••• Tax & Spending •••

Zoning Reform, Not Subsidies, Reduces Housing Costs

Kansas Governor Laura Kelly included in her proposed budget for FY 2022 a $20 million affordable housing subsidy. This policy is unlikely to lower the housing crisis/costs/etc. in the long run. Instead, it is yet another of this administration’s subsidies that is proposing a higher cost to taxpayers in exchange for insignificant change. The real way to make housing affordable is by reducing barriers for development, like zoning reform, or by directly reducing the cost by addressing high property taxation.

Public spending towards housing is often more expensive than private developers because of conditions surrounding labor and material procurement. Because of this, almost all affordable housing subsidies go to non-profit and for-profit developers who are susceptible to market inefficiencies that increase the cost of housing. For instance, tenants of LIHTC only captured about 24% of the benefits of Low Income Housing Tax Credits, with the rest going to developers and their investors.

Long-term reductions in the cost of housing come from removing barriers that inflate the cost of housing. This is namely zoning laws. Building height caps, lot sizes, and rules about what buildings can be built in certain areas all affect the cost to developers. Specifically, zoning artificially increases the costs of housing by limiting the supply of housing. In fact, if only a certain amount of land is zoned for multi-family living and there’s a long line to move into an area, this could cause developers to only develop luxury buildings to cater to those who can pay the most. In my time as a college student in Iowa City, Iowa, a near 0% vacancy rate on apartments meant that the only new buildings going up were luxury high-rises that made it tough to rent. It’s no surprise then that federal housing relief is the highest in states with the most zoning regulations.

As Johnson County is the fastest-growing county in the state, it has seen many issues with its development. Most of the housing in the county is large single-family detached or large multi-family developments with the number of construction permits given out annually since 2013 being split between single and multi-family developments. Despite this, the majority of Johnson County is still single-family homes, resulting in the average cost of all homes in the county to hit $400,000 in late 2020. Maybe that isn’t a bad thing, but it almost certainly increases the cost of housing. Owners of single-family homes often are often mocked as NIMBY’s for their “not in my backyard” stance towards urban development. They will lobby and often oppose non-single family developments to “preserve the community” of their neighborhoods at the cost of increasing prices and making development difficult. This cultural divide has been seen in Johnson County already.

Changing zoning laws could be as simple as expanding the potential for what a neighborhood could look and feel like, allowing for more businesses of a certain type in a different area, or otherwise.

The other direct way that government can reduce the cost of housing is by reducing property taxes – particularly in rural areas. According to our Green Book, a $150,000-valued property in a town the size of Iola pays the 6th highest property tax when compared to cities of the same size in different states. A $1 million-valued property – which may be a decent-sized multi-family facility, not just a mansion – pays the highest property tax nationwide. This can be addressed through adjusting spending – Kansas has the second most local government employees per capita nationwide. Ergo lower government spending and taxes could mean, lowering the cost of housing so that more people stay in rural Kansas communities – or even move there for opportunities. This in turn creates communities that then can support businesses that develop housing for rural towns.

Affordable housing subsidies are a wasteful temporary solution to permanent issues of the market. Reforming zoning laws and addressing high taxation are two ways the government can help Kansas find and stay in their homes.