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Moving the Needle: 5 Ways Local Governments Can Help Address the Housing Shortage

August 12, 2022 Daniel Stevens, AICP

Tackling the housing shortageYou’ve probably heard the news by now: we need more housing. The current national housing shortage has been in the works since (at least) the Great Recession because the pace of housing development never fully rebounded to the levels needed to keep pace with demand.

Add to that the impact of a wild market stoked, in part, by the pandemic (CliffsNotes version: home prices and rents have soared – for now), and we find ourselves in nothing short of a housing crisis.

Consider Freddie Mac’s recent and oft-cited report findings: the US was facing a 3.8 million housing unit shortfall by the end of 2020. And I’d put my money on an even higher number today. Clearly, we are facing a serious issue and the impacts of the national housing shortage are being felt across the country. The real question is: how can local governments hope to tackle this massive challenge? It is a daunting task to be sure.

Recent Housing Studies Document the Problem

Recent housing studies completed by Camoin Associates for its clients, including in many rural communities, illustrate the magnitude of this challenge:

And this is just a small segment of the nationwide need.

These eyebrow-raising numbers reflect the national housing shortage at the local level. It should also be noted the impacts of this crisis are being felt most acutely by “workforce” level households (i.e., middle income).Economic Development Navigator: Get timely, well-researched, and insightful articles about all things economic development delivered directly to your inbox each month. Subscribe now.

How Local Governments Can Help Address the Housing Shortage

While many of the causes of the housing crisis remain outside the control of local governments (rising mortgage interest rates, high construction and materials costs, shortage of skilled labor, escalating land costs, etc.), there are effective strategies that can work at the local level to move the needle in addressing local housing deficits.

1) Bring Public Land to the Table

Land availability and cost are common constraints in many communities. When quality sites are available for development (e.g., suitable locations, served by infrastructure, proper zoning, etc.), they often come with a steep price tag that precludes building housing affordable for middle-income households or even at any other price point.

One of the most effective things that local governments can do is take a closer look at their publicly owned land. Very often government agencies find that vacant, underutilized, surplus, and otherwise non-essential properties can be made available for housing development. Consolidating multiple government buildings or relocating municipal uses to less-prime properties can also free up land housing. (It’s uncanny the number of highway and DPW departments that occupy prime properties.)

To get started, local governments should inventory all publicly owned properties, assess them for housing viability, create a development vision, solicit proposals or qualifications from a developer, and be prepared to sell the property for below market value to make new housing development feasible, especially if it needs to be affordable to middle- to lower-income households.

2) Upzone

Don’t underestimate the barrier that outdated low-density zoning creates for housing development. We continuously see “relic” zoning from a bygone era in desperate need of modernization, including zoning that continues to limit development to single-family detached houses across large swaths of a community.

While it may sound cliché, the “missing middle” housing phenomenon is real and persistent with the biggest gap existing between single-family homes and midrise apartment buildings. This includes housing such as duplexes, triplexes, townhouses, clustered cottages, and mansion apartments, where very large homes are converted into multiple, separate apartments. These denser housing types are urgently needed to increase supply and help mitigate affordability challenges, particularly multifamily rental housing options.

Upzoning existing zones allows higher density development through increased building heights, reduction in minimum lot sizes, higher unit-per-acre maximums, and similar standard changes. It also means allowing multi-family properties in zones where single-family properties are also allowed (cue the NIMBY discussion).

3) Bring the Infrastructure (and the Grants)

Addressing the challenges around the financial feasibility of building housing is one of the primary roles of local government in overcoming the housing deficit.

Adding water and sewer infrastructure to development sites without it is a big-ticket item for developers and this expense can often make development infeasible. Providing that infrastructure to support housing development is an investment that can and often should be done by local governments.

While some communities already add infrastructure to support housing projects at no cost, many do not, and those that do are often doing so reactively in response to a development proposal. Local governments should also be proactively planning capital improvements (including infrastructure investments) to support desired future growth, which means identifying growth areas and prioritizing infrastructure investments to support future development.

Another way local government can help move the needle is with the grants often available to them but not to private housing developers, such as the federal Community Development Block Grant (CDBG) and other state and local grants. There are many grant programs that can be used for specific development-related costs in addition to infrastructure like land acquisition, street improvements, placemaking, brownfield remediation, and more that may help induce development of more affordable housing.

4) Be a Partner in Adaptive Reuse

Many communities have vacant and underutilized properties with the potential for use as housing. Adaptive reuse of these properties has many benefits beyond providing needed housing, including bringing properties back onto tax rolls, improving neighborhood blight, preserving historic architecture, etc.

There are abundant mill redevelopment examples out there, but Camoin Associates has also worked on adaptive reuse projects involving old courthouses, historic inns, former manufacturing buildings, and a number of vacant school properties.

The role of the public sector can vary in these efforts depending on the situation, but often include infrastructure improvements, assistance with brownfield assessments and clean-up, incentives such as tax-increment financing, redevelopment planning/visioning, and other actions. The key is to be engaged with property owners and developers to look for opportunities to help make projects happen.

5) Engage Local Employers

Over the past decade (or so), we’ve seen workforce housing climb the list of priority issues for businesses and other public and nonprofit employers. In many places, the lack of workforce housing is considered nothing short of an existential threat, a notion particularly acute in seasonal tourist communities, but not exclusively so.

As part of the housing needs studies Camoin Associates develops for its clients, we sometimes conduct formal surveys of business owners with respect to workforce housing and the results are always intriguing. Many businesses report difficulty in attracting and retaining workers and a large number have had prospective employees turn down job offers because of the lack of nearby housing at affordable price points.

Most fascinating, however, is that when asked, many employers are open to the idea of participating in some form of employer-assisted housing program. These types of programs can run the gamut and include low-investment options such as educating employers about roles they can play, playing matchmaker between workers and landlords, and providing administrative and staff support to interested employers with limited capacity. Programs can also involve helping employers establish more robust (and complex) programs, such as investment funds, to provide gap funding for workforce housing projects.

Local governments can also provide incentives for employer investment in housing or help facilitate donations of employer-owned land for housing. Local governments can also be directly involved as major employers themselves by offering programs for their own workers, such as down-payment assistance or other resources.

Despite the interest and potential to aggregate employer resources in a community to support housing, many employers remain on the sidelines — ready to be called into action. It’s up to local governments to make the first move in addressing the housing crisis in their communities.

As housing affordability and resulting workforce issues grow in severity across the country, Camoin Associates is helping public and private organizations of all sizes analyze and address their housing needs, and developing strategies and solutions tailored to each community. Learn more about our housing and real estate development services.