By Jess Remington, Adam Ozimek, and Carol Neuhardt
Zoning reform has historically been treated as a matter for state and local authorities alone. Under the constitutional framework established by the Tenth Amendment and the 1926 Supreme Court case Euclid v. Ambler, zoning authority rests with state governments — and for the past century, states have typically delegated this authority to local jurisdictions.
The legal argument for the primacy of state and local governments has long been supported by the conventional wisdom that the federal government’s involvement in zoning, and in many areas of housing policy generally, should be limited.
But things are quickly changing. As the housing shortage has intensified into a crisis in recent years, the traditional thinking has begun to shift. There is now a vigorous debate about whether the federal government has an important role to play in zoning reform. It hinges on three questions:
- Can federal, supply-side housing reform be done on a bipartisan basis?
- Does the federal government have the authority or technical capabilities to create model zoning codes?
- Is it feasible to implement outcome-based incentives for reforming restrictive zoning and building new homes?
Many politicians, economists, and housing scholars have argued that the answer to all three questions is no.
We at the Economic Innovation Group (EIG) have been more optimistic that the federal government can indeed play a vital role in housing. Last year we proposed a federal policy known as “Right-to-Build Zones” — previously called “Density Zones” — through which the federal government could reward municipalities for embracing a standardized, pro-housing zoning code and for building more homes.
Now, the bipartisan ROAD to Housing Act has shifted the Overton window on what’s possible. The bill recently passed through the Senate Banking, Housing, and Urban Affairs Committee with 24 votes in favor and none opposed, becoming the first housing package markup in nearly a decade. The breadth of bipartisan agreement is reflected in the bill’s co-sponsors, Tim Scott (R – South Carolina) and Elizabeth Warren (D – Massachusetts). Should it become law, it promises to usher in a new chapter for housing reform.
In this analysis, we show that the bill not only answers each of the three questions above with a resounding yes, but also clears the path for Right-to-Build Zones, which we believe are a perfect complement to the specific reforms it proposes.
The ROAD to Federal Housing Reform
Over the past few years, bipartisan housing reform efforts have gained serious momentum in statehouses and city halls across the nation. Despite those victories, some YIMBY skeptics of federal involvement have worried that getting the national government involved could risk polarizing the issue along Red-Blue lines, making further bipartisan reform impossible.
The ROAD (“Renewing Opportunity in the American Dream”) to Housing Act shows it isn’t. Aside from every Republican and Democrat on the committee voting for it, the bill also draws on text from at least 27 pieces of previously introduced legislation, including 23 with bipartisan sponsorship.
Some of the bill’s provisions are entirely within the scope of traditional federal policymaking. It exempts urban infill projects from National Environmental Policy Act (NEPA) review, for example, and it prioritizes federal transit funding for projects in areas that have implemented pro-housing policies near public transportation.
Alongside the bevy of supply-side reforms is the bill’s most trailblazing feature: its approach to zoning reform. Restrictive local zoning codes are the primary culprit behind America’s housing shortage and affordability crisis, yet reform has long been considered the policy area most outside the scope of the federal government. No longer.
A number of political hurdles remain before the ROAD to Housing Act can become law. But such comprehensive legislation advancing this far would have been unthinkable even just a few years ago. By establishing that housing supply issues like zoning reform can be addressed in federal legislation while retaining broad bipartisan support, the ROAD to Housing Act is already an impressive political breakthrough.
Model Zoning Codes: The Technical Foundation
Contrary to another point of skepticism, the ROAD to Housing Act also demonstrates that the federal government has both the authority and the technical ability to create model zoning codes.
The Housing Supply Frameworks Act is one of the 40 proposals incorporated into the ROAD to Housing Act. Representing the first major federal effort to develop specific and standard model zoning codes since President Hoover’s 1921 Advisory Committee on Zoning, it directs HUD’s Policy Development & Research division to convene a task force of experts and stakeholders to design model zoning codes. The bill encourages HUD to tailor the model codes to different contexts: urban, suburban, and rural.
The proposed zoning codes embrace many long-sought reforms, including:
- Eliminating mandatory parking minimums
- Reducing minimum lot sizes
- Legalizing accessory dwelling units (ADUs)
- Allowing “missing middle” housing like duplexes, triplexes, and quadplexes by-right in cities and large metros.
Outcome-Based Incentives
Outcome-based incentives are common sense policy. Rather than reward the promise of an action, they reward the action itself. But designing a housing policy that rewards specific outcomes introduces a tricky empirical challenge. Its implementation requires the accurate measurement of building activity at an extremely granular, local level.
Two provisions of the ROAD to Housing Act — the Innovation Fund and the Build Now Act — show how this can actually be done. They set a new precedent for using outcome-based incentives for housing production: paying for what actually gets built rather than what gets promised.
The Innovation Fund would offer grants to municipalities that have meaningfully increased, through zoning and permitting reforms, their housing supply over the past three years. The grant money would prioritize jurisdictions that encourage diverse types of housing and implement substantial reforms like by-right zoning for apartments and “missing middle” housing (which typically encompasses duplexes, triplexes, quadplexes, ADUs, rowhomes, and other forms of “gentle density” housing). Notably, the Innovation Fund was designed in part to improve upon previous federal grant programs — such as “PRO Housing” — by more directly incentivizing actual increases in housing supply.
The Innovation Fund represents a “carrot” strategy — rewarding successful reforms with money to spend on local government priorities.
In contrast, the Build Now Act uses a “stick” approach that would strip certain high-cost jurisdictions (those where housing is most expensive) of money they were set to receive. Specifically, if a high-cost jurisdiction fails to build enough new housing, 10 percent of the annual funding it receives from the federal government’s Community Development Block Grant program would be reallocated to high-cost jurisdictions that do build a lot of housing.
Whether a carrot or a stick, outcome-based incentives are feasible only when there is reliable data to measure and track intended outcomes. The ROAD to Housing Act addresses this challenge through the innovative use of a new Census Bureau data source to track housing production with unprecedented precision at the block level. While the federal government has long monitored housing construction through various data products, this Census dataset breaks new ground in reliability and granularity. As an administrative record rather than a statistical estimate, it bypasses the sampling limitations and methodological variations that affect other housing metrics, providing the most accurate foundation for measuring actual housing production.
Paving the Way for Right-to-Build Zones
We’re excited about the ROAD to Housing Act for many reasons, but one in particular is that several provisions of the bill clear the path for our own policy proposal: Right-to-Build Zones. Our proposal includes two key elements already included in the ROAD to Housing Act — standardized, opt-in federal zoning codes and outcome-based incentives — but it also adds important things that are missing in the bigger bill.
To review, the goal of Right-to-Build Zones is to create mini-laboratories for experimentation in a dramatically freer regulatory environment. They would work as follows:
- The federal government would assemble a task force of experts to establish a set of standard zoning codes, building codes, and permitting timelines drawn from national best practices. These would be designed to eliminate bureaucratic hurdles that prevent homebuilders from meeting local and regional housing demand.
- Municipalities could voluntarily adopt these streamlined codes for specific neighborhoods within their jurisdiction.
- In exchange for meeting construction targets, municipalities would receive “New Home Dividends” — federal payments based on the number of housing units completed per acre, which they could use for infrastructure, education, transit, or affordable housing support.
- The geographic scope for Right-to-Build Zones is intentionally small, designated at the Census block level. They are thus designed to incentivize maximum zoning reform in the most politically viable places.
You can read more details about our proposal here.
The structure of Right-to-Build Zones bears clear similarities to the outcome-based incentives in the ROAD to Housing Act. Both provide direct financial incentives tied to actual housing construction, and both explicitly focus on encouraging more housing units per acre.
The differences between them, however, also matter.
Of the two policies, Right-to-Build Zones aim to encourage more targeted and ambitious zoning reforms. They reward municipalities that adopt a prescribed, model zoning code at a very small scale, such as individual blocks. Rather than working within the city’s existing patchwork of zoning rules, Right-to-Build Zones would drastically reduce or outright eliminate onerous mandates simultaneously — essentially creating a clean slate for homebuilders.
The ROAD to Housing Act’s Innovation Fund, on the other hand, rewards municipalities for relatively more marginal code changes that are built on top of their existing code. These improvements can include allowing “missing middle” housing, reducing parking minimums, or shrinking lot size requirements. The bill text implies that these changes can be implemented at any geographic scale within a jurisdiction, from individual neighborhoods to citywide, as long as they enable more affordable housing construction. Since the Innovation Fund offers rewards retroactively, it will likely reward cities that have followed the typical land-use reforms of recent years: primarily, upzoning residential lots city-wide to allow for duplexes, triplexes, quadplexes, or ADUs.[1] But rather than a clean slate for builders, all of these projects happen within the context of the city’s other land use requirements, such as mandatory parking minimums or hefty setback requirements.
A second difference is that Right-to-Build Zones encourage zoning reform anywhere in the United States, whereas the Build Now Act (another part of the ROAD to Housing Act) targets only high-cost, high-opportunity areas. The Build Now Act’s goal to incentivize homebuilding in the most politically-resistant housing markets is valuable — but Right-to-Build Zones complement it by also offering incentives to build more homes in medium- and low-cost areas. It’s not only San Francisco and New York City that are struggling. Cities like Buffalo and Cleveland need to fix their zoning too.
Finally, the model zoning provisions of the ROAD to Housing Act also leave substantial room for improvement. Among its key components is the Housing Supply Frameworks Act, which notably excludes apartments from its recommendations. This omission is especially troubling in communities facing middle-class housing shortages and ones where higher-density development is most needed. More significantly, the codes in the Housing Supply Frameworks Act are only intended for local municipalities and states to reference, with no incentives or enforcement mechanisms attached. Without financial incentives such as Right-to-Build Zones, widespread adoption of model zoning codes is unlikely.
Given these differences, we think Right-to-Build Zones would be a useful addition to the ROAD to Housing Act, dramatically improving its chances of achieving the central goal shared by both ideas: more housing.
Seizing the Moment for Transformative Change
The ROAD to Housing Act creates an unparalleled opportunity to build towards even more ambitious housing reforms. The preliminary success of this legislation also strengthens the case for Right-to-Build Zones by providing the political precedent, technical tools, and measurement systems that would make them work effectively.
And Right-to-Build Zones, by combining model zoning codes with outcome-based incentives and applying them to smaller geographies, would be an excellent complement to the ROAD to Housing Act.
The challenge now is to harness this remarkable bipartisan momentum, build on the initial victories, and pass these ideas — together — into law. The moment for ambitious federal action on zoning reform has arrived. Policymakers should seize it.
Notes
- Portland, Oregon exemplifies this approach with its recent reforms, as do Minneapolis and Seattle. The Fund might also reward municipalities — such as Washington, D.C. or Denver — that have rezoned small plots of formerly industrial or commercial land to allow for higher-density, mixed-use housing developments.[↩]
