Housing affordability has been a growing concern in our country, particularly the lack of affordable housing for middle- and low-income-earning families. While the current administration is making affordable housing a major priority, developments that fall under current housing and zoning policies aren't enough to meet demand. That's why some are looking to flexible zoning as the answer. Flexible zoning reduces zoning barriers that prohibit certain types of real estate in certain areas. Here's what investors need to know.
Antiquated policies perpetuate the problem
In theory, zoning makes sense. It's the reason many homes aren't nestled next to noisy industrial properties or between busy retail stores. Generally speaking, it helps keep a city organized by placing businesses and residences in specific zones of the city. But zoning policies have a controversial past and are quickly becoming antiquated as our demands for housing shift.
Many exclusionary zoning policies that are still used today were developed in the mid-1800s to early 1900s to establish guidelines for the development of homes.Those policies might restrict the size (such as square footage), build type (wood frame, brick, number of stories), or type of home (single-family, duplex, multifamily) that could be built in a neighborhood. On the surface, this makes sense. It helps keep congruency in the neighborhood, which can boost real estate values.
But these policies also allowed discrimination against who could live where based on their color or class. While a 1917 Supreme Court decision declared zoning policies that excluded minorities unconstitutional, the challenge of race-based zoning is still alive and well. While you cannot be discriminated against because of your color today, you can face barriers because of your income. Restrictions, including minimum lot sizes, mean housing made specifically for low-income families just isn't allowed in certain neighborhoods.
How flexible zoning could combat the problem
The result? Low-income neighborhoods suffer poor-quality housing, underfunded school systems, and a lack of grocery stores -- which can create food deserts. One way to combat this problem, delivering much-needed affordable housing while also addressing the racial and social bias in our current zoning policies, is through flexible zoning.
Flexible zoning would allow neighborhoods to integrate new types of buildings, such as affordable housing, into areas that were previously restricted. Given that there is an estimated shortage of 7.2 million affordable housing units, this change could do wonders for increasing supply in the open market.
Having flexible zoning policies that apply to certain types of property, such as affordable housing, can allow old abandoned buildings, bankrupt hotels, vacant retail centers, or unused parking lots to be adapted and redeveloped into a better and higher use. Several municipalities and even some states are beginning to loosen their zoning policies, but right now it's up to each municipality to address the problem head-on.
Some are concerned that flexible zoning will result in a decrease in real estate values because of the inconsistency in build type and use, but studies have shown that affordable housing doesn't depress neighborhood prices.
There's currently a push for inclusionary zoning, which requires all new developments to include a certain number of affordable housing units. But flexible zoning would allow more freedom for developers who want to participate in creating affordable housing to do so without restriction while gaining access to property and land at a cheaper cost. This allows more freedom in the type of housing provided and, in theory, less hesitancy to include affordable housing units in new developments.
Reducing barriers as to where or what can be developed or redeveloped means developers can help increase the supply of housing at a much faster rate. When coupled with the variety of tax programs that incentivize developers to integrate affordable housing into their projects, it could be a win-win solution for all.