When the pandemic hit, the U.S. was already going through a major affordability crisis. The rising cost of living and continuously growing income disparity have led to millions of Americans being priced out of the housing market.
The solution to a more affordable housing market seems to be simple: more housing. But the barriers to building more affordable properties, however, seem to be relentlessly increasing instead of disappearing. High land and construction costs, outdated zoning regulations, and slow and burdensome permitting and approval systems are some of the challenges developers usually deal with.
In fact, a recent study from Mercatus Center at George Mason University found that the escalation of land use regulations is the major obstacle in creating more affordable cities. “In recent years, the proliferation of land-use regulations has limited development, and it has threatened the income mobility and rising standards of living that come with development,” researchers noted.
Although America’s major cities used to provide the opportunity for innovation and economic growth for all people, the accentuated affordability issues have changed dynamics and led to people fleeing these cities.
“Our unaffordability crisis is deepening the divergence between elite cities and the rest of the country. For most of our history, Americans have migrated toward high-wage places. That’s the story of the Great Migration and the settlement of the West. But in the last generation, migration has shifted toward low-cost places,” Salim Furth, senior research fellow at Mercatus Center at George Mason University, told Multi-Housing News.
COVID-19 has thrown some more challenges into the mix. The pandemic has slowed down new housing development by increased materials costs, supply chain disruptions and the unavailability of the labor force. “The COVID-19 pandemic has exacerbated housing affordability problems and regulatory barriers have prevented businesses from better serving their customers, especially in urban areas,” the study stated.
The solution to solving America’s housing crisis is to increase the housing supply in high-wage metro areas, Furth argued. To do so, zoning and procedural barriers need to be updated or removed. Furth suggested five reforms that cities can implement to increase cost-effective living and alleviate affordability issues.
“What’s great about housing policy is that you don’t have to wait for Congress to act. If a handful of large jurisdictions in each metro area chose to embrace growth, it would solve the housing crisis,” he said. Here are the top five reforms for cities to increase affordable housing development, according to Furth.
1. Allow residential development in commercial zones
As the pandemic reshapes the commercial real estate sector, many hotels, retail and office spaces are becoming permanently vacant, but they could be converted into residential spaces if the zoning allowed.
“There’s a surplus of commercial space, especially post-pandemic, and the large, easy-to-clear lots that typify most commercial and industrial areas are ideal for redevelopment as apartments,” Furth said.
2. Shrink minimum lot sizes
Minimum-lot-size regulations require every land parcel to be equal to or larger than the specified square footage. Regulations like this increase the cost of housing by forcing people to acquire more land than necessary and intensify segregation by income, according to Mercatus Center.
“Houston enabled transformational change when it cut its lot size to 1,400 square feet. And this in a context where multifamily had never been seriously limited,” Furth pointed out.
3. Eliminate parking minimums
Parking uses either a lot of space or a lot of digging, and both are very expensive in urban settings. “In suburban areas, high parking requirements are often used to intentionally discourage multifamily development. Builders know their context and will provide enough parking where it’s needed,” Furth explained.
4. Switch to “as-of-right” development
The as-of-right development would allow developers to go through the permitting process without having to seek any special approvals from the city planning commission or from the local community board.
“A large proportion of development today, from downtown D.C. to suburban Texas, to exurban Minnesota, is done via planned unit developments. These allow the municipality to negotiate with the builder over everything, from infrastructure to the number of bedrooms. Cities should drop this approach and use a set schedule of impact fees instead,” according to Furth.
5. Encourage manufactured homes
Although manufactured homes are traditionally perceived as unsafe due to lower-quality, cheaper materials and unconventional building methods, today’s manufactured houses are different from the mobile home parks known in the past. Manufactured homes now feature luxury amenities found in traditionally built homes. However, the construction cost is around half the price per square foot of in-place built homes.
“There’s a vicious social stigma toward trailers or mobile homes, but they’re the most cost-effective option in low- and moderate-density areas. Municipalities should allow ‘HUD Code’ manufactured homes on any residential lot as a principal or accessory dwelling unit,” Furth concluded.