Respectfully submitted on behalf of the Niskanen Center,
Alex Armlovich, Senior Housing Policy Analyst
David Jimenez, Social Policy Government Affairs Manager
Andrew Justus, Housing Policy Analyst 

Chairman Davidson, Ranking Member Cleaver, and Members of the Committee, thank you for conducting a critical recent hearing on housing affordability. Today’s housing crisis comes in two distinct but related forms: low incomes on the demand side and high housing costs on the supply side. The former is not a new problem, as Americans with low or no market incomes have always struggled to afford market-rate housing. Only work and income support, or housing subsidies, can fix that. Conversely, the supply-side problem of high housing costs is new and increasingly pervasive. To tackle the problem of expensive housing, we must prevent government roadblocks to more housing.

The new supply problem began after World War II in the large East and West Coast cities with tight urban growth controls. Growth controls cap homebuilding through zoning–though that is not the only barrier. Governments use dozens of other land use regulations to dictate every imaginable detail of every building the market is allowed to build (or not).1

High and rising housing costs have since spread beyond the longtime hotspots like New York, Boston, and San Francisco to cities across the country as they run out of buildable land for new suburbs within an hour’s commute. Even smaller cities in more growth-friendly states now have average urban land prices over $1 million per acre. That means a suburban-style home on an average half-acre lot will cost more than $500,000 just for the land, before the first board is nailed.2 The widening urban land shortage has brought America’s broad growth control bans on land-economizing starter homes, townhouses, and apartments to a head as the leading constraints on supply and affordability. Rural communities, by contrast, have plenty of buildable land but still face skilled construction labor shortages and building code barriers to innovation in reducing construction costs.3

Today, the critical details of every building in every incorporated American city are prescribed in advance by a government central planner.4 This goes beyond the height, square footage, or the number of units. The government also dictates the size, shape, and orientation of the yards around the house; the roof pitch and setbacks; the garage size and the curb cut; the number of stairwells; the activities performed and the number of people allowed in the house. A growing number of cities go even further, adding a “discretionary design review,” where a government board decides the materials, facade details, architectural style, and even color of every building.5 

In short, our governments command the market not to build, and they add increasing cost and delay to what they allow.

Yet there is reason for bipartisan hope in state-level housing reform. California Democrats fell furthest down the path of growth control of any state in the 20th century. Still, the dreaded consequences of homelessness and outmigration have finally stirred pro-growth reformers in Sacramento. Montana Republicans this year enjoyed the most successful single legislative session for land use deregulation and property rights defense in recent history, accomplishing in one year most of what California reformers have fought for a decade to achieve.6 California’s example demonstrates that even the most extreme growth controls can be fought. Montana shows us that action can be taken before shortages inflict the worst consequences of government-created housing shortages.

Though most direct regulation of land use happens at the state and local level, the federal government has powerful policy tools to support leaders on the ground committed to pro-growth policies. Congress, in particular, can help address the housing crisis on the supply side with a mix of carefully designed strategies to leverage grant dollars and regulatory relief. 

Federal grant-making 

  • HUD and USDOT discretionary grant criteria incentives for state and local reform

Within federal agency rulemaking, Congress can direct HUD and DOT to amend their discretionary grant criteria to encourage communities to allow more housing. While avoiding heavy-handed mandates and being attentive to each grant’s specific purpose, Congress can amend existing HUD programs to reward grant applicants with supportive land use policies.7 The bipartisan Yes in My Backyard Act (HR3507), sponsored by Congressman Mike Flood (R-NE) and Derek Kilmer (D-WA), is a valuable step, enacting requirements on reporting on land use reform by Community Development Block Grant recipients that will spur elected and agency officials to identify how to remove government red tape that paralyzes homebuilding. 

While beyond this committee’s immediate jurisdiction, the Building More Housing Near Transit Act (HR6199), from Congressman Scott Peters (D-CA) and Congresswoman Cathy McMorris Rodgers (D-OR), updates the Department of Transportation transit capital grant scoring to favor projects with pro-housing land use reforms near stations and terminals.8 This bill will spur more housing options in high-opportunity areas and ensure public transit projects supported by federal taxpayers are highly utilized. It is a disservice to taxpayers and transit riders alike to continue prioritizing grants for new high-capacity mass transit to jurisdictions that refuse to allow enough homes for more people near the transit who will use the transit. 

Regulatory policy and administrative rulemaking oversight

  • Lift the HUD Code chassis requirement, allowing HUD to offer a “modular housing” code

The most straightforward way Congress can influence the housing supply is to strictly enforce a “do no harm” test in its own regulation. Take, for instance, the national HUD Code that governs manufactured homes. These factory-built homes significantly reduce building times and are close to ⅓ of the cost of the average new site-built home.9 Yet Congress statutorily requires a permanent steel chassis–the mobile frame it gets shipped upon–installed at the bottom of a manufactured home, even after the unit is permanently attached to the land.

This seemingly trivial requirement has real consequences. First, it increases construction costs and reduces design flexibility. Second, some local governments use the presence of a permanent steel chassis as an indirect way to limit manufactured housing in their zoning and permitting codes.10 Families, especially in rural communities, thus lose out on an option that can provide affordable housing without federal subsidies.11  

The chassis requirement is the only engineering detail that Congress has not delegated to rulemaking by HUD’s Manufactured Housing Consensus Committee (MHCC). Today, when a factory-built home is removed from the mobile chassis it is shipped upon, it is called a “modular home” and must follow fragmented state or local building codes instead of the national HUD code.12 Congress could remove the chassis requirement to allow HUD’s MHCC to write a new “modular” code option that covers factory-built units without a chassis. The new modular code option would be available for off-chassis builders who choose to use it, but builders would retain the option to continue using existing state and local codes if they see fit. Again, lifting the legislative chassis requirement does not instantly change the rules the industry currently faces, nor does it abolish the current HUD code for current and future on-chassis homes. It simply eliminates the legislative intrusion on HUD’s delegated rulemaking authority to begin drafting a new off-chassis modular code option alongside the current on-chassis manufactured code.13 

The Expansion of Attainable Homeownership through Manufactured Housing Act of 2023 (HR5918), from Congressman John Rose (R-TN) and Lou Correa (D-CA), removes this chassis requirement and gives flexibility back to HUD rulemaking–therefore, after a new round of MHCC rulemaking, to homeowners and homebuilders. This would provide builders and consumers more design flexibility and lower costs, eliminating one outdated element local governments use to exclude these homes from zoning districts where they otherwise comply. This proposal to eliminate the chassis requirement, and thereby to allow HUD to offer a new modular code option, has also been supported by Senator Tim Scott (R-SC) in his ROAD to Housing framework.14 

Conclusion

As America’s housing shortage and rising urban land prices spread to more regions, families and workers struggle to obtain a clear homeownership path. The only way to reduce those land costs is to allow for more efficient land use options like denser single-family homes, townhouses, cottage courts, and multifamily apartments. Federal support of state and local government should be aligned to appropriately foster efforts to reduce government barriers to more land-efficient housing choices for renters and owners.

Rural areas still face barriers to innovation in reducing construction costs. Congress, through its delegation of building code authority to HUD for factory-built homes, has a direct lever to support creative housing supply innovation for both higher quality and lower prices.

Notes

  1. Alex Armlovich, Andrew Justus, “An Agenda for Abundant Housing”, pp. 10, Niskanen Center, 2023. https://www.niskanencenter.org/wp-content/uploads/2023/02/An-agenda-for-abundant-housing.pdf ↩︎
  2. Richard Florida, “The Staggering Value of Urban Land”, Bloomberg CityLab, Nov. 2017 
    https://www.bloomberg.com/news/articles/2017-11-02/america-s-urban-land-is-worth-a-staggering-amount  ↩︎
  3. Alex Armlovich, Andrew Justus, “An Agenda for Abundant Housing”, pp. 2, Niskanen Center, 2023. https://www.niskanencenter.org/wp-content/uploads/2023/02/An-agenda-for-abundant-housing.pdf ↩︎
  4. Every major American city has adopted growth control ordinances with the partial exception of Houston, Texas, which has many land use regulations but not a traditional zoning code. At least 70% of residentially zoned land in nearly every city bans apartments. See: 
    Patrick Sisson, “What Is Zoning Reform and Why Do We Need It?”, Planning Magazine, 2023.
    https://www.planning.org/planning/2023/winter/what-is-zoning-reform-and-why-do-we-need-it/ ↩︎
  5. Alex Armlovich, Andrew Justus, “An Agenda for Abundant Housing”, pp. 10-11, Niskanen Center, 2023. https://www.niskanencenter.org/wp-content/uploads/2023/02/An-agenda-for-abundant-housing.pdf ↩︎
  6. Joe Tedino, “How the Bipartisan ‘Montana Miracle’ Confronts the Housing Crisis Head On”, Planning Magazine, Oct. 2023
    https://www.planning.org/planning/2023/fall/how-the-bipartisan-montana-miracle-confronts-the-housing-crisis-head-on/ ↩︎
  7. Yes In My Back Yard Act, https://www.congress.gov/bill/118th-congress/senate-bill/1688 ↩︎
  8. Build More Housing Near Transit Act, https://www.congress.gov/bill/117th-congress/house-bill/2483 ↩︎
  9. Manufactured homes are approximately 50% cheaper per square foot than site-built homes. Since a larger share of manufactured units target the entry-level starter home segment, the average delivered manufactured home is also smaller. See: Laurie Goodman et al., “New evidence shows manufactured homes appreciate as well as site-built homes”, Urban Institute, September 2018. https://www.urban.org/urban-wire/new-evidence-shows-manufactured-homes-appreciate-well-site-built-homes ↩︎
  10. Andrew Justus and Alex Armlovich, “Manufactured housing: the Ugly Duckling of affordable housing”, Niskanen Center, April 2023.
    https://www.niskanencenter.org/manufactured-housing-the-ugly-duckling-of-affordable-housing/ ↩︎
  11. Aaron Shroyer, “How Manufactured Housing Can Fill Affordable Housing Gaps”, Urban Institute, July 2020.
    https://housingmatters.urban.org/articles/how-manufactured-housing-can-fill-affordable-housing-gaps ↩︎
  12. Andrew Justus and Alex Armlovich, “Manufactured housing: the Ugly Duckling of affordable housing”, Niskanen Center, April 2023.
    https://www.niskanencenter.org/manufactured-housing-the-ugly-duckling-of-affordable-housing/ ↩︎
  13. Members of the public have frequently asked HUD if administrative rulemaking alone could remove the chassis barrier to new and advanced technology and designs in home manufacturing. HUD staff noted in their FAQ document that the barrier to innovation is part of the law, and could only be lifted by Congress. See: HUD Office of Manufactured Housing Programs, “FAQS – MANUFACTURED HOUSING IMPROVEMENT ACT OF 2000”, FAQ #16.
    https://www.hud.gov/program_offices/housing/rmra/mhs/faqs72010 ↩︎
  14. Senator Tim Scott, “ROAD to Housing framework”, Senate Banking Committee, April 2023. https://www.banking.senate.gov/imo/media/doc/road_to_housing_discussion_draft.pdf ↩︎