Greater Housing Density Would Mean a Better Shot at Grants Under New Biden Plan

President Biden, as part of his effort to persuade Americans he’s trying to lower consumer costs, laid out a plan Monday to reduce home prices. The most significant initiative would give extra points for transportation dollars to states and localities that allow more multifamily housing in areas reserved for single-family homes.

“Exclusionary land use and zoning policies constrain land use, artificially inflate prices, perpetuate historical patterns of segregation, keep workers in lower productivity regions, and limit economic growth,” said a fact sheet released by the White House. 

Biden, in the fact sheet, blamed high prices on fewer homes being built in the decade following the Great Recession “than in any decade since the 1960s,” adding the “mismatch between housing supply and housing demand grew during the pandemic.” 

As a result, Biden noted, Moody’s Analytics has estimated that there is a shortage of 1.5 million homes nationally.

Diane Yentel, president and CEO of the National Low Income Housing Coalition, said in a statement that there’s an acute shortage of 7 million homes affordable to renters with extremely low incomes. “And there is not a single state with enough affordable homes to meet demand,” she said.

In response to the shortage, Biden said he wants to boost the supply of housing. One of the most significant issues constraining production, he said, is state and local zoning laws that limit housing density by excluding multifamily units in areas zoned for only single-family homes.

To reward cities like Minneapolis, which has done away with single-family zoning, Biden said the U.S. Transportation Department will give extra points when awarding Infrastructure Investment and Jobs Act and other discretionary grant dollars to jurisdictions that have reformed their land-use policies.

The move will come on top of a nearly $6 billion competitive grant program the DOT announced earlier this year. The grants “reward jurisdictions that have put in place land-use policies to promote density and rural main street revitalization with higher scores in the grant process,” the fact sheet said.” 

Among those grants was the $1.5 billion Rebuilding American Infrastructure with Sustainability and Equity grant program DOT announced in January. Applicants were required to show how their projects “are coordinated with greater economic development such as commercial and mixed-income residential development near public transportation.”

In addition, the administration said DOT will increase Transportation Infrastructure Finance and Innovation Act credit assistance to finance projects that include residential development.

Meanwhile, the U.S. Economic Development Administration will encourage, through its competitive grants, economic development projects that increase density, the White House said.

Biden asked cities to change their zoning laws in his March 26 budget proposal, calling for the creation of a new $10 billion Department of Housing and Urban Development grant program. The grants would reward localities that increase density by providing more funding for transportation, housing, water and other infrastructure projects.

Praise From Housing Advocates

Republicans on the House and Senate housing committees did not immediately return requests for comment on the new plan. Associations representing the nation’s cities and mayors also had no immediate comment.

However, Biden’s push for greater density drew praise from housing advocates like Yentel, who called it “especially promising,” and said single-family zoning is “deeply rooted in racial exclusion.”

David Dworkin, president and CEO of the National Housing Conference, a national affordable housing coalition, said the potential loss of transportation dollars could spur some cities to change their zoning.

“While adding points to an application may technically be a carrot, not getting an application approved because someone else got those points is a very real stick,” he wrote in a blog post.

Biden noted, in the announcement, that several states and localities have acted in recent years to allow more accessory dwelling units. To support the increase, the Federal Housing Administration and the Federal Housing Finance Agency will work to make it easier for homeowners to finance adding accessory dwelling units to their homes. The zoning changes combined with more financing options could add one million more of the units around the country in the next five years, the fact sheet said.

Without revealing details, Biden also announced that the HUD will streamline its HOME Investment Partnerships grants program that provides funding to states and localities to preserve low-income housing and provide rental assistance to low-income people.

Biden highlighted other actions the administration has been taking, noting that the Treasury Department has encouraged state, local and tribal governments to use American Rescue Plan Act funds to build more affordable housing. The administration noted that 570 jurisdictions have committed to spending $11.7 billion in ARPA funds on housing. Los Angeles County, for instance, is spending $10 million in ARPA funds to build container housing for the homeless with health or behavioral health problems, he said.

Likewise, the White House said the Treasury Department and HUD reached an agreement last September to restart the Federal Financing Bank’s Risk-Sharing Program, which will provide $1.3 billion in low-interest loans to state and local housing finance agencies to create and preserve high-quality, affordable homes. 

Biden, however, acknowledged other aspects of his plan, including increasing funding for low-income housing tax credits in his Build Back Better proposal that’s stalled in the Congress.

And while Yentel  praised Biden’s initiative, she added that it’s not enough. “The administration cannot solve the crisis on its own. Congress must also act with similar urgency,” she said, calling for the passage of the $1.75 trillion Democratic proposal.