America’s pandemic-induced residential reshuffling has highlighted the national housing crisis. While the United States has continued to grow over recent decades, the supply of homes has failed to keep pace. Joint Economic Committee (JEC) economists Kevin Corinth and Hugo Dante estimate that the U.S. has a national housing shortage—an informal measure indicating the gap between the actual number of homes and the number that there would be absent supply-constraining regulations—of more than 20 million homes. The result: Americans are priced out of the areas where they’d like to live, residing instead in regions without good job prospects, spending more time in the car on long commutes, and having fewer kids.
To address this social and economic quandary, Senator Mike Lee—the JEC’s ranking Republican—has proposed the Helping Open Underutilized Space to Ensure Shelter Act of 2022 (the HOUSES Act), which would let states purchase certain federally owned lands for the explicit purpose of developing new housing. With national house-price averages at historic highs and western states seeing the sharpest price increases, using the expansive federal holdings west of the Great Plains to expand supply is a nifty idea. By Corinth and Dante’s county-level methodology, the HOUSES Act could add 2.7 million homes to the national tally, shrinking the housing shortfall by 14 percent.
As Corinth and Dante explain in their JEC report, they reach this figure by simulating home construction on a minute portion of the total acreage that the federal government owns. Since the federal government actually owns more than one-quarter of all U.S. land, there’s much to work with, and the HOUSES Act would limit new housing development only to parcels that state and local governments themselves select. The mechanism enabling this would be a new authority under the Federal Land Policy and Management Act (FLPMA), by which a state government or a local government (with state approval) would nominate a tract of land administered by the Department of the Interior’s Bureau of Land Management (BLM). Lands with special protected designations, such as national monuments, wilderness areas, and national recreation areas, would not be eligible.
Using only 0.1 percent, or 680,000 acres, of the federal estate, new HOUSES projects would cover an estimated 100 percent of the housing shortages in Arizona, Nevada, and Wyoming; 95 percent in Idaho; 85 percent in New Mexico and Alaska; 73 percent in Montana; 69 percent in Oregon; 38 percent in Montana, Oregon, and South Dakota; 35 percent in Utah; 27 percent in California; 22 percent in Colorado; and 9 percent in the state of Washington. Additionally, by adding to supply, the law would put downward pressure on prices, allowing an estimated 4.7 million Americans to afford to purchase an average home in their state.
Interestingly, the bill specifies density requirements, stipulating that the housing it facilitates must be projected to provide at least four residences per acre. Further, while it requires that 85 percent of the land included in a nominated tract be used for residences or community amenities, it allows for commercial development in mixed-use residential development properties, as long as the commercial floor space does not exceed the residential floor space. This is an important caveat, since isolated housing fails to provide livability and economic opportunity.
As Senator Lee sees it, HOUSES would pull one of the few levers Congress can use while enhancing state and local decision-making power. In so doing, HOUSES would epitomize the FLPMA’s “multiple use” doctrine, which directs Interior to use America’s land and resources in ways that will best meet the present and future needs of the American people, accounting for changing needs and conditions.
While states in the Mountain West would see their gaps closed most, California—with a shortfall of more than 4 million homes—would be the biggest winner by absolute numbers, potentially adding 1.2 million homes. The U.S. county with the most potential for new HOUSES additions is Southern California’s San Diego County, which, the report estimates, could add a whopping 430,000 homes if the plan goes forward.
But some practical issues remain. Consider San Diego County, which, like most of the California coast, is rugged terrain. The city itself contains more than 100 canyons, which makes for terrific urban hiking but doesn’t lend itself to housing. And the county is both enormous (covering more than 4,500 square miles) and geographically partitioned: the cordillera dividing the temperate coastal zone from the scorching California desert marks a hard break on the range of developable land. Near the mountains—which rise to 6,500 feet just 30 miles from the Pacific Ocean—the value of potential housing additions drops sharply. Yet that’s where BLM owns land in San Diego County, meaning a large portion of the plan’s potential new developments are unlikely to be economically viable.
The JEC report acknowledges this problem in its appendix, explaining that within large counties, significant variation exists in the share of a house price made up by its land value. In San Diego’s coastal enclaves, for instance, the land-value share is extraordinarily high by national standards. Forty miles inland, where BLM administers land, the building costs are almost the same but the land value is far lower, meaning that the county average figures used by the JEC team skew the economic incentive to build there. Assuming one land-share value for large western counties, particularly those with star cities within them, distorts the results.
San Diego’s 430,000 potential additions represent more than one-third of the total the JEC promises for California, and a massive 16 percent of the promised sum for the country. If San Diego’s numbers are inflated, then many other county estimates should also come under scrutiny. San Bernardino County, in California’s Inland Empire, for example, is the largest U.S. county by area. The JEC estimate here is likely also inflated. So, too, in Nevada’s Clark County, home to Las Vegas. Though the report claims the Las Vegas metro area is “visibly constrained by unused federal land,” a county map reveals the same problem: Nevada’s counties are too big to be analyzed with a single, county-level land-value assumption. Indeed, an authority similar to what HOUSES would create has already existed for decades in Clark County, suggesting that the land may not be that attractive.
To account for this issue, the JEC team conducted a second analysis, adjusting for within-county variation in land-shares. This approach shaves off half of San Diego County’s additions and 600,000 homes from the national topline estimate, more than 22 percent. Nevertheless, more than 2 million homes would be expected under these tighter assumptions, a laudable sum in its own right.
The idea of using the federal land estate to alleviate housing stress—and, more broadly, the idea of putting federal land to its most valued economic use—is a good one. Still, the parcels that the HOUSES Act would make available to states and local governments would reduce housing costs only at the margin, due to the remote nature of the Bureau of Land Management’s holdings in places like California.
And while the HOUSES Act would augment housing availability, it wouldn’t attack the policies underlying the housing crisis: restrictions on urban and suburban land use, such as minimum lot sizes, height restrictions, low occupancy limits, and parking requirements. The country’s highest-productivity cities tend to have the most restrictions on housing supply. As the JEC notes, these productive regions could improve their economic performance further still if they expanded their labor markets through reforms on land use. According to a 2019 study conducted by Chang-Tai Hsieh and Enrico Moretti, modest changes to housing-supply regulations in just three highly productive, yet highly restrictive, cities—New York, San Francisco, and San Jose—could boost the growth rate for the entire U.S. economy by more than 0.5 percent annually.
As the JEC report concedes, the HOUSES Act is best viewed as part of a broader strategy. It could help the country score a few runs here and there, but by itself it won’t put up big numbers on the scoreboard. To clear the bases, state and local governments must reform their own overly burdensome restrictions on building.
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