State Preemption of Local Equitable Housing Policies

Introduction

As the federal government retreats from its historical commitment to providing housing affordable to low and moderate income families in communities that provide economic opportunity for all, despite a serious and worsening housing crisis, some cities and other local governments are stepping in to fill the void.

Measures to raise revenue for affordable housing or increase tenant protections appeared on the ballot in twenty-four U.S. cities in the November 2018 election. Many of these measures passed as did local efforts to protect vulnerable tenants. But, just as cities are innovating, some states have been passing legislation that takes away — “preempts” — local authority over housing.

The map focuses on four critical areas of policy: protections against source-of-income discrimination, the regulation of short-term rentals, inclusionary housing programs, and rent control. The rising tide of state preemption detailed in this tool makes it clear that local initiatives and innovation are being blocked when the need for affordable housing and creativity in advancing inclusion is most needed.

State Preemption of Local Equitable Housing Policies


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This mapping tool developed by the Local Solutions Support Center brings together research from Grounded Solutions Network, the Partnership for Working Families, the Poverty & Race Research Action Council (PRRAC), the National Fair Housing Alliance, and the Urban Law Center, to document state preemption of inclusive and equitable local housing policies.

BACKGROUND

The Retreat of the Federal and State Government and the Rise of Local Responses

We are in the midst of a housing crisis that touches every corner of the nation, with low-income Americans suffering the most. According one study, we are losing two affordable apartments each year for every one created. Yet, over the last decade, the federal government has dramatically scaled back the measures it takes to expand the supply of affordable housing. For example, the budget for the federal HOME Investment Partnerships Program, a critical and flexible subsidy for affordable housing for rent and homeownership for low-income people, dropped by 62 percent between 2005 and 2015. Funding for rental assistance has fallen sharply over the last six years, pushing housing assistance spending to its the lowest level relative to the size of the economy since 1980. According to the National Low-Income Housing Coalition, today "low-income housing resources provided by the federal government help only about 25% of eligible households."

Last year’s federal tax bill is expected to make the problem worse, by severely undercutting the value of the $9 billion-per-year Low Income Housing Tax Credit, by far the largest source of government support for the creation of affordable housing. According to one estimate, nearly 235,000 fewer apartments will be built over the next decade as a result of the tax bill. And budget retrenchment on affordable housing is happening at the state level as well. Last year, New Jersey raided its affordable housing trust fund to provide $46 million to shore up the overall budget. Florida’s legislature did the same to the tune of $182 million.

As a result of this retrenchment, local governments now bear a significant burden of addressing the nation’s housing crisis. And a number of localities have risen to the challenge in the last several years, either through raising revenue to fund affordable housing or through policy reforms that protect tenants or encourage production of affordable housing. But, as the map shows, this progress is increasingly imperiled by state preemption.

More About Each Type of Housing Preemption Law

To understand the impact of state interference, it helps to have a basic understanding of some of the most prominent examples of local efforts to advance equitable and inclusive housing policies.

A) SOURCE-OF-INCOME NONDISCRIMINATION

Local laws that protect families from discrimination based on their source of income can make it easier for families who receive federal assistance to find quality, stable affordable housing in communities that meet their needs. Federal housing vouchers allow participants to move anywhere they find suitable housing – theoretically expanding their options beyond the historic, enduring concentration of subsidized housing. In practice, housing choice remains curtailed by landlord bias against voucher holders. In many areas, source-of-income (SOI) discrimination has a disproportionately severe effect on groups already likely to face discrimination based on characteristics protected by the Fair Housing Act, such as race and disability, reinforcing patterns of residential segregation. Landlord discrimination against voucher holders can also deepen the burdens—economic and otherwise—that vulnerable households face when seeking homes, with accounts of discrimination further discouraging tenants.

SOI protections are currently enacted in twelve states, the District of Columbia and numerous cities, while three states provide incentives to promote the acceptance of housing choice vouchers. These protections are promising and show an evolving recognition of the benefits of SOI laws, although the benefits of SOI laws are most fully achieved where there are strong complementary policies to overcome informational hurdles to housing access, including housing mobility counseling, landlord outreach, and affirmative marketing.

B) INCLUSIONARY ZONING AND RELATED HOUSING PROGRAMS

As the affordable housing crisis has grown more severe, cities and counties are using their role as land use regulators to ensure that residential development includes affordable units for low-income and working families. These inclusionary housing programs tap the economic gains from rising real estate values to create affordable housing for lower income families. An inclusionary housing program might require developers to sell or rent 10 to 30 percent of new residential units to lower-income residents.

Many, but not all, programs partially offset the cost of providing affordable units by offering developers incentives such as tax abatements, parking reductions, or the right to build at higher densities. Most programs recognize that it’s not always feasible to include affordable on-site units within market-rate projects. In some cases, developers can choose among alternatives, such as payment of an in-lieu fee or provision of affordable off-site units in another project.

C) REGULATION OF SHORT-TERM RENTALS

Launched in 2007 as airbedandbreakfast.com, Airbnb today has more than 3,000,000 listings worldwide. Airbnb and similar short-term rental platforms like HomeAway, VRBO, and others provide on-line tools to allow people to rent space in their homes, although they also facilitate the rental of units in more traditional vacation properties without actual home sharing.

The rapid growth of these short-term rental platforms has raised significant concerns about their impact on housing affordability and availability. Local regulators have sought to mitigate these concerns by restricting the location or concentration of short-term rentals, or prohibiting them altogether, regulating the minimum length of stay, limiting short-term rentals to primary residences, requiring licenses for short-term rentals, and other regulatory strategies.

D) RENT CONTROL

Regulations that cap the rate at which owners can increase rents over a period of time can help protect tenants from de facto (economic) eviction. These policies can include an annual or multi-year limit on the percentage increase in rents or it can be tied to an indicator like the consumer price index (CPI). Typically rent control allows rents to exceed the maximum rate of increase for major repairs, rising operating costs, or cases of proven hardship. Without these allowances, rent control may prevent landlords from making needed investments to keep properties habitable and up to code, particularly in weaker markets. These laws typically allow landlords to set the initial rent at any level when marketing a vacant unit or signing an initial lease. Limited increases then apply to the subsequent duration of tenancy. This policy feature is termed “vacancy decontrol.” Rent control pairs well with just-cause eviction protections, so that landlords cannot arbitrarily evict tenants to avoid rent control restrictions.

CONCLUSION

As the mapping tool we are providing makes clear, local policies designed to foster communities of opportunity, equity, and inclusion are being compromised by preemption—state interference that is perpetuating inequality at a time of genuine crisis in affordable housing.