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Sep 22, 2021

Reconciliation Bill’s “Zoning Reform” Provision Is Empty Spending

Salim Furth Senior Research Fellow

Throughout its formation, a noted element of President Biden’s housing policy has been a “competitive grant program” to award “jurisdictions that take concrete steps to eliminate … needless barriers to producing affordable housing.” Both advocates and critics agreed it was a big deal, creating a significant fiscal “carrot” for cities willing to follow the lead of Houston, Buffalo, and Minneapolis and remove regulatory barriers to homebuilding. My colleague Emily Hamilton argued that such a program could work if it focused on measuring real-world outcomes like rising construction and falling prices.

Instead, Rep. Maxine Waters (D-Calif.), who chairs the House Financial Services Committee, went the opposite direction, offering up a $4.5 billion grant program for local, regional, and urban planning. The parameters are so loose that the Department of Housing and Urban Development (HUD) would gain almost total discretion in making awards. The new “Unlocking Possibilities” grant program is detailed in pages 64-71 of the committee’s September 12 markup of its $327 billion section of the “Build Back Better” reconciliation bill.

Contrast the language in the new markup with the Housing Supply and Affordability Act (S.902), a bill by Senator Amy Klobuchar (D-Minn.). Along with similar proposals from Senators Elizabeth Warren (D-Mass.) and Cory Booker (D-N.J.), it was the inspiration for the grant program idea. Where Klobuchar’s bill gives a narrow list of purposes, all strictly related to housing supply and residential segregation, the Unlocking Possibilities provision would allow grants for cities to “develop local or regional plans for urban development,” with no further qualification.

There is almost no planning exercise undertaken by any planning consultant or city that would not qualify under this text. But almost no non-planning activity would qualify. A planning consultant could hardly ask for a more perfectly targeted subsidy.

Federal incentives for pro-housing planning are in tension with the voices of local residents and businesses in the planning process. A responsive and representative local government does not enter a planning process with a predetermined outcome. Rather, the planning department presents a range of general concepts. After citizens’ respond, the final outcome is a political compromise. How is HUD to evaluate grants for such an open-ended process? On one side, HUD will want a clear idea of what it is being asked to fund. On the other side, the grantee cannot commit to anything specific unless it plans to ignore its own citizens’ eventual role in the planning process.

Congress should revise this provision by shifting its incentive program from the beginning of the development process to the end, as envisioned in the Warren and Booker proposals.

Federal grants should reward actual policy changes accompanied by tangible results.

For example, Los Angeles has implemented a permissive and successful accessory dwelling unit ordinance that has resulted in thousands of new homes. New Rochelle, New York, used an innovative environmental review strategy to revive a disinvested downtown. A good grant program would recognize and reward those policy-plus-results successes.

By contrast, while Minneapolis implemented a dramatic-sounding zoning change, it is not yet clear that it has worked as intended. Under a better grant framework, HUD would encourage Minneapolis to revisit its policies and make needed adjustments before fully rewarding the city for its good intentions.

Without further changes, the Unlocking Possibilities Program will be a waste of money and will foreclose the opportunity of a better-designed federal grant program.

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