Build, Baby, Build: Unshackling Homeowners and Developers from Local Red Tape

This article is part of The Rooftop, a blog and multimedia series from New America’s Future of Land and Housing program. Featuring insights from experts across diverse fields, the series is a home for bold ideas to improve housing in the United States and globally.

The consequences of the national housing supply shortage are predictable: home prices, rent, and the number of people experiencing homelessness are all too high. The Biden administration did not make a noticeable dent in this crucial economic issue over the last four years, despite housing being the largest component of the economy and inflation. Housing costs will continue to drive voters’ perceptions, and if the Trump administration and the Republican Congress also fail to deliver, they too will pay the price at the polls.

President Trump campaigned on a promise to bring down the cost of living, including record high home prices. In fact, one of his first-day executive orders directed federal agencies to “[pursue] appropriate actions to lower the cost of housing and expand housing supply.” If his administration wants to deliver on this promise, it should tie federal housing funding to housing construction.

Specifically, the president should restrict access to discretionary federal funding for states based on two sets of criteria: housing cost and housing supply. By making a portion of federal funding contingent on removing local housing supply constraints, the administration can allow developers and homeowners to increase housing supply in the places that need it the most, or at least not reward the states that let their housing red tape run wild.

The construction pace is slow nationwide; that’s why we are in a housing crisis. For the housing supply to catch up, the pace has to be considerably faster than average in places with excessive housing costs. Federal funding accounts for almost 40 percent of states’ revenue. A threat of even a relatively small drop in this revenue would be incredibly powerful, equipping many state and local leaders whose constituents are facing skyrocketing housing costs with the levers to actually address those costs. Federal agencies like the Department of Transportation (DOT) or Housing and Urban Development (HUD) allocate billions in discretionary grants each year following eligibility requirements that they control, and are already using local zoning as one of the dozens of criteria for bigger grants.

There are precedents for the federal government influencing local decisions when the stakes are sufficiently high. Both speed limits and minimum age drinking laws were brought about by the federal government tying DOT funding to states adhering to, for example, a minimum drinking age of 21. The stakes of the current housing crisis are high enough to merit a similar change to the status quo. The administration is already considering tying state and local fund availability to other priorities, and the cost of housing might be at least as important for voters in 2026 and 2028.

Local Regulations Restrict Housing Supply

Homebuilders, researchers, and a Trump administration fact sheet agree that the single-biggest impediment to building more housing is excessive regulation. In a 2019 executive order, President Trump states: “Regulatory barriers” that hinder the development of housing “include: overly restrictive zoning and growth management controls; rent controls; cumbersome building and rehabilitation codes; excessive energy and water efficiency mandates; unreasonable maximum-density allowances; historic preservation requirements; overly burdensome wetland or environmental regulations; outdated manufactured-housing regulations and restrictions; undue parking requirements; cumbersome and time-consuming permitting and review procedures.”

States regulate housing, but they have increasingly delegated this power to local bureaucracies of cities and counties since the 1920s. States can override these local decisions, and are starting to do so, but not fast enough given the amount we need to build. Missing middle houses, which are typically five to 12 unit buildings in walkable neighborhoods, higher-rise buildings in downtowns and near transit, accessory dwelling units and duplexes in backyards, manufactured housing—all of these are frequently impeded by local zoning restrictions, including complicated and long permitting processes, parking requirements, environmental requirements, historic district designations, and so on.

Meanwhile, federal government spending does not differentiate between states that make it easy to build new housing everywhere, and states (predominantly blue) where excessive regulation drives up housing costs. So federal taxpayers continue spending billions on infrastructure, guaranteeing million-dollar mortgages, and supporting more expensive housing vouchers and homelessness initiatives in cities where new housing isn’t being built and land has become prohibitively expensive.

How a Federal Strategy Would Work

The current administration could require all federal agencies and departments to identify discretionary state and local funding (grants, loans, or otherwise) related to housing. Then it could issue a more detailed executive order that restricts access to discretionary federal funding from states that: (1) have multiple counties with very high housing costs, (2) do not create sufficient net new housing supply in these counties, and (3) have nonetheless allowed these high-priced counties to create additional red tape for homeowners and developers (over and above state or federal requirements).

States would not be eligible for such funding starting in 2026 if they meet all three criteria above. In response, a state could prohibit local red tape only for the handful of its counties where housing costs are excessive and housing construction pace is unacceptable, or incentivize more construction by, for example, banning laws that discriminate against manufactured homes.

Only about a dozen states would be affected by these criteria; the majority of states wouldn’t need to change anything. All other state and federal rules would still apply, including the state building code, allowing for sufficient local control.

In determining whether housing costs are too high, the administration could use an existing definition—for example, counties that qualify for higher loan limits for Fannie Mae and Freddie Mac loans. Alternatively they could use a new definition, such as permitted units per capita or counties where house prices are 50 percent over median home construction costs (which would add up to around $650,000). By any reasonable definition, California will be affected, as will states around New York City, Washington DC, and Boston, and a few other states with expensive cities like Colorado, Hawaii, and Washington. While the administration should outline details, the states and counties listed above clearly do not produce enough housing right now.

Lifting local restrictions allows developers and homeowners to build, unshackling the housing market from excessive red tape, and enabling developers to compete nationally by making local connections less important than construction cost and quality, while enabling economies of scale. No developer wants to build a low-rent building on outrageously expensive land. Even if a developer builds a multifamily high-rise in a well-off neighborhood, a resulting luxury building would nonetheless alleviate housing pressures elsewhere by freeing up units that the incoming residents will be vacating.

We should not let minor and often hypothetical inconveniences stand in the way of land development. That’s especially true in the cities that desperately need more housing, stop residents and developers from improving their own land, and receive disproportionately high federal funding despite (and frequently because of) this. We can develop and build, while steering from the major concerns that the former HUD Secretary Ben Carson and President Trump described in a 2020 Wall Street Journal op-ed: We should not force suburbs to build dense low-income housing, just like we should not force communities to accept a coal plant or allow anything that goes against a state’s building code and could be unsafe.

Voters Overwhelmingly Back Removing Local Red Tape

In 2026 and beyond, voters will demand change yet again if there is no visible movement on house prices, rents, and homelessness. At the current pace, there will not be. Voters are already skeptical of President Trump’s promises to lower prices, including housing costs. Meanwhile, local housing supply restrictions are unpopular nationally, with 70 to 80 percent of Americans supporting major changes, in a bipartisan fashion across the income spectrum.

Now is the Trump administration’s chance to show that the market can provide enough housing. Carson and Trump’s 2020 op-ed states, “America was founded on liberty and independence, not government coercion, domination, and control.” What’s government coercion if not being forbidden from building in your own backyard?

Editor’s note: The views expressed in the articles on The Rooftop are those of the authors alone and do not necessarily reflect the opinions or policy positions of New America.