Mar 20, 2020

Nebraska Housing Reform Bill Fails to Go Far Enough

Rising housing costs are causing the Nebraska legislature to weigh zoning reforms in the hope of preventing a crisis of rental affordability in its major cities, where single-family homes dominate and local rules heavily restrict new construction. The benefits of new housing are diffuse; they go to renters who will see less rent inflation as a result of new supply, residents of the new housing, and employers whose employees have new housing options, among others. But while many people can agree that Nebraska needs more housing at lower prices, no one wants it to be built near them. This is why local governments tend to allow too little housing to be built.

State policymakers have an important role to play in setting limits on the extent to which local policymakers can restrict housing construction. As Salim Furth and I have testified, the downside of new housing construction is felt primarily by people who live right next door to it. They may be inconvenienced by construction noise and activity or may notice less availability of street parking or more traffic in their neighborhood.

When a state steps in to limit local land use regulations, as the legislature is considering doing, it does not ban any type of housing. On the contrary, legalizing middle housing is a restoration of rights to property owners.

In January, Nebraska Senator Matt Hansen introduced LB 794, a housing bill that would have preempted single-family zoning across the state. The bill would have required “middle housing,” up to four units, to be permitted anywhere that localities currently allow a single-family home to be built. This could take the form of duplexes, triplexes, fourplexes, townhouses, or cottage clusters.

By allowing multiple households to share the cost of land, permitting multiple homes to be built on a single lot facilitates lower cost new housing relative to what’s feasible to with detached single-family construction. But rather than advancing LB 794, it appears state policymakers are moving forward with a weaker bill, LB 866, that is unlikely to have much of an effect on Nebraska’s housing market.

Unfortunately, LB 866, a compromise housing bill that advanced out of the Urban Affairs Committee last week, is unlikely to significantly improve housing supply or affordability. Under this bill, localities would be required to develop “affordable housing action plans” for state review. If LB 866 becomes law, localities would only be required to permit middle housing up to fourplexes if they fail to develop plans and goals that satisfy state policymakers.

As Salim and I explain in a Public Interest Comment on a proposed rule revision from the Department of Housing and Urban Development, simply mandating that local governments plan for housing affordability doesn’t work. This approach allows localities to appear as if they are going to make it feasible for more housing to be built at lower prices without really doing so.

As a more effective alternative to LB 866, Nebraska legislators could develop a compromise bill that requires localities to upzone all residential lots to fourplexes if they fail to meet housing market outcomes. For example, the state could preempt single family zoning in localities that experience a median house price higher than the state’s median and that also fail to permit a housing stock growth rate of at least 3 percent over the past 3 years.

On the one hand, this would provide clear expectations for how much housing cities and towns should be allowing to be built, taking the guesswork out of state enforcement. It also puts local policymakers in the driver seat, only interceding when states fail to build their fair share of housing. On the other hand, this would provide the state with a clear basis for adopting modest local reforms when cities and towns in high cost areas continue to block new housing.

Nebraska legislators could also consider a compromise bill that gives local policymakers a menu of policy reforms to consider rather than specifically requiring at least four units to be permitted on all residential lots. These options could include tried and tested reforms for increasing housing supply and improving affordability, such as:

  • Eliminating residential parking requirements;
  • Permitting residential or mixed-use development on land zoned for commercial use;
  • Permitting multifamily development on at least ten percent of the jurisdiction’s land;
  • Reducing minimum lot sizes for all residential developments to no more than 5,000 square feet; and
  • Eliminating minimum unit size requirements.

As is, LB 866 is unlikely to result in more housing at lower costs for Nebraskans. Localities that wish to remain exclusionary would be able to do so under this bill by crafting affordable housing plans to satisfy state policymakers while not actually making it feasible for homebuilders to provide more housing at more affordable prices. Whether through clear housing growth expectations or meaningful policy reforms, sustainable housing affordability will likely require more than a plan.

Photo by Mint Images

If you are interested in speaking with Emily Hamilton about her research, please reach out to media@mercatus.org.

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