This article is excerpted from a forthcoming Lincoln Institute Policy Focus Report, Rethinking the Property Tax–School Funding Dilemma, and from a Lincoln Institute working paper, “Effects of Reducing the Role of the Local Property Tax in Funding K–12 Education.” 

The massive shutdown of K–12 schools sparked by the COVID-19 pandemic has no precedent in U.S. history. By the end of the 2019–2020 school year, at least 50.8 million public school students had been affected by school closures (Education Week 2020). Although schools closed during the 1918 influenza pandemic, fewer children attended school then and schools were not as integral to daily life (Sawchuk 2020). This time, almost overnight, the national education system shifted dramatically. Teachers were required to adapt lessons to virtual meeting platforms. The forced rapid transition to online methods led to learning loss or unfinished learning for many students. The pandemic exacerbated existing disparities and created new challenges for students of color, English language learners, and students with disabilities. 

The pandemic also sparked a temporary shift in national education funding as the country experienced one of the deepest economic downturns in its history. Vigorous federal fiscal policy helped make it the shortest recession in the country’s history as well, and as part of this economic rescue effort, Congress funneled hundreds of billions of dollars to education. These funds came via the March 2020 CARES Act; a second infusion sent to state and local governments in December 2020; and the American Rescue Plan Act of March 2021, which contained another $350 billion for state and local governments plus about $130 billion specifically for K–12 education. Altogether in the first year of the pandemic, the federal government provided an unprecedented amount of aid for public K–12 education, equivalent to about $4,000 per student (Griffith 2021). 

Although this lessened the fiscal impact of the pandemic in the near term, it did not permanently alter the federal government’s traditionally modest role in funding K–12 education. Public schools are typically supported by a combination of state aid and local funding. The property tax has been the single largest source of local revenue for schools in the United States, reflecting a strong culture of local control and a preference for local provision. 

An Ideal Local Funding Source

Property taxation and school funding are closely linked in the United States. In 2018–2019, public education revenue totaled $771 billion. Nearly half (47 percent) came from state governments, slightly less than half (45 percent) from local government sources, and a modest share (8 percent) from the federal government. Of the local revenue, about 36 percent came from property taxes. The remaining 8.9 percent was generated from other taxes; fees and charges for things like school lunches and athletic events; and contributions from individuals, organizations, or businesses. 

In many ways, the property tax is an ideal local tax for funding public education. In a well-structured property tax system, without complex or confusing property tax limitations, the tax is both visible and transparent. Voters considering a local expenditure, such as for a new elementary school, will have clear information on benefits and costs. The property tax base is immobile; by contrast, shoppers can easily avoid a local sales tax by driving a few miles and businesses can avoid liability for local income taxes by relocating office headquarters. 

The property tax is also a stable tax, as evidenced by its performance relative to the sales tax and income tax each time the economy falls into a recession. Since state governments rely predominantly on sales and income taxes, states often cut aid to schools in recessions in order to balance their budgets. This means that in most recessions public schools increase their reliance on property tax revenues to make up for declining state school aid (see figure 1). 

But the property tax as a source of school funding has not been without controversy. In the 1970s, public recognition that disparities in the relative size of local tax bases can lead to differences in the level and quality of public services ignited a national debate about the importance of equal access to educational opportunity. As the single largest source of local revenue, the property tax became the main target in this debate, giving rise to proposals that sought to reduce schools’ reliance on local property taxes and increase the state share of education spending to mitigate educational disparities. Between 1976 and 1981, the local property tax share of national education revenues declined from approximately 40 percent to 35 percent (McGuire, Papke, and Reschovsky 2015). But in the three decades since, the role of the local property tax in school funding has remained remarkably stable, never deviating much from that 35 percent. 

In recent years, increased public concern about rising inequality has amplified the debate about ensuring equal access to educational opportunities and adequate funding to address the needs of all students, especially those in traditionally disadvantaged groups. Some suggest that an increase in state aid would accomplish this goal, but there are conflicting results in the literature as to whether centralizing school funding by substituting state aid for local property tax increases or decreases per-pupil spending and equity. With the pandemic forcing a reconsideration of school funding formulas, including those based on enrollment (see sidebar), the following excerpted case studies of Michigan, California, and Massachusetts offer examples that may be helpful to places considering the best way to provide an adequate and equitable education for all. Massachusetts relies heavily on the property tax to fund schools, while California and Michigan rely heavily on state aid (see table 1). 

SCHOOL ENROLLMENT AND FUNDING FORMULAS  

When the pandemic thrust students across the country into remote and hybrid learning, many public schools lost enrollment. For the 2020–2021 school year, enrollment was down 3 percent nationwide compared to 2019–2020. Declines were uneven across states and student groups, with the largest drops among pre-K and kindergarten students and among low-income students and students of color (NCES 2021). Since state aid for public schools is linked to the number of students attending or enrolled, a slump in attendance or enrollment can reduce that revenue. In response to these enrollment declines, many states adopted short-term policies to hold school districts harmless. Delaware and Minnesota, for example, provided extra state funding for declining districts. Many states, including New Hampshire and California, used prepandemic enrollment to calculate state aid (Dewitt 2021; Fensterwald 2021). Texas announced hold-harmless funding to districts that lost attendance if they maintained or increased in-person enrollment, in an effort to bolster in-person learning. All of these provisions are temporary, and states are waiting to see if enrollment will recover in 2022–2023. If it doesn’t, the data suggest that reduced funding for schools with the highest enrollment declines will disproportionately affect Black and low-income households (Musaddiq et al. 2021). These fiscal and equity concerns are causing educators to rethink the measurement of attendance and enrollment, and its link to funding. 

Michigan: A Tax Swap 

Michigan voters passed a proposal in 1994 that reduced reliance on the local property tax, shifting much of the state’s school funding to the sales tax and other taxes while restructuring state aid to schools. Research suggests this shift led to increased spending in the short term that improved some educational outcomes, but also resulted in a distribution of funds that did not reach the students who most need support.  

Michigan voters had considered and defeated a series of proposals to restructure property taxes and school funding before approving Proposal A in 1994, which reduced reliance on the property tax and raised the sales tax to pay for that property tax relief. This “tax swap” greatly increased state education aid in the year of implementation and for some years after, changed the basic state aid formula, and changed the way state education aid is targeted. 

The state raised the sales tax from 4 to 6 percent, depositing the revenue into the School Aid Fund. It obtained additional revenue from the income tax, real estate transfer tax, tobacco taxes, liquor taxes, the lottery, and a new state government property tax known as the State Education Tax. Local property taxes levied for school operating costs, which had averaged a rate of 3.4 percent before Proposal A, were eliminated; the state mandated a 1.8 percent local property tax rate on nonhomestead property, and all property became subject to the 0.6 percent State Education Property Tax.  

State aid under Proposal A explicitly targeted low-spending districts. Increases in state funding were phased in over time, with substantial increases for low-spending districts, without reducing the funding of initially high-spending districts. In addition, school districts were allowed only limited options for supplementing education spending (Courant and Loeb 1997). 

Because Michigan’s tax swap was enacted so long ago, we can observe the impacts of three recessions on state aid and local property tax funding. During the 1990–1991 and 2000–2001 recessions, reliance on state aid decreased while reliance on the local property tax increased. In the Great Recession, reliance on state aid decreased and reliance on the local property tax decreased slightly. The fact that the property tax was less effective as a backstop in the Great Recession is likely due to uniquely restrictive property tax limits in the state. 

Michigan’s property tax is subject to all three main types of property tax limits: rate, levy, and assessment. In addition, one provision of the levy limit is particularly restrictive: not only does it require reductions in tax rates when the property tax base grows rapidly (“Headlee rollbacks”), but unlike most state levy limits, it prohibits increased tax rates without an override vote when the property tax base grows slowly or declines. This had a very constraining effect on property tax revenues during the Great Recession, when property values declined (Lincoln Institute 2020).  

Although real per-pupil education revenue increased at a faster rate just after passage of Proposal A, beginning with the recession of 2000–2001, real state aid declined for many years, leading to slower growth or declines in total real per-pupil revenue and in educational expenditures per pupil (see figure 2). An empirical study to analyze the impacts of Proposal A on revenue and spending in K–12 education concludes that “the reform increases the level of school revenue and spending at the state level only in the first two years of the reform; the reform eventually decreases it two years after and onwards” (Choi 2017, 4).  

Importantly, a tax swap may not create a more equitable school finance system. The school finance restructuring in Proposal A did reduce the disparities in school spending per pupil among school districts (Wassmer and Fisher 1996). This equalization was primarily accomplished by using state aid to raise per-pupil spending of the lowest-spending districts and placing some restrictions on spending on the highest-spending districts. But Michigan’s Proposal A was not designed to target aid to the children or the school districts most in need. It targeted additional school aid to previously low-spending school districts, which tended to be middle-income and rural.  

An evaluation of the equity and adequacy of school funding systems across the United States concluded that resources in Michigan’s highest poverty districts are severely inadequate (Baker et al. 2021). Thirty-seven percent of students attend districts with spending below the amount required to achieve U.S. average test scores.  

The recovery from the COVID recession, along with the massive influx of federal funds for education, may yet enable a turnaround in Michigan’s K–12 education system. In her 2022 State of the State address, Governor Gretchen Whitmer said her next budget would include the largest state education funding increase in more than 20 years (Egan 2022). 

California: Shifting Control 

California’s school finance narrative illustrates the tension between school funding equity goals and property tax reduction goals, providing a cautionary tale of the danger of diminishing local funding and the unintended consequences of assessment limits. In its pursuit of educational equity, California shifted funding away from local governments at the cost of local control. In taxpayers’ quest to control property tax increases, they traded horizontal equity for predictability.  

Prior to 1979, California school districts raised over half of their revenue locally and school districts exercised control over their budgets and property tax rates. School finance litigation that began in the early 1970s drove legislation that began to erode this local control, shifting authority for property tax revenue distribution to the state in an attempt to equalize school district revenues. This series of cases, known as Serrano v. Priest, was motivated by concerns that the disparities in wealth among school districts created by dependence on local property taxes discriminated against the poor and violated California’s equal protection clause. 

During the same period, dramatic growth in property tax values without an offsetting decrease in property tax rates incited a tax revolt that culminated in the passage of Proposition 13 in 1978. This citizen-initiated constitutional amendment fundamentally changed the nature of property tax assessments and imposed strict limits on growth in assessed values and property tax rates. Among other things, Proposition 13 limited growth in assessed values to 2 percent per year and capped cumulative property tax rates at 1 percent of assessed value.  

Combined with the assessment limit, the rate limit provided certainty to taxpayers about how much property taxes could increase in the future—but stripped local governments and school districts of their ability to control spending levels and budgets. 

Proposition 13 also instituted acquisition value assessment, under which properties are reassessed only when sold. This provides a strong incentive for taxpayers to remain in their homes and contributes to the state’s housing affordability crisis. Proposition 13 also prevented local governments and school districts from exceeding the limits in order to raise funds for local priorities, except for voter-approved bond measures. It required a two-thirds majority vote by both houses of the California legislature to increase any state tax and required a two-thirds majority vote of the electorate for local governments to impose special taxes. 

In 1978, school district tax collections accounted for 50 percent of school district revenue; in 1979, they made up only a quarter of total revenue. The state aid share of school district revenue, supported mostly by state income taxes, climbed from 36 percent in 1978 to 58 percent in 1979. 

In 1986, the California Court of Appeal held that the state’s centralized school finance system complied with the state constitution. The court found 93 percent of California students were in districts with wealth-related spending differences of less than $100 per pupil as prescribed by the courts in 1976. While the reforms satisfied the court, making per-pupil spending more consistent among school districts has not definitively improved or equalized educational outcomes. 

Together, the court rulings and Proposition 13 altered the school finance landscape in California and inspired a wave of property tax revolts and school finance litigation across the United States. The school finance reforms in California successfully constrained revenues, but at the cost of local control and to the detriment of education quality. School districts lost control over their primary revenue source, per-pupil spending fell below the national average (see figure 2), and academic achievement and public school enrollment declined (Brunner and Sonstelie 2006; Downes and Schoeman 1998). 

California’s test scores continue to suffer. National Assessment of Educational Progress (NAEP) scores for California show that its students continue to perform below the national average, although the gaps have narrowed since 2013, when California enacted the Local Control Funding Formula (LCFF) school finance reforms (see figure 3). Among other reforms, the LCFF targets aid to high-need districts through concentration grants and gives districts more discretion over how they spend state funds. 

One analysis suggests that California’s reforms played a major role in the rapid decline in public school enrollment in the 1970s and a partial role in the rapid growth in private school enrollment during the same period (Downes and Schoeman 1998). 

Persistent efforts to amend the state constitution to eliminate acquisition value assessment for nonresidential property provide evidence of long-term dissatisfaction with Proposition 13 among some Californians. Referred to as a “split roll,” such proposals are often debated but rarely make it to the ballot. Voters narrowly defeated one such proposal, Proposition 15, in November 2020. Proposition 15 would have returned certain commercial and industrial real property to market-value assessment while preserving acquisition value assessment for residential properties and most small businesses. 

Massachusetts: Targeted Aid 

Massachusetts’ case indicates that targeting state aid to the school districts that need it most and linking accountability standards to increased school aid can produce strong academic results. The state was also able to reduce reliance on the property tax while improving its property tax system. However, recent years show that even strong school finance systems can backtrack and should be reevaluated periodically. 

In 1980, Massachusetts enacted a property tax limit known as Proposition 2½. The two most important components of Proposition 2½ limit the level and growth of property taxes: they may not exceed 2.5 percent of the value of all assessed value in a municipality, and tax revenues may not increase more than 2.5 percent per year. Because K–12 schools are part of city and town governments in the state and not independent governments, as in some states, Proposition 2½ directly affects schools. 

One might expect that reducing reliance on the property tax in a state that does not allow local governments to levy either sales or income taxes might heavily constrain local government revenues. But local governments were lucky in the timing of the enactment of Proposition 2½. The tax limitation came into force at the beginning of a period of significant economic growth in the state popularly termed the “Massachusetts Miracle.” This enabled the state to increase aid to localities, which cushioned the tax limitation’s impact. 

Also important is the fact that Proposition 2½ was not a constitutional amendment, but a piece of legislation that could be modified by the legislature—and was. Altogether, Proposition 2½ had “a smaller impact than either its supporters had hoped or its detractors had feared” (Cutler, Elmendorf, and Zeckhauser 1997). Although not perfect, Proposition 2½ is less restrictive and less distortionary than many property tax limits in other states (Wen et al. 2018). 

During the 1980s, the state also reformed its property tax system by moving to assessing properties at full market value. Before this reform, most properties, especially residential ones, were assessed at far less than market value, with high-income properties receiving preferential treatment. Proposition 2½ created an incentive to move to the full value because of the 2.5 percent cap on the property tax levy. 

As the state was coming out of a deep recession in the early 1990s, the quality of its public schools had caused broad dissatisfaction. The Massachusetts Business Alliance for Education published Every Child a Winner in 1991, calling for “high standards, accountability for performance, and equitable distribution of resources among school districts” (MBAE 1991). The highest court was considering an equity lawsuit that had been filed in 1978, and the state Board of Education published a report highlighting some schools’ shortcomings (Chester 2014). 

In 1993, a pivotal year, the state legislature passed the Massachusetts Education Reform Act (MERA) and the state’s highest court ruled in McDuffy that the state was not meeting its constitutional duty to provide an adequate education for all students. MERA had a number of important components, including a large increase in state aid for education (from $1.6 billion in 1993 to $4 billion in 2002), and a new school funding formula targeted to districts that needed it most. Another component of MERA was curriculum standards and accountability. In 1998, the MCAS (Massachusetts Comprehensive Assessment System) was administered for the first time to measure student achievement. 

In a second school funding lawsuit, Hancock v. Driscoll, settled in 2005, the Supreme Judicial Court concluded that “a system mired in failure has given way to one that, although far from perfect, shows a steady trajectory of progress” (Costrell 2005, 23). One measure of Massachusetts’ achievement is the improvement of state scores on NAEP tests (see figure 3). Although the original intention was to reevaluate and, if need be, revise the state’s school funding formula periodically, that did not happen. Furthermore, after several years of growth in state school aid, cuts came in 2004, then again in 2009 after the onset of the Great Recession. 

In 2015, a Foundation Budget Review Commission was established to review the state’s school aid system (Ouellette 2018). The commission concluded that local governments were bearing a disproportionate share of the cost of educating children and that several elements of the foundation aid program, such as the way health insurance costs were taken into account, were outdated.  

In 2019, the legislature passed and Governor Charlie Baker signed the Student Opportunity Act (SOA), which provides $1.5 billion in additional school aid better targeted to low-income students. This revised school aid system was designed to be phased in over seven years. In 2020, the state delayed the funding increases because of pandemic-related economic uncertainty. However, in 2021, the legislature fully funded the act for the first time (Martin 2021).  

Finding the Right Combination 

Neither state aid nor the property tax on its own can provide adequate, stable, and equitable school funding. But the right combination can provide all three. Just as weaving requires lengthwise and crosswise threads (the warp and woof), so a sound school finance system requires a well-designed property tax and well-designed state school aid. 

The system of state and local funding should provide sufficient funding so that all children, no matter their race, ethnicity, or income, can receive an adequate education. When designed properly, state aid can ensure that all school districts can provide an adequate education and weaken the link between per-pupil property tax wealth and per-pupil education funding—without sacrificing the benefits that come from a stable property tax base and local control of public schools. 

Daphne Kenyon is a resident fellow in tax policy at the Lincoln Institute. Bethany Paquin is a senior research analyst at the Lincoln Institute. Semida Munteanu is associate director, valuation and land markets at the Lincoln Institute. 

Lead image by skynesher via Getty Images.

REFERENCES 

Baker, Bruce, Matthew Di Carlo, Kayla Reist, and Mark Weber. 2021. The Adequacy and Fairness of State School Finance Systems, School Year 2018–2019, Fourth Edition. Albert Shanker Institute and Rutgers University Graduate School of Education. December. 

Brunner, Eric J., and Jon Sonstelie. 2006. “California’s School Finance Reform: An Experiment in Fiscal Federalism.” Economic Working Papers 200609. Hartford, CT: University of Connecticut. 

Chester, Mitchell. 2014. Building on 20 Years of Massachusetts Education Reform. Massachusetts Department of Elementary and Secondary Education. 

Choi, Jinsub. 2017. “The Effect of School Finance Centralization on School Revenue and Spending: Evidence from a Reform in Michigan.” Proceedings, Annual Conference of the National Tax Association (110): 1–31. 

Costrell, Robert M. 2005. “A Tale of Two Rankings: Equity v. Equity.” Education Next, Summer: 77–81.  

Courant, Paul N., and Susanna Loeb. 1997. “Centralization of School Finance in Michigan.” Journal of Policy Analysis and Management 16 (1): 114–136. 

Cutler, David M., Douglas W. Elmendorf, and Richard Zeckhauser. 1997. “Restraining the Leviathan: Property Tax Limitation in Massachusetts.” Working Paper 6196. Cambridge, MA: National Bureau of Economic Research. 

Dewitt, Ethan. 2021. “School Enrollment Decline Persists Despite Return to Classrooms.” New Hampshire Bulletin, November 24. 

Downes, Thomas A., and David Schoeman. 1998. “School Finance Reform and Private School Enrollment: Evidence from California.” Journal of Urban Economics 43 (418–443). 

Education Week. 2020. “The Coronavirus Spring: The Historic Closing of U.S. Schools (A Timeline).” July 1. 

Egan, Paul. 2022. “Whitmer Budget to Propose Billions Extra for Schools, Five Percent Boost in Per-Pupil Grant.” Detroit Free Press. February 6. 

Fensterwald, John. 2021. “Projected K–12 Drops in Enrollment Pose Immediate Upheaval and Decade-long Challenge.” EdSource, October 18. 

Griffith, Michael. 2021. “An Unparalleled Investment in U.S. Public Education: Analysis of the American Rescue Plan Act of 2021.” Learning in the Time of COVID. Washington, DC: Learning Policy Institute. 

Korman, Hailly T.N., Bonnie O’Keefe, and Matt Repka. 2020. “Missing in the Margins 2020: Estimating the Scale of the COVID-19 Attendance Crisis.” Bellwether Education, October 21. 

Lincoln Institute. 2020. “Towards Fiscally Healthy Michigan Local Governments.” Cambridge, MA: Lincoln Institute of Land Policy, October. 

Martin, Naomi. 2021. “Low-Income Students Are Receiving ‘Game-Changer’ Student Opportunity Act Funding.” Boston Globe. July 17. 

MBAE. 1991. “Every Child a Winner.” Boston, MA: Massachusetts Business Alliance for Education. 

McGuire, Therese J., Leslie E. Papke, and Andrew Reschovsky. 2015. “Local Funding of Schools: The Property Tax and Its Alternatives.” In Handbook of Research in Education Finance and Policy, 392–407. New York, NY: Routledge. 

Musaddiq, Tareena, Kevin Stange, Andrew Bacher-Hicks, and Joshua Goodman. 2021. “The Pandemic’s Effect on Demand for Public Schools, Homeschooling, and Private Schools.” Working paper 29262. Cambridge, MA: National Bureau of Economic Research. 

NCES. 2021. “New Data Reveal Public School Enrollment Decreased 3 Percent in 2020–2021 School Year.” Blog post. National Center for Education Statistics. July 26. 

Ouellette, John. 2018. “Two Decades into Education Reform Effort, Commission Calls for Substantial Changes to Funding Formula.” Municipal Advocate: 29 (2). 

Sawchuk, Stephen. 2020. “When Schools Shut Down, We All Lose.” Education Week. March 20.  

Wassmer, Robert W., and Ronald C. Fisher. 1996. “An Evaluation of the Recent Move to Centralize the Funding of Public Schools in Michigan.” Public Budgeting and Finance 16 (Fall): 90–112. 

Wen, Christine, Yuanshuo Xu, Yunji Kim, and Mildred E. Warner. 2018. “Starving Counties, Squeezing Cities: Tax and Expenditure Limits in the U.S.” Journal of Economic Policy Reform 23(2): 101–119. 

When Jacob Gonzalez moved from Seattle back to his hometown of Pasco, Washington, to work for the region’s Council of Governments in 2013, his housing needs were both seemingly straightforward and surprisingly difficult to address. “All I wanted was a tiny apartment for me and my CDs. I didn’t even have a pet,” he explains. “But there weren’t many apartments, and I wasn’t going to stress myself out by paying for space I either didn’t need or couldn’t afford, or by paying for an older apartment that didn’t have what I wanted it to have.” So he moved in with his parents. 

Gonzalez joined the City of Pasco as a planner in 2018 and is now the planning manager for the city’s Community and Economic Development department. These days, he rents a small cottage a few miles from his childhood home. He recognizes that his option to fall back on family for temporary housing is a luxury most of his fellow residents of Pasco do not have. “Thanks to my parents, I had choices. Maybe I didn’t like my choices, but at least I had them, whereas a lot of our community members don’t have that flexibility. For many of them, housing is a challenge on a month-to-month basis.” 
 
Like virtually every community in the United States, Pasco is facing a significant shortage of affordable housing. Located on the rich soils of the Columbia Basin in southeastern Washington, Pasco is a city of about 80,000 residents and is part of the Tri-Cities, a regional hub that includes the cities of Kennewick and Richland and is collectively home to about 300,000 people. Established by the Northern Pacific Railway Company in the late nineteenth century, Pasco is largely agricultural. For many decades it has been considered an affordable place to buy a home in a region with high housing costs. 

Until a few years ago, Pasco could accommodate those buyers with housing stock that is 70 percent detached single-family and mostly built prior to 2000. However, Pasco has grown significantly in the past two decades and is now one of the fastest-growing cities in Washington. Today, Pasco is home to a relatively young and demographically diverse population; the median age in the city is 29, compared to 38 nationally, and more than half of residents identify as Hispanic or Latino. The rapid population growth is due at least in part to Pasco’s rapidly diversifying economy, which has expanded beyond its agricultural base to include job opportunities in public health and local government services. 

As the population has grown, land and housing costs have risen. In Pasco, the median home price has increased about 60 percent in less than five years, from $237,600 in 2017 to $379,000 in 2021. That’s in line with an average increase of 66 percent across Washington during the same time, but dramatically higher than the 21 percent national increase. According to Pasco’s 2018–2038 Comprehensive Plan, more than 15,000 additional units of housing will be required by 2038 to accommodate the projected 48,000 new residents. At its current rate of production, city staff estimate, Pasco will fall about 5,000 units short of that target.  

Pasco is not alone in grappling with housing issues related to rapid growth, says Martha Galvez, executive director of the Housing Solutions Lab at New York University’s Furman Center for Real Estate and Urban Policy. “Growth has been a really common theme among small and medium-sized cities,” Galvez notes. “Some of that growth is due to people migrating out of the big, hot coastal cities to smaller places where you can get more space for your dollar. And some of it is because these places are gaining jobs and attracting industries.” That’s the case in Pasco, where Amazon is building two warehouses, each more than one million square feet, and Darigold recently announced plans to build North America’s largest whey processing center. 

Broadly speaking, the shortage of affordable housing options plaguing nearly every community in America is at least partially the result of a significant decline in the production of single-family homes beginning in the mid-2000s, combined with stagnant wages and rising land and housing costs. The shortage has only worsened during the COVID-19 pandemic: low interest rates have stoked demand just as construction costs have increased due to labor and material shortages and supply chain challenges.  

Across the country, places like Pasco are exploring how land use decisions can help address the housing affordability crisis. Last year, Gonzalez and his colleagues participated in the Housing Solutions Workshop run by the Furman Center and Abt Associates, in partnership with the Lincoln Institute. Designed to help leaders from small and midsize communities develop and implement balanced and comprehensive local housing strategies, the program invited applications from communities with populations between 50,000 and 500,000, and selected participants through a competitive national process. Gonzalez says the workshop helped him and his colleagues better identify barriers to increasing the availability of affordable housing in Pasco and meaningful actions they could take. 

It was good timing. Two years earlier, the state of Washington had passed House Bill 1923, which offers communities the opportunity to qualify for planning grant assistance in exchange for a range of actions that promote urban density, such as authorizing multifamily zoning in areas previously zoned for single-family homes and approving smaller lot sizes. That legislation created an opportunity for Gonzalez and his colleagues. 

“We could apply for a grant, so that’s always appealing,” says Gonzalez. “And the legislation included a list of proposed code amendments we could make. So my department recommended three code amendments to the city council and the mayor.” 

In January of this year, the city of Pasco became one of 52 communities across Washington that have adopted some of the code amendments proposed in HB 1923. By doing so, Pasco is reforming the city’s approach to land use and demonstrating the critical role local governments can play in promoting housing affordability. 

Zoning for All 

Pasco’s historic approach to land use reflects its longstanding identity as a place where homeownership is affordable to people priced out of the region’s better-known cities. Because of this cultural expectation of affordable homeownership, the city’s primary focus has been ensuring a supply of single-family homes, and that was reflected in its zoning. Prior to the city council vote, 84 percent of the land that was zoned residential in Pasco was restricted to single-family homes. 

The result of zoning like this, which is common in communities across the country, can be not only a housing shortage, but also numerous missed opportunities for a more affordable, diverse range of housing options, says Michael Andersen, a senior housing researcher at the Sightline Institute, which researches economic and policy issues in the Pacific Northwest. 

“The effect of only allowing multifamily housing in such a small area is that you constrain the volume of lots that could be plausibly built on,” Andersen says. “And you then have to wait until whoever owns one of those lots is interested in doing something with it. Part of the way to increase the number of homes being built is to increase the odds on any given property that it is time to do something on that land. In hockey they say that you miss 100 percent of the shots you don’t take. With this zoning, Pasco decided not to take 84 percent of the shots.” 

Gonzalez and his colleagues understood this, so they worked with the city council to revise the city’s housing policies. Under an amendment to the city’s municipal code adopted in late January, 68 percent of land that is zoned residential will now be eligible for some forms of multifamily housing, including duplexes, triplexes, and, in some instances, small apartment buildings oriented around a courtyard. This represents a roughly fourfold increase in land available for multifamily properties, and allows for the development of “missing middle” housing—properties that occupy the middle of the housing spectrum, between detached single-family homes and massive multifamily developments. Missing middle housing usually includes two to twelve units, and can be built in a neighborhood of single-family homes without seeming out of place or altering the feel of the area. 

Creating opportunities for missing middle housing offers numerous benefits. For starters, missing middle housing can accommodate developers who would like to build properties other than detached single-family homes, and residents who would like to live in a smaller unit. It can also increase the availability of affordable housing, says Andersen. “Depending on the style, the homes may share walls or wood frames or exteriors, which not only reduces the cost of building missing middle housing but also helps to keep down the price of existing housing by providing affordable alternatives. Additionally, missing middle units can help tip a neighborhood into a level that it can support a bus line or a small commercial hub with a little corner grocery store, a coffee shop, something like that, which makes for a more walkable community and is also good for local economic development and social interactions.” 

While not everyone in Pasco supports the idea of denser housing, Gonzalez is confident that the community benefits from at least having the option to build it. “Our community is growing very quickly. People are moving here in their twenties and maybe they don’t want to buy a home, and we also have people who are older and want to age here. They can’t do that if the only option is to buy a detached single-family home,” he says. “That’s why we need a lot of everything—detached homes, townhomes, apartments—because, as a municipality, we have to plan for the needs of the community, and not just for preferences. Sure, there may be a preference for a big house on a large lot, but that should not preclude us from removing barriers and restrictive policies to make other forms of housing more attainable.” 

In addition to accommodating missing middle housing, the Pasco City Council passed a second code amendment that allows for “lot size averaging,” which allows individual lots in a multiparcel housing development to fall below the city’s minimum lot size requirements as long as the project’s average lot size can meet the requirement. In Pasco, where residential lots tend to be quite large—an average of 13,068 square feet, compared to 6,345 square feet in the western United States and 8,177 square feet nationally—allowing for smaller lots is a smart idea, says Andersen. 

“When you’re talking about lot sizes, you’re effectively telling residents that in order to live here you have to purchase or rent a certain amount of land,” says Andersen. “When the lot sizes are as large as Pasco’s, that’s a lot of land, and that cost can be a barrier to entry.” Larger lots also typically mean increased infrastructure costs. According to research by the Victoria Transport Policy Institute, urban sprawl can increase the cost of providing public services and infrastructure by 10 percent to 40 percent. As Andersen explains, that can lead to increased housing costs. 

The code amendments are also designed to encourage the creation of housing that increases access to hospitals, schools, major transportation routes, parks, and other critical services by allowing for slightly more flexibility. As Gonzalez explains, the emphasis on access stems from the fact that transportation costs are high in Pasco. According to the Center for Neighborhood Technology’s Housing and Transportation Affordability Index, Pasco residents spend 24 percent of their income on transportation and have the third-largest transportation costs as a percentage of total household costs among the state’s 20 largest cities (CNT 2022). By increasing access, the planning staff hopes to reduce transportation costs, in turn reducing overall household costs. 

To further reduce barriers to creating more housing, the Pasco City Council passed a third code amendment that authorizes the creation of Accessory Dwelling Units (ADUs) on all residential parcels that contain a single-family home. The amendment allows the ADU to be either attached—to a garage, for example—or freestanding, does not include a minimum parking requirement, and does not require the owner of the ADU to occupy the primary residence. While there is a maximum allowable size—the smaller of either 1,000 square feet or 55 percent of the primary dwelling—there is no minimum size requirement, nor are there design requirements beyond ensuring that the ADU complements the home. 

“We don’t want to overburden people or unnecessarily complicate the process,” explains Gonzalez. “That’s why we ultimately decided not to require parking. If we did, there would be many fewer lots that could feasibly have an ADU because the only place to put parking would be in the front yard. We wanted to avoid a situation in which our policies technically allow something, but in practice make it almost impossible to do.” 

Pursuing a Balanced, Comprehensive Strategy 

Pasco’s rezoning efforts are just one of the steps the city is taking to address housing affordability. The city also offers a down payment assistance program to first-time homebuyers, is working to identify opportunities to partner with local and regional stakeholders to better address housing needs, and is about to undertake a Housing Action Plan. Officials in Pasco are also exploring tax incentives and taking advantage of House Bill 1406, a revenue-sharing program for local governments that allows a percentage of local sales and use taxes to be credited against the state sales tax for housing investments. 

Still, Pasco aims to do more, says Gonzalez: “There was a lot of focus in the workshop on taking a balanced housing approach that addresses all the different aspects of our housing needs. We aspire toward it, but we aren’t there yet.” 

That idea of a balanced and comprehensive strategy is critical to effectively tackling housing issues, says Ingrid Gould Ellen, a professor of Urban Policy and Planning at New York University and the faculty director for the Furman Center. “There is no magic bullet to solve a jurisdiction’s housing challenges,” says Ellen, who coauthored Through the Roof: What Communities Can Do About the High Cost of Rental Housing in America, a Lincoln Institute Policy Focus Report (Ellen, Lubell, and Willis 2021). “Housing problems are complex and usually touch on a lot of different functions and policies that implicate different parts of local government, including the housing department, the planning department, and the buildings and finance departments.” 

Given the multifaceted nature of housing shortages, Ellen encourages local governments to adopt comprehensive strategies that use the full set of tools available to the various departments. As she explains, “localities that do not adopt a comprehensive approach run the risk of creating well-intentioned, well-designed housing plans that could be thwarted by, say, zoning codes that don’t allow for certain types of construction, or a tax code that disincentivizes the development of rental housing when it is rental housing you’re trying to promote through subsidies.” In taking a more comprehensive approach, local governments can take full advantage of their entire suite of resources, and can also align agencies that may otherwise remain siloed and at risk of unintentionally undermining each other.  

In addition to a housing plan that is comprehensive, Ellen advocates for one that is balanced, by which she means a plan that addresses a range of housing issues rather than a single barrier. “Partially, that’s a political issue,” she explains. “If you focus on a range of goals, then you are more likely to gain political acceptance and support.” She says a balanced plan is more likely to succeed by recognizing and addressing the multidimensional nature of housing challenges.  

In Through the Roof, Ellen and her coauthors Jeffrey Lubell and Mark A. Willis provide a framework for a balanced and comprehensive housing strategy that centers on advancing four broad goals (see figure 1). 

“This four-part framework for a balanced and comprehensive housing strategy groups individual policies into broader categories, so communities can assess where there are gaps in their local housing strategy and work to close them,” says Adam Langley, associate director of U.S. and Canadian programs at the Lincoln Institute. “The number of local housing programs and their scope often matters less than ensuring that a community has implemented at least one tool to address each part of the framework—that’s why it’s so important to consider comprehensiveness.” 

This framework is central to Local Housing Solutions, a joint initiative of the Furman Center and Abt Associates that provides actionable resources and step-by-step guidance to help cities develop, implement, and monitor housing strategies. With an emphasis on affordability and equity, the program is specifically targeted to local governments, both because their role is frequently overlooked in discussions of housing challenges, and because of their significant and unique power to address housing problems. 

“While all levels of government are important, local governments are particularly well-positioned to quarterback their local housing strategies,” Ellen explains, citing the local nature of the housing market and the power local governments have over the most critical tools affecting housing policy, including land use, building codes, permitting, and, at least to some degree, property taxes. “Even though the majority of the funding is coming from the federal government, and to a lesser degree the state government, it’s not just spending that matters. Those key decisions over how much housing can be built, what kind of housing can be built, and who can live where are really important and happen at the local level.” 

The Furman Center launched the Housing Solutions Workshop to support local governments as they make those decisions. In addition to Pasco, the 2021 cohort included teams of five to six senior leaders from Bethlehem, Pennsylvania; the City of Bozeman and Gallatin County, Montana; Huntsville, Alabama; and the City and County of Kalamazoo, Michigan. 

“In the workshop, our delegation kept finding ourselves talking about the fact that we have all these great policies, yet our development standards don’t get us there,” Gonzalez says. “The more we talked—and continue to talk—about it, the more I understand the importance of focusing on the implementation piece, which is the most difficult part. It’s especially true in a place like Pasco, where we have had years of rapid growth, years of not producing enough housing, and years of not having the right regulatory structure in place. I’m seeing now that we really have to dive into our objectives and measurements and strategies. We have to ask ourselves if our strategies are feasible. Are they practical and relevant for Pasco or are we just copying and pasting a policy from another city?”  

For Gonzalez, that shift in focus toward implementation is exemplified in the city’s recent passage of the three code amendments. “We didn’t make any mandates. We aren’t requiring property owners to build these types of housing. We are just making it an option, whereas two weeks ago it wasn’t an option. And by doing so, not only do we save builders and residents from the headache of not being able to do what they want to do, but we also streamline the permitting process, which is often a significant barrier, because we’ve made it so that there’s no longer a need to rezone the property. So it better aligns our comprehensive plan with our development standards.” 

Gonzalez knows that the recently adopted code amendments are not a panacea, and that Pasco has more to do to ensure that it is providing affordable housing options for all. And he is excited to continue with that work. In the coming year, he hopes to work with the Pasco City Council to reconsider existing development standards, including height and lot coverage, in order to identify opportunities to create a more modern, and more flexible, code. He also hopes to look into the policies that govern nonconforming properties—those that comply with earlier standards but not current ones—in an effort to ensure that policies are applied “based on health and safety, and not aesthetics.” He’d like to work more closely with neighboring cities Kennewick and Richland, which are experiencing similar shortages of affordable housing. And he wants to investigate density bonuses and tax exemptions for multifamily developments, among other things. 

“There is an urgency to the work,” he explains. “Fifteen years ago, when our comprehensive plan was adopted, there was no such thing as Uber or apps or on-demand pizza delivery. We have to change our policies so that they make sense for today’s residents, and for future residents. I think our community members deserve that.” 

Housing Affordability Initiatives at the Lincoln Institute 

In 2020, the Lincoln Institute embarked on several new housing-related projects, recognizing the importance of land policy in the housing affordability debate and its implications for reducing poverty and inequality, which is one of the Lincoln Institute’s six core goals. As part of this work, a cross-departmental team issued a call for research proposals, seeking to better understand barriers to implementing housing solutions at the scale needed to effectively address the U.S. housing affordability crisis and strategies to overcome those barriers. The commissioned papers cover a diverse set of topics and geographies, from case studies of U.S. political coalitions built to advance housing affordability to an exploration of the impact and applications of France’s fair-share housing law. The Lincoln Institute partnered with the NYU Furman Center and Abt Associates on the 2021 Housing Solutions Workshop described in this article, and hopes to offer another iteration of the workshop. The team will also undertake new research on state and local policies to improve housing markets. 

Loren Berlin is a writer and communications consultant specializing in housing and economic opportunity. Read more about her at www.lorenberlin.com. 

Lead image: The population of Washington’s Tri-Cities region, which includes Pasco, Richland, and Kennewick, grew 19.8 percent between 2010 and 2020. Credit: alohadave via iStock/Getty Images Plus.

Writing during the last Gilded Age, Henry George warned of the social and economic perils of giving away land value increases to landowners who had done nothing to earn them. In this new Gilded Age, wealth inequality coupled with persistently low interest rates is leading to a worsening redistribution of wealth, with a growing share flowing to the asset-rich while a growing share of families is priced out of decent housing. One positive outgrowth of the pandemic is the political will we’ve summoned to deal with two related challenges that have their roots in land policy: the housing affordability crisis and the wealth gaps created by structural racism. 

A consensus is emerging among policy analysts and policy makers that both challenges are the result of exclusionary land policies. While exclusion is the principal driver, it is not the only one. More important, no single remedy will magically call forth more affordable housing and simultaneously close wealth gaps. Dozens of local, state, and national governments—including that of Pasco, Washington, which we recently profiled—are reforming residential zoning that previously permitted only detached single-family dwellings. The logic of this intervention is sound. Single-family zoning constrains development with restrictions like minimum lot sizes. This drives up housing costs and excludes lower-income families from buying or renting in desirable neighborhoods. By relaxing these policies, it will be possible to produce more housing at lower prices. At least in theory. 

Market fundamentalists argue that the financial incentives are so powerful that if we make it possible to build two, four, or even twelve units on a parcel that formerly permitted one, we cannot help but solve the housing affordability crisis through increased production. But there is a big difference between permitting the development of multiple units and multiple units being developed. And there is no guarantee that these units will be affordable. Many unaffordable condos and apartments have been built in high-density locales like New York City, where affordable housing is in critically short supply. A lot of them are vacant. How can places like Pasco keep the same thing from happening? 

Part of the answer has to do with the housing market. As I’ve noted before, housing represents two very different commodities traded in the same market. Each unit can satisfy the demand for shelter for a family or the demand for yield from hungry investors. Often, but not always, a housing unit can satisfy both—when the owner occupies the unit. But more and more frequently, households find themselves competing for available shelter against investors drowning in liquidity. With the exception of a pathbreaking intervention by the Port of Cincinnati that I will discuss another time, the investors usually win.  

As global wealth inequality worsens, the wedge between shelter provision and investment opportunity is precipitating unassailable affordable housing shortages. But not housing shortages. We have some 20 million more units of housing in the United States than we have households, and there are more houses than households in every housing market in the country. Even in a tight market like Pasco, the U.S. Census reports that there are 23,126 housing units but only 22,174 households. The metro market that includes Pasco contains 106,104 housing units and 100,336 households. This oversupply is not vast, but it offers a good illustration: our problem is not supply, but the kind of housing we supply (or allow to be supplied). 

Land, too, is a commodity traded in multiple markets—as an investment good and a good with multiple uses: residential, industrial, commercial, and agricultural. The price of land derives from a complex mix of social, statutory, and economic factors that are almost completely outside the aegis of the landowner. If more people migrate to a city or neighborhood, the land value goes up. If infrastructure improvements are made, like wastewater treatment or accessible transportation, the value of the land goes up. If local policies allow for more intensive development on a parcel, its value will go up. 

Who wins when we allow multifamily construction on formerly single-family lots? Landowners who receive windfall increases in land values are among the big winners. This increase in property values puts nearby homeowners at risk, if it raises their tax bills. If zoning changes aren’t designed to be part of a broader strategy to tackle affordability, they could inadvertently usher in displacement. Planners in Pasco know this and are working on a suite of balanced and comprehensive tactics to keep their community affordable. 

This country’s legacy of racial exclusion further complicates land and housing markets, while eluding all efforts to address it. Historically, deed restrictions, legal covenants, and other overt, but now illegal, practices ensured that people were kept out of neighborhoods based on skin color, ethnicity, or religious affiliation. These were supplemented with blatantly racist finance practices established at the birth of the modern housing finance system. For six decades, we have attempted to confront these forms of structural racism using public policy, with very limited success. It is an important cautionary tale.  

Starting with the Civil Rights Act of 1964, the Fair Housing Act of 1968, and the Equal Credit Opportunity Act in 1974, the nation nominally prohibited discrimination in housing and lending. The Community Reinvestment Act of 1977 imposed further affirmative obligations on regulated lenders to meet the credit needs of their communities. And yet, in 2018 the Center for Investigative Reporting analyzed 31 million mortgages and found that people of color were denied conventional mortgages by regulated lenders at significantly higher rates than whites in 61 metropolitan areas, even after controlling for income and other socioeconomic factors. The national racial gap in homeownership rates is worse today than it was in 1960, when efforts to address housing discrimination began. 

Closing the racial wealth gap will require much more than leveling the financial playing field and producing more housing units. Stable, affordable housing in high-opportunity areas is foundational to the long-term economic success of families. But increasing the housing stock does not necessarily increase affordable housing for lower-income households, nor does it ensure that historically excluded populations will have access to wealth-building homeownership opportunities in thriving neighborhoods.  

In almost every housing market in the United States, we’re producing too much of the wrong kind of housing and letting the existing housing stock slip out of local control. Escalating rents are inspiring conversions of single-family homes to rental units at unprecedented rates. Single-family rental real estate investment trusts (SFR REITs) have become a hot investment. According to CoreLogic, investors acquired more than 25 percent of all the single-family homes purchased in the United States in the last two quarters of 2021.  

A single zoning reform will not change the way the market works, and nothing will stop global capital from bidding housing in desirable neighborhoods away from families that need shelter unless other actions are taken. We need aggressive inclusionary housing requirements that obligate landowners to build affordable housing when redeveloping former single-family sites. We also need to provide and protect opportunities for historically excluded families to purchase affordable homes and build wealth. Rather than giving away additional development rights to landowners, development rights should be sold. Development rights are traded actively in many private and some public markets in the United States. Municipalities could raise billions of dollars by selling development rights, and the proceeds could be used for affirmative efforts to address the racial wealth gap by, for example, providing generous down payment assistance or property tax relief. 

Once we have established a reasonable supply of affordable housing, we need to preserve it. This will require shielding affordable housing stocks from global capital markets. This can be done easily with steeper capital gains taxes imposed on speculative property transactions. In Taiwan, land value increment taxes had a chilling effect on property speculation. 

In addition, deed restrictions can limit future sales prices. Alternative ownership arrangements like limited equity cooperatives or community land trusts can ensure permanent affordability. If we don’t act now, we’ll face continual affordable housing crises in the coming decades. But there is an important caveat: preserving affordable housing by limiting the financial upside will impede our efforts to close racial wealth gaps through homeownership. This illustrates the challenges of intervening in complex systems. Once we recognize the complexity, we can consider tradeoffs to find a practical and acceptable compromise.  

At the Lincoln Institute, we applaud the recognition that land policy sits at the roots of major social and economic challenges. But simplistic interventions in complex land and housing systems will not address these staggeringly complex challenges. We cannot rely on increasing the supply of housing as a silver-bullet solution. We must layer zoning reform with other policies, trying different combinations in an iterative process. As we proceed, we should be mindful of the words of H.L. Mencken: “there is always a well-known solution to every human problem—neat, plausible, and wrong.” 

George W. McCarthy is president and CEO of the Lincoln Institute of Land Policy. 

Image: “Missing middle” housing such as this duplex in Portland, Oregon, can provide more affordable options in formerly single-family neighborhoods, but the zoning changes that allow such housing must also mandate affordability and must be part of a broader housing strategy. Credit: Sightline Institute Middle Homes Photo Library via flickr CC BY 2.0.

As part of a multipronged effort to address the housing affordability crisis, the Lincoln Institute of Land Policy is overseeing an initiative to promote manufactured housing as a source of wealth-building home ownership and stable rental housing. The Lincoln Institute is the new convenor of the Innovations in Manufactured Homes (I’m HOME) Network, which was founded in 2005 by Prosperity Now (formerly the Corporation for Enterprise Development) to counteract stigma associated with manufactured housing, change public policy, and improve industry practices.

“We need to protect the largest source of unsubsidized affordable housing in the United States. Manufactured homes are an underappreciated solution to the housing affordability crisis,” said Lincoln Institute President and CEO George W. McCarthy. “The Lincoln Institute is grateful to Prosperity Now for its longstanding leadership, and we are committed to continuing their work to make manufactured homes a secure and accessible onramp to homeownership for millions of American families.”

“Prosperity Now is extremely proud of the success of I’m HOME over the years,” said Doug Ryan, vice president for policy and applied research for Prosperity Now. “As a network, we advanced policies, scaled programs, and helped reduce the stigma attached to manufactured and mobile homes and their owners. We are thrilled that the work will continue and grow at the Lincoln Institute of Land Policy and look forward to many years of partnership in the field.” 

Modern manufactured homes are often indistinguishable from traditional houses, but they cost less to build thanks to an efficient construction process. However, several barriers prevent manufactured homes from reaching their potential.  

First, manufactured homes have a reputation for poor quality that dates to early mobile homes, even though models built after 1976 adhere to rigorous national standards. Second, a lack of good financing options means that loans on manufactured homes are often more expensive and less secure than traditional mortgages. Finally, many states fail to create legal pathways for residents to easily purchase the land on which their homes sit, leaving residents vulnerable to predatory landlords. 

The I’m HOME Network will work to remove all these barriers through research, analysis, technical assistance, and engagement with policy makers. The network includes homeowners, advocates, academics, policy makers, lenders, manufacturers, developers, and others who, together, can effect change in the private sector and at all levels of government. 

“The first step in reenergizing I’m HOME will be to listen to the many manufactured-unit owners and other members of this network to ensure that we are taking it in the direction they wish to go,” said Lincoln Institute Senior Fellow Jim Gray, who will oversee the network. 

Convening the I’m HOME Network is part of the Lincoln Institute’s larger effort to address the housing affordability crisis as part of its goal to reduce poverty and spatial inequality. The institute recently published a report outlining comprehensive and balanced housing strategies, it is conducting research, and it is collaborating with the Housing Solutions Lab at the NYU Furman Center to help local governments develop such strategies. The Lincoln Institute is also working with the Underserved Mortgage Markets Coalition to create a bigger role for government-sponsored housing enterprises in securing housing finance opportunities for families not traditionally served by the private market. 

Will Jason is director of communications at the Lincoln Institute of Land Policy.

Image: Mobile homes in Montauk, New York. Credit: rjlerich via Getty Images. 

American cities need to pursue creative new strategies as they rebuild from the COVID-19 pandemic and work to address longstanding social and economic inequities. Too often, however, cities face stiff headwinds in the form of state laws and policies that hinder their efforts to build healthy neighborhoods, provide high-quality public services, and foster vibrant economies in which all residents have an opportunity to thrive, according to a new Policy Focus Report by Center for Community Progress Senior Fellow Alan Mallach from the Lincoln Institute of Land Policy and the Center for Community Progress.  

With a massive infusion of funds from the American Rescue Plan into cities and states, advocates for urban revitalization have an unprecedented opportunity to engage with state policy makers in creating a more prosperous, equitable future, Mallach writes in the report, From State Capitols to City Halls: Smarter State Policies for Stronger Cities. “If there’s one central message in this report, it’s that states matter—and that those who care about the future of our cities need to direct far greater attention to them,” he writes.  

Based on a detailed analysis of the complex yet critical relationship between states and their cities, the report illustrates how state policies and practices affect the course of urban revitalization, from the ways cities raise revenues to the conditions under which they can finance redevelopment. The report provides a rich picture of how state laws and practices can help or hinder equitable urban revitalization, drawing upon examples and strategies from across the country and highlighting the recurrent city–state tug-of-war that both must move beyond to work together for mutual benefit.  

The report also breaks down what goes into successful revitalization, and how leaders can use legal and policy tools to bring about more equitable outcomes. Mallach recommends five underlying principles that should ground state policy related to urban revitalization: target areas of greatest need, think regionally, break down silos, support cities’ own efforts, and build in equity and inclusivity.  

“This report is thorough, relevant, and timely—and it provides a critical perspective on the importance of building capacity to ensure stronger alignment between state and local policy makers to improve equity and inclusion,” said Sue Pechilio Polis, the director of health and wellness for the National League of Cities. “A detailed accounting of all of the ways state laws impact municipalities, this essential report will be a must read for state and local policy makers.”  

“As this Policy Focus Report details, state governments must be true partners with their cities in order to realize meaningful, equitable revitalization across the board,” said Jessie Grogan, associate director of reduced poverty and spatial inequality at the Lincoln Institute. “By deliberately incorporating equity into economic growth and community work across locations and sectors, leaders at every level can foster truly progressive change.”  

From State Capitols to City Halls offers specific state policy directions to help local governments build fiscal and service delivery capacity, foster a robust housing market, stimulate a competitive economy, cultivate healthy neighborhoods and quality of life, and build human capital, all with the goal of bringing about a more sustainable, inclusive revival in American cities and towns. The report’s recommendations offer a practical roadmap to help state policy makers take a fresh look at their own laws and further more effective advocacy for substantive change by local officials and non-governmental actors.  

“We all deserve access to stable jobs, affordable housing, and green spaces, but unfortunately our systems aren’t built to guarantee that for future and even current generations,” said Massachusetts State Senator Eric P. Lesser, who chairs the Gateway Cities Caucus and the Economic Development Committee. “This report takes a thoughtful look at how we as policy makers can have a direct impact on building inclusive cities for all. From State Capitols to City Halls: Smarter State Policies for Stronger Cities provides real tools to support our communities, break down policies that breed inequality, and give everyone a fair shot at a high quality of life.”  

While successful strategies will vary from state to state, Mallach stresses that all policy makers must remember that every state is fundamental to its cities’ futures as places of equity and inclusion. “In the final analysis,” he notes, “states play a central, even essential, role in making revitalization possible—or, conversely, frustrating local revitalization efforts. This report should encourage public officials and advocates for change to make states more supportive, engaged partners with local governments and other stakeholders in their efforts to make our cities stronger, healthier places for all.” 

The report is available for download on the Lincoln Institute’s website: https://www.lincolninst.edu/publications/policy-focus-reports/state-capitols-city-halls
 

Image: USA/Alamy Stock Photo

At Capital City Farm, the first commercial urban farm in Trenton, New Jersey, more than 37 varieties of fruits, vegetables, and flowers grow on two formerly abandoned city-owned acres. The farm, run by the D&R Greenway Land Trust, is a financially self-sufficient operation that donates 30 percent of its produce to the Trenton Area Soup Kitchen and sells the rest to nearby markets. A local community development and environmental nonprofit runs a well-established youth gardening program at the farm, which has won several awards since its founding in 2016. 

There’s no question that Capital City Farm is a success story on many levels, from repurposing a trash-strewn lot to involving the local community in its development and operations. Now the city is hoping to emulate that success, working closely with local residents as it sets out to convert additional vacant lots into community gardens. The effort is part of a recently launched plan called Fight the Blight, which will include property demolition and redevelopment. 

Trenton, population 83,000, has a disproportionate number of neglected and vacant properties: 1,500 of them in a city that covers just 7.5 square miles. As the city embarks on addressing this issue, officials are sensitive to the fact that, for residents in neglected urban neighborhoods, municipal improvement efforts can be a double-edged sword. On the one hand, fixing up vacant lots and tearing down condemned buildings yields major quality of life improvements, including improving public safety and increasing community morale. But on the other hand, the sudden arrival of plans and projects developed without local input can be an unwelcome signal to residents that the future of the neighborhood is out of their hands and might not include them. 

“Trenton . . . has historically been behind the eight ball” on securing local input in revitalization efforts, said the city’s principal planner, Stephani Register. “The way we’re approaching it now is this idea of ‘let’s give the people back their power.’ If we do that, we as an administration get better participation from residents. The question is, how do you do that for communities of color who have been disenfranchised for so long because they didn’t have the right information, and the tools that are out there have been used against them.” 

An interdisciplinary team from Trenton is exploring these issues through its participation in the Lincoln Institute’s Legacy Cities Communities of Practice project. Over the past year, teams from three legacy cities (Trenton; Akron, Ohio; and Dearborn, Mich.) have met regularly to facilitate peer learning, gain insights from expert faculty on issues ranging from racial equity to fiscal health, and access resources and support to tackle entrenched citywide policy issues with place-based project approaches. Trenton’s team includes Register, mayoral aide Rick Kavin, Jamilah Harris, an analyst from the state Department of Environmental Protection, and Caitlin Fair, executive director of the nonprofit East Trenton Collaborative (ETC). 

Legacy cities like Trenton are places that have experienced population and economic decline that has left them with common infrastructure and demographic challenges. Many of them have vast areas once full of people and industry that have now been abandoned and neglected. Smaller legacy cities have many of the same challenges as larger legacy cities like Detroit or Baltimore, said Jessie Grogan, associate director of Reduced Poverty and Spatial Inequality at the Lincoln Institute. But they tend not to draw the same national attention from think tanks or large philanthropic funders, and they tend to have smaller municipal staffs and budgets. 

“These cities are kind of left to solve really complex problems on their own,” she said. “These smaller cities are in a tough spot where they have enough capacity to know what the problems are, but not enough to know what the potential solutions are or what their peer cities are doing that’s working.” The Legacy Cities Community of Practice gives them an opportunity to compare notes, get new ideas, and support each other’s work. 

Trenton, for example, is now working to engage the community in its Fight the Blight program using strategies employed in Syracuse, N.Y., and Flint, Mich., and detailed in the Lincoln Institute’s Policy Focus Report Revitalizing America’s Smaller Legacy Cities. Rather than the city taking the lead in projects like the effort to expand its community gardens, officials have turned to community organizations. Kavin said Capital City Farm has been advising the city on the youth apprenticeship aspect of the proposed community garden project. And Fair says the ETC would like to see community gardens become year-round, accessible neighborhood resources that support workforce development and a healthy community. 

“The idea is to marry [the gardens] with our youth employment program and for the city to create an opportunity for kids in the community to have a paid apprenticeship,” she said. “A goal of this initiative is to create a very public, community-oriented space that is open to everyone to use.” 

The vision is for Trenton’s new community gardens to be financially self-sustaining, providing a steady source of local jobs and local food thanks to greenhouses and hydroponic gardening that make cultivation possible during the winter months. Allowing year-round structures such as greenhouses on lots operated as community gardens required a zoning code change, which the Trenton team collaborated on and achieved by mid-2021. In the fall of 2021, the ETC began working on deciding which vacant lots in East Trenton they want to turn into community farms. 

Ultimately, the Trenton team sees the community farm project as just one way to start breaking down barriers between local government and residents and approach planning from a more holistic perspective. To that end, the city has also launched “how-to” informational sessions aimed at increasing small business owners’ access to capital and city contracts. Other sessions help homeowners figure out how to access grant money or loans to fix up their historic homes. And last year, Trenton launched an “Adopt a Lot” program that gives residents temporary access to vacant lots for their own gardens or other greenspace use. 

“With all of these programs, we’re trying to foster an environment where all local residents can have a say,” Kavin said. “Not just in their city’s planning, but also in their own future.” 

Liz Farmer is a fiscal policy expert and journalist whose areas of expertise include budgets, fiscal distress, and tax policy. She is currently a research fellow at the Rockefeller Institute’s Future of Labor Research Center.

Image: Volunteers plant seeds at Capital City Farm in Trenton, New Jersey. Credit: Capital City Farm.

Two weeks after a U.S federal agency rejected affordable housing plans from Fannie Mae and Freddie Mac, a coalition of housing organizations has released a blueprint showing how the two government-sponsored enterprises can better reach underserved mortgage markets.

On January 5, the Federal Housing Finance Agency (FHFA) rejected three-year plans from Fannie Mae and Freddie Mac to comply with Duty to Serve, a federal regulation that requires the enterprises to prioritize and improve affordable housing finance opportunities in three historically neglected markets: manufactured housing, affordable housing preservation, and rural housing. Fannie Mae and Freddie Mac must substantially improve their plans in all three areas, and a new blueprint from the Underserved Mortgage Markets Coalition provides a path that would likely lead to approval.

The coalition consists of 20 leading U.S. affordable housing organizations seeking to hold Fannie Mae and Freddie Mac accountable to their founding purpose: to bring housing finance opportunities to American families not traditionally served by the private market.

“I applaud FHFA for rejecting the proposed Duty to Serve plans,” said George W. McCarthy, president and CEO of the Lincoln Institute of Land Policy, one of the convenors of the coalition. “If Fannie Mae and Freddie Mac adopt the modest consensus recommendations of the Underserved Mortgage Markets Coalition, that would be a win for the enterprises, FHFA, and affordable housing in the United States.”

The coalition’s blueprint outlines key recommendations for the enterprises’ Duty to Serve plans for 2022–24. By recommending specific, prioritized action steps, the coalition hopes to expand and enhance the enterprises’ performance in underserved markets. The blueprint urges the enterprises to increase certain loan purchases in all three markets, improve loan products for rural low- and moderate-income borrowers, and allow for Low Income Housing Tax Credit-equity investment in non-rural markets.

The members of the Underserved Mortgage Markets Coalition include:

• Center for Community Progress
• cdcb
• Enterprise Community Partners
• Fahe
• Grounded Solutions Network
• Housing Assistance Council
• Housing Partnership Network
• Lincoln Institute of Land Policy
• Local Initiatives Support Corporation
• National Council of State Housing Agencies
• National Community Stabilization Trust
• National Housing Trust
• NeighborWorks America
• Next Step
• Novogradac
• Opportunity Finance Network
• Prosperity Now
• RMI
• ROC USA
• Stewards of Affordable Housing for the Future

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