Rising housing costs have made housing largely inaccessible and unaffordable to most Americans, but have acutely impacted communities of color and low- to moderate-income families over the past several decades. The median asking rent in the United States rose above $2,000 for the first time in June 2022. Given that the U.S. Department of Housing and Urban Development (HUD) sets the standard of affordability at 30% of household income, $2,000 per month would only be “affordable” for households earning at least $80,000 per year—well above the median U.S. household income ($67,521).
A growing housing supply shortage is a key contributor to the housing affordability crisis. Following the Great Recession, the share of homes being built fell significantly, causing buyer demand to exceed housing production. In fact, fewer new homes were built in the decade following the Great Recession than in any decade since the 1960s. This deficit has now expanded even further, contributing to a shortfall of over 3 million homes and growing.
Some of the leading factors responsible for the housing shortage are land availability and exclusionary zoning laws, which restrict the kinds of homes that can be put in certain neighborhoods—maintaining segregation. Examples of exclusionary zoning laws include minimum lot and square footage requirements, limits on the height of buildings, and restrictions on building multi-family homes. These laws have historically sought to exclude lower-income residents from living in more affluent suburban developments with access to high-performing schools, employment, and other amenities. In the early decades of the 20th century, these laws were also used as a vehicle for explicit racial discrimination excluding Black residents from predominantly white neighborhoods.
Today, the legacy of these laws remains in place and has had far-reaching consequences for all families trying to secure housing. Despite the Fair Housing Act prohibiting discrimination based on race, color, national origin, religion, sex, and other identities, the law does not prohibit class-based discrimination. This allows a legal loophole where people earning low incomes can be restricted to certain neighborhoods and excluded from living in more affluent areas with broader investment and economic opportunity. Given that Black and Latinx families have far less wealth and income than white households, on average, these exclusionary zoning laws are often used to intentionally drive people of color out of certain communities and keep neighborhoods more uniformly white. The pattern of this discriminatory practice over time has exacerbated many racial economic disparities we see today and also takes root in the current housing unaffordability crisis.
How did we get here?
Like most economic phenomena in the United States, the housing supply shortage is the result of a series of deliberate political economic decisions made over time. It is helpful to think through the conditions that led to these decisions being made and continually supported so that we can see what should change to prevent the historical process from repeating itself, even if we eventually find some way to increase inventory or affordability in the short term.
In the United States, homeownership not only provides the shelter every person needs to live a secure life, but also serves as most families’ primary mode of wealth acquisition. Most American families hold most of their net worth—to the extent that they have assets at all—in the value of their home. This is particularly true for Black and brown families, whose housing wealth makes up an even larger percentage of their (much smaller) net worth compared with white families. Other forms of building wealth, like the growth of a defined-contribution retirement account over time or individual entrepreneurship, have proven less secure and less effective than homeownership at increasing families’ net worth.
Americans homeowners hold most of their assets in their primary residence; this is especially true for Black and brown households
|Typical share of total assets in housing|
Source: Survey of Consumer Finances 2019 (author’s calculations).
The United States also has one of the weakest social safety net arrangements among Organization for Economic Co-operation and Development (OECD) countries, making the acquisition and maintenance of individual family wealth necessary for economic security. Our economic system is full of pitfalls that are avoidable for families who have secured individual wealth but can be devastating for those who have not. The rising costs of health care, higher education, and other living expenses are all defrayed by having a valuable asset like a home to borrow against or sell when times are particularly hard. The value of a home even matters intergenerationally, as homes are an asset that can be easily transferred to one’s children or used to otherwise support their economic goals.
The necessity of valuable homeownership for family economic security in the United States means that there are powerful incentives to keep existing homes valuable. These incentives have historically led to policies limiting both access to homeownership and the supply of housing. During the early to mid-20th century, the Federal Housing Authority financed mortgages and built affordable, quality public housing aimed at assisting (largely white) American families in securing homeownership. These policies became less politically popular after the Civil Rights Movement and a recommitment to ensuring that all families—including Black and brown families—could take advantage of government assistance.
The “redlining” practices of the early and mid-20th century, which effectively (though not explicitly) excluded Black families from purchasing homes in certain neighborhoods, can also be understood in this context. Even today, racial bias shapes the value attributed to homes in neighborhoods with growing Black populations; white American families were determined to preserve the racial purity of their neighborhoods not purely out of a distaste for Black neighbors, but because that collective distaste could lower the value of their most significant financial asset, their home. Racist policies are often maintained because it is economically beneficial to keep them in place for dominant groups.
As Richard Rothstein—EPI research associate and the author of “The Color of Law”—explained, many of these exclusionary rules practices cropped up in the 20th century just as court rulings made it more difficult to enact explicitly racist housing policies. In 1917’s Buchanan v. Warley, the Supreme Court held unanimously that a city ordinance prohibiting the sale of property to blacks in majority-white neighborhoods in Louisville, Kentucky, violated the 14th Amendment. Government-instituted racial zoning policies were thus declared unconstitutional (a ruling later codified in the Fair Housing Act of 1968). In the wake of that Supreme Court decision, a flood of communities rushed to adopt more covert zoning ordinances that effectively excluded Black families by restricting the supply of new, affordable housing. In 1916, only eight cities in the country had zoning ordinances. By 1936, 1,246 cities had put such ordinances on the books.
These policies of exclusion and our lack of support for the creation of new housing supply resulted in homeownership becoming less accessible for all working families. This problem culminates today in the rise of NIMBYism (Not in My Backyard), an extension of the same 20th century ideology of exclusion that brought us to this point. NIMBYism seeks to preserve the value of homes today by opposing policies that would increase access to homeownership (e.g., changing zoning laws to allow for more multi-family housing, increasing the supply of affordable housing, or creating more public transportation lines to connect suburban residential areas to urban work centers). NIMBYs are often “not opposed” to the implementation of these policies in principle—just not in any way that could affect them or the value of their property. As a widespread social view, it is easy to see how this could restrict the development of policies that could solve the problem.
What’s being done to increase housing supply?
In order to combat the rising cost of housing and the growing housing shortage, the Biden administration announced the Housing Supply Action Plan in May 2022. This plan intends to close America’s housing supply shortfall within the next five years through administrative and legislative policies authorizing the creation and preservation of hundreds of thousands of affordable housing units.
Specifically, the administration plans to:
- Reward jurisdictions that have reformed zoning and land-use policies with higher scores in certain federal grant processes;
- Deploy new financing mechanisms to build and preserve more housing where financing gaps currently exist;
- Expand and improve existing forms of federal financing;
- Ensure that more government-owned supply of homes and other housing go to owners who will live in them or non-profits who will rehab them; and
- Work with the private sector to address supply chain challenges and improve building techniques to finish construction in 2022 on the most new homes in any year since 2006.
The administration anticipates that these steps, in addition to actions they announced last September to build and rehabilitate 100,000 homes over the next three years, will ease the burden of housing costs for families and close the housing shortfall over the next few years. Regarding state and local zoning and land-use laws and regulations specifically, the Biden administration aims to immediately incentivize state and local jurisdictions to reform their policies by implementing the following:
- Leveraging transportation funding from the Bipartisan Infrastructure Law (BIL);
- Integrating affordable housing into Department of Transportation Programs; and
- Including land use within the U.S. Economic Development Administration’s (EDA) investment priorities that enhance density in the vicinity of the development.
What’s left to do and why is it important?
The Housing Supply Action Plan put forward by the Biden administration is indeed a step in the right direction. But there is still a long way to go before we address the root conditions that led us to the housing supply crisis. The incentivization of zoning law reform is useful, but there is no guarantee that relying on directional nudges will lead to substantive policy change; direct changes to federal zoning laws and land-use policies would go further in the right direction. The revitalization of programs to build more high-quality public housing and direct assistance for low- and middle-income families to secure those homes, could also go further toward addressing the housing affordability crisis.
There are still discriminatory practices depressing Black and brown families’ access to homeownership, and the value of Black and brown homes upon securing access to homeownership. These practices of institutional bias and discrimination need to be rooted out as well if homeownership is ever to be truly accessible and fair for all Americans.
At a more macro level, we need a stronger social safety net for American families in general, so that homeowners are no longer incentivized to pit their economic well-being against their neighbors’ access to an essential human need like shelter. Ultimately, we will need a wide range of bold policy efforts to change the way we provide American families with homes.
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