County officials representing large urban areas across the country traveled to Washington D.C. April 23 to discuss data-driven approaches to expanding housing supply and affordability at a think tank and relay local housing needs to federal agency staff and members of Congress at NACo’s Large Urban County Caucus (LUCC) fly-in. 

“Housing, especially housing supply and affordability, is one of the most pressing challenges facing our respective metropolitan areas,” said LUCC Chair Adrian Garcia, who serves as a Harris County, Texas commissioner. “It’s a core constraint, not only on quality of life, but also on economic growth and workforce ability.”

Best practices

Edward Pinto, senior fellow and co-director of the American Enterprise Institute (AEI) Housing Center, outlined three ways local governments can increase housing supply:

• Allow houses to be built on smaller lots, increasing the amount of starter single family homes and townhomes
• Allow lot split flexibilities on existing lots, enabling a variety of dwelling types and sizes to exist on one property (such as duplexes, ADUs and townhomes)
• Expand flexibility to build homes near jobs

“The three most important things in housing affordability are small lot, small lot, small lot,” Pinto said. “Small lots cost less; you get smaller homes on small lots.”

Local governments should encourage the construction of small residential properties — specifically single-family buildings that contain between one and four separate dwelling units, according to Pinto. 

“That is the way that you actually make housing affordable,” he said. “… The first home I bought in 1975 [was] 1,400 square feet, three bedrooms, on a 4,800 square foot lot. We don’t build those houses anymore. They’re illegal. You need to activate that.”

Into the early 20th century, it was common to have multiple types of residences — small, large, duplexes, triplexes, townhomes — mixed in the same neighborhood as doctor’s offices, grocery stores and other commercial properties, Pinto said. And not just in urban areas, but in smaller cities, as well, he noted. 

That ended when Herbert Hoover, who was the U.S. Secretary of Commerce at the time, appointed a zoning commission to develop a model zoning statute for the states to pass. That statute was based on a Baltimore city ordinance that led to economic segregation, Pinto noted. 

In 1910, Baltimore passed the country’s first racial-zoning ordinance, making it illegal for Black people to live in predominantly white neighborhoods, and vice-versa. In 1917, the U.S. Supreme Court struck down racial zoning, declaring it unconstitutional to refuse to sell a home to someone because of their race, so the city then moved to control how land could be developed and used, requiring lots and homes to be a certain minimum size.   

“They came upon economic segregation … That’s why they focused on single-family, detached [homes],” Pinto said. “They now could set lot sizes. They could set side yards, front yards, backyards … and they knew there was lots of research that showed that that would just drive the prices up, out of the reach of the people they didn’t want living there.”

Over a century later, it’s these restrictive zoning ordinances that continue to prevent the expansion of housing supply and affordability, Pinto said. In the United States, 38 million people between the ages of 25 to 65 qualify as low-wage workers, meaning they make less than $40,000 a year working full-time. Low-wage workers usually can’t afford to rent one- or two-bedroom units in high-rise buildings. So, if the goal is to expand affordable housing, those types of developments shouldn’t make up such a large share of new construction, he said.

“Of the 40% of low-wage workers that are in rental households, 60% of them live in single family-1 to 4 — the exact things that were being built in Los Angeles that [the Federal Housing Administration] stamped out back in 1935,” he said. 

“And the reason is because you can spread the cost … across more than one wager easily, either you’re married, you have roommates, whatever, you’re able to spread it, but it’s very hard to do that in a one-bedroom apartment.”

If counties do rezone land to maximize housing supply, they need to make the replatting process as simple and inexpensive as possible, so that it’s not dragged out, Pinto said. 

“If you’re just taking 8,000 square feet, and you’re dividing it into four, 2,000 square foot lots, that should be drop dead simple,” he said. “If it isn’t drop dead simple, you need to make it drop dead simple.”

Federal housing priorities 

In December, the Federal Housing Finance Agency (FHFA) finalized its housing target goals through 2028, which outline that a certain percentage of acquisitions that the enterprises make must support low-income households in low-income areas and multi-family housing, according to Leda Bloomfield, associate director of FHFA’s Office of Housing, Community Investment and Inclusion. 

“We want to make sure that you’re providing liquidity not just for the class A new construction, but also for starter homes and homes where we think the vast majority of Americans and families are,” Bloomfield said. “Thinking about, how do we achieve the American dream, to get them into those kinds of housing? And making sure that we support the spectrum of borrowers there.”

FHFA announced April 22 that it’s implementing VantageScore 4.0 and FICO 10T for mortgage underwriting, according to Daniel Fichtler, principal readiness adviser for FHFA’s Division of Conservatorship Oversight and Readiness. They are modern, trended-data credit models approved by the FHFA for mortgage underwriting by Fannie Mae, Freddie Mac and FHA replacing older static models. Both analyze 24-plus months of credit behavior, including rent/utility payments, to better predict risk and expand homeownership opportunities.

“They use what’s called trended credit data, which is more accurate, more reliable,” Fichtler said. 

“And they also do things like better account for rent payments — those types of obligations that aren’t always as visible on the credit bureau side, but that can give a better picture of certain borrowers’ credit worthiness. 

“We think this is going to be a really important development, because it both improves access and improves safety and soundness.”

The 21st Century ROAD to Housing Act, bipartisan legislation the Senate passed in March, would modernize locally administered housing programs and cut artificial costs from regulatory barriers, according to NACo. 

If enacted, it would be a “very important step that’s going to help Americans access quality, affordable housing,” said Geoffrey Smith, general deputy assistant secretary, U.S. Department of Housing and Urban Development (HUD) Office of Congressional and Intergovernmental Relations. 

HUD will continue to work with Congress to expand the housing supply, streamline regulations and lower housing costs for all Americans, Smith said. Deregulation is a “top priority” for the department, he noted. 

“HUD is taking bold action to help American families with thoughtful proposals to increase housing and opportunity zones, promoting the value of manufactured housing and addressing just the mountain of red tape out there builders are dealing with right now,” Smith said.