White House targets local zoning restrictions to combat rising housing costs

The White House criticized local zoning restrictions for their role in driving up housing costs in the president’s annual economic report Thursday.

The White House Council of Economic Advisers argued that these local rules were largely responsible for the housing shortage and suggested that the federal government could play a role in encouraging zoning reforms.

“Housing shortages and unaffordability have increased over the past 60 years, largely due to local land use policies that limit housing density and what can be built,” the report said. “These effects are felt most by low-income and vulnerable families, who are increasingly excluded from the housing market.”

Zoning restrictions – including bans on multi-family homes, height limits, minimum lot sizes, minimum square footage and parking requirements – limit housing supply and decrease affordability , says the report.

For example, according to the report, minimum lot sizes force developers to build on larger lots than “the market would otherwise provide,” while minimum parking requirements often exceed demand, increase costs and reduce number of homes that could otherwise be built.

“Lower zoning restrictions lead to a greater supply of smaller, cheaper housing and, in at least some cases, may lead to lower prices and rents or slower rent growth among housing units. existing,” the report states.

Housing costs have soared, particularly in the wake of the pandemic, as COVID-19 limited new construction and low interest rates boosted demand.

The average price of an existing single-family home in February was $384,500, up 5.7% from a year earlier, according to the National Association of Realtors.

As the Federal Reserve raised interest rates to their highest level in two decades to curb inflation, mortgage rates also climbed above 7%, further increasing the cost of homeownership .

However, house prices have long been rising at a faster rate than wages. Over the past two decades, housing prices have tripled while household incomes have doubled, and a growing proportion of Americans are finding themselves facing the burden of rent, the report notes.

As President Biden heads toward a likely rematch against former President Trump in November, he has struggled to change Americans’ largely negative views of his handling of the economy, despite falling inflation and a surprisingly strong job market.

Since reaching a 40-year high of 9.1% in June 2022, inflation has diminished considerably, falling to 3.2 percent last month. Job gains also repeatedly beat expectations, while unemployment remained below 4% for the longest period since the 1960s.

The economy has also remained surprisingly resilient in the face of Fed rate hikes, defying widely held predictions of a recession and appearing to achieve what’s known as a “soft landing.”