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

Photograph: vkyryl via iStock / Getty Images Plus.