Increasing overall housing supply

Before making investments in this strategy, city and county leaders should ensure it addresses local needs.

The Urban Institute and Mathematica have developed indicator frameworks to help local leaders assess conditions related to upward mobility, identify barriers, and guide investments to address these challenges. These indicator frameworks can serve as a starting point for self-assessment, not as a comprehensive evaluation, and should be complemented by other forms of local knowledge.

The Urban Institute's Upward Mobility Framework identifies a set of key local conditions that shape communities’ ability to advance upward mobility and racial equity. Local leaders can use the Upward Mobility Framework to better understand the factors that improve upward mobility and prioritize areas of focus. Data reports for cities and counties can be created here.

Several indicators in the Upward Mobility Framework may be improved with investments in increasing the overall housing supply. To measure these indicators and determine if investments in these interventions could help, examine the following:

• Housing stability: Number and share of public-school children who are ever homeless during the school year. These data are collected by local public school districts.

• Housing affordability: Ratio of affordable and available housing units to households with low, very low, and extremely low income levels. These data are available from the Census Bureau’s American Community Survey and the U.S. Department of Housing and Urban Development’s Local Income Bands.
  

• Economic inclusion: Share of people experiencing poverty who live in high-poverty neighborhoods. These data are available in the Census Bureau’s American Community Survey.

• Racial diversity:Index of people’s exposure to neighbors of different races and ethnicities. These data are available through the Census Bureau’s American Community Survey.

• Opportunities for wealth-building: Ratio of the share of a community’s housing wealth held by a racial or ethnic group to the share of households of the same group. These data are available from the Census Bureau’s American Community Survey.

• Reforming zoning codes to allow for more housing construction: Jurisdictions can unlock greater housing supply by enabling denser and more diverse types of housing to be built in their community. In most jurisdictions, zoning codes regulate a wide range of development standards, from building typology, to the minimum size of individual lots, to the maximum height of buildings. These standards often combine – either explicitly or in effect – to restrict housing development to detached, single-family homes. Any single development standard could affect the feasibility of denser, more diverse housing projects. As such, jurisdictions should examine their zoning regulations comprehensively in order to enable the construction of a greater variety of housing types. For detailed guidance on zoning reform, see National Association for Latino Community Asset Builders and Smart Growth America’s Eliminating Zoning Barriers to Affordable Housing guidebook.

• Reviewing building and construction standards: Municipal building codes and construction standards promote the creation of safe, high-quality housing. However, onerous requirements can disincentivize new housing construction by increasing development costs. As such, jurisdictions that have the legal authority to amend their building and construction codes should regularly review them for standards that are obsolete or have no real connection to safety outcomes. For example, in 2021, Memphis (TN) amended its building code to apply residential instead of commercial standards to multifamily buildings with between 3 and 6 units. The move made the construction of small multifamily structures more financially feasible by subjecting them to safety standards more appropriate for their scale (e.g., requiring fire-rated walls instead of sprinkler systems). See Local Housing Solutions for more on building and construction code reform.

• Reducing costs resulting from permitting processes: When securing a building permit takes a long time, it can increase the cost of creating new housing. Jurisdictions can shorten the length of their permitting processes by increasing the number of developments that can be approved “by-right.” By-right approval allows developers to apply directly for a building permit if their proposed project meets set zoning and building requirements, eliminating the costs associated with securing discretionary approval from municipal boards or administrators. When discretionary approval is required, however, local governments can still shorten the length of their permitting processes by allowing concurrent – as opposed to sequential – review of proposed developments (e.g., conducting environmental and historical preservation reviews simultaneously).

• Providing incentives to encourage housing development: Jurisdictions can offer financial incentives to encourage the construction of new housing. The most common types of financial incentives are tax abatements, which reduce the amount of taxes owed on a property, and tax exemptions, which exempt a property from increases in its assessed value that would typically occur after completing a new development. Generally, tax incentives are time-bound (e.g., for a 5- or 10-year period) and targeted to geographic areas where the private market is not delivering sufficient housing to meet local goals. As incentives represent foregone tax revenue, jurisdictions should regularly evaluate their incentive programs to ensure they are generating housing that would not have otherwise been built were no incentives offered.

• Situate supply-oriented strategies as part of a broader housing policy: The creation of exclusively market-rate housing may not result in a sufficient amount of affordable housing for low- to moderate-income households. As such, in most cases, supply-oriented strategies should be paired with those that create dedicated affordable housing. Additionally, by increasing market-rate housing construction, communities can risk displacing low- or moderate-income residents, if new market-rate housing replaces existing affordable housing units. Strategies that promote housing stability or create new or preserve existing affordable housing, such as inclusionary zoning or community land trusts, can help mitigate these risks. (It is important to remember, however, that the primary cause of displacement is rising housing costs resulting from insufficient housing supply and lagging income growth, not the construction of new market-rate housing.)

• Enact regulatory reforms jurisdiction-wide: Typically, communities should implement zoning and building reforms jurisdiction-wide. Enacting comprehensive reforms avoids several trade-offs that come with restricting these changes to a subset of neighborhoods, particularly when those neighborhoods are predominantly lower-income. Specifically, targeting these reforms risks: (1) limiting their effectiveness by suppressing overall housing production; (2) concentrating development into a smaller number of neighborhoods, increasing the risk of displacement; and (3) preserving high housing costs in what are often high-income, high-opportunity areas. That said, jurisdictions may still tailor aspects of regulatory reforms to reflect varying market conditions across neighborhoods (for an example, see the City of Chicago’s Connected Communities Ordinance).

• Assess disparate impacts on subpopulations: Housing policy in the United States has historically caused and exacerbated inequalities in segregation, disinvestment, and displacement. These negative impacts have typically fallen most heavily on racial and ethnic minorities, people with disabilities, and older adults. Equity assessments can help local leaders understand the impact of status quo policies and assess how proposed policy changes may benefit or harm different subpopulations. For an example equity assessment framework, see the Government Alliance on Race and Equity’s Racial Equity Toolkit.

• Residents: Engaging residents early and throughout a policy reform process can build public support by increasing awareness of the relationship between housing regulations, supply, and affordability. However, research shows that residents who show up for in-person and virtual community meetings are older, wealthier, whiter, and more likely to be long-term homeowners than the communities in which they live. Redesigning community engagement processes to encourage better representation by younger households and renters is a key challenge for planners.

• Private housing developers: Private developers are typically responsible for creating most of the housing supply in a community. Local leaders can consult with developers to better understand which aspects of the jurisdiction’s zoning code, building code, or permitting process present the largest barriers to increasing the housing supply. Similarly, when designing financial incentives, feedback from housing developers can be key in calibrating the size and length of tax abatements, tax exemptions, or other incentives.

• Civic and non-profit organizations: While they typically operate at a smaller scale, non-profit housing developers (e.g., community development corporations) can also serve as an important source of guidance when designing policies to spur housing development. Additionally, community groups and advocacy organizations can be strong partners in crafting reforms that are responsive to community needs and fears and will ultimately advance the case for policy change.

• Local government staff: Local planning, housing and building, and economic development departments often lead efforts to reform zoning and building codes, permitting processes, or development incentive programs. Additionally, as housing developments impact local infrastructure and transportation patterns, public works and transportation officials can be key partners in ensuring housing policy is aligned with broader community priorities. Partnering with public transit agency staff in particular can unlock opportunities to align housing development efforts with future public transit investments.

• Local elected officials: In most communities, significant changes to zoning or building codes require approval from local elected officials. Officials with neighborhood-level connections, such as ward-based council members, may also be helpful in conducting effective public engagement and advocacy efforts. However, giving veto power to individual council members over regulatory reforms in their district (e.g., aldermanic privilege) may stymie projects toward city-wide goals.

• Large institutional stakeholders: Institutional stakeholders, like hospitals and universities, can drive increased housing demand around their properties. Partnering with these organizations enables local leaders to encourage housing development that meets this increased demand and that is affordable to the wide-range of residents that work, study, or otherwise interact with these institutions.

• Large landowners: Local leaders may benefit from developing relationships with landowners who own large or many smaller parcels that could be repurposed for housing. Understanding these landowners’ long-term plans can position local leaders to better advocate for housing development that meets community needs as these properties come up for redevelopment.

• Using data to assess local housing needs: Housing needs assessments can help local leaders determine if more housing is needed in their community and, if so, what policy changes are needed to close the gap. Common elements of a housing needs assessment include: (1) an overview of jurisdictional and regional socioeconomic and housing trends, (2) an analysis of any gaps in housing need versus supply, and (3) the identification of barriers preventing the construction of needed housing. The above information provides the necessary context to select the appropriate strategies to achieve a community’s housing goals. To access a high-level overview of your community’s housing needs, see Local Housing Solutions’ Housing Needs Assessment.

• Addressing varied local market conditions: While experts generally recommend that zoning and permitting reforms apply jurisdiction-wide, development incentives should be tailored to the conditions of local submarkets. A recent housing needs assessment can be a starting point for understanding variation in market strength across a community. To ensure financial incentives are necessary, however, jurisdictions may need to conduct more detailed market analyses and engage area developers and lenders. Regardless, any financial incentives should be reviewed regularly to ensure they are still necessary to generate additional housing.

• Weighting community engagement efforts toward policies relative to projects: Jurisdictions should conduct meaningful and ongoing public engagement when creating new housing policies. When residents understand a policy, and the policy responds to local priorities, future proposed developments that are in line with that policy may themselves enjoy greater public support. To the extent that public support at the policy level can reduce opposition to individual projects, it can shorten and create more certainty around development timelines for developers. For guidance on how to design meaningful community engagement efforts, see IAP2’s resources and Duo Development and Elevated Chicago’s In.Field toolkit.

• Housing cost burden: Housing affordability is most commonly measured by calculating the proportion of pre-tax income that households spend on housing. Those that spend 30 percent or more of their income on housing are considered cost-burdened. Cost burden can be misleading when measured for small geographic areas, however; expensive communities often have very low shares of cost-burdened households because only wealthy people can afford to live there, while low-cost communities with many low-income households have high cost burdens.

• Housing and transportation costs: Transportation costs are generally linked to housing costs. In many communities, the most affordable housing is farthest from key amenities, like jobs, education, or healthcare. Considering transportation and housing costs together may give local leaders a more comprehensive picture of the local cost of living. For an example of a combined housing and transportation affordability index, see the Center for Neighborhood Technology’s Housing and Transportation Index.

• Housing supply: The total number of housing units is used to measure a jurisdiction’s housing supply. Tracking this number over time and disaggregating it by location and housing type (e.g., single-family versus multi-family and/or number of bedrooms) can provide insights into how attractive a community is for housing development. (However, local leaders should remember that macroeconomic factors outside of their control will have a significant impact on this metric.)

• Gains and losses in units: In addition to the number of new housing units created, jurisdictions may track the number of units lost through deconversions or disrepair, as well. This information can be valuable, as the policy solutions that generate new housing differ from those that preserve existing housing.

• New construction variances: Effective zoning reform increases the proportion of housing developments that can be built by-right, without requiring discretionary approval on a case-by-case basis. One approach to assessing the effectiveness of zoning reforms is to compare the proportion of housing developments that applied for a zoning variance before the reforms were enacted to the same proportion after.

• Time to approval: Jurisdictions should track the time it takes for developers to receive the approvals necessary to begin construction of proposed developments. This can help local leaders understand the total cost of approval processes and identify opportunities to minimize delays. Measuring the variability in time to approval may also be useful, as predictable approval timelines are attractive to developers.