The state of Oregon has effectively banned single-family zoning. Minneapolis upzoned nearly the entire city, 75 percent of which was zoned for single-family houses. California’s Senate Bill 50, up for a vote in 2020, would eliminate zoning restrictions around transit lines and job centers.
As affordable housing crisis has taken hold, state and local governments across the country have targeted low-density zoning laws for reform in hopes of spurring more housing developments in cities that are starved for more supply.
And with housing affordability becoming an issue on the 2020 campaign trail for the first time in recent memory, the Yes In My Back Yard (YIMBY) movement is going federal, as Democratic candidates for president Elizabeth Warren and Cory Booker have both released housing plans that attempt to coerce local governments into zoning reform by offering or withholding money from federal housing and transportation funds.
But given zoning laws are administered at the city or county level, how effective would wielding the power of the purse be at inducing change in local zoning laws?
Warren and Booker’s plans take diverging approaches. Warren proposes a new $10 billion competitive grant program that communities could use on infrastructure, roads, parks, or schools. But local governments have to reform their land use laws to be eligible for the grants.
Conversely, Booker’s plan would withhold $16 billion in existing federal funding from a handful of housing and transportation funds if local governments don’t reform their zoning laws. Warren’s plan uses the proverbial carrot, while Booker uses the proverbial stick.
Would either of these approaches actually get local governments to change? Homeowners—particularly single-family homeowners—tend to be incredibly resistant to any change in local zoning because they don’t want affordable or multifamily housing driving down their home values or introducing low-income families to their neighborhoods, so local pushback would be fierce.
In the case of Warren’s proposed $10 billion competitive grant program, any community that doesn’t want to reform their zoning laws might simply not apply to receive a grant from the program. It’s not money they get now so they won’t miss it if they don’t get it in the future. And given it’s a competitive grant program—meaning you may not even get the money if you apply—a city may not want to undertake what would amount to a huge battle over zoning laws for money they may not even get.
“Because the most exclusionary local governments tend to be wealthy suburbs, either carrots or sticks would have to be pretty large,” said Jenny Schuetz of the Brookings Institute. “It’s quite likely that the exclusionary suburbs would prefer to pass up small amounts of federal funds rather than build apartments. But it’s worth noting that the federal government hasn’t actively tried to influence local zoning before, so we’re a bit in uncharted territory. These proposals may have modest impacts, but they’re definitely a step in the right direction.”
Booker’s plan to withhold money from housing and transportation funds could be effective if local communities are dependent enough on that money that they’d make changes to ensure they still get it. Withholding money from Community Development Block Grants (CDBG)—the housing fund in Booker’s plan—to force zoning reform was proposed by Department of Housing and Urban Development (HUD) secretary Ben Carson last year.
But does CDBG money go to the cities that most need zoning reform? The CDBG program—which allocates about $3.4 billion per year—has multiple funding streams, but the CDBG Entitlement Program is the formula block grant program people usually mean when they refer to CDBG. A formula decides how much money each local government gets, and the formula is designed so that larger and poorer communities receive more than wealthy communities that are more likely to have single-family zoning or be exclusionary suburbs.
Schuetz looked at where the money goes in New Jersey and California and found that only 17 percent of California’s most exclusionary cities receive CDBG money and none of them do in New Jersey. Schuetz notes that there are neighborhoods with exclusionary zoning in San Francisco, Berkeley, and Los Angeles, but there are so few that it would be like “performing brain surgery with a chainsaw.”
But Booker’s plan would also withhold money from a number of federal transportation funds and programs if local governments didn’t reform their zoning laws, including the Surface Transportation Block Grant (STBGP) Program, an annual $12 billion formula block grant that can be used for transit, highway, or bridge projects. Booker’s plan also includes two competitive grant programs—the National Infrastructure Investments Program ($900 million annually) and the Nationally Significant Freight and Highway Projects Program ($950 million)—and two transportation loan programs that lower borrowing costs for transportation projects—the Railroad Rehabilitation and Improvement Financing Program and the Transportation Infrastructure Finance and Innovation Act Program.
“Federal appropriations in this space are already conditional,” says Greg Shill, a law professor at the University of Iowa who’s done research on transportation subsidies. “What some of these proposals do is seek to take that existing framework and apply it in service of better outcomes. Even at the policy level, there’s a lack of awareness around these tools, so it’s great to see them getting attention from presidential candidates; conditional appropriation and preemption can be very powerful ways to improve public health, economic development, and climate mitigation.”
STBGP accounts for three quarters of the money Booker’s plan ties to zoning reform. The money is allocated to states, and the department of transportation in each state works with cities to decide where it’s allocated. But because practically every community in the country depends on federal money for transportation projects, it would be hard for a city to pass on STBGP money to avoid having to reform its zoning laws.
And there’s precedent for the federal government withholding transportation money to induce change at the local level. In 1984, President Ronald Reagan signed the National Minimum Drinking Age Act, which cut 10 percent of a state’s federal highway funding if they didn’t raise the drinking age from 18 to 21. The law provoked a legal challenge but the Supreme Court upheld it in 1987, after which any states that had not yet raised the drinking age to 21 did so.