Moves to a more rules-based system in the USA have increased the supply of new homes.
There have been several changes in the USA in recent years to attempt to make the planning system more rules-based to introduce greater certainty for developers and residents. The federal system means that while the end goal has been similar, the approach taken has been different. This blog summarises the experiences seen in California, Oregon and Montana and sets out what this means for reform in the UK.
In many ways, California resembles the United Kingdom. Though it has a zoning system – land is geographically divided into allowed uses – its system of plans, targets and regulations create a de facto discretionary permitting process. And like the UK, it has a property tax system that disincentivises growth. The result is that many municipalities refuse to allow building, making California the most expensive state for residential property in the mainland US.
Efforts to reform the system have been underway for years. Some have failed, like attempts in 2018-2020 to pass a bill that would have legalised millions of homes near transit stations. But there have been a number of successes. One was the bills passed 2016-2017 that removed accessory dwelling units (ADUs) – essentially ‘granny flats’ – from discretionary permitting. This granted all homeowners the right to add a small extra dwelling to their plot provided it complied with certain rules. Despite being a new product and requiring financial innovation, ADUs have become almost a third of total units permitted. Figure 1 shows the rapid increase in ADUs since 2016.
Source: FRED St Louis CABPRIVSA; California Department of Housing and Community Development APR
Another was the laws passed in 2016-2023 have raised planning targets; the 2023-2031 statewide target was raised 250 per cent to 2.5 million units and some local targets by more than 1,000 per cent. And a 2017 bill empowered California’s planning body to implement a ‘builder’s remedy’, allowing it to suspend most zoning and permissions in areas refusing to plan.
However, delivering more development is not the same as planning for it. Anti-housing local authorities have used their superior responsiveness and information to subvert or openly refuse to obey the state plan. There are also problems with plan enforcement mechanisms. While builder’s remedy will likely achieve results as legislators continually strengthen it, it is a new and uncertain process, so few developers are willing to risk submitting applications. As Centre for Cities has shown in the UK, builders require a stable and rules-based system from the government to build at scale.
For these reasons, setting state-wide rules has so far proven superior to managing local rulemaking. A comprehensive planning system can be made to work, but it requires stripping municipalities of their authority if they refuse to plan.
Oregon’s system is much like California’s, with the addition that, like England, its cities are surrounded by green belts. Recent changes have improved on California’s model in three ways.
First, Oregon overrode local control to a greater extent. A 2019 bill forced municipalities to legalise by-right development of two to four units on a single-family plot or accept a state-written zoning code.
Second, Oregon’s planning body is more powerful. Rather than trying to micromanage municipal decisions, a 2023 bill empowered the Department of Administrative Services (DAS) to enforce a model zoning code. In addition to pre-emption, the DAS has powers like investing in infrastructure. DAS will regularly audit municipal codes to identify specific barriers to housing and unlike in California, these audits are to be conducted on a predictable timetable.
Third, Oregon is making its green belt allocation more flexible. A 2023 bill authorised the governor to free green belt land for semiconductor manufacturing. Municipalities are no longer allowed to escape housing commitments by adding green belt. And a commission has been empowered to reallocate green belt land and supervise green belt swap deals between municipalities.
While the previous examples have similarities to the UK, Montana shows what is possible when legislators commit to a rules-based system.
Montana’s reforms have been simple, rapid, and imaginative – its slate of reforms was drafted and passed in six months. One four page bill doubles the capacity of Montana’s single-family zones. SB382, the ‘YIMBY Omnibus’ bill, frontloads public consultation on municipal zoning and permits subsequent development by-right. It innovates by creating a menu of fifteen measures – such as legalising single-room occupancy buildings or lifting zoning around transit – and obligates municipalities to implement at least five.
Rather than being controversial, these reforms have enjoyed support from the state’s heavily conservative legislature, the legislature’s left-wing minority, and a wide variety of community groups. Montana’s pro-housing coalition is characterised by conservative localism and concern for property rights. Nevertheless, they built a coalition on a common desire to reduce prices.
Not all of these US reforms can be copied exactly – unlike the UK, the US has far more land and already has zoning codes, which make it possible for simple changes to unlock big increases in new homes. However, they offer important lessons for housing policy and planning reform in the UK.
First, improving housing outcomes requires planning reform from a body above local authorities. In the UK, this means Parliament needs to set more of the rules of the planning system, and local government should apply those rules locally.
Second, in the US, state governments have stripped powers to block homes from municipalities and created rules-based systems to guarantee development rights once clear conditions are met. These rule-based systems have increased the supply of land for housing and allowed that land to be developed more intensively.
And third, the most successful reforms create or build on a flexible zoning system. Higher-tier authorities set the overarching categories and allow local authorities, with supervision, flexibility when applying them. Local government should not be excluded from making decisions relevant to their communities, but they should not be able to decline growth entirely either. It is possible to offer local authorities a menu of options within a rules-based system, but they must order from the menu.
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