Will the Democrats’ ‘Build Back Better’ Bill Do Anything to Fix Zoning?

President Joe Biden’s social spending agenda might get a vote in the House later this week—and with it, a program intended to bribe local governments into repealing their regulations on new housing construction.

150 billion dollars are dedicated to housing by the Democrats’ Build Back better Act. The new program, called “Unlocking Possibilities,” would award $1.6 million over 10 years to the states and local governments. This money could be used to “substantially improve” their housing plans as well as “streamlining regulatory processes and procedures” and “reform.”[ing]”Zoning codes” among others.

The program has a lower funding amount and more uses potential than many previous “YIMBY grant” proposals that have been made by Congress members and the administration.

The White House urged Congress in June to establish a $5 billion program to provide “flexible, attractive financing to jurisdictions that reduce unnecessary barriers to affordable housing production and increase housing options for those with low and moderate incomes.”

The Sens. Amy Klobuchar (D–Minn.), Rob Portman (R–Ohio), and Tim Kaine (D–Va.) Their Housing Supply and Affordability Act was reintroduced. This bill would have provided $1.5 billion in grants over five years to localities and states to remove barriers to housing development.

Instead, Unlocking Possibilities’ current program allows for spending that is not tied to growing housing supply.

Grantees can also use grant money to develop “local or regional plans to community development,” which plans to improve the quality of housing supply and affordability.[ing]accessibility to public transport” and “community development strategies that promote sustainability, fair housing and efficiency in the community.”

For these grants, eligible governments would need to apply for funding from the U.S. Department of Housing and Urban Development. HUD would provide guidelines on how the money could be used.

Some proponents of zoning legislation have voiced concerns about the size and flexibility of the program, as well as the freedom that HUD has in selecting grantees.

Salim Furth (a senior research fellow at George Mason University’s Mercatus Center), wrote, “There are almost no planning exercises undertaken by any consulting firm or city that would fail to qualify under this text.” The BridgeIt is. A planning consultant couldn’t ask for more targeted subsidies.

Mike Kingsella from the advocacy group Up for Growth Action counters by saying that although HUD can have broad discretion in determining criteria for awarding grants, the law makes it clear that funds are to be spent on projects that will increase the housing supply.

That language and the competitive nature of the grant program—in which no jurisdiction is entitled to the money and instead will receive awards based on how closely their application matches HUD’s criteria—will ensure the money actually goes to governments that are serious about reforming their zoning codes, he argues.

Kingsella explains that the devil is not in the details. ReasonAccording to HUD, it would be absurd to assume that any HUD could draft guidance for grant recipients that would contradict the legislative intent.

Another criticism of the Unlocking Possibilities program—and the Housing Supply and Affordability Act before it—is that they pay for paper promises and not results.

Last year’s testimony to the House Committee on Financial Service, Emily Hamilton said that a successful zoning reform program needs to reward localities, such as permitting ample housing construction. The past experience shows that local governments often keep plans for improving housing affordability on their shelves, without actually implementing any zoning changes and/or new housing.

Even positive reforms may not be implemented in a timely manner.

Furth mentions Minneapolis as an example. In 2020, single-family-only zones were eliminated and triplexes allowed to be built in residential areas. However, this reform did not produce any new housing because the city maintained its requirements that triplexes must be equal in size to single-family homes.

Minneapolis could be awarded a grant under a program that encourages planning for housing, if they decide to eliminate single-family-only zoned development. A program that awards jurisdictions for new housing construction might help the city reduce the red tape that hinders the effectiveness of the reform.

Hamilton states that only jurisdictions which issue housing permits should receive grants. The Klobuchar bill, as well as the Unlocking Possibilities Program, provide money for states and regional planning organisations that do not approve of new construction.

Of course, libertarians will not be happy with any federal spending increases. This is perfectly acceptable. However, even if federal funds are going to be spent on housing affordability, some might also serve as an incentive for repealing rules that should not exist.

In a recent White House seminar on zoning reform, Oregon House Speaker Tina Kotek (D–Portland)—who authored the law abolishing single-family-only zoning almost everywhere in the state—argued that local governments need incentives as well as mandates if they are to embrace reform.

Kotek said, “Put money down on the table. Don’t tell them what they should do.”

Contrary to the state governments, federal officials cannot tell local governments how they should handle their zoning codes. It can offer money. It will be interesting to see what happens with that extra money.