Beyond Zoning Reform: 4 Ways States Can Boost Their Housing Supply
In recent years, numerous states – including California, Massachusetts, Montana, Oregon, Vermont and Washington – have adopted zoning initiatives that require localities to allow a more diverse mix of housing types and/or increase residential density. This is definitely cause for celebration; these zoning reforms are important steps for boosting housing supply.
But is zoning reform enough, on its own, to make the kind of progress that states need to meet their housing goals? Recent research indicates that changes in local zoning policies lead to statistically significant increases in housing supply within three to nine years of adoption, but the increase tends to be modest and not enough to significantly improve housing affordability for low- and moderate-income households. To generate larger increases in housing supply that produce more substantial improvements in housing affordability, states should consider accompanying their zoning reforms with complementary policies. Here are four areas for additional state action.
1. Expand financing for water/wastewater infrastructure: Large areas within many states do not have publicly supported water and wastewater infrastructure and require individual wells and septic tanks. This limits the locations that can support multifamily housing and single-family subdivisions. Processes for funding new water/wastewater infrastructure vary from state to state, but often require localities to assume high levels of financial risk that inhibit the installation of this infrastructure in places where it’s needed to meet demand. Even where publicly supported systems exist, it can be costly to expand them. Creative state programs for financing infrastructure can help expand the areas where at-scale housing development is feasible and reduce the impacts that infrastructure costs have on home affordability. Washington’s Connecting Housing to Infrastructure Program (CHIP) is a great example of this type of initiative: it funds the costs of connecting affordable homes to water, wastewater and stormwater infrastructure. CHIP helped create more than 7,800 affordable housing units since it was introduced in 2021.
2. Increase the construction workforce and developer capacity: Severe deficits in skilled construction workforce and developer capacity represent serious obstacles to expanding housing supply. According to the Associated Builders and Contractors trade association, there is currently a shortage of half a million construction workers. And the problem may only grow worse; with a median age of 42, many construction workers are older and close to retirement. There is also a continuing shortage of skilled trade subcontractors, like electricians and plumbers. Despite some recent progress in closing the worker shortage gap, the time it takes to fill a construction job is still very long. Developers are paying more in wages than ever before but still struggling to find the skilled workers they need. This causes delays in construction timelines and increases costs. States can help promote skill development by expanding vocational training and creating partnerships with higher education institutions. Georgia’s heavy equipment operator pilot program for high schools and Texas’ Skill Development Fund are examples of state initiatives for growing the construction workforce.
3. Expand the use of offsite construction: In markets where developers can build 200 or more homes per year, economies of scale allow for a substantial reduction in the costs of home construction. But these economies of scale are only possible in and around large cities. By building modular or manufactured homes in factories, states can achieve the economies of scale needed to substantially lower housing construction costs in rural areas and small cities. Colorado has created several initiatives to support offsite construction, which are expected to help deliver 4,700 units per year. Oregon has made large direct investments in modular and manufactured housing plants, which have the added benefit of giving the state leverage to ensure homes are deeply affordable. As discussed in a recent Bipartisan Policy Center paper, another option is to enter into a pre-buy agreement with a manufacturer in which a state agency agrees to purchase a large number of attractive but modest-sized entry-level homes at a steep discount, and then distributes the homes to families through nonprofit partners. In addition to producing low-cost homes at little cost to the state, such programs can support the creation of year-round jobs with good wages in the factories building the housing.
4. Develop a comprehensive state housing strategy: As these examples illustrate, the solutions to state housing challenges are multi-faceted; identifying the ones that will work in a given state requires innovative, intelligent, and thoughtful responses from a variety of actors. States are innovating, but with so many problems to solve, and so many solutions to choose from, it is often a challenge to determine how to proceed. A comprehensive housing strategy allows states to channel their time and resources carefully, build a deeper understanding of the issues at play, identify gaps in the state’s policy response, and bring together diverse actors to develop coordinated solutions. States such as, Michigan, New Mexico, Oregon, and California have invested in state housing strategies in recent years to guide and focus state action.
It is incredibly encouraging to see governors and state legislators expanding their efforts to address their states’ housing challenges. Zoning reform is a great first step, but additional complementary steps are needed to expand housing affordability.
