EDITORIAL: Biden may have a winner with housing grant program

Mired in an economic morass largely of its own making, the Biden administration desperately needs an escape plan. It could start by more heavily pushing a White House initiative that could attract bipartisan support and help stabilize soaring U.S. housing costs.

Under President Joe Biden’s most recent budget blueprint, the U.S. Department of Housing and Urban Development would receive $35 billion over 10 years to encourage local governments to remove barriers to new and affordable housing construction. The program is an admission that the nation’s housing “crisis” is the product of an overactive regulatory state that distorts markets in many locales and prevents supply from meeting demand.

In essence, a portion of the $35 billion would be used as a carrot to persuade local and state planners to ease zoning and other regulatory impediments that make it difficult to build new housing.

“We know local and state leaders are critical to enabling housing development,” a HUD spokesperson told Reason. “The proposed fund will provide incentives to leaders taking the steps necessary to streamline production in order to reduce the time and cost to build.”

If the proposal is narrowly targeted toward jurisdictions that take concrete steps to increase local housing stock and to encourage functioning markets, it has the potential to gain support from both Republicans and Democrats. The danger is that federal intervention could become the means for Beltway power brokers to run roughshod over local governments and priorities while imposing a more expansive agenda.

A White House fact sheet explains, “For decades, exclusionary zoning laws — like minimum lot sizes, mandatory parking requirements and prohibitions on multifamily housing — have inflated housing and construction costs and locked families out of areas with more opportunities.”

Fair enough. But if the grant initiative becomes bogged down in efforts to promote the progressive vision of “housing equity,” it will become an ineffective slush fund.

“A successful reform program must be carefully designed to create the strongest possible incentive for the most exclusionary jurisdictions to reform,” Emily Hamilton of the Mercatus Center wrote in a 2021 research paper on the topic. She added that “ultimately solving the housing scarcity problem requires localities to permit more housing supply in the locations where demand is high.”

In a perfect world, the federal government wouldn’t have to bribe local politicians to do the right thing. Ultimately, zoning should remain a local function, but providing financial incentives to remove hurdles that discourage housing investment and drive up costs makes sense. The president should more aggressively promote the concept.