The White House took aim at local zoning restrictions for their role in driving rising housing costs in the president’s annual economic report Thursday.
The White House’s Council of Economic Advisers argued these local rules are largely to blame for housing supply shortages, and it suggested the federal government could play a role in incentivizing zoning reforms.
“Housing shortages and unaffordability have risen over the last 60 years, in large part because of local land-use policies that restrict housing density and what can be built,” the report said. “These effects are felt most by low-income and vulnerable families, which are increasingly priced out of the housing market.”
Zoning restrictions — including prohibitions on multifamily homes, height limits, minimum lot sizes, square footage minimums and parking requirements — limit housing supply and decrease affordability, the report argued.
For instance, minimum lot sizes require developers to build on larger lots than “the market would otherwise provide,” while minimum parking requirements often exceed demand, increase costs and reduce the amount of housing that could otherwise be built, according to the report.
“More relaxed zoning restrictions lead to a higher supply of smaller, lower-cost housing, and, in at least some instances, can lead to lower prices and rents or slower growth in rents among existing housing,” the report said.
Housing costs have skyrocketed, particularly in the wake of the pandemic, as COVID-19 limited new construction and low interest rates fueled demand.
The average price of an existing single-family home in February was $384,500, up 5.7 percent from one year earlier, according to the National Association of Realtors.
As the Federal Reserve has raised interest rates to a two-decade high to tamp down on inflation, mortgage rates have also climbed above 7 percent, further increasing the costs of homeownership.
However, housing prices have long been rising at a faster rate than wages. Over the past two decades, housing prices tripled while household income doubled, and an increasing share of Americans have become rent-burdened, the report noted.
As President Biden heads into a likely rematch against former President Trump in November, he has struggled to change Americans’ largely negative views on his handling of the economy, despite falling inflation and an unexpectedly strong job market.
Since peaking at a 40-year high of 9.1 percent in June 2022, inflation has eased significantly, falling to 3.2 percent last month. Job gains have also repeatedly exceeded expectations, while unemployment has remained below 4 percent for the longest stretch since the 1960s.
The economy has also remained surprisingly resilient in the face of the Fed’s rate hikes, defying widespread predictions of a recession and appearing to achieve a so-called “soft landing.”
