- Some housing experts want Washington to take a bolder approach to policy reform.
- They want the federal government to target local and state land-use laws that stifle construction.
There are two classic ways to encourage someone to change their behavior: a carrot or a stick.
The federal government is much more likely to rely on incentives — or carrots — when it comes to housing policy. The construction and regulation of homes in the US are almost entirely controlled by state and local governments; the president and Congress don't have a ton of power to shape what gets built where. But lawmakers in Washington do have money. So, they tend to use federal funding to reward housing policies they like.
As the housing affordability crisis tops Americans' list of concerns, some housing experts say Washington needs to play a much bigger role in solving it, partly by using its punitive powers — or the stick.
One example of the kind of bold federal law that some point to as a model has nothing to do with housing. The National Minimum Drinking Age Act, signed by Republican President Ronald Reagan in 1984, required all states to set their alcoholic drinking age at 21 years old or risk losing some amount of federal funding for highway construction. The threat worked. All states moved quite quickly to comply with the law.
Because transportation funding is often "must-pass" legislation in Congress, lawmakers could arguably tag on a provision intended to force states and cities to make building homes easier. In a recent op-ed in the New York Times, Harvard economist Edward Glaeser argued that the next administration should implement a housing construction law that follows the model of the Drinking Age Act.
"The legislation could establish minimum construction levels over three years for all counties with median housing values above $500,000," Glaeser wrote. "States with high-price, low-construction counties would have to figure out how to overrule local zoning codes themselves or lose federal transportation funding."
Skyrocketing home prices and rents are largely a result of a severe shortage of housing. A web of restrictive land-use laws, building codes, and other regulations makes it challenging or impossible to build enough homes.
"The federal government needs to figure out how to accelerate the process of unwinding those kinds of local regulatory barriers," Ben Metcalf, managing director of the Terner Center for Housing Innovation at UC Berkeley, told Business Insider. "And to do that requires quite a bit more boldness."
Democratic presidential nominee Kamala Harris's housing policy plan includes demand-side subsidies, including a $25,000 downpayment assistance for first-time homebuyers, and supply-side funding to boost innovation and help affordable housing development proceed. But her approach is all about incentives.
Metcalf, who also pointed to the drinking age law as a model for a housing mandate, conceded that the politics of it would be tricky. He also noted that it would be challenging to measure who's building enough housing. The construction mandate that Glaeser proposes is a lagging indicator, Metcalf said, because it can take a few years for zoning or other land-use changes to prompt developers to build more.
There would also inevitably be legal challenges to a federal mandate. Since the 1980s, the Supreme Court's stance on the power Congress should have has changed. This is evidenced by the Court's decision striking down Obamacare's mandatory Medicaid expansion as unconstitutionally coercive of states, said Daniel Hemel, a law professor at New York University.
"The key question would be whether Congress has overstepped the blurry line between inducement and coercion," Hemel told Business Insider. If the law withheld new transportation funding, as opposed to pre-existing funding, it might be seen as less coercive and, therefore, be more resistant to legal challenges, he argued. That, however, would be more of a carrot than a stick approach.
But Hemel noted that a law like this could put the Court in an interesting bind. While the conservative majority tends to support limits on congressional power over the states, it also favors less government regulation.
"This is an instance in which the conservatives' federalist impulses and their deregulatory impulses collide," he said.