The housing revolution brewing in 2023

It’s early, but a revolutionary year in housing policy seems to be brewing in state capitals from Raleigh to Olympia. Like the pivotal Revolutionary War campaigns of 1777, the action began just before the New Year in Trenton, New Jersey. A unanimous legislature approved a law reducing construction delays by allowing contractors to hire private sector building inspectors. This may sound like a Republican idea. But its sponsors included New Jersey’s Democratic leadership, and it was celebrated by Gov. Phil Murphy (D).

Inflation, extreme swings in mortgage interest rates and supply chain disruptions exposed the inadequacies of a housing supply system biased toward “no.” The resulting price spike forced together conservatives and progressives in a remarkable swell of interest in reforms to streamline housing approvals and preempt local zoning barriers.

Housing reform has always had appeal across the ideological spectrum. Economically, it both alleviates inequality and repairs a broken rung on the ladder to self-sufficiency. In terms of the role of government, zoning reform offers both freedom from overregulation and inclusion of the politically powerless. But it took the urgency of high housing prices and the advocacy of the “Yes In My Backyard” (YIMBY) movement to put reform on the agenda.

The most forceful elected advocate for reform may be Gov. Greg Gianforte (R-Mont.), who said that “government-imposed mandates” are the problem and “high-density housing…is part of the solution.” He convened a task force of legislators, experts and stakeholders. The ambitious reforms they proposed will get a serious hearing in Montana’s upcoming session.

In Washington, State Rep. Davina Duerr (D-Bothell) has introduced a comparably ambitious bill. Among other things, it would adjust building codes to make small-footprint apartment buildings economically viable and exempt development in walking distance from schools, parks and transit from the state’s onerous environmental review. Duerr’s colleagues have introduced several other bills to round out the state’s zoning reform package. Gov. Jay Inslee (D) rejects the false choice between zoning reform and housing subsidies. He supports both, saying, “It would be a shame to finance four billion dollars and then not have a place to build the houses.”

Would-be homeowners have long fled exorbitant blue-state prices for Texas. But in 2022, metro Austin’s home prices caught up with those of Washington, D.C., and Portland, Oregon. Drawing lessons from his own, more-affordable Texas boomtown, State Sen. Paul Bettencourt (R-Houston) has pointed to local zoning restrictions as the source of scarcity. Previewing the coming legislative session, he called minimum lot size and minimum home size restrictions “anti-market, anti-growth, anti-reality.” For Bettencourt and other Texas reformers, the challenge will be fighting for committee time during the biennial legislative sprint.

In several states, reformers are regrouping after early defeats. Gov. Kathy Hochul (D-N.Y.) was forced to withdraw a zoning preemption proposal last year. But rather than being chastened, she doubled down on the need for change, using her state of the state address this month to unveil a plan that would require New York villages and cities to sharply increase their housing production via substantial zoning reforms.

In North Carolina, a wide-ranging 2021 housing reform bill fell short despite bipartisan sponsorship. The John Locke Foundation has picked up the mantle, convening a working group of legislators and housing professionals and advocates. Interest runs high but the group has not yet publicized a reform agenda.

These efforts, and similar reforms in a dozen other states, face understandable opposition from municipal associations. Their arguments for the sanctity of local control appeal to the minority party in states with long term one-party control. A few culture war belligerents from both sides have tried to politicize the issue of housing reform. Their clickbait has fortunately failed to gain traction. Instead, reformers have the more pedestrian challenge of winning over colleagues whose constituents generally want new housing but are also wary of change.

Federal policymakers can aid their state-level compatriots in two ways. First, give them air cover by vocally supporting regulatory reform as a means to housing abundance. Senior statesmen can explain how zoning reforms fit into their own vision of a fair, prosperous America, casting a vision that state policymakers can hammer into workable compromises.

Second (and beyond the scope of this op-ed) is to explore reforms to the many federal policies that impact and distort local housing markets. Small grants like those passed in the 2023 omnibus appropriations bill can ease the way for cities and state doing the groundwork of zoning reform.

The media magnifies federal policy battles. But it flips the telescope backward to view state-level debates, making them seem inconsequential. For this year at least, it will be worth watching the action in Albany, Austin, Helena and other capitals that are hammering out a new American housing regime.