Bernie’s Housing Proposal Takes Supply Constraints Seriously (But Rent Control Is Still Bad)

September 30, 2019

Last week, Sen. Bernie Sanders (I-VT) released a plan titled “Housing for All” as part of his bid for the presidency. Unlike many of his opponents, the former Burlington mayor’s proposal is fairly comprehensive. It talks about demand-side subsidies, addressing homelessness, improving the state of repair of existing public housing, and nationwide rent control. I don’t agree with most of it—nationwide rent control is a deeply flawed idea, and higher taxes on real estate will slow building—but the senator’s proposal makes clear his staff knows that fixing housing in America will take more than getting people into single family homes. The way the plan addresses the United States’ legacy of exclusionary zoning shows how seriously he and his staff take America’s housing problems.

The plan would create an office within the Department of Housing and Urban Development (HUD) that would, among other tasks, work with states and localities to “implement fair and inclusive zoning ordinances.” In the past, HUD has not done much to encourage such policies, preferring to stick to its primary role as a regulator of public housing agencies and manager of federal housing subsidy programs. Sanders’ proposal would thrust HUD into a supporting, if not starring, role in American housing politics.

A major problem with federal housing proposals to date has been that Congress and the President never have much say about American housing policy. It’s been a local and state issue first, a task appropriate for lower levels of government. But times are changing. We now understand that dysfunctional local housing politics can slow economic growth and interstate commerce at a national scale. Solving America’s housing crisis now calls for solutions that only the federal government is broad enough in scope to address.

Accordingly, Sanders’ plan would use some of the most powerful mechanisms available to federal officials in its effort to engineer more inclusive housing rules at scale. First, it would require recipients of federal transportation and HUD dollars to make reforms that “end exclusionary and restrictive zoning.” It would also “[p]rovide funding to states that preempt local exclusionary zoning ordinances to make housing more equitable, accessible and affordable for all.” What’s more, it would make access to federal funds contingent on efforts to “[e]ncourage zoning and development that promotes integration and access to public transportation” and “create walkable and livable communities,” while encouraging the adoption of zoning laws that allow more development geared toward those with disabilities.

The combination of these elements—conditional federal transportation and HUD funding, preemption subsidies, and federal funds contingent on rezoning for transit access and density—could be the recipe for a dramatically improved building environment. Taking away transportation funding is an easy way to derail local officials seeking to make their traffic better on the backs of taxpayers elsewhere in the country. Under this system, they’d need to allow new construction for people that would use federally improved roads, making federal transportation funds far less like the free lunch they’re perceived as today. Similarly, those who use federal money to make new transit investments would need to zone for buildings that actually generate transit riders. The incentive to cut ribbons on trains to park-and-ride lots in the middle of nowhere isn’t as powerful if towns need to zone for and pay for infrastructure to support many new homes nearby.

Yet the most radical idea of all may be new funding for states that preempt exclusionary local zoning ordinances. Sanders’ plan doesn’t explain how this mechanism would work, but the idea of the federal government providing cash incentives to encourage states to preempt the decisions of exclusion-minded local officials could be the nudge states need to finally confront the housing cost problem these disparate decisions cause.

Bernie Sanders and I may have very different politics, but we agree on a handful of things. We both think maple creemees are delicious. We both think there’s an affordable housing crisis, including in rural states like Vermont. And we both think there are ways the federal government could help make the crisis less acute. Whatever you think of the rest of his plan, an empowered HUD, preemption subsidies, and conditioned federal aid are certainly proposals that deserve consideration, regardless of the fate of Mr. Sanders’ presidential run.

Nick Zaiac is a Catalyst Policy Fellow and a Fellow in Commercial Freedom at the R Street Institute where his portfolio includes housing, postal and transportation issues. He holds a master's degree in economics from George Mason University. He lives in Washington, DC with his wife, Ali.
Catalyst articles by Nick Zaiac