The current housing market has pushed housing affordability, a long-standing issue, to the forefront of every homeowner's, renter's, and investor's mind. The Yes In My Backyard (YIMBY) Act (H.R. 4351), which was passed by the House of Representatives in 2020, aims at combating the issue of affordable housing head-on, addressing legislative regulations in local governments that prohibit and hinder the ease of and access to affordable housing projects. The Act, which still needs to be approved by the Senate, could make some major changes to housing if passed. Here's what investors need to know.
What is the Yes in My Backyard Act?
The Yes in My Backyard Act is a bill initially proposed by Representatives Denny Heck (D-WA) and Trey Hollingsworth (R-IN) in 2019 in an effort to remove exclusionary land-use policies that impede the development of housing, particularly affordable housing.
Increased production of homes, including affordable housing projects, apartments, and single-family homes, among other residential dwellings, would help reduce the cost of rent and real estate, which has been pushed to record levels due to a nationwide housing shortage. Up for Growth conducted a study that found the United States underproduced 7.3 million homes from 2000 to 2015. It's now estimated that the U.S. is short roughly 4 million homes, despite increased efforts to add more by developers and real estate investors in the private market.
Underdevelopment of real estate, particularly affordable housing, can largely be attributed to strict land-use policies, which have a controversial history rooted in racism and classism. YIMBY aims to remove these barriers, requiring local municipalities to disclose their housing policies, particularly to recipients of the Community Development Block Grant (CDBG).
The bill hopes to increase transparency for local citizens while promoting more thoughtful, inclusive development practices for jurisdictions. This could include:
- Rezoning areas for high-density housing.
- Encouraging mixed-income, mixed-use, and transit-oriented developments.
- Reducing minimum-lot size requirements.
- Allowing accessory dwellings.
- Ensuring historic preservation requirements that encourage construction of housing in historic buildings and districts, among others.
YIMBY lost much of its traction after the onset of the global pandemic but was recently re-endorsed by senators Todd Young (R-IN) and Brian Schatz (D-HI), which has brought attention back to the bill.
Could YIMBY make a long-term impact in real estate?
If passed, the bill could change the real estate industry in major ways. Dismantling certain restrictive land-use policies would allow developers and real estate investors to build more and in areas that were once prohibited. This opportunity means more economic activity as well as more opportunities for investors in these fields.
While investors may enjoy the rapid rental price and real estate value growth the country has been experiencing over the past year and a half, it's not sustainable. This bill would help rebalance supply while allowing for housing to be more readily available to tenants of all incomes, classes, and races.