Finally, federal policy and industry lobbyists have worked overtime to put low‐cost manufactured housing at a disadvantage. Specifically, the provision of low‐rate Section 235 mortgage loans for traditional stick‐built homes only and the regulation of typically cheaper manufactured homes through the Department of Housing and Urban Development’s Manufactured Home Construction and Safety Standards—more commonly known as the HUD Code or national building code—have made it more difficult for manufactured housing to compete with their stick‐built counterparts. Although the Section 235 program is now obsolete, HUD still requires manufactured housing to be attached to a chassis, or metal base frame (typically of a motor vehicle), which allows local governments to regulate manufactured homes more restrictively, as if they were mobile homes. Such restrictions deny American workers more affordable manufactured housing options.
Other federal laws and regulations, such as the Department of Energy’s appliance and equipment efficiency standards, presumably also raise the cost of housing.
State and Local Policy Issues
Arguably more important than any policy at the federal level, however, are ever‐increasing state and local regulatory constraints: ultimately, the way to improve housing affordability is to allow people to build housing. Unfortunately, land‐use regulation continues to limit housing supply by increasing development costs, creating uncertainty, and producing delays. These regulations determine everything from the height, width, and architectural features to the use of a given property, and they subject development to lengthy review processes with many veto points. Together, zoning regulations effectively freeze preexisting development patterns, which makes it difficult to grow or accommodate new residents.
Scores of research papers tie land‐use regulations to increased housing prices. One study found, for example, that zoning regulations pushed up the cost of apartments by about 50 percent in Manhattan, New York, and San Francisco and San Jose, California. This figure has likely only grown as regulatory constraints and demand have increased in recent years.
In addition to increasing regulatory obstacles, developer impact fees have grown over time. One survey found that the fees had grown by 45 percent between 2005 and 2016 to an average of $21,000. These fees land hard on starter homes, where would‐be tenants are less able to absorb the costs.
Meanwhile, local building codes—which include structural, plumbing, mechanical, electrical, accessibility, and energy‐related requirements—also raise the cost of housing. Although their original purpose was to protect public health and safety, building codes have strayed from that goal and are used to achieve other objectives, like increasing perceived housing quality or pursuing environmental goals, with costly consequences. For example, stricter state building energy codes aimed at reducing energy‐related environmental externalities have been observed to reduce the number of bedrooms and square footage of homes at the lowest end of the income distribution.
These policies and others that restrict housing development are important to Americans for many reasons, including that housing availability and affordability continue to influence employment opportunities for the roughly three‐quarters of workers who work onsite full‐ or part‐time. In the past, research found that less skilled workers could not afford the higher housing costs in heavily regulated cities with strong economic opportunities, and so these workers became stuck in lower‐cost areas that have fewer job opportunities. Although remote work is changing the geography of work opportunities for some workers, it seems unavoidable that housing will continue to function as a de facto gateway to vital economic, educational, and social opportunities for many years to come.
Policy Recommendations
Although migration patterns, supply chain delays, and inflation will continue to put pressure on U.S. housing prices, smart policy reforms can serve as an essential release valve. Policymakers should pursue market‐oriented reforms that will increase residential construction and lower housing prices for all Americans.
At the federal level, trade policy should be reformed to reduce the cost of housing materials. Although U.S. antidumping and countervailing duties are difficult to eliminate, the administration should work with Congress to reform the process that led to these tariffs in the first place (e.g., by allowing administering agencies to consider the consumer and broader economic harms of proposed duties). The administration also can and should unilaterally eliminate Section 232 tariffs on steel and aluminum imports, as well as Section 301 tariffs on Chinese imports of various building materials and appliances. And the administration should relax or eliminate federal appliance and equipment efficiency standards that add to the expense of housing.
Congress can also play an important role in improving housing supply and affordability. For example, Congress should make permanent the limits that the TCJA placed on state and local tax deductions and the mortgage interest deduction and should in the long term work to eliminate these deductions. To encourage housing development, Congress should reform the tax treatment for development by allowing more rapid, ideally immediate, expensing of structures. According to Tax Foundation estimates, a more neutral tax approach would reduce construction costs by about 11 percent, which would make low‐income units both more affordable and more likely to be built.
Congress should also increase the amount of land available for housing and development in Western and Southwestern states that are experiencing high levels of in‐migration. To that end, Congress could pass a law that requires the federal government to return some of the 640 million acres of federally owned land to state and local governments or private owners. Such a law could apply to lands that are not specially designated or sensitive (lands that are not national monuments, critical areas, national recreation areas, etc.).
The Southern Nevada Public Land Management Act (SNPLMA) is an example of an existing program that returns federal land to private hands, and this program could be used as a template. The program makes federal public land in Clark County, Nevada, available for auction. Under the SNPLMA, the revenue resulting from the sale of federal lands is returned to the secretary of the interior to be used for environmental conservation and projects, to the state of Nevada to be used for educational purposes, and to the Southern Nevada Water Authority. As a result, many interested stakeholders benefit from the sale of federal public lands.
A new bill with objectives similar to the SNPLMA but with more of a focus on housing development—the Helping Open Underutilized Space to Ensure Shelter Act (HOUSES Act)—was introduced earlier this year. This bill or something like it could increase the amount of developable land in Western states.
Although zoning reform is mostly a state and local issue, some policymakers and analysts have suggested federal reforms to encourage states and localities to deregulate more comprehensively. For example, federal housing subsidies are concentrated in the most restrictively regulated states (see Figure 3), which means that states and cities that actively create housing affordability issues via restrictive zoning practices are rewarded for doing so.
