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Knowledge Base

Addressing the Housing Crisis

What are land-use regulations/zoning ordinances?

Land-use regulations/rules or zoning ordinances are government-approved laws that dictate how property within the government’s jurisdiction can be used. These laws include defining what type of structures can be built on the land, what those structures can be used for (e.g., housing, retail spaces, industrial uses), what those structures can look like, and other specific items that must be or cannot be present in or around the structure (e.g., how many parking spaces must be associated with the building).

What are some barriers to building new houses?

Common barriers to building new homes include 1) a local political climate that is anti-growth (commonly led by “not-in-my-backyard” groups, or NIMBYs); 2) onerous land-use or zoning rules that place excessive requirements on what can be built, how it must be built, and where it can only be built; and 3) local or state tax systems that disincentivize housing over other types of buildings, such as commercial or retail spaces.

What is a building permit?

A building permit, sometimes also known as a construction permit, is an authorization from the relevant governing board, usually a local government, for a land owner to engage in some form of building or construction on their property. Permits could be for the building of new structures or just for renovations to existing structures. Because permits have to come before construction begins, the number of permits issued is considered a predictive indicator of development within a certain area.

How do NIMBYs control or dictate a locality’s development process?

In most communities, zoning or land-use decisions are made by the local elected council. These councils, however, delegate significant portions of the planning and development process to appointed boards or commissions. NIMBYs can influence the decisions of elected councils by a) getting elected to the council; b) getting appointed to the various types of planning boards that first screen development plans and land-use rules and provide recommendations to the elected council; or c) showing up to board and council meetings to provide public comments on the development items to be discussed and voted on during that particular meeting. In many cases, NIMBYs use all three methods to ensure their (and only their) opinions are heard.

What is the solution to housing unaffordability for a region?

The only long-term, sustainable solution to housing unaffordability is to correct the mismatch between supply and demand. This typically means encouraging the development of new housing supply. If the solution isn’t correcting the supply-demand mismatch, then it will only be a short-term fix and could make the problem much worse.

What is rent control?

Rent control is a government-mandated price control on rent within a specific jurisdiction, typically tying future rent increases to a formula that takes into consideration overall cost-of-living adjustments and some maintenance costs. Rent control doesn’t, typically, reduce rents but rather controls the rise in rents. Under the economic theory, price ceilings, of which rent control is an example, lead to an excess of demand and a shortage of supply for the good or service in question.

What do economists think of rent control?

In a 2012 Initiative on Global Markets Forum—a survey of a panel of economists conducted by the University of Chicago’s Booth School of Business—95% of respondents disagreed (52% strongly disagreed) with the following statement: “Local ordinances that limit rent increases for some rental housing units, such as in New York and San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them.” In fact, just 1% agreed or strongly agreed. The panel includes a wide range of economists across the ideological spectrum. In general, rent control is one of the few policies where economists, regardless of ideology, agree; it doesn’t yield the outcomes it seeks.