How the US made affordable homes illegal

Summary

The video discusses the growing housing affordability crisis in the US, particularly in areas like the San Francisco Bay Area. Housing prices have skyrocketed due to high demand and limited supply, driven by factors like low mortgage rates and restrictive zoning laws. Exclusionary zoning, which limits the construction of affordable multi-family homes, is a major contributor to the shortage. Wealthy residents often oppose changes, fearing property value declines. The video explores potential solutions, including zoning reforms and federal initiatives, but highlights the need for strong political will to tackle the crisis.

Takeaways

• 🏠 The Bay Area's housing market is extremely expensive, and this is a reflection of a larger nationwide housing affordability crisis.
• 📈 Housing prices in the US have reached record highs, making homeownership less attainable and driving up rental costs.
• 👨‍👩‍👧‍👦 Millennials, the largest generation in American history, are now entering their prime home-buying years, contributing to increased housing demand.
• 💸 Low mortgage rates have further fueled demand for homes, but the supply of new homes isn't keeping up.
• 🏗️ The US built fewer homes in the 2010s than in any decade since the 1960s, with a significant drop in the construction of starter homes.
• 🚫 Exclusionary zoning, including single-family-only zoning and minimum lot sizes, is a major obstacle preventing the construction of more affordable housing.
• 🚗 Many zoning laws require excessive parking spaces and impose height restrictions, further limiting housing development.
• 🏡 Zoning laws are a significant factor in racial segregation, as they have historically been used to exclude people of color from certain neighborhoods.
• 🙅‍♂️ Wealthy residents often oppose changes to zoning laws to preserve 'neighborhood character,' which limits the development of affordable housing.
• 🏛️ Addressing the housing crisis will require political action at state or federal levels, as local efforts often face opposition from influential residents.

Q & A

Why have housing prices risen so much in the last year?

Housing prices have increased due to a combination of factors, including a surge in demand driven by millennials entering their prime home-buying years and historically low mortgage rates making borrowing cheaper. However, housing supply has not kept pace with this demand, causing prices to skyrocket.

What is exclusionary zoning, and how does it contribute to the housing crisis?

Exclusionary zoning refers to local regulations that restrict certain types of housing, such as multi-family units, from being built in certain areas. This limits housing supply, especially in high-demand areas, and contributes to rising home prices and rents by preventing the construction of more affordable housing options.

How does single-family-only zoning exacerbate the housing shortage?

Single-family-only zoning limits land to one housing unit per lot, restricting the construction of more affordable housing like duplexes or small multi-family buildings. This reduces the overall housing supply in areas where demand is high, driving up prices and making homeownership less attainable for many.

What are the effects of parking requirements in zoning laws on housing development?

Parking requirements, such as mandating two parking spaces per housing unit, reduce the number of homes that can be built on a given piece of land. This increases the cost of development and ultimately makes housing more expensive, as developers must reduce the number of units they can build to accommodate parking spaces.

How do minimum lot size requirements impact housing affordability?

Minimum lot size requirements mandate that each home be built on a large plot of land, making it impossible to build smaller, more affordable homes. In areas with high lot size requirements, like Atherton with a minimum of one acre per home, affordable housing becomes virtually unattainable.

Why is it challenging to change zoning laws that could help ease the housing crisis?

Changing zoning laws is difficult because it often faces opposition from wealthier residents who fear that new housing developments will lower property values or change the character of their neighborhoods. These residents frequently attend public meetings to block zoning changes, preventing the construction of more affordable housing.

How does the generational shift in homebuyers contribute to the housing crisis?

Millennials, the largest generation in American history, are now reaching their prime home-buying years, significantly increasing demand for housing. This surge in demand is not being met with adequate supply, worsening the housing shortage and driving up prices.

What impact do zoning laws have on racial segregation in housing?

Zoning laws, particularly single-family zoning, contribute to racial segregation by restricting housing in certain areas to wealthier, predominantly white residents. Historically, zoning laws were designed to exclude people of color from certain neighborhoods, and although race is no longer explicitly mentioned, these laws continue to disproportionately affect minority communities.

What are some potential solutions to the housing shortage mentioned in the script?

Potential solutions include changing zoning laws to allow more multi-family housing, reducing parking requirements, and lowering minimum lot sizes. Additionally, federal or statewide action to incentivize local governments to remove exclusionary zoning policies could help increase the housing supply and make homeownership more attainable.

What actions is the Biden administration taking to address exclusionary zoning?

The Biden administration has introduced a $5 billion program to incentivize local governments to remove exclusionary zoning laws. However, this effort is relatively small in the face of the housing crisis and may not be enough to address the scale of the problem without further political will and action.

Outlines

00:00

🏡 Rising Housing Costs in Expensive Areas

The narrator begins by sharing their experience of noticing increasingly high housing prices on Zillow, particularly in already expensive areas like the San Francisco Bay Area. They highlight how this region has long exemplified the housing crisis, with workers like bus drivers and teachers unable to afford housing near their jobs. This situation is not limited to the Bay Area, as rising housing prices and rents have become a national problem, with prices reaching unprecedented levels, making homeownership less attainable for millions.

05:01

📈 Demand and Supply Imbalance Driving Prices

The housing price surge is framed as a supply-and-demand issue. On the demand side, Millennials, the largest American generation, are entering their prime home-buying years. Low mortgage rates have also fueled demand. However, supply is lagging far behind, with the 2010s seeing fewer homes built than in any decade since the 1960s. Entry-level homes, crucial for first-time buyers, have especially declined, making up only 7% of new builds compared to 40% in the 1980s. This shortage, which was 3.8 million homes by 2020, is particularly severe near jobs, transit, and schools.

🚧 Zoning Laws Limiting New Housing

A key obstacle to solving the housing shortage is restrictive zoning laws. The Bay Area’s zoning map shows most land is reserved for single-family homes, prohibiting the construction of multi-family housing like duplexes and fourplexes in 82% of residential areas. This exclusionary zoning is widespread across the U.S., limiting how much new housing can be built and pushing up prices. Other zoning laws, like height restrictions and parking requirements, further limit development, forcing builders to reduce the number of affordable units.

📏 Minimum Lot Sizes Blocking Affordable Homes

Many areas also impose minimum lot sizes, requiring a large amount of land for each home. For example, Cupertino mandates a minimum of 5,000 square feet per single-family lot, effectively banning starter homes, which are typically smaller. In wealthier areas like Atherton, minimum lot sizes of one acre make it nearly impossible to build affordable homes. This zoning leads builders to focus on larger, luxury homes instead of affordable starter or multi-family homes, contributing to the national housing shortage.

⚖️ Exclusionary Zoning and Its Historical Roots

Exclusionary zoning laws have historical roots in racial segregation, designed to prevent people of color, especially Black Americans, from living in predominantly white neighborhoods. While modern laws don’t explicitly mention race, they perpetuate segregation by making housing unaffordable in certain areas. These laws favor wealthier homeowners and shrink the available housing stock, driving up prices for everyone.

🛑 Opposition to Zoning Changes and Affordable Housing

Efforts to change zoning laws often face strong opposition from wealthier residents concerned about their property values and ‘neighborhood character.’ The example of a school district proposing affordable housing for teachers in San Jose, which caused an uproar among local parents, illustrates this resistance. While one neighborhood blocking a single multi-family development may not seem significant, this kind of opposition happens frequently, preventing new housing from being built.

🔑 Small Zoning Changes Can Help Solve the Crisis

Gradual changes to zoning laws, such as allowing smaller homes on smaller lots or duplexes, could significantly increase housing availability. Some cities like Berkeley, Minneapolis, and Portland have already taken steps to eliminate single-family zoning, but the problem remains nationwide. Broader solutions will require statewide or federal regulations to overcome local opposition and make a meaningful impact on the housing crisis.

💡 Federal Initiatives and Political Will Needed

The Biden administration is attempting to address exclusionary zoning through a $5 billion program offering incentives to localities that relax these policies. However, this initiative, while unprecedented, is small compared to the scale of the housing crisis. Addressing the housing shortage will require significant political willpower and a nationwide reassessment of zoning laws to make homeownership accessible to millions of Americans who are currently shut out.

Keywords

💡Affordable Housing

Affordable housing refers to housing that is reasonably priced, making it accessible to people with lower incomes. The video discusses the nationwide shortage of affordable housing, particularly in expensive regions like the San Francisco Bay Area. Due to the rising demand for homes and the limited supply, affordable housing has become unattainable for many, including essential workers like teachers and bus drivers.

💡Housing Supply and Demand

The concept of housing supply and demand explains the imbalance between the number of available homes and the number of people wanting to buy them. The video highlights that while demand for homes has increased, especially among millennials entering their prime home-buying years, the supply of housing, particularly starter homes, has not kept pace. This mismatch contributes to skyrocketing housing prices.

💡Zoning

Zoning refers to local regulations that control what can be built in specific areas. In the video, exclusionary zoning laws are discussed as a significant barrier to increasing housing supply. Most of the Bay Area is zoned for single-family homes, limiting the construction of multi-family housing like duplexes and apartments, exacerbating the housing shortage.

💡Exclusionary Zoning

Exclusionary zoning refers to laws that restrict the types of housing that can be built in certain neighborhoods, often to single-family homes. These regulations prevent the development of more affordable multi-family housing, contributing to segregation and the overall housing shortage. The video mentions how such zoning practices were historically used to exclude minority groups and continue to affect housing today.

💡Multi-family Housing

Multi-family housing includes residential buildings that house multiple units, such as duplexes, fourplexes, or apartment complexes. In the video, multi-family housing is presented as a solution to the housing crisis, but restrictive zoning laws in many areas prevent their construction. Cities like Atherton and Cupertino restrict building beyond single-family homes or impose height and parking restrictions that further limit multi-family developments.

💡Starter Homes

Starter homes are smaller, more affordable homes typically purchased by first-time buyers. The video points out that the construction of starter homes has dramatically decreased since the 1980s, from 40% to 7% of new homes, further exacerbating the housing crisis. This lack of entry-level housing makes it difficult for young adults and lower-income families to enter the housing market.

💡Neighborhood Character

The term 'neighborhood character' is often used by residents to argue against new housing developments, particularly multi-family units, out of concern for how it might change the appearance or feel of their community. The video describes how wealthier residents use this term to resist changes that might make their neighborhoods more affordable and accessible to people from diverse backgrounds.

💡Mortgage Rates

Mortgage rates are the interest rates charged on loans used to buy homes. Low mortgage rates, as discussed in the video, have made borrowing money cheaper, which has enticed more people to purchase homes. However, this increased demand, combined with limited housing supply, has contributed to soaring home prices, making homeownership less attainable for many.

💡Federal Housing Policy

Federal housing policy refers to government initiatives aimed at addressing housing issues. The video highlights the Biden administration’s attempt to tackle exclusionary zoning through a $5 billion program designed to incentivize local governments to remove restrictive zoning laws. However, the video suggests that while this is a step in the right direction, it may not be enough to address the full scale of the housing crisis.

💡Gentrification

Gentrification refers to the process where higher-income individuals move into lower-income neighborhoods, driving up property values and rents, which often displaces long-time, lower-income residents. While not explicitly mentioned in the video, the themes of rising home prices and exclusionary zoning indirectly relate to gentrification, as more affluent individuals compete for housing, leading to the displacement of vulnerable populations.

Highlights

Housing prices have reached an all-time high, with the median American home costing $350,000.

Millennials are entering their prime home-buying years, increasing demand for housing.

Mortgage rates are at historic lows, making borrowing cheaper and further increasing demand.

Home construction has not kept pace with demand, especially for entry-level homes.

Only 7% of new homes built today are 'starter' homes, compared to 40% in the 1980s.

By the end of 2020, the US was short by 3.8 million homes, exacerbating the housing crisis.

Exclusionary zoning laws, like single-family-only zoning, prevent multi-family housing construction in many areas.

82% of residential land in the San Francisco Bay Area is zoned for single-family homes only.

Cities like Cupertino, California, impose height restrictions and parking requirements that limit multi-family housing development.

Large minimum lot sizes for single-family homes further reduce opportunities for affordable housing.

Exclusionary zoning laws disproportionately affect people of color, worsening segregation in many areas.

Neighborhood resistance, often driven by concerns about 'neighborhood character,' blocks new housing developments.

Berkeley, Minneapolis, and Portland have taken steps to end single-family zoning, but broader changes are needed.

The Biden administration has proposed a $5 billion program to address exclusionary zoning, but it may not be enough.

Political willpower is essential to reform exclusionary zoning and address America’s housing shortage.

Transcripts

So I spend a lot of time looking at houses on Zillow.

And lately, I noticed that, even in places where houses are usually expensive...

they seem even more expensive.

Like here, in the San Francisco Bay Area. 

What has the last year been like?

For years, the Bay Area has been an extreme example

of how difficult it is to find affordable housing in the US.

It’s where Silicon Valley bus drivers sleep in their cars at night,

because they can’t afford housing near work.

And where school teachers can’t afford to live in the counties they teach. 

But it’s not just the Bay Area.

The lack of affordable housing is a national problem.

And right now, it’s worse than ever.

We've seen, over the last year,

housing prices reach a level they've never reached before in American history. 

They kind of just look like a rocket ship going to the moon:

housing prices reaching a median of $350,000 for the median American home.

Those prices have made rents more expensive,

and have made homeownership less attainable for millions of Americans.

So why is this happening?

And how do we bring that rocket ship closer to Earth? 

We can think of today’s housing prices in terms of a supply-and-demand problem. 

On the demand side, there are a few things happening.

The first is a generational shift in who’s buying homes. 

Millennials are the biggest generation in American history,

and they're aging into their prime home-buying years.

On top of that, mortgage rates are at an all-time low,

which means it’s very cheap to borrow the money needed to buy a house.

That’s enticed more people to buy if they can, making demand for houses even higher.

The problem is that supply isn’t matching that demand.

From 2010 to 2019, there were fewer homes built in the US than in any decade since the 1960s.

In particular, the construction of smaller, entry-level housing,

the kind made for first-time home buyers, has dropped dramatically.

In the 1980s, those "starter" homes made up around 40% of all homes built.

Today, it’s closer to 7%.  

In 2018, one estimate said the US housing market was 2.5 million homes short of meeting demand.

By the end of 2020, it was 3.8 million.

And that's driving a big part of the problem, both for renters

and for people who want to be homeowners.

The shortage is worst in the places where demand is highest,

near good jobs, transit, and schools. 

And one pretty straightforward solution to that

is to just build more homes in those places.

But for years, there’s been one big obstacle to that:

we aren’t allowed to.

Take a look at this map of the Bay Area.

It’s showing something called zoning,

or local regulations that decide what can be built where. 

This much of the region is zoned for residential housing. 

In blue are areas zoned to allow multi-family housing,

while the areas shaded in pink are zoned for single-family housing only. 

That’s 82 percent of all residential land in the Bay Area.

What it means is that you've banned the ability for anyone to build anything

other than a single unit of housing on that lot of land.

And in many towns, like Atherton,

they’ve excluded all multi-family housing from their neighborhoods.

And that doesn't just mean a giant apartment building.

It means things like duplexes, things like fourplexes...

Things like that are illegal in the majority of the country.

 This is an example of something called "exclusionary zoning."

It’s a big part of the reason for the housing supply shortage in the US.

And single-family-only zoning is just one way local laws limit how much housing we can build. 

Many places also employ height restrictions.

In Cupertino, California, some areas are zoned for multi-family buildings,

but they don’t allow any buildings over two stories.

Parking requirements are often written into zoning laws, too.

Cupertino requires developers to set aside space for two parking spaces

for each unit of multi-family housing.

That means, if you were building an apartment complex that had 100 units,

you’d need to find space for 200 parking spots.

Which usually means buildings that size don’t get built at all. 

They lower the number of units they're actually building

so they can save space for those parking spaces.

And then, those units become more expensive

because the land still stays the same cost to the developer.

And you then get a situation where potentially more affordable units

turn into higher-income-servicing units.

Another feature of many zoning laws is minimum lot sizes.

It means builders are legally required to allot a minimum amount of land for each home.

Often a large amount of land. 

In Cupertino, most single-family lots must be at least 5,000 square feet each. 

Starter homes are usually around 1,400 to 1,500 square feet.

And so you've basically banned all that type of housing.

In Atherton, the minimum lot size for homes is one acre: more than 43,000 square feet.

Which makes it virtually impossible to build any kind of affordable home there.

Together, exclusionary zoning laws like this push builders across the country

to focus on bigger, luxury homes,

instead of smaller starter homes, or multi-family housing. 

Essentially creating gated communities in public spaces. 

What you are saying is that you are only allowing people

who have already been able to partake in the wealth of this country,

and to grow their income,

and have access to high opportunity jobs and education,

to live in our neighborhoods.

Historically, some of the first zoning laws in the US were engineered for that exactly:

to block people of color, and in particular Black Americans,

from living in predominantly white neighborhoods. 

Today, the laws don’t explicitly mention race, but they continue to worsen segregation. 

In the Bay Area, the more single-family zoning in a neighborhood, the whiter it is. 

But all this has another effect as well:

By shrinking the pot of new housing getting built, while demand keeps rising,

it drives up the cost of housing for everyone.

Changing zoning laws can be difficult.

And often, the biggest obstacles are the wealthiest residents.

The process is usually defined by who shows up to these public meetings.

And what you have is often a much whiter, wealthier crowd,

the ones who come and say, "I don't want this in my community,"

"I'm concerned about what will happen to my property values."

And then there's this kind of code word, “neighborhood character.” 

Remember those teachers I mentioned,

who can’t afford to live in the counties where they teach?

Well in 2018, one local school district proposed a solution:

building affordable housing units for teachers in San Jose.

It caused an uproar among San Jose parents,

who petitioned against "changing the neighborhood."

It may not seem like a big deal when one wealthy neighborhood

blocks one multi-family development.

The problem is that it happens all the time:

Communities block new housing everywhere. 

People are, when they hear this kind of rhetoric, very confused.

Because they're like, "I don't want to live in a place with ten thousand apartment buildings.

It doesn't make sense to do that."

And they're right. No one is saying that every neighborhood in every city

should be ten thousand-foot apartment buildings or anything like that.

But even small, gradual changes to zoning laws can have an impact.

For example, allowing smaller homes on smaller lots, or simply allowing duplexes,

would double capacity for housing in some areas. 

In recent years, some cities like Berkeley, Minneapolis, and Portland

have taken the huge step of ending single-family zoning.

But the problem is nationwide.

The real fix is going to happen when these decisions start being made, and start being regulated,

at the statewide level or at the federal level in some capacity. 

Today, the Biden administration is attempting to tackle exclusionary zoning

through a five billion-dollar program,

that would give money to localities that remove exclusionary zoning policies.

But even that may not be enough.

This is more than any presidential administration has done on this topic,

either Democrat or Republican.

It is also very small in the face of this problem.

They want to take action, they recognize how big of a deal it is,

but they are not actually willing to create the kind of political blowback

from often very high-value voters living in suburban environments.

Ending America's housing shortage will require real political willpower.  

And it’ll require people across the country to take a look at their own neighborhoods:

what gets built, who gets excluded,

and how to make homeownership achievable for the millions who are shut out.