Happy Tuesday, and welcome to another edition of Rent Free. This week’s stories include:
- The Trump administration’s little-noticed bid to connect housing voucher funding to local supply-restraining policies.
- Another court ruling blocks the administration’s attempt to divert federal homelessness dollars from jurisdictions that prioritize a “housing first” approach.
- North Carolina’s Legislature approves a diluted version of reforms allowing residential projects in commercial zones.
The Trump Administration Proposes Tying Voucher Funding to Land Use Regulations
In a regulatory move that slipped under the radar, the U.S. Department of Housing and Urban Development (HUD) floated a plan to trim federal housing voucher allocations for areas whose land-use rules push rents higher.
The Housing Choice Voucher program, commonly referred to as Section 8, constitutes HUD’s largest line item. A spending package approved earlier this year appropriated about $38 billion for the program. The funding passes through to local housing authorities, which then issue vouchers to eligible low-income families to use toward privately owned rental units.
To ensure that voucher values keep pace with mounting rents, HUD uses its own metric of local inflation and rent levels to adjust how much funding each housing authority receives.
Back in July, HUD released a notice in the Federal Register outlining a subtly revised approach for calculating these inflation-based adjustments for FY 2026 allocations.
Beginning in FY 2027, the agency proposed to begin incorporating the effect of local land-use regulations on rents when determining each housing authority’s voucher allocation.
HUD indicated the goal was to avoid directing more funds to places where rent increases are being driven by local policy constraints on new housing supply.
The notice cites “land use policies, permitting practices, and other local regulatory policy factors that influence new housing supply” as potential inputs for voucher allocations.
Both housing authorities and affordable housing advocates pushed back against the proposal.
“Adopting this change would penalize those who have no control over local land-use decisions, particularly families with the lowest incomes in high-cost areas. Likewise, public housing agencies (PHAs) generally do not set local land-use policies,” reads the comment letter submitted by the National Low Income Housing Coalition and signed by several other affordable-housing allies.
The letter also warns that the policy’s vagueness regarding the factors HUD might weigh could enable the department to withhold funding from jurisdictions for a broad range of policy disagreements.
Alex Armlovich, a housing program officer at Coefficient Giving, filed an individual comment offering conditional support for the proposal.
His letter cites studies showing that HUD’s upward recalibration of voucher allocations to supply-constrained areas tends to fuel higher rent inflation in those same locales.
The policy-neutral inflation calculations could be seen as self-defeating or circular: increasing voucher funding raises rents, which then necessitates further funding.
Armlovich also argues that tying voucher funding to land-use regulation could create an indirect incentive to roll back regulations that raise costs.
Inclusion of those land-use policy considerations in voucher allocations could “plausibly raise the total number of households served by Section 8 over the long term” by nudging policymakers toward supply-friendly reforms and/or redirecting funds to jurisdictions where additional vouchers do not spur rent increases, he adds in the letter.
Over the past several years, the federal government has run a few small-scale “YIMBY grant” pilots that linked federal housing and transportation subsidies to local land-use reforms to spur supply-friendly changes.
The recently enacted 21st Century ROAD to Housing act creates a new $200 million Innovation Fund to reward jurisdictions with grants for pro-supply policy reforms.
Tying voucher funding to local regulatory shifts could be a far more powerful incentive, given the much larger pool of money at stake.
Court Blocks Trump Administration’s Funding Shift Away From ‘Housing First’
Once again, the Trump administration’s effort to move homelessness funding away from a “housing first” framework has been halted by the courts.
Housing first emphasizes placing homeless individuals into permanent housing before addressing other underlying challenges such as addiction or mental health issues.
A central aim of President Donald Trump’s second term has been to transfer federal dollars from “housing first” jurisdictions toward states and locales that emphasize public order and swiftly moving people off the streets into temporary shelter.
To that end, the administration has repeatedly sought to reform the $4 billion Continuum of Care program (the government’s primary homelessness funding program) in ways that shift funds away from housing-first jurisdictions.
As Politico reports, those efforts have repeatedly been blocked by the courts. The latest ruling from a U.S. district court judge in Rhode Island determined HUD failed to follow the Administrative Procedure Act’s notice-and-comment requirements when reshaping the program.
North Carolina Passes Residential-in-Commercial Reforms
The North Carolina General Assembly has given final approval to a regulatory reform measure that encompasses several major housing provisions.
As this newsletter noted last week, a feature of Senate Bill (S.B.) 445 would permit builders to place housing in commercial and light-industrial zones by-right—meaning local governments would approve such developments without requiring public hearings or discretionary decisions.
Localities would be required to permit these structures to reach a minimum height of 60 feet. Similar residential-in-commercial reforms have passed in Florida and Texas, and they have been shown to enable new housing supply.
The version of S.B. 445 ratified by the Legislature this past Thursday was toned down. Earlier drafts would have extended the zoning reforms to cities with at least 50,000 residents located in counties of at least 275,000 people.
The final form of S.B. 445 applies only to cities with populations of 80,000 or more in counties with at least 1 million residents. In practice, that confines the law to two counties, Wake County (home to Raleigh-Durham) and Mecklenburg County (home to Charlotte).
Quick Links
- Rent control may be gaining ground globally, but it faces a setback in northern Canada. The Yukon territorial government says it will eliminate rent caps next year.
- “Potterheads” in the United Kingdom have persuaded an energy company to reroute an undersea power line to avoid passing through the fictional resting place of Dobby the elf from the Harry Potter series.
- Portland, Maine’s zoning authorities moved to prohibit new gas stations.
- Washington has enacted emergency eviction restrictions in response to wildfires near Spokane that have displaced thousands.
