To Fix Their Housing Shortage in 2024, Cities and States Should Turn To Market

States and cities considering housing supply reforms in the new year to combat worsening affordability should unleash the free market rather than rely on the Department for Housing and Urban Development (HUD) regulatory solutions. HUD’s recommendations tilt towards heavy-handed government interventions that lack thorough analysis and proven results.

A particularly egregious example is HUD’s latest assessment of Seattle’s Mandatory Housing Affordability (MHA) fund, which looks past historical context and unintended consequences while presenting a one-sided picture. While HUD singles out the “success” of the MHA by highlighting the creation of hundreds of new affordable units since its inception in 2019, it leaves out the thousands of units that were not built because of MHA. In that sense, the MHA has undone decades of progress from Seattle’s prior upzoning reforms that freed the market from government regulations.

To properly evaluate the MHA, one must go further back in time than the HUD assessment. The story begins in the mid-1990s when Seattle started to grapple with rising housing costs. As a political compromise that left most of the city restricted to single-family zoning, the city allowed moderately higher density around “urban villages” that comprised only about 16 percent of the city’s residentially zoned land. The idea was simple: Increase supply within the urban villages by replacing older single-family detached residences with new generally four-unit townhomes.

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Tobias Peter is a Senior Fellow and Codirector of the AEI Housing Center.

The views expressed in this article are the writer’s own.