking urban land that can substantially narrow the affordability gap. Those levers—and the potential cost reductions estimated for each—are: 

  • An industrial approach to deliver housing quickly, on a large scale, and at the desired cost (16 percent)
  • Efficiencies in operations and maintenance (2 percent)
  • Expanding access to lending and reducing financing costs (7 percent)

(E.g., Blueprint at v) With the use of all four of the basic levers, McKinsey estimates that the annualized cost of a standard housing unit could be reduced by an average of 48 percent worldwide. Blueprint at viii) For more, click on McKINSEY REPORT ON MEETING GLOBAL HOUSING AFFORDABILITY CHALLENGE.