Vice President Kamala Harris correctly identified one of America’s biggest problems when she said that “there’s a serious housing shortage.” America’s affordable-housing crisis exacerbates wealth inequities, leads low-income parents to live in neighborhoods with less upward mobility and reduces our country’s capacity for economic growth, innovation and adaptation to regional shocks. Unfortunately, her proposed solutions seem too small and too poorly targeted to generate enough housing to make America’s most productive places more affordable.
Our next president could do much to unwind America’s housing shortage, which has its roots in regulations enacted by innumerable municipalities. But “not in my backyard” towns won’t start building out of the goodness of their hearts. To unleash enough new building to bring affordability, we need to dust off our history books and remember how this country raised the legal alcohol drinking age. The National Minimum Drinking Age Act of 1984 demanded states raise the minimum age to buy or publicly possess alcohol to 21 — or face a reduction in federal highway funds. The threat of losing such funds is a big stick.
It will take a forceful solution to address such a big problem. Nominal rents have risen by 6.5 percent a year since the start of the Biden administration and continue to surge even while overall inflation is dropping. The National Association of Realtors reports that the median sale price for an existing single-family home was $422,000 in the second quarter of 2024. One-half of renters spend more than 30 percent of their income on rent, and about one-fourth spend more than one-half of their income on housing. High prices and high interest rates make homeownership way out of reach for millions of people.
America wasn’t always like this. In the 1920s, New York City was affordable to its poorer residents because it permitted the construction of as many as 100,000 units a year. After World War II, builders like the Levitt brothers kept costs down by applying mass production techniques to new housing. But in those early days, builders had a distinct advantage: Existing residents didn’t control the permitting process, and zoning still accommodated growth. Fear of change, especially change to one’s neighborhood, is constant, but the ability of residents to block projects has since exploded.
And while the merits of any battle over a particular project are debatable, the overall cost to our country is beyond doubt. We are just not building enough homes, especially in the coastal markets where there is the most demand. Per capita, there was less than half as much permitting in 2023 as in 2003 or 1973.
What’s newer, and worse, is that even those places in the country that historically built a lot of housing and thus offered less expensive alternatives — such as Austin, Texas, and Raleigh, N.C. — have also experienced big price increases, possibly because of less building in their most desirable neighborhoods. Hopefully, this is a blip and does not portend the spread of NIMBYism to these onetime growth machines.
As many observers have already realized, residents have made it particularly difficult to build in the most productive parts of America, such as Silicon Valley, which means that America’s G.D.P. is much lower than it would be if people could move to where the jobs pay the most. Areas with the most upward mobility limit building the most, which makes America more permanently unequal. We also make it easy to build in areas that have high carbon footprints because it is too hot or too cold, but we make it hard to build in areas where carbon emissions are naturally low because of mild climates.
In unveiling the beginnings of her economic platform, Ms. Harris announced a housing plan that includes demand-side subsidies like $25,000 for all first-time home buyers. The problem, however, with any policy that gives more money to buyers is that it pushes up demand, which only pushes up prices further, as housing supply has become ever more rigid amid development opposition.
Another proposal is a $40 billion innovation fund that might have the same structure as the Obama-era Race to the Top education initiative, in which communities submit proposals and the federal government rewards the proposals it likes best with cash that can be used to pay for home construction or renovation. If the fund offers federal money to localities that enact meaningful reform, this could have some bite in a few larger cities that already have some appetite for building. But no reasonable cash handout is likely to achieve much in the more prosperous suburbs that are NIMBYist ground zero. The opposition to change is too strong. Moreover, the track record of Race to the Top suggests that local governments often promise far more than they deliver.
The rules that limit building are hyperlocal, and the limits on local government are set by state governments. States have been taking small steps forward in recent years. For example, in 2022 the California State Legislature eliminated the ability of most local governments to require that new building projects build extra parking spaces if they are close to public transportation. The goal should be to nudge state legislatures to reduce the ability of communities to zone out change.
For example, the legislation could establish minimum construction levels over three years for all counties with median housing values above $500,000. States with high-price, low-construction counties would have to figure out how to overrule local zoning codes themselves or lose federal transportation funding.
What about the constitutional challenges facing such a federal law? In South Dakota v. Dole, the Supreme Court ruled 7 to 2 that “indirect encouragement of state action to obtain uniformity in the states’ drinking ages is a valid use of the spending power,” although the court also placed limits on such “indirect encouragement of state action.”
The most important requirement is that the spending requirement must relate “to the federal interest in particular national projects or programs.” To make the case that building new housing is closely related to transportation spending, any federal legislation would need to emphasize that the benefits of transportation are closely linked to the ability to build near that transportation. If you built a train system to an exurb but didn’t allow any building near the new stations, then the value of that system is far lower than if housing surrounded the stop.
America’s housing crisis is a deep, self-inflicted wound. Ms. Harris is right to want to do something, but it is hard for the federal government to engineer change at the hyperlocal level. Tying federal transportation spending to building activity may be the best way to induce change.