Final take (for now) on state and local policies that help or hurt housing for people who earn less ... [+]
Restating the principle from previous posts cataloging what state and local governments should avoid and what they should seek from housing policy: the best solution to housing is always more housing created when there are fewer rules and more incentives for producers of housing. Subsidies when they are needed (and they always will be) should be cash for rent and built housing only for people with profound needs beyond housing. Here’s the last set of suggestions for now. Getting to more production isn’t politically easy, and even when it happens, the effort and implementation of policy change needs to be sustained.
Don’ts: Tempting Political Wins But Bad Policy
Banning Short-Term Rentals – Local governments provide various excuses for trying to limit or ban short-term rentals ranging from parking concerns to worries about who is renting them. Additionally, some argue that short-term rentals take rental housing away from local residents. Cities and towns are moving against short-term rentals for these reasons but also because unions representing hotel workers would rather have people stay in their hotels.
However, for many families, short-term rentals generate money to supplement their income, and the rentals often are one way to more affordably house nurses and other temporary supplemental workers that would be more expensive to put up in traditional hotels. The answer to lack of housing supply isn’t shutting down short term rentals, buy more housing of all kinds everywhere, including in single-family neighborhoods.
Solution: States that can should preempt local governments from limiting short-term rentals. In cases when cities are confronted by angry neighbors or unions, the councils should resist the urge to punish short term rentals and focus instead on how to incentivize more homeownership and right priced rental housing. That’s the long term and sustainable solution.
Read More: “Housing Scapegoat: Short Term Rentals Aren’t The Problem,” by Roger Valdez, Forbes.com, October 6, 2022.
Discourage Investment in Housing – Everyone has heard it: “Investors from out of town are driving up the cost of housing!” This is false. Remember the principle. If prices go up, it’s because there is scarcity. Some jurisdictions have gone on something of a spree in the last year campaigning against “real estate investors,” especially large “out of town” investors. Often the fuss starts with one building that has been plagued with problems, and then this becomes the pretext to declare war on institutional investors.
There are unscrupulous investors in every business, including housing. But investment in the rehabilitation of housing is a good thing. If there is a problem, more housing will solve it. If an out of state investor is a jerk, more housing means people can easily move and maybe save money. If an operator violates the code, fine the owner just like any other violator of the law.
Solution: Local governments should make and enforce clear and easy to follow rules on maintenance and operation of buildings. If investors are buying up houses, don’t try to ban it; instead spend some time figuring out what’s happening and why. Incentivize local investment through tax abatement, create land banks, and get aggressive about more production. This is the best thing to support people who need housing.
Do’s: Some Positive But Challenging Proposals
Fund a Risk-Reduction Pool – Some cities have pursued a raft of troublesome and ultimately damaging rental housing policies. Blocking the use of a tenant’s rental history, including evictions and criminal background checks, have passed in some states and cities. Such bans increase the risk for housing providers and will result in higher rents and add a disincentive to create new housing. The City of Albuquerque is creating a fund that “will provide support to landlords and tenants by providing incentives, risk mitigation and assistance” to help offset risk from residents who might have bad or no credit, a criminal record, or a negative housing history.
Proposal: Create an easy-to-use program for local jurisdictions to offset risk for renters who might be riskier to house.
Read More: “Housing Voucher Program Provides Second Chances,” by Roger Valdez, Seattle For Growth, December, 2014.
Link Federal and State Funding to More Housing – Many city leaders have offered legislation for more density in multifamily and single-family zones. Often the legislation fails because of neighborhood opposition. The legislature could incentivize reduced regulation and speed up permitting. Unfortunately, most jurisdictions in the United States, including Cincinnati, don’t have transparent ways of tracking permitting. However, Montana has considered holding back subsidies until local jurisdictions demonstrate they’ve allowed as much market production as possible.
Proposal: The legislature has oversight of housing finance agencies and could require them to establish standards for local jurisdictions to receive subsidies, including Low-Income Housing Tax Credits. The legislature could require efficient use of subsidies and set goals for lower per-unit development costs.
Read More: “Montana Housing Task Force Set Up Real Reforms,” by Roger Valdez, Forbes.com, November 9, 2022.
My recommendations are not exhaustive. There is always more. As simple as the solution maybe — just allow more housing and keep subsidies simple and compassionate — it takes great effort to implement simple policies. But it is worth collecting solutions and things to avoid. I’ll close out the series with some final thoughts on how to reduce the rules that kill housing supply.