BAM Key Details:
- Housing market experts in Zillow’s Home Price Expectations Survey (ZHPE) say relaxing zoning rules would be one of the best ways to solve housing affordability issues.
- Other solutions include tax credits to incentivize new home construction, relaxing design requirements, and converting downtown commercial zones.
According to Zillow’s Home Price Expectations Survey, an independent panel of housing market experts says relaxing zoning rules would be one of the most effective ways to solve today’s housing affordability issues.
It seems straightforward: We need to build more homes. Changes through policies like modest densification will give us more ‘at bats’ to create density and help communities stay livable for everyone. Without a huge injection of new homes in the near future, affordability will continue to be a challenge for many—especially for first-time home buyers.
Local governments need to step up their game
Housing experts weighing in for Zillow’s survey believe local jurisdictions should streamline and ease their approval process to increase the supply of new, affordable housing.
Zoning reform to allow an increase in housing density within existing neighborhoods and growing communities was met with overwhelming approval, with 73% of respondents ranking it as one of the most effective solutions to housing affordability issues.
While monthly mortgage costs for the typical home (assuming a 20% down payment) stood at $1,595 in January, monthly payments are still 46% higher than they were in January 2022 and $754 higher than before the COVID pandemic (January 2020).
A key factor behind the housing affordability crisis is the chronic shortfall in new housing construction. Having yet to recover from the Great Recession, construction stands at a 3.79 million-unit gap in housing production in 230 metro areas, according to a study by Up For Growth, a nationwide think tank focused on identifying and implementing research-backed solutions to the country’s housing shortage.
Restrictive and exclusionary zoning, artificial barriers, and NIMBY opposition have combined to create an unprecedented and persistent housing shortage. Failure to address these issues will create lower economic output and fewer opportunities for everyone. Families and individuals will be forced to pay higher rents, the equity gap will widen, and transportation costs will rise as people are forced to travel greater distances for work and education.
The most effective ways to improve housing affordability
Zillow’s survey asked panelists to select policies they believe would increase the supply of affordable housing and to rank those policies by effectiveness.
Changes to zoning topped the list. In second place was to encourage governments to more quickly approve and facilitate the building of affordable housing; 59% of economists on Zillow’s panel believe this would effectively address the supply shortage.
Other solutions included—
- Converting downtown commercial zones to make room for more residential housing
- Providing tax credits to encourage new home single and multi-family construction
- Relaxing design requirements (like parking mandates) to ease the approval process
The broad support for zoning reforms to increase housing density is understandable given the results of a 2022 nationwide survey of homeowners and renters, who expressed overwhelming support for the idea.
Even a minimal increase could yield millions of new affordable homes. One example would be allowing a percentage of single-family lots to accommodate two housing units.
There are no quick fixes for the housing affordability problem in the U.S., especially at a time when demand for entry-level homes far exceeds available inventory. Supply-side initiatives such as those recommended by this panel may not be easy to implement, but they will be the most effective means to durably improve homeownership affordability and market balance.
Pulsenomics, LLC is the author of Zillow’s Home Price Expectations Survey, among other expert surveys and consumer polls.
Top takeaways for real estate agents
Be aware of what your local government is doing (or not doing) to improve housing affordability. The more educated you are about market conditions and influences, the better qualified you are to weigh in and influence local government bodies to take corrective action.
Meanwhile, potential buyers in your community will appreciate the actions you’ve taken on their behalf to increase the supply of affordable housing in your market.
Make it a priority to serve your community by finding ways to advocate for the increase of affordable and desirable housing for buyers. And encourage residents in your market to do the same.