Both a housing shortage and rising rents in the greater D.C. region are becoming problems that present a long-term economic risk, a new report indicates.
Both a housing shortage and rising rents in the greater D.C. region are becoming problems that present a long-term economic risk, a new report indicates.
From Baltimore through D.C. and down to Richmond, rising housing costs are deterring job seekers and pushing workers to leave for more affordable areas, according to a new report from the Greater Washington Partnership.
Kathy Hollinger, CEO of the Greater Washington Partnership, said the ability to find and afford homes has become a critical issue.
“It has become one of the most material constraints on talent recruitment, retention and long-term economic competitiveness,” Hollinger said.
The group’s housing playbook found that the region is short roughly 390,000 housing units.
Of that shortage, D.C. accounts for the largest share, followed by Baltimore and Richmond. The report said vacancy rates are at historic lows, and about half of all renters in the region are feeling pressed.
“Half of renters are cost burdened, meaning they spend more than 30% of income on housing,” Hollinger said.
Employers are feeling the effects when it comes to hiring, especially for entry and mid-level positions. One way it shows up is when people turn down job offers after doing the math.
“Candidates are declining offers after running basic cost of living numbers,” she said.
To bring about change, the housing playbook calls for zoning reform, which would allow more housing to be built near job centers and transit. It also calls for faster and more predictable permitting to speed up development.
“Plans don’t move housing, but approvals do,” Hollinger said.
The report also stressed the importance of preserving existing affordable housing, which it said can often be done more quickly and at a lower cost than building new housing.
The playbook encourages not just local governments, but also employers, to invest in solutions. Hollinger said some major corporations, including JPMorgan Chase and Amazon, have already invested in the region.
Hollinger said companies aren’t treating housing investments as charity, but as a practical way to support their workforce and keep their businesses running.
“This is not philanthropy on the part of private sector. For private sector, it’s workforce infrastructure,” she said.
Without action, Hollinger warned the region risks losing more than just workers.
“If we are not thinking about how we collaboratively address this issue, we are at risk for losing more talent; not only talent, but families,” she said.
She said that would also mean the greater D.C. region risks losing its future leadership pipeline.
One of Maryland Gov. Wes Moore’s favorite statistics is the state’s 96,000-unit housing shortage, but analysts say the number is more complicated than it seems at first blush.
Since he took office in 2023, Gov. Wes Moore (D) has made housing a focus of his administration, and nearly every speech, proclamation and press release since then has featured the state’s 96,000-unit housing shortage.
Does that mean there are 96,000 unhoused people in the state? Hardly. The number is the end product of a complicated formula that measures “latent demand” for housing, but analysts say it’s a solid number and a good starting point for discussions on the issue.
“These are regional measures of housing ecosystems,” said Anjali Kolachalam, policy manager for Up for Growth, a nationwide nonprofit that focuses on easing the far-reaching housing crisis through new housing development.
“What it doesn’t mean is that you can look out your window and see hundreds of thousands of people unhoused … that there are 100,000 people on the streets of Maryland waiting for a house.”
The number comes from Up For Growth’s Housing Underproduction Report. The organization released the 2025 Housing Underproduction Report late last month, which nudged Moore’s favorite statistic down slightly, from a 96,000-unit shortage for the 2023 report to a 94,000-unit housing shortage for 2025.
The report compares available housing units to the “latent demand” of housing in a region, based on the housing market, Kolachalam explains.
“Underproduction is basically a measure of ‘housing you have’ and ‘housing you need,’” she said. “The ‘housing you have’ is basically the existing housing units, second and vacation homes and uninhabitable units. These are units that are currently renter or owner occupied, or they couldn’t be inhabited anyways.”
“Housing you need” reflects demand and includes households that “should have formed but didn’t” due to high housing costs or lack of options, she said.
“Missing households is basically a measure of latent demand,” Kolachalam said. “Latent demand is represented by kids who can’t move out of their parents’ place. Or, people who have more than one roommate when maybe they are looking to live alone because they are a little bit older.”
In the 2025 analysis, Up for Growth determined that nationwide housing underproduction reached 3.78 million units, according to the most recent report reflecting 2023 data. That’s a decrease from the previous report, which found a 3.85 million unit underproduction nationally. Underproduction peaked during the 2021 housing market at 3.89 million units.
The report shows a similar decrease in Maryland over the last two years. The 2023 Housing Underproduction Report shows that Maryland faced an underproduction of 96,000 units in 2021, which is the figure used in a recent executive order Moore issued to reduce administrative hurdles for new development to address the “shortage of at least 96,000 housing units.”
It may seem like an improvement to Maryland’s housing supply, but analysts warn that tracking “housing underproduction” is a complicated data point.
A reduced number does not always mean that more houses have been built, though that could be a factor, the report notes. In some metro areas, such as Baltimore, reduced underproduction could indicate a decrease in demand as people leave those areas for more affordable locations.
“The modest improvement in regional housing market conditions can be linked to concurrent increases in supply and reductions in demand in urban centers,” the report said. “At the same time, housing starts and unit deliveries were strong across many of those same metro areas. High levels of permitting activity in 2022 … ushered in a 15-year production high of single-family detached homes and the highest new apartment construction since 1987.”
A recent report from the Comptroller’s office reported that from 2010 to 2023, Maryland saw 2.3 million residents move to other states. In the report, Comptroller Brooke Lierman said that outmigration is a symptom of the state’s housing affordability crisis.
The Moore administration is not taking any victory laps yet.
“The decrease of 2,000 units estimated by the report is a statistically insignificant change in a statewide context,” said a statement from the Department of Housing and Community Development. “More critical to evaluate is our current rate of housing production. At this rate, Maryland’s 94,000-unit shortage would take another 50 years to address.
“Next week, the Department will publish housing production targets for the State of Maryland that will estimate the needed production rate to solve the state’s housing shortage,” the statement said.
Regardless, housing affordability still tops the list as the No. 1 concern from Maryland voters, with nearly a quarter saying it is the biggest problem facing the state, according to polling by the Maryland Association of Realtors. It said one in three Maryland families are cost-burdened by their monthly rent or mortgage payment, including 52% of Maryland renters who pay more than 30% of their income on rent.
Meanwhile, there’s debate on how useful tracking underproduction is as a data point, as state officials, developers and advocates work to tackle housing unaffordability in the state.
“The 96,000-unit housing shortage figure is a useful starting point,” said Aaron Greenfield, director of government affairs with the Maryland Multi-Housing Association, in a written statement. He noted that Maryland has a “significant supply deficiency.”
“It helps highlight the scale of the challenge, but it does not fully capture the complexity of Maryland’s housing needs, particularly in the rental housing market,” he said. “While 96,000 units communicates the magnitude of the problem, Maryland must focus not only on the total number but also on ensuring we can actually deliver the right mix of housing across income levels.”
Matt Losak, executive director of the Montgomery County Renters Alliance, says that while looking at the state’s “underproduction” metric may help with future planning of housing needs, it does “nothing” to make housing more affordable for those struggling now.
“They’re talking about folks who would move here in the future in anticipating the growth of our population,” Losak said. “They have nothing to do with protecting or preserving the affordability and quality and stability of existing households.”
Losak and other renter advocates support policies such as “good cause evictions” and rent stabilization to help keep people comfortably housed in the state. He is skeptical of having a singular focus on building new units.
“There is a theory that we can build our way out of the unaffordability and instability, but that theory is pockmarked with numerous holes,” he said. “The landlord-developer industry is not going to build their way out of profits … While we have no problem with people building more housing, more types of housing, we just don’t believe that policy is a substitute for renter protections.”
Imagine you’ve finally taken your car to the mechanic to investigate that mysterious warning light that’s been flashing on your dashboard for the past week and a half.
The mechanic informs you that your car’s brake fluid is too low. Dangerously low. Your brake fluid supply, he says, has reached “crisis” levels, which sounds both scary and very expensive.
Naturally, you would prefer that your car have a noncritical amount of brake fluid. “How much more do I need?” you ask.
“A quart,” the mechanic responds. “No, actually, three quarts. Or maybe seven gallons — but only routed to your rear brakes. Actually, let’s settle on half an ounce.”
Such is the situation with California’s housing shortage.
For nearly a decade now, the Legislature has been churning out bills, Atty. Gen. Rob Bonta has been filing lawsuits and Gov. Gavin Newsom has been revamping agencies, dashing off executive orders and quoting Ezra Klein with the explicit goal of easing the state’s chronic undersupply of places to live.
California simply doesn’t have enough housing and this shortage is the leading cause of our housing affordability concerns — virtually everyone in and around the state government, along with the vast majority of academics who have studied the issue, seems now to agree on this point.
This consensus was on display this year when lawmakers passed two sweeping changes to state housing law, one that shields apartment developments from environmental litigation and the other that would permit denser development near major public transit stops in big cities. Both were legislative nonstarters just a few years ago. These days, even the opponents of these bills have accepted the premise that the state faces a “housing shortage,” a term evoked at least 30 times in committee hearings and floor speeches this year.
Now, if only anyone could agree on how big the housing shortage actually is.
Plenty of people have tried to put a number on the problem.
In 2015, the Legislative Analyst’s Office, which serves as a policy analysis shop and think tank for the Legislature, took an early crack at quantifying the state’s shortage by calculating how many additional units major metro areas would have had to build over the prior three decades to keep housing cost inflation on par with that of the rest of the country.
It came up with 2.7 million missing units.
A year later, consulting giant McKinsey one-upped the LAO, putting the state’s “housing shortfall” at 3.5 million houses, apartments and condos, a number Newsom campaigned on.
Not all estimates hit seven digits. In 2024, the housing policy nonprofit Up For Growth published the more modest estimated shortfall of 840,000 units, which comes pretty close to the 820,000 Freddie Mac put forward a few years earlier.
California Housing Partnership, a nonprofit that advocates for affordable housing, has counted the deficit at 1.3 million units — but not just any units. That’s how many homes the state needs to add that are affordable to people making under a certain income.
Then, this summer, a group of housing analysts, including an economist at Moody’s Analytics, came up with the strikingly low figure of just 56,000 — though the authors acknowledged that it’s probably an underestimate.
Estimates of the nation’s overall housing supply are similarly all over the place: from as high as 8.2 million to 1.5 million (and, in one controversial paper, zero).
The concept of a “housing shortage” is, in theory, pretty simple, said Anjali Kolachalam, an analyst at Up For Growth.
“It’s basically just the gap between the housing you have and the housing you need,” she said.
In practice, defining and then setting out to quantify the “housing you need” is an exercise fraught with messy data, guesstimation and an inconvenient need for judgement calls.
Most estimates begin with a target vacancy rate. In any reasonably well-functioning housing market, the logic goes, some houses and apartments sit empty, either because they’re between renters, they’ve just been built or sold, they’re being fixed or renovated or they’re someone’s second home. A modest vacancy rate is what allows you to pull up Zillow or Craigslist and not get a “no results found” error. A very low one suggests there aren’t enough homes to go around.
But choosing a “healthy” vacancy rate — one that reflects a functional housing market — and then backing out the number of additional homes needed to hit it, is more art than science. Most estimates turn to historical data to find some level when supply and demand weren’t completely out of whack. Whether that halcyon period of relative affordability is 2015 or 2006 or 2000 or 1980 varies by researcher and, likely, by the region being considered.
Beyond that, many researchers have tried to put a value on what is sometimes called “pent up” demand or “missing households.” Those are all the people who would have gone off and gotten their own apartment or bought their own place, but, because of the unavailability of affordable places to live, have opted to keep living with housemates, with parents or, in more extreme cases, without shelter of any kind.
Absent a survey of every living person, there’s no way to precisely measure how many people fall into this camp.
“This notion of ‘pent up demand’ is necessarily in an economist’s judgment call,” said Elena Patel, a fellow at the Brookings Institution who helped put together a nationwide shortage estimate last year (4.9 million).
These variations in methods help explain some of the differences in the shortage estimates. Other differences pop up thanks to the vagaries of data.
The Moody’s Analytics-led report, for example, calculated a national shortage of roughly 2 million units by adding together both the number of new units needed to raise the overall vacancy rate and the homes needed to backfill their measure of “pent up” demand. But for its California-specific estimate, the data wasn’t available to do the latter, potentially leaving out a big chunk of the statewide shortage.
Then some estimates differ because the analysts are defining the shortage in a completely different way.
The California Housing Partnership looks at the difference between the number of households deemed by federal housing guidelines to have “very” or “extremely” low incomes and the number of units that those households could conceivably rent with less than 30% of their incomes.
That gap of 1.3 million gets at a problem totally distinct from an overall shortage of homes.
Finally, there’s the question of scale. Housing markets are, on the whole, local. A national shortage is going to add together San Francisco and Detroit, masking the extremes of both. A shortage estimate for a state as large and diverse as California may have the same problem.
“It is like looking for a weather forecast for a trip to the beach and being told that the average temperature nationwide is likely to be 67 degrees,” the authors of the Moody’s-led analysis wrote.
What might be more valuable than fixating on any one shortage estimate, said Daniel McCue, a researcher at the Harvard Joint Center for Housing Studies, is to look at all the estimates together and appreciate that, by and large, they’re all huge.
“Whether it’s 1.5 million or 5.5 million, these are big numbers,” he said. That leads to an inescapable takeaway, he said. “There’s so much to do. There’s so far to go.”
Patel, from Brookings, said trying to put a precise tally on what is ultimately the somewhat nebulous concept of a “housing shortage” is still a worthwhile exercise because it gives lawmakers and planners a benchmark against which to measure progress.
How much additional taxpayer money should a state throw at affordable housing development? How aggressive should a locality be in pursuing changes to local zoning? “The more concrete you can be in policymaking land, the better,” she said.
The state of California does in fact have its own set of concrete numbers.
Every eight years, the Department of Housing and Community Development issues planning goals to regions across the state — a number of additional homes, broken down by affordability level, that every municipality should plan for. These are, effectively, California government’s official estimates of the state shortage.
To cobble together these numbers, state regulators look at projections of population growth to accommodate the need for future homes and then tack on adjustments to account for all the homes that weren’t built in prior periods, but perhaps ought to have been. If a region has an excess number of households deemed overcrowded, it gets more units. If vacancy rates are below a predetermined level, it gets more units. If there is a bevy of people spending more than 30% of their incomes on rent, more (affordable) units.
It’s a process that the state regulators have come to take somewhat more seriously in recent years, engendering an ongoing political backlash from density-averse local governments and neighborhood activists.
In the state’s last estimate, the topline total was 2.5 million units.
This coming cycle, which has already begun in the rural north and will slowly roll out across the state in the coming years, will produce yet another number. That will be one more estimate for state lawmakers of how much brake fluid the car needs.
Lawmakers in Sacramento look to make changes to the 2022 bill
1316 Beverly Grove PlCredit: (Via Zillow/The MLS)
State lawmakers proposed a new bill to overhaul measure ULA or L.A. ‘s ‘mansion tax’ on Tuesday.
The new bill, SB-423, aims to take out parts of ULA that critics have said do more harm than good to the current housing market. By reducing the taxes imposed by Measure ULA for people looking to sell commercial buildings constructed in the last 15 years, think apartment buildings, offices, and shopping centers.
Measure ULA was originally intended to raise taxes on high-value properties and funnel that money into affordable housing projects and programs to alleviate homelessness. The measure was passed by city voters in 2022, and since April 2023, the city has levied a tax on sales of properties worth $5 million or more.
The ‘Mansion tax’ did not only apply to celebrity single-family houses in the hills, but also commercial buildings, including apartment complexes. While backers say that it is working as intended, those who oppose the tax say that it is having a much larger impact on slowing the development of new housing. This leads to making affordability worse in an already tight housing market.
With the higher increase of taxes on higher-value property, it can scare away developers, leaving L.A. with less housing than it started with.
Mott Smith, adjunct professor of real estate development at the USC Price School told LAist, “The units that we need to support all the households coming into the city — or that have to move and deal with their lives — those aren’t happening,” he said. “And when we squeeze the housing supply, the poor feel it the most.”
Bernalillo County Commissioner Barbara Baca speaks before a front end loader parked on a dirt lot that will soon become an affordable apartment complex on Albuquerque’s West Side, thanks to a new round of state funding. (Photo by Patrick Lohmann / Source NM)
The allocation of $83 million for housing and homelessness projects in the Albuquerque area will empower local officials to get 1,000 people off the street by next July, local leaders said at a news conference Tuesday.
The New Mexico Legislature approved about $140 million for housing programs during the legislative session earlier this year. Elected state and local officials gathered at a dirt lot on Albuquerque’s West Side on Tuesday to celebrate the arrival of most of that money for projects in the state’s biggest metropolitan area.
New Mexico House Speaker Javier Martinez (D-Albuquerque) said the city needs the lion’s share of the new housing funding because it is the epicenter of the state’s housing crisis and where most people go for services.
“Here is where the services are for communities,” he said. “And so I was not shy, and my House colleagues were not shy, about calling that out and making sure that we delivered money that could be used and executed today.”
Albuquerque’s count of unhoused individuals has increased by 108% since 2017, a rate more than two-and-a-half times the national average, according to the Pew Charitable Trusts, which also reports median rents in the city increased 46% between 2019 and 2024.
Overall, Albuquerque lacks about 20,000 housing units to meet the demand, said Albuquerque Mayor Tim Keller.
“We have national trends, whether it’s a housing shortage in general across America, or whether it is challenges around fentanyl and addiction and unhoused and homelessness, and then we have our own Albuquerque challenges,” Keller said. “But this is a step-change answer to those issues.”
More than $20 million of the funding will be used for expansion of the Gateway network of shelters and services, according to a news release. That includes $5 million for a 204-unit shelter for seniors; $6.5 million for Gateway West, which serves 660 people nightly; and additional funding for Gateway Young Adult.
Gateway Young Adult will provide an “appropriate space for young adults” to receive services and a path to permanent housing.
The funding will also help pay for “gap financing,” which are subsidies to private developers to ensure affordable housing complexes get built, leaders said. One such project, the Tierra Linda Projects, will receive $6 million to complete the financing for a 240-home development to house roughly 840 low-income residents in what is now a dirt lot across the street from where the news conference occurred.
The newly created Office of Housing is overseeing the allocation of the projects. In April, the office and its employees moved from the state’s finance department to the New Mexico Workforce Solutions Department, which effectively doubled the department’s budget, said Secretary Sarita Nair. That the department was able to allocate $80 million a few months later is an achievement, she said.
While the governor’s office announced the first round of funding last week, local leaders gave more specifics Tuesday on where more than $60 million of the funding will be spent, including:
$17.85 million for the purchase of the Poblana Place apartments in Bernalillo County for an 84-unit workforce housing complex for seniors and displaced youth;
$1.5 million for a new mixed-income development called Sombra del Oeste in southwest Albuquerque, adding 72 homes;
$10 million to convert the iconic but vacant Wells Fargo building in downtown Albuquerque into the 13-story Lomas Tower, which will mean 100 residents for 140 people who earn less than 70% of the area median income (in Bernalillo County, that’s $44,800 for a one-person household);
and $13.5 million for West Mesa Ridge A and B in the 700 block of Coors Boulevard, which will include 128 three-bedroom homes for residents earning from 30% to 80% of the area median income.
Taken together, the new funding will enable leaders in Bernalillo County and Albuquerque to help 1,000 people find stable shelter within the next year, leaders promised.
“It’s ambitious, but we can do it,” Bernalillo County Commissioner Barbara Baca said at the news conference. “And we will do it in a way that lifts up entire communities.”
President Biden’s recent pro-housing pivot didn’t come a moment too soon. Even though the housing shortage is long-standing, well-known and worse in blue cities, high housing costs somehow sneaked up on Democrats.
By facing the crisis head on, Biden and his fellow Democrats can show voters they’re committed to expanding and strengthening the middle class and dealing with its most serious concerns. Let’s hope it’s not too late.
The housing shortage has generated deep economic resentment. Meanwhile, wealthy communities from Cupertino, Calif., to Milburn, N.J., have done everything they can to stifle construction, driving up the cost of renting or owning a home. These high prices chip away at paychecks and morale, pushing people into ever longer commutes as well as crowded and substandard housing.
The housing shortage is a dark cloud over America’s otherwise sunny economic forecast, generating dissatisfaction and endangering Democrats in the coming election.
By all the usual measures, the economy is rebounding. Inflation has fallen from the highs of the past few years to near 3%. Wages are growing, and unemployment is low. The pandemic’s worst economic consequences are over.
And yet anyone trying to afford a home is stuck in the mud of high costs. Experts think inflated housing prices are part of the reason 8 in 10 Americans in key swing states see the economy as just “fair” or “poor.” The restricted housing supply keeps workers from feeling the benefits of higher wages and moving to places where incomes are even higher.
When people are struggling, they blame those they perceive to be in charge. That helps explain the discrepancy between economic indicators and Biden’s polling.
Instead of trying to convince people that the way they’re feeling about the economy is wrong, Democrats must address the pain that working- and middle-class people are feeling. Injecting positivity into the online conversation — as Biden’s team has tried to do by countering economic doomsayers on TikTok and other platforms — will only go so far.
To his credit, the president has been quietly working on housing affordability throughout his term. The administration’s Housing Supply Action Plan, released in July, provided funding to municipalities that have made it easier to build housing, among other pro-growth measures. The administration has also promoted commercial-to-residential conversion and financed affordable housing designed to be resilient to climate change. All of this will help bring housing costs down.
But in the last few months, Biden has finally grown louder about making housing affordable by increasing supply. As Neera Tanden, the director of his Domestic Policy Council, put it: “We know we need to increase housing supply to ensure that we can bring down rents and the cost of homeownership.”
Democrats are beginning to understand the need for a rallying cry that speaks to economic anxieties and signals that the administration is focused on bringing housing costs down. It’s a message that resonates with members of an eroding middle class, many of whom believe the Democratic Party isn’t fighting for them. It’s a message that appeals to young people, minorities and every other demographic being locked out of prosperity in America. It’s a message that puts Democrats back in the conversation about the economy, an area where voters still trust Republicans more.
Is Biden a YIMBY, a “Yes in My Backyard” advocate for increasing housing supply? Whether or not he calls himself one, his work and rhetoric on the issue suggest he is.
By publicly embracing YIMBYism as an ideology and an agenda, Biden can align himself with a bipartisan majority of Americans who believe in easing zoning restrictions to allow more housing to be built. And he can signal to those struggling with housing costs that he has their backs.
Housing offers Democrats a chance to talk about rebuilding an America that works for everyone, one with a thriving, growing, expanding middle class. The administration has to show voters it understands that current housing prices are unacceptable and that it will do what it takes to bring them down. Until more people believe they will one day be able to buy a home, pessimism about access to opportunity will persist, and so will the risk to Biden’s reelection effort.
Laura Foote is the executive director of YIMBY Action and a member of the board of Up for Growth.
On Jan. 9, the U.S. Supreme Court will hear the caseof Californian George Sheetz, who applied for a permit to put a manufactured house on his land in El Dorado County and got hit with a $23,420 traffic mitigation fee. Objecting to the lack of any connection between the dollar amount and his family’s actual impact on traffic in the area, Sheetz paid the fee but turned to the legal system. Sheetz vs. County of El Dorado, California, addresses just a small piece of the state’s housing crisis. Nonetheless, it will matter for millions of people unable to find affordable homes here and in many other states.
When “impact fees” are unmoored from the increased costs a city or county will incur because of a new house or development, the fees can do more than present someone with an unfair bill — they can also reduce housing construction. In a country where a shortage of homes has led to sky-high prices, this matters more than you might think.
Developers should pay their fair share, of course. If construction fees fail to cover the costs of the increased public services required by new development, elected officials and voters turn to other means to cover or avoid those costs. They may impose growth restrictions or other exclusionary zoning policies to block the building of new homes rather than accept projects that lead to higher taxes or degraded services.
We see pervasive evidence of this happening when localities adopt rules such as single-family zoning, minimum lot-size requirements and aesthetic requirements that ensure that only expensive housing, which generates higher property taxes, can be built.
Properly set impact fees offer a way for development to pay its way, and they reduce political pressure against necessary growth. Local studies have found that appropriately set fees are associated with increased construction in suburban areas.
But when fees are set at arbitrarily high levels, they disincentivize new home building and add to the country’s housing affordability challenges, causing strain for renters and new home buyers.
In 2013, the Supreme Court held that all permit fees must have an essential connection to the actual impact of a development on city or county services, and a roughly proportional price tag. This sensibly reduces the risk that fees will choke off development.
In some states, such as Florida, jurisprudence goes even further, requiring that fees fund only infrastructure that serves the specific developments they were levied on. Not coincidentally, Florida has seen its population grow more than twice as fast as the country as a whole, reflecting its openness to new homes and relatively fair prices compared with much of the rest of the country.
But in other states, including California, Maryland, Washington and Arizona, courts have carved out an exception to the Supreme Court’s proportionality principle, allowing higher fees if they are set by legislation. Sheetz’s case will test whether that exception is constitutional.
Part of the rationale for the carve-out is that voters have a remedy against excessive assessments at the ballot box. In theory, they can vote out the lawmakers who are responsible.
However, any claim that voters can and will actually do this is dubious. Housing developers are a small share of any electorate. Future home buyers or renters — those who need municipalities to incentivize, not discourage, home building — may not even vote or live in the jurisdiction when the fees are determined. On the other hand, the people who do vote are likely to be those who already own homes nearby, and they tend to resist growth: Their property increases in value if high fees keep the housing supply low.
The housing affordability crisis is real. Californians in particular should understand the simple calculus of supply and demand that is exacerbating homelessness and causing seven cities (or metro areas) in the state to rank among the 10 most expensive in the nation, according to U.S. News and World Report. When and where state courts allow local politicians to cater to their wealthiest constituents, charge exorbitant impact fees and otherwise keep out new homes, the situation won’t improve.
The Supreme Court is expected to issue a ruling on the El Dorado County fees in the first half of 2024. The legal case that all impact fees, no matter who sets them, should be subject to the same conditions is strong. And during a nationwide housing crisis, the economic case against state and local practices that worsen housing affordability and impede needed housing production is even stronger.
Charles Gardner is an attorney and research fellow with the Mercatus Center at George Mason University. Emily Hamiltonis a director of Mercatus’ Urbanity Project.
On a Wednesday afternoon in March, the Montview Boulevard Presbyterian Church, in Denver’s South Park Hill neighborhood, was packed. The local chapter of the progressive group Indivisible was sponsoring a mayoral-candidate forum. Five candidates had been invited to attend. The moderator asked the usual questions about crime and public safety, homelessness and guns. Then came a question comprehensible only to a close observer of Denver politics: “Do you support releasing the city-owned conservation easement on the Park Hill Golf Course to allow the currently proposed redevelopment of this site?”
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Four candidates raised their hands, a couple only halfway, as if that sign of reluctance might lessen the coming disapproval. It didn’t. The crowd booed.
On April 4 of this year, voters declined to lift the easement. The split was 59–41, not exactly close. Some observers have taken this outcome as a signal that the people of Denver (or, at least, the fewer than 100,000 who voted down the proposal) reject new development. But in that same election, voters sent two candidates who supported the proposal to a mayoral runoff. Back in the 2022 statewide election, almost a quarter million Denver voters supported Democratic Governor Jared Polis, who campaigned on increasing housing supply and dismantling local roadblocks to construction in order to get a handle on Colorado’s housing-affordability crisis. Also that year, nearly 1.3 million Coloradans voted to dedicate hundreds of millions of dollars to increasing affordable housing. In Denver, the measure won 70–30. Deciding “what the people believe” is not so easy.
Colorado is short an estimated 127,000 homes. The Denver metro area alone is short nearly 70,000 homes. The housing shortage is the main driver of the region’s affordability crisis, and housing-policy experts—though they remain divided on many questions—are nearly unanimous in their belief that resolving it will require bringing many more homes to market. From 2012 to 2017, the region permitted only one new home for every 5.4 new jobs; over the same period, home prices in Denver jumped by 50 percent.
When someone who favors new development in theory opposes a specific project near where they live, we call them a NIMBY. NIMBYism is regularly characterized as a case of revealed preferences: Talk is cheap, and support for policies in the abstract is worthless. Voting for a candidate who champions pro-housing policies is one thing; agreeing to new development in your neighborhood is another.
Conflicting desires do not by themselves prove hypocrisy, however. Some people really do want to see more housing in general, even if they don’t want construction next door. The problem is that the local institutions charged with land-use decisions are attuned to parochial complaints, not large-scale needs.
The level of government at which we choose to resolve a conflict shapes public opinion and the eventual outcome. The same question posed at a town hall, at a county-council meeting, in the governor’s office, or by Congress will not be answered the same way in each venue. The tools available, the norms of debate, and the architecture of accountability change drastically from place to place. Americans believe that housing is a local issue. And it is a local issue. But it is also a regional issue, a state issue, and a national issue. By restricting the debate to the hyperlocal level, we’ve blocked out our big-picture values.
Across metro areas, in states led by Democrats and Republicans alike, the same pattern emerges: Local governments decide what gets built and where, and they use that power to ban multifamily housing, entrench economic segregation, and perpetuate a national affordability crisis.
It’s tough to admit, but sometimes NIMBYs have a point. In Denver, I spoke with dozens of community leaders, elected officials, and voters who live near the Park Hill Golf Course. Opponents of the project raised concerns about preserving open spaces, about gentrification, about the democratic process itself.
Former Mayor Wellington Webb told me he opposes developing the Park Hill site because it’s “the last piece of open space, land, in Denver.”
Leslie Herod, a Colorado state representative and an unsuccessful candidate in this year’s mayoral race, also opposes the proposal. She told me she had identified more than 80 underutilized city-owned lots already zoned for residential development where she would rather see housing built.
The Denver city-council member Candi CdeBaca made a version of the “other places” argument too, questioning why development efforts are never focused on wealthy neighborhoods. “We’re not talking about development in places where people have privilege,” she told me. “Those places are protected with their zoning, those places are protected with their level of engagement, those places are protected by the people they have elected to represent them.”
Some voters told me they simply distrusted the process. “There’s no guarantee that if the conservation easement is lifted that the [developer] will honor what they’ve said with creating a park, creating affordable housing,” a landscape architect with an antidevelopment yard sign said.
Of course, no project can solve every problem or skirt every concern. Comparison shopping for umbrellas is fine on a sunny day. When you’re caught in a torrential downpour, it’s wise to take what’s available and run for cover.
For their part, proponents of the Park Hill project, in their eagerness to win votes, tended to oversell what it could accomplish. Some described it as a blow against racism or climate change, or a way to help the working class. In my conversations with the plan’s backers, I sometimes had to remind myself that we were talking about a 155-acre lot, not the fate of the republic.
Land-use regulations and development patterns are a key driver of inequality, pollution, and financial strain. But whether or not the Park Hill plan was approved would have a negligible impact on these larger crises, which will require collective action beyond the scope of any one project. Asking a neighborhood or municipality to bear the responsibility for a housing crisis and its knock-on effects is asking for failure. Local government simply wasn’t built to do this.
Local government is about what you can do for me, right now. Because local officials have a narrow jurisdiction, engaged voters have a direct line to them and significant influence on their decisions. This tight relationship is good for handling issues like broken streetlights and potholes, but it doesn’t lend itself to managing society-wide problems, such as a housing crisis. This is why the political logic of building a lot more housing rarely carries the day at the local level.
Who would have lived in the Park Hill housing development, had voters approved it? No one knows. It could have been a recent University of Colorado at Boulder graduate or empty-nesters from the suburbs looking to downsize. Many of the people who would most benefit from the new housing don’t yet live in Denver—so they don’t have a vote.
Local housing-policy debates are thus asymmetrical. Construction projects have no readily identifiable beneficiaries, but they do levy clear harms, in the form of excessive noise and street closures and changing neighborhood aesthetics.
Just a small fraction of people even engage in local housing fights. Many of those who do are extreme voices or otherwise unrepresentative of the broader community. Look at Fort Collins, Colorado. After more than five years of community engagement, and many months of work by city planners, a 5–2 majority on the city council voted to liberalize land-use policies to allow more housing. But a small group of opponents pressured the council to reverse itself, gathering 6,500 petition signatures—this in a city of more than 160,000. And they won. The council voted again, this time 7–0 to repeal the change.
In interviews, both the head of the Colorado Municipal League, Kevin Bommer, and Denver’s current mayor, Michael B. Hancock, touted regional collaboration as a solution to the affordability crisis. But just as one town cannot ensure that the entire region maintains adequate green space while increasing density, it cannot force neighboring towns to work together to find the right balance. The incentive is too strong for an individual government to say to its neighbor, “You can have all the apartments—we’ll just keep our parks.”
In addition to the Colorado Municipal League, Colorado has several influential regional associations, including the Metro Mayors Caucus and Colorado Counties Inc. Yet greater Denver is still tens of thousands of housing units short of its needs.
The Denver metro area is particularly desperate for small multifamily dwellings (two to nine units) to meet the demand for affordable housing. According to Carrie Makarewicz, a professor at the University of Colorado at Denver, roughly 10 percent of homes in the region meet this criteria. By contrast, 85 percent of residentially zoned land is reserved for single-family homes. By this measure, too, the regional associations have come up short.
Collective-action problems require a body that can hold everyone accountable. Regional associations—which rely on voluntary participation—aren’t going to cut it.
The democratic process begins by defining the democratic body. And when it comes to housing, the body of concern does not end at a town’s boundary line. People moving to the Denver metro area look across the city and into the suburbs for a place to live. One suburb’s opposition to building more housing directly affects prices miles away, because it constrains the supply in a market that spans municipalities. Local governments, in seeking to satisfy local concerns, undermine statewide goals. At least, they do in the absence of state intervention.
State government is also about what you can do for me, but on average: That’s the electoral reality of representing voters across geographic constituencies. Governors and other statewide officials are forced to see the bigger picture because they’re accountable not only to the people who live in a particular community, but also to past residents priced out of and displaced from that community, and to future residents as well. (Nor are newcomers overwhelmingly from out of state, as many seem to believe; census data reveal that about 82 percent of moves happen within states.) Denver’s city council represents the people of Denver, not Aurora, and vice versa. The state represents them all. And in recent polling, 60 percent of registered voters supported eliminating local restrictions to allow for multifamily housing.
The Colorado state capitol is just a short drive from Park Hill and a brisk walk from city hall, but feels miles away from the thrum of local politics. I went there two days after the Indivisible forum to interview Governor Polis. From across a large round table in his office, Polis told me that “housing, transit, travel, roads: These are interjurisdictional issues because really, very few Coloradans live their whole lives in one jurisdiction.” Unencumbered by the need to defend any one project or developer, the governor reiterated a simple point: “Demand has exceeded supply for the last couple decades, and prices have gone up.” Colorado has to “create more housing now.”
Soon after providing that clean summary of what Colorado needs, Polis announced his best shot at providing it. Washington, Oregon, California, Utah, Montana, and Massachusetts have, to varying degrees, pulled authority for land-use decisions up to the state level. Following their lead, he proposed a bill compelling local governments to adjust their land-use policies to meet housing goals, a process that state officials would oversee. The bill addressed climate, infrastructure, and equity concerns; included provisions for increasing and preserving affordable and multifamily housing; encouraged development near transit; and removed onerous parking requirements.
I asked the governor how he would deal with the political opposition to his bill. “People across the board—Republican, Democrat, independent—housing costs is one of the top items of concern,” he replied. I asked again. “People understand that housing needs to be built,” he told me.
Polis’s original proposal was greeted by fierce opposition from local governments, though not because of objections to open space, affordability, or new parking rules. The fight was over where the power to make land-use decisions should lie.
Kevin Bommer, of the Colorado Municipal League, offered a pithy synthesis of local governments’ position: “Respectfully, get off our lawn,” he told me.
I asked Bommer about his policy disagreements with the governor, but he kept stressing the issue of local control. “My members statewide don’t necessarily disagree with a lot of [Polis’s] goals, but to start with saying that the state gets to set a model code and the state gets to regulate and the state will be in charge of land use going forward is a nonstarter,” he said.
Bommer pointed me to an old amicus brief filed in defense of a local moratorium on fracking by then-Representative Polis. It defended local government’s authority over land-use decisions as both a state-constitution matter and a policy matter. Polis wrote that local democracy allows for “widespread citizen input and broad stakeholder involvement,” as well as “more opportunities for public participation.”
The fact that Representative Polis disagrees with Governor Polis is exactly the point. A congressman represents his district; he has little reason to care that local control can harm the rest of the state. A governor has a wider remit. If Polis the representative was right, and localities really are the best transmitters of their residents’ housing preferences, then what explains clear, widespread discontent with the outcomes of those decisions? Colorado’s housing crisis is undeniable, and its land-use authority has rested with local government virtually unquestioned for decades.
Colorado’s legislative session ended on May 8. The bill died in the Senate without a final vote.
Afterward, the governor told me he intends to keep fighting. States that have passed land-use reforms, such as California and Washington, suffered multiple defeats before seeing a first victory. Polis told me he’s frustrated by communities that said, No, we should do it. “The thing is, they’re not doing it!” he said with a laugh. Polis returned again to his central argument: “It’s beyond the capabilities of [local government] even if there’s a city council or mayor with the best of intentions … We have to figure this out together.”
Two citywide votes, multiple lawsuits, and accusations of racism, classism, and harassment that divided Denver. What was the point? The property owner is now promising that the former golf course will become … an active golf course. (This despite the fact that the company has never developed a golf course; its founder told me they’re “doing research on it now.”) Well-meaning objectors judge proposals against a hypothetical better option, but in reality, the alternative to a decent project is often no project at all.
Kelly Brough, who supported the development project and was in the runoff to become Denver’s next mayor, is nevertheless hesitant to embrace state interference. “I can’t say Denver should not control its destiny … I’m just not ready to give it up yet.”
This power struggle is playing out across the country. It’s ostensibly a struggle over housing affordability, but it is also a fight over how we see voters. In polls and interviews, voters express deep empathy for people experiencing homelessness and deep frustration with widespread housing unaffordability. But that’s not the part of us that local government can hear. Instead local politics magnifies our selfish concerns: How will this affect my parking availability? What will this do to my view?
Everyone has a little NIMBY in them. It doesn’t have to be the part that wins.
This article appears in the July/August 2023 print edition with the headline “Local Government Has Too Much Power.”
