How Government Policy Made Housing Expensive and Scarce, and How Unleashing Market Forces Can Address It

Edward Pinto
Tobias Peter
American Enterprise Institute

The views expressed are those of the authors alone and do not necessarily represent those of the American Enterprise Institute or of any individual who provided comments.

In 1922, the federal government began promoting the widespread adoption of zoning by municipalities, which particularly encouraged single-family detached zoning as a backdoor to achieving constitutionally prohibited racial segregation. This legacy of zoning and land use continues today: residential districts are economically segregated as the original planners intended, with the vast majority of zoning codes reserving large areas of land exclusively for single-family detached homes. By freezing land use, government action—not builders or markets—has prevented the building of enough housing to sustain our growing population. To repair this broken legacy and enable more people to access the American Dream of homeownership, policymakers at the state and local levels must address the supply crisis at its core by implementing by-right light-touch density (LTD), which permits incremental increases to allowable density. LTD can potentially create up to an estimated 930,000 additional housing units annually (depending on the maximum allowed density) for the next 30 to 40 years. This moderate density increase would expand the construction of more naturally affordable and inclusionary housing, thereby keeping home prices more aligned with incomes and keeping housing displacement pressures low. LTD policies appeal to a broad coalition, as they have found success in California and Washington and the cities of Minneapolis, Minnesota, and Arlington, Virginia. A model zoning bill that draws on lessons from numerous case studies is detailed in a following section. The model bills emphasize that the key to success for LTD is simplicity. We also demonstrate that adding affordable housing requirements will have the unintended consequence of greatly reducing or even eliminating the opportunity for LTD to add meaningful supply.