Eliminating Regulatory Barriers to Affordable Housing: Federal, State, Local, and Tribal Opportunities

Introduction

This report, developed by the Department of Housing and Urban Development (HUD), addresses the issue of high housing costs in the United States due to burdensome regulatory regimes that restrict housing supply. It emphasizes the need to eliminate unnecessary regulatory barriers at the federal, state, local, and tribal levels to create more affordable housing opportunities and promote economic growth. The report is based on stakeholder input, interagency collaboration, and reviews of existing regulations and practices.

What is a regulatory barrier?

A regulatory barrier is defined as any rule, regulation, or process that increases the cost of housing, creates barriers to competition, and generates significant social costs6. These barriers can include complex and non-transparent development processes, restrictive land use regulations, and environmental reviews that create delays and additional expenses. Federal Actions to Reduce Barriers: Several federal agencies have taken steps to reduce regulatory burdens9. These include:

• HUD: Has streamlined its environmental review process by adding or broadening categorical exclusions, downgrading evaluative requirements, and reorganising regulations. HUD also made changes to the FHA mortgage insurance program, such as revising the "Three-Year Rule" to allow for refinancing of newly built properties sooner and reducing fees for broadly affordable housing transactions. They have also expanded the Rental Assistance Demonstration (RAD) program to preserve and improve HUD-assisted housing.
• Department of Agriculture (USDA): Has improved its environmental review process and made changes to its single family loan guarantee program by removing a maximum interest rate cap and paying loss claims at the time of foreclosure to improve lender liquidity and encourage rural lending.
• Department of Energy (DOE): Has proposed a rule to streamline the test procedure waiver process, requiring notification of an interim waiver request within 30 business days.
• Environmental Protection Agency (EPA): Has issued a final Navigable Waters Protection Rule to clarify definitions and reduce uncertainty in water regulations. They have also increased transparency and efficiency in the Clean Water Act (CWA) Section 401 certification process to streamline infrastructure projects.
• Department of the Interior (DOI): Is developing an online portal for title status reports and has updated the Endangered Species Act (ESA) regulations to reduce permitting delays and uncertainty.
• Department of Labor (DOL): Has clarified wage liability and overtime pay rules under the Fair Labor Standards Act (FLSA), aiding contractors in calculating employment costs.
• Department of Transportation (DOT): Is working to streamline the environmental review process and reduce the time and cost of preparing NEPA documents. They will evaluate future funding opportunities to include the removal of regulatory barriers.
• Treasury: Has issued proposed regulations to reduce the burden of monitoring LIHTC projects. They are also considering public input on LIHTC rules and possible reforms to control costs and improve efficiency.

State, Local and Tribal Opportunities to Increase Housing Supply:

State and local governments play a crucial role in addressing housing affordability. Some examples of actions that have been taken include:

• State actions: States have deployed legal and financial tools to influence local housing markets. For example, Utah requires jurisdictions to adopt at least 3 of 23 recommended strategies for affordable housing and Massachusetts has adopted a statewide Smart Growth Overlay District. Some states have incentivized certain developments through tax policies. States have also removed barriers to housing development through zoning reforms and by allowing for by-right development.
• Local Actions: Local jurisdictions have revised their zoning to increase density around transportation infrastructure and in mixed residential-commercial areas. Some have also streamlined permitting processes41 and reduced or eliminated parking requirements. Furthermore, they are re-evaluating regulations of building materials and design elements and offering incentives for adaptive reuse of commercial buildings.
• Tribal Actions: Some tribes have streamlined environmental review processes8 and made use of federal programs to improve housing.

Other Strategies:

• Community Land Trusts (CLTs): CLTs have been identified as a way to provide affordable housing options.
• Land banks: Land banks help to redevelop underutilized or vacant properties, contributing to the housing supply.
• Adaptive reuse: Converting unused commercial properties to residential units can increase housing options, especially in legacy cities.
• Accessory Dwelling Units (ADUs): ADUs can provide additional housing while making better use of existing properties.
• Shared housing: Shared housing models can be a source of affordable housing for low-income tenants.

Impact Fees: Impact fees are another significant cost in housing development. To reduce the burden of these fees, governments can ensure that fees are transparent, consistent, and not frontloaded. Fees should be tied to the actual costs of infrastructure upgrades and payments should be made over the course of development. Transparency and Data Quality: Improving data collection and transparency is essential54. This can be achieved by posting zoning maps online, streamlining the permit review process, and creating a more collaborative environment among local agencies. Environmental Regulations: The report also examines how environmental regulations can be a barrier to housing. Revisions to the State Environmental Policy Act (SEPA) and the California Environmental Quality Act (CEQA) to remove duplicative and anonymous lawsuits have been suggested. Technical Assistance and Further Research Technical assistance is needed to support stakeholders with various aspects of housing development, including lenders for tribal lands and innovative construction strategies. It would also be beneficial to create a clearinghouse of best practices to help jurisdictions learn from each other. The report highlights the need for improved data collection and publication to inform policymakers and evaluate the effectiveness of different policies and rules.

Conclusion

The report concludes that reducing regulatory burdens is crucial to increasing housing supply, lowering costs, and creating more opportunities for Americans to access affordable, safe housing61. It encourages federal agencies to continue their efforts and emphasizes the need for collaboration between all levels of government and the private sector. For further reading: Eliminating Barriers to Affordable Housing Similar post on ACASH