Another regional vs. local protest continues in Indiana. Lawmakers there are poised to strip cities of much power over where and how new housing is built, creating a conflict over who is in charge of local growth and — especially — housing development.
A proposed Indiana bill would change the way communities across the state approve housing. If passed, the Statehouse would make important decisions, subjecting local planning commissions and councils to much-reduced scrutiny due to neighborhood opposition.
The effort reflects a growing pattern of states versus zoning contests in places like California, Connecticut, Texas, Colorado and Florida, where state leaders have rejected zoning to encourage new housing construction as a housing affordability strategy.
In those states, governors and elected legislative representatives argue that resistance to condos, duplexes, and tiny houses has exacerbated the acute shortage by impeding new housing development. In response, those state-level officials passed laws that overrode city planning procedures.
Local officials, in turn, warn that the state’s broad mandate can be counterproductive by ignoring realities such as sewers, school congestion, and neighborhood character, not to mention environmental issues and central services.
Indiana is now fully embroiled in that debate, testing the lengths to which state leaders will go to rewrite housing laws in the face of pushback from mayors, county officials and neighborhood groups opposed to development.
Why Indiana is about affordability
Indianapolis has experienced double-digit rent growth during the COVID-19 crisis, even as Sun Belt states and cities post dramatic rent and home price gains.
Supply and construction mark the difference.
During the pandemic, the Sun Belt metro attracted investors and domestic migrants chasing location, warmth, affordability and the flexibility of working remotely. Builders responded with unprecedented construction, leaving many Southern markets oversupplied when immigration slowed.
Indianapolis and the rest of the region held firm. The construction remained flat. A lack of new supply combined with continued demand has accelerated house price and rent growth.
Central Indiana has avoided the extreme home price increases experienced by other Sun Belt markets. It also avoided the price drop those markets saw as demand waned. Zillow recently ranked Indianapolis at the top of its list of buyer-friendly markets. Still, home prices have risen faster than wages, creating an unaffordable demand for workforce housing, according to housing advocates and business leaders.
“Indiana, which has long been an area of affordability, has been very fortunate” because of the disparity in affordable housing, Sara Coers, Indiana University’s director for Real Estate Studies, wrote in a letter. Indiana Business Review. According to Coers, low-wage workers are the most affected.
That part is what lawmakers want to address in Indiana and elsewhere.
The Indiana Statehouse is cracking down on local ordinances
The proposed legislation follows a well-trodden approach used by other states to encourage more housing supply. House Bill 1001 would declare several types of housing as permitted uses “by right,” allowing approval without a public hearing in most residential and commercial areas.
Single-family homes, duplexes, townhomes and condominiums will automatically be approved in residential districts. Certain mixed-use and multifamily projects can move forward in commercial zones unless the community passes an ordinance to pull them out.
The bill also would prevent local governments from adopting multiple exterior design standards, minimum lot sizes, strict setback laws and minimum parking ordinances unless they specify otherwise through local ordinances.
Supporters of the proposed state law say the laws add tens of thousands of dollars to the cost of new homes. They argue that those costs have contributed to the estimated shortage of tens of thousands of newly developed residential properties across Indiana.
What local officials say
Local leaders told the House Local Government Committee at a hearing in mid-January that the proposal goes too far, removing basic local planning tools and shifting all risks to neighborhoods.
“Determining minimum development standards should not be a federal decision,” said Clarksville City Manager Kevin Baity.
Baity argued that local officials are “low boots” and are already measuring accessibility and public behavior. He warned that limiting parking requirements could clog narrow streets with traffic and prevent access for fire trucks and transport workers.
“Determining the minimum standards of development should not be a decision of the state,” he said. Some mayors and planners have also expressed concern about losing the ability to protect parks, infrastructure and other public services as growth accelerates.
Indianapolis Democratic Rep. Blake Johnson questioned whether the state is trading off long-term building quality for short-term cost savings, saying lawmakers must balance durability and price. Even after committee amendments rolled back some multifamily provisions following public testimony, critics said the bill, HB 1001, as written, “continues to steamroll control” the area in the name of speed.
Support from business and real estate attorneys
Business groups and housing advocates argue that the bill is an outdated response to the housing shortage that is straining Indiana’s labor market.
Camille Blunt, vice president of government affairs for the Indiana Chamber of Commerce, told lawmakers that the changes could lower development costs, increase housing supply and improve the predictability of private investment. He called housing policy “labour policy.”
Gina Leckron, state director of Habitat for Humanity of Indiana, said local laws cost more working families out of homeownership and that the state needs to “start building homes for the workers we have right now.”
Miller framed HB 1001 as a way to remove “unnecessary regulations” and make it easier, faster and cheaper to build entry-level and so-called “middle-class” housing types.
Riding on housing affordability is a national trend
Indiana’s debate comes amid a broader shift in which state officials have increasingly gone beyond the local area to boost housing production, from New England to the Sun Belt. In some regions, that pressure has disrupted traditional political lines.
The Democratic governor has signed a House reform bill that Republicans opposed after initially opposing it. Republican-controlled Florida has empowered state agencies to pursue local complaints. Leaders in Texas, California and Colorado followed suit. The move in all cases prompted warnings of a loss of domestic law.
Miles’ Law, which states that “where you stand depends on where you sit,” seems to always apply in the real estate debate. Governors and legislative leaders are now planning land use reform as a core economic policy. They argue that housing supply is important to attract tenants and stabilize prices.
Indiana Republicans are betting that voters concerned about housing costs will embrace the state’s new powers over how homes are built.
