States Look to Address Affordable Housing — What Are Their Policy Options?

As markets continue to recover from the COVID-19 pandemic and eviction moratoriums come to a close, the affordable housing crisis has become more apparent. Over half of state legislatures and governors cited housing as a key priority this year. States seek to address topics ranging from youth, elderly, and veteran homelessness to emergency housing and sheltering. Of the varying housing-related interests, access and affordability stand out as a top issue of interest for state legislators.

Policy Approaches to Affordable and Low Income Housing

State policymakers are debating the best techniques to achieve access and affordability in housing. Popular options include tax exemptions for developers, tax reimbursements for landlords, rural and urban-focused development grants, and new zoning regulations. The first few options are relatively straightforward. Tax exemptions and reimbursements aim to build new units and more efficiently use existing properties. Rural and urban grants target specific communities that states have identified as needy. 

Changing Zoning Regulations

However, changes to zoning regulations are a bit more complicated. Typically, zoning is the domain of local governments, which use zoning ordinances to decide what type of development can take place in certain parts of the locality. This form of urban planning is usually left to local governments, as they tend to know what works best for their communities. However, when housing shortages become widespread, the issue garners the attention of state legislators. 

When state policymakers view local zoning laws as a barrier to housing construction and thus causing a shortage and availability crisis, they’ve taken the extraordinary step to overrule local governments. A prominent method of generating new affordable housing complexes is the state-level centralization of zoning policies. Zoning, specifications for land usage and development, is a significant tool to increase affordable housing. Two methods stand out as the primary tools: mixed-use and inclusionary policies.

Mixed-Use Zoning

Mixed-use zoning allows land development for multiple purposes. Commercially and industrially zoned lots may, with permission, also build residential units in the same building. Mixed-use zoning expands space available for residential property by allowing land zoned for other purposes to be doubly utilized. For example, California has proposed extensions on its Density Bonus Law which rewards developers for expanding affordable housing. The Density Bonus Law, enacted about 40 years ago, allows construction of additional units outside of the usually applicable density range for lots approved for residential housing.

Inclusionary Policies

Inclusionary policies require a property owner to produce housing units that are affordable to low-income persons or families. Developers are required to reserve a specified percentage of units for low-income renters, typically around 10 to 30 percent. Unlike voluntary, incentive-based policies like tax exemptions and reimbursements, inclusionary programs mandate the preservation of low-income units in new projects.

It is also important to note that much legislation uses a combination of both zoning techniques. Florida lawmakers passed legislation (FL SB 962) this year, which awaits the governor’s signature, that would approve the use of commercial or industrial zoned property for mixed-use projects. The revision allows developers to obtain approval for these projects without waiting for local county commissioners. But it also includes an inclusionary provision that requires all mixed-use developers to reserve 10 percent of units for affordable housing. Virginia lawmakers are debating a similar bill (VA HB 635) that permits inclusionary and mixed-use development throughout the commonwealth.

What’s Next?

States will continue taking a variety of approaches to address the housing crisis. Zoning laws are a proven method of addressing housing availability. However, state-level legislation bleeding into local and municipal regulatory authority may cause contention between the different levels of government.