First 100: Biden Enters the Housing Supply Minefield

The competitive grant program in the American Jobs Plan looks a lot like Race to the Top, which didn’t work out well for education reformers.

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The Chief

Housing is a universal need, and it’s so tied up with personal wealth building, economic health (see the financial crisis), inequality, transportation, and even climate that it quickly turns into a divisive subject. In reporting Chain of Title and the plight of foreclosure victims, I saw how much personal investment we have in our homes, how we use them to mark time and measure up in society. People were scraping by to stay current on their mortgages before their medical bills or utilities; they’d rather have a house than the heat in that house.

What I’m trying to say is that the totemic value placed on housing, particularly in the United States, makes housing policy divisive. That’s not necessarily going to change with federal investment. And that’s the context for one of the more tantalizing policy strands in the American Jobs Plan, which is one of the rare throwbacks to the 2009 Obama stimulus.

The Biden plan vows to “eliminate exclusionary zoning and harmful land use policies” though a “competitive grant program that awards flexible and attractive funding to jurisdictions that take concrete steps to eliminate such needless barriers to producing affordable housing.” The grants will reportedly be at least $5 billion.

The policy idea here is that local control of zoning has led to things like mandatory parking and height limits and single-family requirements that have depressed the supply of housing, particularly in expensive cities on the coasts, and that addressing the shortage would keep up with demand and make these areas more affordable (or at least not completely outpriced). The response from opponents is that this tears down the character of neighborhoods and leads to gentrification and congestion and doesn’t reduce the cost of housing or the displacement of lower-income residents, because the replacement housing serves luxury markets. The response to that response is that those luxury units still comply with the laws of supply and demand, and the housing vacated by those snapping up gentrified replacements is lower-cost, and you can solve congestion in other ways, like through transit-oriented development. And then it just keeps going.

The policy arguments are even more entrenched than most debates, for the sentimental reasons explained above. For this piece I want to talk about the politics of the Biden administration entering into this argument at the federal level. Because the model for this is something called Race to the Top.

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About the only thing more important to people than their homes is their kids, and in the late-aughts there was a separate fierce debate on the center-left around “failing schools” and the need for education reform. One side said that bad teachers had to be fired and testing had to measure student achievement and nontraditional setups like charter schooling had to be encouraged. The other said that teaching to a test wasn’t teaching and charters cherry-picked their own students and testing didn’t correlate to teaching and poverty and other factors played into learning. And it just kept going.

The Obama administration got into the middle of that debate with Race to the Top. Part of the 2009 stimulus and also priced in the range of $5 billion, it was a competitive grant program that gave states money if they changed their K-12 rules to conform to the ed reform agenda. This included supporting charters and evaluating teachers stringently and turning around underperforming schools and developing more tests and assessments. Nineteen states were eventually awarded grants, and many standards were changed to acquire them.

At the time, states were cash-strapped from the recession, and the Obama administration was exploiting that to make the education reform changes it wanted. Today, cities are more cash-strapped than states (and really everyone’s in better shape now that the American Rescue Plan’s fiscal aid is in process), and the money dangled would come in handy, if land use were changed.

It’s what happened after Race to the Top that’s more notable. School districts opted out of the reforms, and eventually so did several states. Backlash to low pay rallied the nation to the cause of teachers, including in red states. And education reformers rather rapidly lost their advantage within the Democratic coalition. During the 2020 presidential campaign, every Democratic candidate distanced themselves from the charter school movement. Biden’s education secretary marked a real shift from the Obama years too. And when the Biden team initially added a competitive grant for pandemic resources for schools in the American Rescue Plan, the pushback of it as “Race to the Top 2.0” was so furious that it was quietly removed.

Part of this is because teachers are such a large and powerful constituency within the Democratic Party that deliberately antagonizing them wasn’t going to work. But the model of a Democratic administration taking sides in an intra-party debate and using federal dollars to boost their desires led to their side of the debate being completely walked out of the party. Is it better for Democratic education reformers that they got a handful of states to change their education policies, some temporarily, if in the exchange they gave up practically all of their influence within the party?

And could this happen with these competitive grants for land use? Not everything is the same, of course, and the exclusionary zoning/housing supply charges have arguably more support among Democrats than education reformers did. But though conservatives pay more lip service to it, the stirrings of local control are ever-present, and tensions run as high in housing as they do in education. The potential for a backlash is definitely present, and the politics of housing are volatile. Supply-side reformers might want to be careful what they wish for.

Granted, there’s eight times as much money, about $40 billion, in the Biden plan for public housing investment, though a lot of this will go to fixes of the existing dilapidated stock rather than supply. An investment in social housing, which would start by repealing the Faircloth Amendment that literally makes it illegal to build new public housing without bulldozing old units, would do much to balance the scales on this. Faircloth repeal, authored by AOC, passed the House in their infrastructure bill last year; I’d imagine it will pop up again in the Democratic version of the Biden package.

By the way, this piece is part of our Building Back America series, a deep dive into the Biden public investment package, and you can read all the stories by clicking here.

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