Federal ROAD to Housing Act Won’t Solve the Housing Affordability Crisis

The U.S. Senate version of the 21st Century ROAD to Housing Act, now going the U.S. House of Representatives for approval, is a mixed brew of a few good ideas and a potentially dangerous regulatory drag for local governments.

Sprawling through 100 sections and 9 major titles over 381 pages of legislation, the legislation’s core intent is laudable: Fix America’s housing affordability crisis by increasing supply.

But, like most federal (and state-level) initiatives, the legislation fails to grasp the localized and fundamentally decentralized nature of the solution. Policymakers have created square pegs for a playbook full of round holes.

Both the nature and complexity of the problem are well illustrated by the State of Florida.

Florida has more than 10.3 million housing units, third largest after California (14.6 million) and Texas (12.1 million).

Until the mid-2000s, Florida was one of the most affordable states in the nation. By the end of the decade, however, high housing prices were eroding affordability. The financial crisis of 2008 kept prices at bay, but by the mid-2010s, housing affordability was falling rapidly. The Pandemic put the trend into overdrive.

The DeVoe L. Moore Institute (DMI) found that Florida went from adding about 100,000 units each year to net reductions in the housing stock in less than a decade. From 2015 to 2022, Florida fell behind demand by nearly 500,000 housing units. By 2022, 61 of Florida’s 67 counties were experiencing chronic shortages. The net impacts were felt almost equally in the owner-occupied and rental-housing markets.

These statewide trends, however, mask state and local policy decisions that contributed significantly to the erosion of housing affordability. Local governments did this primarily by making the task of building the right kind of housing, in the right place, at the right time, for the right buyer harder and more complicated.

Analyses of housing price trends in the 1990s and 2000s, published by Reason Foundation and the James Madison Institute, found that affordability began to erode quickly in Florida (as well as Oregon and Washington State) after the state fully implemented its statewide growth management law in the early 1990s.

Indeed, the longer a city or county had planned under the statewide mandate, the more quickly housing prices increased. In Florida, the effects were strong enough to reverse trends toward increased housing affordability.

More and more local housing markets became unbalanced as local communities exercised their legal authority to micromanage land use and housing markets. More hoops were required for developers and builders to jump through. While the intent was not always to slow down development, the effect was to grind approvals for permits and rezonings to a snail’s pace.

Will the ROAD to Housing Act change the political calculus necessary to increase housing across the spectrum?

Probably not.

The legislation has several elements that should cut regulatory drag and improve the ability for housing markets to expand. But they are limited.

Legitimizing so-called manufactured housing, in particular, has the potential to change the trajectory of this industry and create a new tier of affordable housing. Pre-fabricated housing has reduced costs outside the U.S., and expanding this sector will allow for more units to be brought on-line faster at lower price points.

Other provisions work against housing affordability. Capping investor-owned housing, for example, will limit capital in a market that needs more. Investors rarely hold purchased units off the market. Rather, they rent them or flip them to new owners.

While using infrastructure funding incentives might entice a few cities to streamline permitting, the time, energy, and labor needed to navigate the grant-making process, determine what kind of housing qualifies, and get money flowing to the city is likely to hole-up resources rather than free them.

Ironically, much of the regulatory burden miring housing markets down in a bog of land-use regulation is a result of federal policy. The U.S. Department of Commerce created the State Zoning Enabling Act in 1922 to center political decision-making over markets in housing land-use. By 1926, more than 19 states had adopted the model legislation, laying the foundation for development regulation and micromanaging land use in the U.S. In 1928, it published the Standard City Planning Enabling Act to encourage master planning.

The real key to improving affordability will be restoring fluid regional and local housing markets. This is not something the federal government can, or should, mandate. Rather, the task is for state and local policymakers to roll up their sleeves and dive into the muck of land-use regulation and do the dirty work necessary to restore the healthy market-driven dynamics that build housing across the economic and income spectra.