Legalizing the condo

Moving the needle on US homebuilding

Read Issue 18 of Works in Progress here. Today on Links in Progress Alex Armlovich reviews the many things happening in American housing policy (and what is left to do).

1. Twenty US states passed 65 housing supply bills in the year to June 2024. Colorado’s transit-oriented development (aka ‘TOD’) pre-emption – requiring zoning for 40 dwellings per acre on average within a half mile of frequent transit – is arguably the most significant TOD reform passed in the US to date, at least pending details on enforcement.

2. NYC housing plan enables 82,000 homes over the next 15 years beyond the existing pace of development. The final version will create the largest 'parking freedom' zone in the US, eclipsing the citywide parking reforms in the geographically small cities of Austin, San Francisco, and San Jose in total acreage. Next steps include neighborhood upzonings and the Manhattan Plan.

3. 'HUD Code' homes, following rules written by the Department of Housing and Urban Development to regulate factory-built homes, cost just $90,000 to build. But until this year, the HUD code was restricted to single family units, limiting their market appeal to areas with low land costs. Last year’s new rulemaking and upcoming legislative reforms together are expected to change this.

4. Up for Growth’s regular annual tally of regional US housing underproduction asks how many homes would be needed in the short run to alleviate overcrowding and achieve a healthy vacancy rate assuming no movement between cities. By this measure the US is missing 3.9 million homes. But ‘housing need’ estimates face a basic knowledge problem and this number is a huge underestimate.

Papers of Note:

5. A recent Terner Center report looks at how six US states use funding access and priority grants to encourage municipalities to upzone. Massachusetts, California, New York, and New Hampshire use voluntary programs. Montana and Utah enforce local participation. They target zoning reforms, ADUs, and affordable housing. Unfortunately the states have not evaluated its impact on actual housing production.

6. The desire to see property values rise is a common explanation for NIMBYism. But we often see restrictions on housing supply in areas where growth would overwhelmingly raise land values.

7. Traditional office to residential conversion requires expensive whole-building renovation. Large post-war office buildings with deeper floor plates generate either windowless bedrooms or require the excavation of light courts to bring windows into the building’s core. Co-living can cut office to residential conversion costs by 25 percent to 35 percent versus traditional conversion. In Denver, converted co-living units would cost just $123,000 per unit compared to a typical subsidized low-income housing studio costing $400,000 each.

8. In 1986, the US imposed a harsh depreciation schedule on corporate structures. Knowing it would reduce housebuilding, Congress created the Low Income Housing Tax Credit to subsidize non-market housing. With the Tax Cuts and Jobs Act coming up for renewal in this year, the Tax Foundation argues we should extend this pro-growth 'full expensing' logic to all buildings.

9. Condo construction in the US has collapsed in recent decades. Intended to protect owners from poor development practices, strict condo defect laws penalized builders who construct them. Decade-long lookback periods and incentives to sue are common, and mortgage access for condos is tight compared to financing for single family homes. (Meanwhile, Canadian YIMBYs tell me new multifamily housing in Toronto and Vancouver is overwhelmingly condo, and locals complain about the absence of purpose-built rentals.)