The Construction Conundrum: Affordable Housing and the Future of the American City

Across major American cities, residents are facing the high costs of a growing housing crisis. While zoning regulations and affordable housing have typically been hailed as ways to preserve neighborhoods while providing opportunities for low-income families, there is a significant downside to this more restrictive approach. This method of local control over the market gives far too much power to local residents, many of whom have a vested interest in maintaining market scarcity. As a result, major cities have become playgrounds for the rich. Burdening developers and giving local bureaucracy the leverage necessary to stall major building projects suppresses the construction of housing from the outset. These regulations have a harmful impact on the fight for affordable housing. On top of this, the racialized stigma of public or affordable housing as a special dispensation for lazy or undeserving Americans keeps such housing and its residents from entering middle class neighborhoods. This dynamic exacerbates housing segregation and concentrates poverty in already depressed urban neighborhoods. As a result, impoverished and working-class individuals cannot afford to live in cities where they would be among the 11.8 million Americans paying more than half of their household income on rent. Ultimately, this regulatory approach accepts a fundamentally broken housing market. A solution to the housing crisis should not require advocates to fight battles in municipalities across the country to simply gain a few units here and there. Promoting affordable housing in our most prosperous and populous cities will pay many dividends, but the tools on which policymakers have traditionally relied are not working. Liberalizing building restrictions and increasing enforcement of anti-discrimination laws will lead to more affordable cities permanently.

In San Francisco, for example, voters overwhelmingly chose to limit all high-rise building on the waterfront opting instead to individually approve each project.

In many urban areas, developers are more than willing to build housing. However, interested parties often run up against building and zoning regulations that make building difficult. The construction of the dense, multi-family housing that has grown more popular and necessary in recent years is all but impossible in many communities, where rules allow only single-family housing or other low-density construction. As a result, even though developers see the need for more affordable housing, they cannot build it. This phenomenon is especially prevalent in liberal coastal enclaves. In San Francisco, for example, voters overwhelmingly chose to limit all high-rise building on the waterfront opting instead to individually approve each project. This referendum was framed as an attempt to prevent the ills of gentrification but will likely only exacerbate it by further restricting the supply of housing. In affluent and primarily left-leaning Westchester County, authorities have only built half of the 750 affordable housing units promised after a federal court case ruling against discriminatory housing practices by the local government. Residents have loudly and consistently decried attempts to promote affordable housing development – a potent mix of financial interests in keeping the market scarce and racially-charged exclusion which sees affordable housing as a threat to white, middle class neighborhoods. This argument has proven to be a powerful force in inducing communities to resist development. As a result, residents in specific neighborhoods across the country are using their power to resist the real change needed to solve the affordable housing crisis.

For the last twenty years, gentrification has been at the center of debates over housing and neighborhood change. However, as important as it is to address displacement of predominately minority and low-income communities, the dynamics of the larger metropolitan area cannot be ignored when shaping housing policy. Policymakers often fixate on luxury housing built in formerly poor areas because this phenomenon is highly visible. But the problem is hardly limited to transitional neighborhoods – persisting patterns of exclusivity in long-established wealthy enclaves have trickle-down effects in diverse parts of metropolitan regions. The real problem with housing in cities is simple: There is simply not enough supply to accommodate population growth in major American cities. The forced restrictions on building and change in the most expensive neighborhoods force the poorest residents to compete with the middle class for artificially scarce housing. New York’s state tax on rental properties discourages investment in affordable housing in New York City by burdening rental buildings with some of the highest property taxes in the nation. In Northwest Washington, DC, wealthy residents of the Woodley Park neighborhood shut down plans to build almost 1,750 units, including single-family housing, by altering zoning regulations. Large developers, who can afford the massive capital investment to overcome the bureaucratic red tape and gain expensive permits, tend to focus on large, luxury projects with a large return. These zoning regulations mean that it is simply not worth it to build housing that is not exorbitantly priced.

In turn, requiring a small, arbitrary amount of affordable housing does little to halt the processes that create the artificial scarcity of housing in the first place. Placing a band-aid on the system by adding another rule to require affordable housing not only further exacerbates the supply problem but also lends another tool to challenge construction. This has and will be done in ways similar to how local officials in California have abused environmental laws in order to kill efforts to promote affordable housing. One can move around the rules and add more of them, but in general, rules will restrict development and ensure that an adequate supply of housing is never built.

Enacting rules that slow down development is the wrong approach to take with a housing crisis of this magnitude, and the worst are those enacted to preserve “neighborhood character.” Advocates claim historical and economic motivations, but their resistance to change is harmful to the poor. Embracing change in the physical landscape of cities is necessary to ensure that poorer residents in historically preserved neighborhoods will not be forced out by a constantly rising real estate market. A focus on fixing the symptoms blinds advocates, allowing their agenda to ultimately benefit the wealthiest residents by entrenching zoning laws in the place of more meaningful reform. Other patchwork efforts such as rent control have helped many people afford housing, but fundamentally restrict the supply of the market and people’s freedom to seek better opportunities. Regulation to mandate affordable housing only entrenches the right of those in power to use the same tools to inflate housing prices and constrain supply.

Fixing the problem will not be easy. Wealthy residents of the most expensive and exclusive neighborhoods benefit from the status quo as their house and land values are artificially inflated by building restrictions. Every single homeowner in the city gains at the expense of all the non-resident workers who commute into the city and spend money on local business and sales taxes, but use fewer public resources and do not vote in municipal elections. This is one of the major reasons it is so hard to build more housing in cities: Those who have the capital to own their homes have a vested interest in creating an artificially scarce housing market. In order to wrestle power away from these entrenched interests on the municipal level, it is more important than ever for state and federal governments to step in to promote affordable housing and fight against unnecessary and counterproductive zoning laws.

Financial self-interest is far from the only reason zoning laws remain stringent in some communities. Historically, restrictions have been used to keep out blacks, Latinos and low-income individuals from living in certain neighborhoods. Beginning in the 1930s, policymakers at the Federal Housing Administration blatantly refused to back loans in predominantly black neighborhoods. This process, known as redlining, maintained racial and socio-economic segregation through zoning, and its effects persist today. However, it is not merely direct discriminatory beliefs that power this system. Solutions must recognize that there is a “possessive investment in whiteness,” a term coined by George Lipsitz, that refers to the cash value white people can extract from discrimination. These benefits come from inflated house prices, better educational opportunities, and social networks that favor them in finding employment. Thus, white Americans – particularly wealthy ones – maintain individual investment in whiteness which, whether consciously or unconsciously, exacerbates segregation. As the main stakeholders gain too much financial and social benefit from the status quo, government efforts to promote affordable housing in wealthy white neighborhoods are quickly stifled.

Policymakers at the Federal Housing Administration blatantly refused to back loans in predominantly black neighborhoods. This process, known as redlining, maintained racial and socio-economic segregation through zoning, and its effects persist today.

As a result, de facto and de jure segregation and discrimination has left minorities less able to take advantage of the housing market. This inequity in access is reflected in the significant racial wealth gap that exists in the US today, with white median wealth hovering at $113,149 compared to only $5,677 for black families. The single largest factor in the current and historical gaps in home ownership and home equity is the fact that African-Americans were denied loans in suburban communities and were left out of the GI Bill by the federal government, which allowed millions of returning veterans to buy homes in the post-WWII housing boom. Today, more pernicious methods worsen segregation, from racial steering by real estate agents to discriminatory lending practices by banks. Thus, black Americans have lower rates of home ownership and the homes they do own often have lower value than those owned by their white counterparts. Additionally, there is a compounding effect, as white families are far more able to lend financial assistance to their family members, allowing them to purchase more valuable homes and attain more favorable terms from banks. Merely implementing laissez-faire reforms won’t reach the goals of economic and racial justice in the urban housing market.

Past injustice perpetuated by exclusionary or discriminatory housing policy has distorted access to capital. In turn, the possibilities of housing subsidies for those who have benefited from past discrimination could be a solution to overcoming these barriers, especially if done in coordination with other policy prescriptions to fight discrimination. In turn, any program which seeks to fix racialized inequality in urban housing markets must aggressively enforce non-discrimination laws such as the Civil Rights Act and the Fair Housing Act. Congress should also undo the measures it introduced in the 1996 Welfare Reform package which punitively limits access to housing for felons by banning them from publically subsidized housing. Reparative action can come in the form of thoroughly implementing existing protections while pursuing legal action against further harm.

The path forward remains unclear. The system of government in the United States delegates great power to small localities and states who have little incentive to respond to multi-regional issues such as affordable housing in metropolitan areas. Massive homeowner power over localized political decision-making means municipal governments are unlikely to make changes on their own. Voters, even in liberal areas, find lots of reasons to reject more housing that seem well-intentioned – neighborhood character, environment, their view – and others that are not, including motivations to exclude minorities. But while local interests currently have immense control over this process, policies decided locally have a large impact beyond city or county borders. Renters and commuters currently have little say in zoning decisions despite being integral to the functioning of urban spaces. There is a bit of a prisoner’s dilemma as well: If one town or part of a city liberalizes their zoning, they will bear far more than their fair share of development change, far more than their fair share. As a result, this is truly a regional, and in many ways a national, problem. Thus, part of the solution should involve moving or at least evaluating housing and zoning decisions at the regional or national level. Other countries are already doing this: Japan’s national model has resulted in housing prices remaining nearly flat in Tokyo over the last decade. Only at this level can housing supply be addressed and seen in the proper context.

These reforms can help solve the crux of the housing affordability crisis: lack of supply and entrenched segregation. To stop the displacement of poor people and people of color from their homes, federal, state, and local housing policy must address artificially inflated rents that incentivize landlords to kick out long-term tenants and raise prices. Deflating the housing market through more supply and the other non-discriminatory policies outlined above will help, not harm these people. Lifting structural impediments on building affordable housing while pushing for redistributive and reparative policies would go a long way toward repairing the urban housing crisis striking cities in the United States.