Restrictive regulations fuel affordable housing crisis

Nowhere in the country can a full-time worker earning the federal minimum wage of $5.15 per hour afford the market-rate rent on a one-bedroom apartment, according to the National Low Income Housing Coalition.

NLIHC’s troubling calculation is based on the U.S. Department of Housing and Urban Development’s federal affordability standard, which assumes that families should not spend more than 30 percent of their income for housing. Families that spend more than 30 percent of income on housing may be forced to sacrifice spending on other critical needs, including food, clothing, healthcare, education and transportation.

So how do low-income families find housing that they can afford? Research indicates that millions of families spend more than 30 percent of income on housing – in some cases more than 50 percent of income. Many are forced to “double up” and live with one or more other families, or they live in seriously substandard housing.

Demographic and economic forces continue to drive demand for more housing that is affordable for low- and moderate-income families. But more and more, local governments are adopting land-use policies that limit the production of housing that is affordable to working families.

In fact, local government regulations can add as much as 30 percent to the cost of a new home, according to a new study of development regulations in 187 cities and towns in eastern Massachusetts.

The study found that for each instance that communities increase minimum lot sizes by one-quarter of an acre, about 10 percent fewer homes are permitted. Fourteen municipalities in eastern Massachusetts zone more than 90 percent of their land area for two-acre lots. And half of the municipalities set a minimum lot size of one acre for more than half of their land area.

Two Massachusetts research organizations, the Pioneer Institute for Public Policy Research and Harvard’s Rappaport Institute for Greater Boston, jointly conducted the study. The results of the research are summarized in a new report, “Regulation and the Rise of Housing Prices in Greater Boston.”

Unfortunately, the relationship between regulations and rising housing prices is not unique to Massachusetts. In fact, it’s quite common.

Across the nation, including in New Hampshire, the evidence is clear that restrictive development regulations – including large-lot zoning, excessive setback requirements, growth boundaries, prohibitions on multifamily housing and high impact fees – are driving the cost of housing beyond the means of many low- and moderate-income families.

While the housing affordability problem affects even low-cost rural areas, the problem is most acute in high-growth, high-cost areas.

In California, perhaps the most heavily regulated state in the nation, the median cost of a home is more than $470,000. And a study by Northwestern University found that roughly one-fifth of that cost – or about $97,000 – is due to regulatory costs and impact fees imposed by the government.

At the end of the third quarter of 2005, portions of New Hampshire were among the least affordable in the nation for families earning that area’s median income. According to the NAHB/Wells Fargo Housing Opportunity Index, 41.6 percent of homes sold in the third quarter of that year were affordable to families earning the median income of $73,000, and the median price of homes sold was $275,000 ranking it 101st on the scale of affordability nationally and 19th for the region.

When the cost of housing gets too high, families suffer. Ultimately, many families may be forced to move to places where the housing is not so expensive. That’s the case in Massachusetts, where the high cost of housing is making it difficult for Massachusetts companies to attract and retain top employees. Massachusetts is one of the few states that have lost population the last two years in a row.

From Portland, Maine, to San Diego, Calif., and from Seattle, Wash., to Miami, Fla., rising housing prices are forcing more and more families into crisis. The housing affordability crisis takes a toll on families, on businesses and on communities.

It’s time that local government officials acknowledge that restrictive development regulations drive up the cost of housing. And it’s time that they do something about it.

Ed Stewart is president of the Home Builders & Remodelers Association of New Hampshire.