This article is part of MACo’s Policy Deep Dive series, where expert policy analysts explore and explain the top county policy issues of the day. Read all of MACo’s Policy Deep Dives.
Earlier this year, Ganesh Sitaraman & Christopher Serkin of Vanderbilt University published a paper titled Post-Neoliberal Housing Policy, in which they argued that the recent focus on zoning in housing policy may be misguided and outlined a wider lens within which housing challenges and solutions should be considered. While the authors did proffer a handful of potential policies, these ideas do not represent an exhaustive list of all options. The actual value of this work lies in the lens through which the authors challenge us to consider the issue. Markets are not magic, nor are they always benevolent; additionally, government can be just as much a force for equity as it can be for stagnation. The housing market does not exist in a vacuum, but in a complex, dynamic, and highly local environment. This perspective should help policymakers develop more tailored solutions and avoid dismantling guardrails meant to protect communities. In this week’s deep dive, we digest the work of Sitaraman and Serkin and discuss its relevance to Maryland’s housing crisis.
Zoning
The authority to regulate how land is used (land use) is one of the core functions of local government in Maryland and one of the most powerful tools of government generally. Land use is primarily guided by the comprehensive plan process, which mandates that, at least once a decade, local governments develop a plan for how and where land within their communities will be used. The decisions made within the comprehensive plan are the product of an intense, sometimes years-long, highly public process. These decisions are then implemented via zoning codes.
The General Assembly delegated land use authority to counties and municipalities in the mid-20th century, and, except for the creation of the comprehensive plan process in the 1990s, has largely left the use of this tool to the discretion of locally elected officials. By its very nature, land use decisions are a highly local and at times highly controversial subject.
In recent years, there has been national scrutiny of local government zoning decisions, largely in response to the affordable housing crisis. While, in some cases, zoning may be a barrier to development, as Sitaraman & Serkin recognized in their work, zoning more broadly is a tool meant to help shape markets. Two of the most common goals of zoning have been to balance growing density where capacity allows it and to prevent growth from outpacing the capacity of public infrastructure.
Like many issues, the role and use of zoning can be nuanced. A common critique of the authors, one MACo has raised previously, is that one-size-fits-all mandates largely miss the real barriers on the ground. Some of the biggest factors delaying development have nothing to do with zoning at all. Sitaraman & Serkin pointedly note that housing was largely not as controversial until after the 2008 Great Recession, when many nonzoning factors, the majority of which had to do with how housing is financed and how private markets function, changed in a myriad of complex but impactful ways that now hinder development.
Focusing intensely on zoning draws attention away from issues such as rising land and material costs, severe labor and skills shortages, mortgage and interest rate policy, institutional investors, motivations of developers to seek the highest profits, coordinating setting rents in markets and the use of AI, state mandates such as forest conservation, energy efficiency, sediment and erosion control, sprinkler requirements, bans on state investment in certain regions, state bureaucracy and delays on application reviews and approvals, inconsistent application of regulations, all of which contribute to the lack of affordable housing and are entirely disconnected from zoning.
A Wider Lens
In their paper, Sitaraman & Serkin explain that pro-growth advocates largely put forward solutions that call for deregulation, liberalization, privatization, and fiscal austerity, i.e., by removing government interference, private markets produce better results. The underlying assumption is that if not for government interference, the housing market would be both capable and willing to meet every demand and fill every gap. This assumption overlooks the fact that markets do not exist in isolation, nor are developers motivated to rectify deficiencies in public goods.
To challenge this assumption, Sitaraman & Serkin argue that policymakers need to do a better job of establishing rules and expanding tools to channel the energies of market actors toward desirable outcomes. The problem is not that there are rules, but instead how the rules are written and implemented.
“. . . we need to build the housing market we want to see, not assume it will miraculously appear from the benevolence of financiers, developers, and landlords. Increasing the supply of housing and ensuring housing affordability requires market-crafting and market-shaping, not abdicating responsibility for—and regulatory control over— land use decisions. This point may seem simple, but it is at best unsaid, perhaps unrecognized, and at worst rejected in housing policy debates.” (Sitaraman & Serkin, Page 12)
Policies to Consider
Sitaraman and Serkin propose a thought-provoking list of ideas for policymakers to consider, which are outside the current realm of conversation. Below is a synopsis of suggestions that are likely to find some level of success in Maryland.
For State Policymakers:
Standard Setting for Modular Construction – An important part of the Housing Expansion and Affordability Act of 2024 was to allow modular construction in any area zoned single-family. The General Assembly can take another step forward by requiring the state to adopt standards for modular construction, thereby allowing for greater predictability and ease of approval.
Workforce Development in Construction and the Building Trades – One of the biggest challenges nationally is recruiting enough laborers and skilled workers to build new units. The state could collaborate with community colleges to expand construction workforce programs, thereby growing the necessary labor supply.
Invest in Infrastructure – One of the biggest catch-22s of housing is the need for infrastructure. Impact fees, which are fees borne by developers, raise the cost of units and are largely insufficient to fully cover the cost of infrastructure expansion. Costs for new development borne by local governments are likely to see resistance from residents who do not wish to have higher taxes. Only the state and federal government can “break this zero-sum game”, by spreading costs through direct investment. The General Assembly could fully restore the county share of highway user revenues and more aggressively invest in local infrastructure.
Taxes on Second Homes – The state can authorize counties to levy special taxes on communities with an abundance of second homes or those owned by investors. Second homes make housing more expensive for primary residents, even if the owners consume fewer public services. An alternative to raising property taxes on second homes may be to stratify the transfer tax on non-owner-occupied homes instead, a policy that would encourage the same behavior but could be less politically sensitive.
Taxes on Undeveloped Land – Certain regional and national developer firms, as part of their business model, purchase and hold land in a market, and then wait to develop that land until they believe costs have reached a certain level. Many of these firms may wait longer than smaller, local companies to build, and often wait even though there is an immediate demand for affordable housing in that community. To discourage this practice, the state can authorize counties to levy an excise-style tax on undeveloped land near major infrastructure or in urban areas.
Ban Algorithmic Pricing in Rental Markets – The firm RealPage has been at the center of a controversial practice of helping landlords fix market prices by setting rents. The General Assembly could ban algorithmic pricing in state rental markets and ban price consulting when firms work with more than one client.
Establish Landlord Registries – MACo championed this idea of landlord transparency as part of the 2024 legislative initiative. Negative behavior by landlords, or even total abandonment of properties, can go unreported or unaddressed due to the inability to reach the true property owner. The General Assembly can address this issue by creating a state registry, where all landlords, including those operating as LLCs, must register and provide regularly updated contact information.
Institutional Investor Free Zones – Particularly in the single-family and multi-family markets, institutional investors have been playing a larger role in buying and renting units. These units often have higher turnover and lower quality, while also pricing out families looking to purchase a home in that community. The General Assembly could authorize local governments to establish institutional investor free zones where large corporations are prohibited from owning properties.
Limit Authority of Homeowners Associations – Some homeowners associations (HOA) allow for covenants that are more restrictive than local zoning. These covenants effectively override local policy, are more difficult to change than zoning codes, and are more resistant to public pressure. The General Assembly can delegate authority to local governments to preempt HOA covenants that are more restrictive than local zoning codes.
For County Policymakers:
Pre-Approved Building Designs & Pattern Books – Building codes can be challenging to navigate and vary by jurisdiction. Counties can adopt pre-approved designs for modular housing, which, if used, satisfy building code requirements. For jurisdictions with limited capacity or expertise, the state can offer model designs for local governments to adopt.
Density Minimum Zoning – As most zoning sets some minimum regulation related to construction and, at times, limits on density, local governments may wish to use zoning to encourage the inverse and establish a minimum amount of density in certain regions. In high-demand areas, developers often reduce project density to maximize profits. Density minimums would function to ensure that development is required to provide a number of units to ensure each project adequately adds to the supply.
Maximum Home Size Zoning – For the past several decades, the size of single-family homes has expanded greatly, decreasing the total number of units per acre. By establishing maximum home sizes in certain areas, local governments can limit the development of McMansions and further encourage developers to produce smaller, more affordable units.
Primary Residence Zoning – Similar to the second home tax discussed above, zoning regulations may also be used to ensure that homes are meant to be used as a primary residence. This could be achieved by redefining what constitutes a “permissible use” and narrowing that definition only to include a primary residence. Counties could tailor policies to grandfather current secondary homes, further regulate use as a short-term rental, and allow secondary homes as a conditional use, and apply additional stipulations.
Minimum Occupancy Zoning – Another alternative would be to implement minimum occupancy zoning, requiring properties to be occupied for a minimum number of days per year. Similar to primary residence zoning, this would encourage units not to sit vacant for an extended period.
Conclusion
Sitaraman & Serkin‘s Post-Neoliberal Housing Policy underscores that while zoning is a part of the housing puzzle, over-focusing on that piece has meant that less attention has been paid to the broader picture. If zoning in Maryland were to be abolished overnight, many of the pervasive problems of housing affordability would likely persist, if not worsen. Instead, Sitaraman & Serkin offer a new lens within which to consider actions to influence market actors to produce more affordable units, including zoning. While housing will remain a complex and long-term issue, this work provides an important redirection of the conversation, allowing stakeholders to move forward with solutions that drive results.
