The federal government's new YIMBY ("yes in my backyard") grant program has a democracy problem. Local governments are asking for federal money to implement zoning reforms that still require approval from elected officials.
The idea behind the new program, created last year as part of Congress' $1.7 trillion spending bill, is to incentivize localities to cut back on the red tape they've applied to new housing construction.
"We need to legalize housing, and abandon the exclusionary zoning that originated during Jim Crow and continues today. Government needs to change its mentality from intentionally constraining the supply of housing to incentivizing it," said Sen. Brian Schatz (D–Hawaii), who secured $85 million for the new program, in December 2022.
To that end, the Pathways to Removing Obstacles to Housing (PRO Housing) program offers grant awards of up to $10 million to state governments, localities, and regional planning associations to identify and remove obstacles to affordable housing.
These PRO Housing grants are competitive, meaning jurisdictions aren't entitled to this money. Instead, applicants have to demonstrate their "progress and commitment" to removing barriers to new housing, as well as "acute demand" for new housing. U.S. Department of Housing and Urban Development (HUD) Secretary Marcia Fudge has wide discretion to determine who gets paid.
Supporters of the program, and previous versions of it that have been floated in Congress, argue this design ensures that money will flow to the jurisdictions doing the most work to remove supply-killing regulations.
Critics meanwhile have contended the program's requirements are overly broad and unfocused. Applicants can cite a huge range of things they've either done or plan to do to justify their requests for money. HUD can cut checks for drafting up plans and policies that don't really address housing underproduction and might never be implemented.
The applications produced so far suggest that the critics have a point. Applicants are asking for money to implement plans that might never actually get passed.
Take the draft application from the Metropolitan Washington Council of Governments—a regional planning body in the D.C. area comprised of local governments. The council is asking for a $6 million PRO grant.
Some of that money, it says, would go to pay for the implementation of Alexandria, Virginia's Zoning for Housing proposal—a grab bag of reforms that would provide developers with incentives to build affordable housing, pare back parking requirements, and allow more types of housing in single-family neighborhoods.
Local YIMBY groups have criticized the proposal as rather weak and ineffective. More importantly, the Alexandria City Council isn't set to vote on the Zoning for Housing proposals until November—a month after PRO Housing applications are due.
One can imagine a scenario where Alexandria gets a federal grant to implement these reforms and then votes to kill these reforms anyway.
Other cities aren't that ambitious. They're asking for money to study the benefits of removing obstacles to housing production.
Philadelphia's $7 million draft PRO grant application includes a plan to study the benefits of allowing more accessory dwelling units (ADUs)—which are currently illegal in most residential areas.
Yet, the whole premise of the PRO Housing grants is that these obstacles should be removed already. Philadelphia is basically asking for money intended for zoning reform to study whether zoning reform is a good idea or not.
Philadelphia's application includes some other oddities. It cites its inclusionary zoning policies—which require developers to include below-market-rate affordable units in new developments—as evidence of its commitment to affordable housing. Yet it's also asking for money to study whether its inclusionary zoning policies are, in fact, killing development by requiring developers to provide affordable units at a loss.
This is a by-product of the PRO Housing program having pretty vague definitions of what counts as good housing policy and what kinds of reforms it's intended to pay for. Grant applicants are therefore compiling big long lists of everything they're doing on housing and hoping some of it looks favorable to the feds.
Some grant applicants argue that funding studies and planning activities are a worthwhile use of federal money as cities don't have the resources to do all the planning work necessary to get reforms done.
"Units of local government and not-for-profit organizations cannot realistically implement change and reduce known or presumed barriers to accessible and affordable housing when they cannot fund the planning studies or specific tasks required to address them," writes New York state in its draft PRO grant application.
Even if that's true, it nevertheless means that these federal PRO Housing grants could go to fund studies and planning activities for zoning reforms that still might not get the sign-off from elected officials.
"Past experience shows that plans to improve housing affordability often sit on local government shelves without actually leading to any zoning changes or new housing," said Emily Hamilton, an economist and housing researcher at George Mason University's Mercatus Center, in 2020 Congressional testimony about the design of a potential zoning reform grant program.
This is the fundamental flaw in the PRO program. City staff are asking for money to fund zoning reform work while elected officials decide whether any of that work becomes actual policy.
Hamilton, in her 2020 congressional testimony, recommended that a zoning reform program reward localities that permit a lot of new housing. Money would flow to places with good outcomes, not good promises.
That's not the road Congress and HUD took with the PRO Housing program, and it shows.
To be sure, HUD has yet to issue any PRO Housing grants yet. The application deadline is October 30.
It is possible money will flow to the better-conceived applications. (New American Planning has compiled a helpful spreadsheet of draft grant applications.) There's no guarantee that it will.
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