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“Why Not In Our Community?” Removing Barriers to Affordable Housing
An Update to the Report
of the Advisory Commission on Regulatory Barriers
to Affordable Housing
U.S. Department of Housing and Urban Development
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“Why Not In Our Community?”
Removing Barriers to Affordable Housing
An Update to the Report
of the Advisory Commission on Regulatory Barriers
to Affordable Housing
U.S. Department of Housing and Urban Development
Office of Policy Development and Research
he mission of the U.S. Department of Housing and Urban Development is to increase homeownership, promote community development, and expand access to decent affordable
housing without discrimination. Increasingly, we find that many of the constraints to providing affordable housing and to developing communities lie within the communities and their regions in the form of regulatory barriers.
Regulatory barriers were exposed as a problem 13 years ago, when the Advisory Commission on Regulatory Barriers to Affordable Housing submitted its report, “Not In My Back Yard”: Removing Barriers to Affordable Housing. Despite some areas of progress, the Advisory Commission’s finding that exclusionary, discriminatory, or unnecessary regulations reduce the availability of affordable housing remains true today.
At the direction of President Bush, I am therefore pleased to publish this update to the 1991 Advisory Commission’s report. Besides illustrating the Administration’s and Department’s commitment to affordable housing, it demonstrates an ability to innovate and reach beyond narrow views of the federal government as funder and regulator. HUD has grasped this opportunity to establish policies that lead and enable state and local partners to address the issues we all deal with on a daily basis.
In June 2003, HUD launched a department-wide initiative among senior staff entitled America’s
Affordable Communities Initiative: Bringing Homes Within Reach Through Regulatory Reform.
The Initiative reinforces HUD’s commitment to work with states and communities to break down
the regulatory barriers that needlessly drive up housing costs and reduce the nation’s stock of affordable housing. The first fruits of this effort are abundantly evident in this document.
The update describes recent trends in regulatory barriers to affordable housing, reviews recent efforts by states and local communities to reduce regulatory barriers, and details actions being implemented by the Department to reduce regulatory barriers.
HUD is addressing these issues in a number of ways through this Initiative. The Departmen t is leading by example—streamlining program regulations and ensuring that program applicants have appropriately addressed regulatory barriers. We developed our Regulatory Barriers Clearinghouse website (www.regbarriers.org) to share barrier reduction information and best practices with communities
across the nation.
My hope is that this update will increase awareness of regulatory barriers and stimulate additional national dialogue on this important issue.
Alphonso Jackson
Secretary
Background
1
Section I. Regulatory Barriers to Affordable Housing Persist
Evidence That Regulatory Barriers Increase Housing Costs
Trends in the Regulatory Environment Affecting Housing Development
3
Section II. Efforts to Solve Barrier Problems at the State and Local Level 10
State Efforts to Reduce Regulatory Barriers
Local Efforts to Reduce Regulatory Barriers
Section III. HUD’s Commitment to Barrier Removal Efforts
Creating the America’s Affordable Communities Initiative
Leading by Example
Regulatory Barrier Reform as a Departmental Policy Priority
Secretarial Awards
Coalition-Building and Education Regulatory Barriers Clearinghouse Regulatory Barriers Research
14
Acknowledgments
19
Appendix. 1991 Executive Summary of “Not In My Back Yard”: Removing Barriers to Affordable Housing—The Report of the
Advisory Commission on Regulatory Barriers to Affordable Housing
20
v
hirteen years ago, the Advisory Commission on Regulatory Barriers to Affordable Housing
Secretary Martinez and then-Deputy Secretary
Jackson realized that creating a separate office
submitted its report, “Not In My Back Yard”: Removing Barriers to Affordable Housing (the
1991 Report). Its basic finding remains true
today: exclusionary, discriminatory, or unnecessary regulations constitute formidable barriers to affordable housing. Understanding that government should help, not hinder, the creation and rehabilitation of affordable housing, then- Secretary of Housing and Urban Development
Mel Martinez resolved that regulatory barriers to affordable housing must become an issue
of national concern and action. Today, Secretary Alphonso Jackson is equally committed to knocking down barriers to affordable housing,
as he makes clear in the following statement:
As a long-time advocate for increased affordable housing, I know that regulatory barriers have an enormous impact on the cost and availability of housing for hard working American families. For the past three years, we at HUD have been working with states and local communities to break down these barriers. I am committed to
assuring that this important work continues.
No clear “bright line” definition can delineate when a state or local policy is a regulatory barrier—each policy or rule must be assessed on its own merits. Many policies and regulations that restrict housing are implemented or promulgated with other worthy goals. A policy, rule, process,
or procedure is considered a barrier when it prohibits, discourages, or excessively increases the cost of new or rehabilitated affordable housing without sound compensating public benefits.
Although Recommendation 6-16 of the 1991
Report suggested creating an Office of Regulatory Reform to develop ways to reduce regulatory barriers at the state and local levels , former
would only create more bureaucracy, add expense, and take a considerable amount of time. Seeking
a daily focus on this issue, they ordered senior staff immediately to undertake a department wide initiative entitled America’s Affordable Communities Initiative: Bringing Homes Within Reach Through Regulatory Reform
(the Initiative).
The Initiative seeks to help state and local governments identify regulatory barriers to affordable housing. It also assists community and interest groups and the general public in understanding that well-designed, attractive affordable housing can be an economic and social asset to a community.
Housing is affordable if a low- or moderate- income family can afford to rent or buy a decent quality dwelling without spending more than 30 percent of its income on shelter. Some describe affordable housing for moderate-income families as America’s workforce housing. The increased availability of such housing would enable hard working and dedicated people—including public servants such as police officers, firefighters, schoolteachers, and nurses—to live in the communities they serve. The social and economic benefits of having these hard-working citizens live in the communities in which they work is self- evident. Removing affordable housing barriers could reduce development costs by up to 35 percent; then, millions of hard-working American families would be able to buy or rent suitable housing that they otherwise could not afford.
For lower-income families and individuals, subsidies can be essential tools for helping them gain
stability and self-sufficiency. People who have built or tried to build affordable housing, however, recognize the constraints imposed by unnecessary
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or excessive barriers. Barrier removal will not only make it easier to find and obtain approval for affordable housing sites; it also will enable available funds to go further in meeting vital housing needs.
The Initiative has made reducing regulatory barriers to affordable housing a top departmental priority receiving high-level attention on a daily basis. HUD hopes that this effort will change
the outdated thinking of citizens and public officials from “not in my back yard” to “why not in our community?”
Some progress has been made in responding to the concerns raised by the Advisory Commission, but the problem of regulatory barriers persists. This update does not aim to recreate the 1991
Report, but seeks to examine the trends in the regulatory environment affecting housing development in the past 13 years. In addition, this update charts a workable and innovative strategy for HUD to help states and local communities reduce regulatory barriers. It
also includes a plan for decreasing barriers to
affordable housing production at the federal level.
The update is organized into the following sections:
Section I describes recent trends and demonstrates that the problem of regulatory barriers to
affordable housing still remains.
Section II reviews recent efforts by states and local communities to reduce regulatory barriers.
Section III identifies some of the major actions being implemented by the Department to reduce regulatory barriers.
The Appendix is a reprint of the first part of the
1991 Report’s executive summary. This document summarizes the problem of regulatory barriers
to affordable housing. Readers unfamiliar with the general nature of regulatory barriers to the development of rental and affordable housing may find it helpful to review the Appendix before reading Sections I through III.
2
Regulato ry Barriers to Affordable Housing Persist
lthough a number of studies and commissions, since as early as 1967, have addressed the
issue of regulatory barriers, the 1991 Report for the first time identified regulatory reform as a necessary component of any overall national housing policy. The 1991 Report found that various regulatory barriers—public processes and requirements that significantly impede the development of affordable housing without commensurate health or safety benefits—directly raise development costs in some communities by as much as 35 percent. These regulatory barriers have other significant negative impacts on the country’s ability to meet national housing needs. By constraining overall supply and the market’s ability to respond to demand, housing prices and rents in many markets are inflated. Regulations that restrict market rate and affordable housing options, such as higher density housing, multifamily rental housing, accessory units,
and manufactured homes, further exacerbate the problem by limiting or excluding many affordable housing options.
The 1991 Report identified a number of causes— including infrastructure costs, local building practices, bureaucratic inertia, and property taxes— for this extensive network of regulatory barriers
to affordable housing development. The 1991
Report, however, concluded that one powerful motive lay behind many of these regulatory barriers: opposition by residents and public officials alike
to various types of affordable housing in their communities. This opposition, which the 1991
Report called “not in my back yard” (NIMBY), was found to be a pervasive practice motivating local political officials to intentionally limit growth in general and affordable housing in particular. Notwithstanding the achievement of some
reforms, “NIMBYism” continues to prompt the implementation of regulatory barriers that pose major obstacles to rental housing, high-density development, and other types of affordable housing.
EVIDENCE THAT REGULATORY BARRIERS
INCREASE HOUSING COSTS
Recent research has confirmed that regulatory barriers pose a major obstacle
to the development of affordable housing. Consider the following examples:
One study found that excessive regulation drove up the cost of a new home in New Jersey by as much as 35 percent.
Another study determined that the price of newly built homes in New York City would decline by as much as 25 percent if the city reduced regulatory barriers.
The results of these and other recent studies are summarized in Table 1.
While regulatory barriers are not the only factors responsible for increasing housing costs, they
are major factors. Their significant role in driving up housing costs poses a crucial obstacle to achieving the national goal of increased homeownership. Regulatory barriers also have a negative impact on costs for all types of housing, whether single-family or multifamily, manufactured or site-built.
Regulatory barriers also affect the location of housing. To the extent that regulatory barriers prevent development in the suburbs and other areas of high job growth, they can force lower income households to live far from job opportunities. This home-to-work distance can make it more difficult for the unemployed to find
work; for the employed, it lengthens the commute, which lowers the quality of life.
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STUDY FINDING
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Sundig and I Various forms of housing regulation decreased the total amount of housing built
I
I
Swoboda I and increased prices by as much as $40,000.
I
I
(2004) I
I
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Ben-Joseph I Regulatory system has gotten more complex over the last two decades and constitutes
I
(2003) I the single greatest problem in getting housing built.
I
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Glaeser and : Government regulation is responsible for high housing costs where high costs
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Gyourko : exist. Measures of zoning strictness are highly correlated with high prices.
(2002) !
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: The typical new Alachua County, Florida, household pays more than its actual share
Dewey ! of infrastructure costs by $3,114, demonstrating how ill-conceived fees can undermine
(2001) ! affordable housing.
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Baden and ! In suburban Chicago, municipal fees increase new housing costs by 70% to 210% of the
Coursey : actual fee imposed, which ranges from $2,224 to $8,942 for an average four-bedroom
I •
(2000) : home m the study.
------------------------I ----------------------------------------------------------------------------------------------------------------------
1
Green and I Moving from a light regulatory environment to a heavy regulatory environment raises
I
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Malpezzi I rents by 17%, increases house values by 51%, and lowers homeownership rates by 0
I
I .
(2000) : percentage pomts.
------------------------t---·----····--·----····--·----····--·----····--·----····--·----····--·-·······--·-·······--·-·····----·-·--·-----·-·--
Luger and ! Excessive regulation can raise the final new home price by $40,000 to $80,000, or
Temkin ! approximately 35%. In New Jersey, this amount prices approximately 430,000 house
(2000) : holds out of the market.
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Mayer and ! metropolitan area with a 4.5-month delay in approval and two different types of
1
A
Somerville : growth control restrictions would experience 45% (estimated) less construction than a
(2000) ! metropolitan area with a 1.5-month approval delay and no growth-management policy.
------------------------t---------------------------------------------------------------------------------------------------------------------- Phillips and ! Portland's Urban Growth Boundary law has increased median hous e prices in the Goodstein ! Portland metropolitan area.
(2000) :
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Green I In Waukesha County, Wisconsin, banning manufactured homes increased home prices
I
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(1999) I by 7.1% to 8.5%. Increasing required minimum frontage by 10 feet drove up prices by
I
I 6.1% to 7.8%.
---·--·-------·--·------,I·--·-------·--·-------·--·-------·-------·--·-------·--·-------·--·-------·--·-------·--·-------·-------·--·-------·--
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Levine : A study of 490 California cities and towns found that growth control measures that
I
(1999) I remove land from development or require less intense development reduced rental
! and ownership housing. Impacts on rental housing were particularly severe.
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Salama, 1 In New York City, the price of newly built homes could decline by 2 5% if the city
I
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Schill, and I implemented a comprehensive barrier removal strategy.
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I
Stark (1999) I
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National In 42 metropolitan areas, eliminating unnecessary government regulations, fees, Association and delays could reduce housing costs by 10%. Results varied significantly by area. of Home
Builders
(1998)
4
smart growth rhetoric to justify restricting
TRENDS IN THE REGULATORY ENVIRONMENT growth and limiting developable land supply,
AFFECTING HOUSING DEVELOPMENT which lead to housing cost increases.
Since 1991, regulatory barriers to development
of market rate, rental, and affordable housing have become more widespread in suburban regions and some rural areas as communities seek to limit population growth. Generally, regulatory tools
that were barriers then remain barriers today. Regulatory mechanisms, such as restrictive zoning, excessive impact fees, growth controls, inefficient and outdated building and rehabilitation codes, multifamily housing restrictions, and excessive subdivision controls have been in use for decades. These controls have become more sophisticated and prevalent. The current regulatory framework makes building a range of housing types increasingly difficult, if not altogether impossible, in many areas. Although some recent market research appears to indicate a greater willingness
by the general population to accept affordable housing for moderate or middle income families
in their communities, no evidence exists that such abstract acceptance has translated into large-scale action at the local level to undertake significant regulatory reform.
The following trends stand out:
Increased complexity of envi ronmental regulation. Over the past decade, environmental protection regulation has increased in complexity, resulting in lengthy review and approval processes, additional
mitigation requirements, and new requirements for consultants. Although environmental protection is an important national objective, inefficient implementation of environmental regulations results in higher development
costs and restricted development opportunities.
Misuse of smart growth. A major change in
the development climate over the past decade is the rapid emergence of the smart growth movement. Some smart growth principles, such as higher density development, can
facilitate the development of affordable housing. A number of communities, however, have used
Still NIMBY in the suburbs. Many suburban communities continue to enact affordable housing restrictions, use exclusionary zoning practices, impose excessive subdivision controls, and establish delaying tactics for project approvals. These development barriers can effectively exclude rental and affordable housing development in a community.
Impact fee expansion. Impact fees are
an accepted and growing mechanism to finance the infrastructure and public services associated with new development. Although some impact fees reflect actual front-end infrastructure development costs, others are disproportionate to communities’ actual costs, reflect an unnecessarily high level of infrastructure investment, or are assessed
in a regressive manner.
Urban barriers—building codes, rehabilitation, and infill development. Slow and burdensome permitting and approval systems, obsolete building and rehabilitation codes, and infill development difficulties remain serious impediments to affordable housing development in cities. Obsolete building and rehabilitation codes are one of the most widespread urban regulatory obstacles,
requiring old-fashioned and expensive materials, outdated construction methods, and excessive rehabilitation requirements that make construction and rehabilitation more expensive in certain regions.
Each trend is described in detail below.
Increased Complexity of
Environmental Regulation
Environmental protection regulation is essential to building healthy and sustainable communities. Environmental protection and affordable housing development need not be competing objectives. How these regulations are implemented, however,
Section 1. Regulatory Barriers to Affordable Housing Persist 5
often has the unintended consequence of preventing development of much-needed affordable housing. Good planning considers, integrates, and balances a host of public objectives: a clean environment, adequate public infrastructure, schools, quality of life, and fiscal concerns, as well as housing needs and future growth accommodation. Unfortunately, in practice, developmental and environmental reviews are often two distinct processes with often-conflicting standards and approval
procedures. Such inefficiencies result in conflicting environmental requirements, prolonged review processes, lack of justification for environmental decisions, and regulations that extend beyond
the scope of the desired goals—all combining to reduce the supply of developable land and increase the cost of development.
A number of trends indicate that since 1991 poorly designed environmental procedures and regulatory processes have become more significant barriers to the development of affordable housing. Major trends include the proliferation of national mandates, the increasing complexity of urban environmental regulations, layering of additional local environmental laws, and the misuse of environmental regulations by those opposed
to affordable housing.