Affordable Housing Crisis or Shortage?: Reconciling Legal Scholarship with Free Market Solutions Over the Use of Eminent Domain for Economic Development

Abstract

Throughout the United States, low-income families are having an increasingly difficult time finding an affordable place to live. Due to high rents, static incomes, and a shortage of housing, local communities, particularly in urban areas, are struggling to fight off this wave of decline and displacement. Currently in the U.S., an estimated 12 million families are now spending more than half of their income on rent. According to Federal Guidelines, “[f]amilies who pay more than 30 percent of their income for housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation, and medical care.”A large reason for this overspending by low-income families is that the supply of affordable housing is shrinking. Landlords and tenants both are adding to the affordable housing problem as “all sides are being squeezed.” Today, most new construction on rental housing is for the high-end market, “not for low and middle-income families.” So while the problem is clear, the cause of the problem is anything but.This note seeks a better understanding of the current housing problems plaguing local communities around the United States. Whether it is attributable to a crisis of societal construction or a shortage in the supply of affordable housing, this note attempts to reconcile current legal scholarship on local government initiatives, and economic free market solutions to lower barriers.Part I of this note examines the historical background of government initiatives to promote local development primarily through the mechanism of eminent domain. Frequently one of the first tools pulled out of the local government toolkit, eminent domain has evolved over the past century along with a shroud of controversy over its use. Part II details the current problems associated with local governments’ use of eminent domain, particularly regarding its effectiveness (or lack thereof) in accomplishing the government’s intended policy. Part III observes many of the other incentives local governments are using beyond eminent domain and examines their effectiveness in redeveloping their communities for all classes of residents.Part IV reviews current proposals of legal and government-side solutions including “inclusionary” eminent domain, Community Benefits Agreements (CBAs), and Community Development Corporations (CDCs). Part V then proposes alternatives to these regulatory proposals through market-oriented solutions based on increasing the overall supply in the market through deregulation of the zoning and permitting process. Exploring case studies in: Durham, North Carolina: Atlanta, Georgia: and Anaheim, California, this note will make the case that the solution to creating more affordable housing can be found in a reconciliation of both the legal/government and market-based proposals. Part VI offers this reconciliation and provides a comparative study of a proposal first implemented in Rotterdam, Netherlands, and its potential application to local governments in the United States. Lastly, I will conclude this note by describing how local governments should help alleviate the affordable housing problem in light of the reconciliation of government and market-based solutions.