FREOPP Policy Memo - State Level Reforms - Senator Reynolds Word.docx

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OHIO CAN LEAD THE NATION IN
HOUSING REFORM
State policies to end housing inflation
Prepared for
Senator Michele Reynolds
June 9, 2023

FREOPP.org Housing reform | Senator Reynolds | 1
What is the problem with housing and how do we solve it?
Fortunately, the answer is simple: lack of supply in the face of rising demand. Noted
economist Milton Friedman often said that inflation is “always and everywhere” the result
of too much money. That is, as employers higher more people and population grows,
demand for housing grows with it. If housing is scarce, then its price begins to rise, and this
means people with less money can’t compete and get priced out of the market. The
immutable law of supply and demand applies to housing just as it does to any other
consumer product.
The answer to housing price increases is either to reduce jobs and population growth or to
increase production. The answer is definitely not more money, yet this is at the core of
almost every housing proposal offered at the federal, state, and local levels. The argument
is, “we need more affordable housing” when it should be “we don’t need more affordable
(subsidized) housing, we need more housing so that it is affordable.” The way to
accomplish this from a state policy level falls into two categories: 1) things not to do and 2)
things to do.
What not to do
 Rent Control – Price controls always increase inflation by disincentivizing
production. If housing producers can’t increase prices in the face of rising costs, they
can’t pay their loans and mortgages. This means investing in housing becomes risky
and money will go elsewhere, so this aggravates underlying scarcity. Some units are
rent controlled but none are available. Cities with rent control—think New York,
San Francisco, or Santa Monica—always top the list of the most expensive cities.
Solution: Preempt local cities from creating rent control.
Status in Ohio: Done.
Read More: “How Rent Control Makes Housing Less Affordable,” by Roger Valdez,
FREOPP.org, May 20, 2022.
 Inclusionary Zoning –That taxing something will discourage its production and use
is a common-sense notion. A mandate for housing providers to include rent-
restricted units in rental housing projects or pay a fee in lieu is essentially a tax on
new housing production, thus discouraging that production. Worse, when rents can
support the fees, the residents ultimately pay the fees through higher rents,
resulting in local renters adding local dollars to federally funded projects. Cincinnati
has been flirting with inclusionary zoning as it gains popularity.
Solution: Preempt local cities from imposing inclusionary requirements (Tennessee

has done this).
Status in Ohio: Some cities are considering this option.
Read More: “It Is Not Too Late For Cincinnati To Adopt Housing Density Measures,”
by Roger Valdez, Forbes.com, April 6, 2022, and ““Esta Es La Mordida;” Mandatory
Inclusionary Zoning Is Bribery,” by Roger Valdez, Forbes.com, October 2, 2019.
 Banning Short-Term Rentals – Local governments provide various excuses for
trying to limit or ban short-term rentals ranging from parking concerns to worries
about who is renting them. Additionally, some argue that short-term rentals take
rental housing away from local residents. Several cities and towns in Ohio are
moving against short-term rentals for these reasons but also because unions
representing hotel workers would rather have people stay in their hotels. However,
for many families, short-term rentals generate money to supplement their income,
and the rentals often are one way to more affordably house nurses and other
temporary supplemental workers that would be more expensive to put up in
traditional hotels. More housing of all kinds in across Ohio is the proper answer for
scarce rental housing, not shutting down an important segment of housing that is in
demand.
Solution: Preempt local governments from limiting short-term rentals.
Status in Ohio: House Bill 563, set to limit local regulation, was voted out of
committee but didn’t move any further.
Read More: “Housing Scapegoat: Short Term Rentals Aren’t The Problem,” by Roger
Valdez, Forbes.com, October 6, 2022.
 Source-of-Income Discrimination Ordinances – Housing authorities are
frustrated because households that qualify for Housing Choice Vouchers (Section 8)
often struggle to find places to use their vouchers. Reflexively, some cities blame
discrimination against people with vouchers and pass ordinances requiring housing
providers to accept vouchers. Columbus passed just such a law in 2021. Two things
are important to note. A HUD study found that the biggest factor for housing
providers who decide not to take vouchers is the bureaucratic hassle of inspections
and slow payment. If these were eliminated, most housing providers would be
happy to take vouchers. Second, no jurisdiction that has enacted such laws—such as
the City of Seattle and State of Washington— has seen much improvement in
voucher use after passage. HUD’s Office of the Inspector General suggested
incentives, not penalties, to improve voucher-qualified households’ efforts to find
housing. In the end, to avoid being forced to take vouchers, housing providers will
have to raise rents, exactly the opposite of what will help people with less money.
Solution: Preempt local governments from source-of-income rules and laws,
require fewer inspections, and create more incentives (see below).
Status in Ohio: The United States Civil Rights Commission held a hearing on this

topic last December with the intent of possibly encouraging more local legislation.
Dayton is also considering a law.
Read More: “Today, The Section 8 Voucher Program Is Missing Opportunities,” by
Roger Valdez, Forbes.com, February 13, 2023.
 Allow More Local Tenant/Landlord Laws –Generally, adding more rules and
requirements to regulations of contracts between tenants and housing providers is
done in the interests of preventing evictions. These onerous rules include: banning
credit checks and background checks; paying for eviction legal defense; requiring
housing providers to accept payment after an eviction has been filed;, requiring
housing providers to provide “just cause” for evictions; and limiting deposits and
late fees. All of these incrementally increase the risks for providers that can only be
offset with higher prices. These interventions are myriad and have surfaced all over
Ohio, including a “pay to stay” law in Dayton.
Solution: Review Chapter 5321 of the Ohio Revised Code to simplify it and
standardize those changes across all jurisdictions.
Status in Ohio: Local politicians in Dayton, Cincinnati, Columbus, and other cities
used these interventions to score points with vocal constituencies. Other ambitious
politicians are noticing the positive attention. Imposing order and predictability
would remove the temptation to pass rules and regulations that will drive-up costs
and ultimately push smaller housing providers out of cities where they are needed
the most.
Read More: “There Is No "Eviction Epidemic," Just Bad Data And Poor Reporting,”
by Roger Valdez, Forbes.com, March 28, 2019.
 Discourage Investment in Housing – The head of the Port of Cincinnati has been
on something of a spree in the last year campaigning against “real estate investors,”
especially large “out of town” investors. There has been one large apartment
development with outside owners that has been plagued with problems, and this
has been the pretext to declare war on institutional investors. The proposed
solution? The Port should buy up lots of rental housing and provide it to first-time
homebuyers and selling bonds to out-of-town investors to generate capital. Already
the scheme is running into trouble: The cost of rehabilitating the housing the Port
purchased is far more expensive than it planned, so the idea offering favorable
terms to buyers may not be possible.
Solution: It’s time for the legislature to hold hearings about the Port’s scheme and
propose legislation to rein it in.
Status in Ohio: Senator Sherrod Brown made the Port’s efforts a showpiece.
Stepping-in now could discourage other agencies in the state from trying the same
things.

Read More: “Port of Cincinnati Scheme: Sell Bonds to Investors to Stop Investors in
Housing,” by Roger Valdez, Forbes.com, May 6, 2022.
Some positive proposals
 Link Federal and State Funding to More Housing – Cincinnati Councilmember Liz
Keating offered legislation last year that would have allowed for more density in
multifamily zones. The legislation failed because of neighborhood opposition. The
legislature could incentivize reduced regulation and speed up permitting.
Unfortunately, most jurisdictions in the United States, including Cincinnati, don’t
have transparent ways of tracking permitting. However, Montana has considered
holding back subsidies until local jurisdictions demonstrate they’ve allowed as
much market production as possible.
Proposal: The legislature has oversight of the Ohio Housing Finance Agency and
could require them to establish standards for local jurisdictions to receive subsidies,
including Low-Income Housing Tax Credits. The legislature could also require
efficient use of subsidies and set goals for lower per-unit development costs.
Status in Ohio: Incomplete.
Read More: “Montana Housing Task Force Set Up Real Reforms,” by Roger Valdez,
Forbes.com, November 9, 2022.
 Make Vouchers Easier to Use – Most households that qualify for a Section 8
voucher are living and paying rent somewhere; they’re just paying too much
because their current unit does not qualify for a voucher. Current federal and state
rules require that those households hunt for a unit that qualifies. This should end.
Instead, when a household qualifies for a voucher, they should be able to apply it to
pay the rent where they currently live. We’ve suggested that the Hamilton County
Housing Authority and the City of Cincinnati use their Housing Trust Fund to pilot
this kind of program. Vouchers should be treated more like cash and have fewer
restrictions for both housing providers and residents. HUD’s Moving to Work
program allows such flexibility.
Status in Ohio: Endangered by more regulation (see above).
Proposal: Use state funds to match local dollars and vouchers to pilot a program.
Read More: “Making Housing Vouchers Easier and Faster for Tenants and
Landlords,” by Roger Valdez, FREOPP.org, April 3, 2020.
 Tax Exemptions for Rent Restricted Housing – The Ohio Community
Reinvestment Area program “provides real property tax exemptions for property
owners who renovate existing or construct new buildings.” This program could be
expanded and modeled on a program in Washington State called the Multifamily Tax

Exemption. Developers and housing providers in Washington can get a reduction in
property taxes for 12 to 15 years by restricting rents to households making 80
percent of Area Median Income or lower. The program is efficient, producing
thousands of rent restricted units and—unlike inclusion mandates—does not boost
the cost of other units to subsidize cheaper units or fees.
Proposal: Create efficient and effective incentives for lower rents.
Status in Ohio: Prospective
Read More: “Incentives More Effective At Creating Housing Than Mandates,” by
Roger Valdez, Forbes.com, September 1, 2022.
 Create a Low-Interest Loan Program for Rental Housing – Lead contamination is
real problem in many cities, including in Ohio. One group in Cleveland called CLASH
has proposed punishing property owners with the demolition of rental housing that
doesn’t comply with stronger lead requirements. This is counterproductive as it
punishes owners and renters alike. Were this policy to catch on, it would expose
many older but more affordable housing units to destruction, reducing housing
supply and thus driving up prices. The right approach is to support upgrades and
fixes for lead and other problems without passing the costs on to people who need
an affordable place to live.
Proposal: A revolving fund that property owners could tap to get low-interest loans
to improve rental housing. Condition the use of the funds on keeping rents
consistently lower.
Status in Ohio: Cities like Cleveland are toying with disastrous policies.
Read More: “Too many Fort Worthians live in substandard houses. Here’s how we
can help with repairs,” Fort Worth Start-Telegram Editorial, March 28, 2022.
 Fund a Risk-Reduction Pool – The City of Columbus is pursuing a raft of
troublesome and ultimately damaging rental housing policies. Blocking the use of a
tenant’s rental history, including evictions and criminal background checks, has
passed in other states. Such bans increase the risk for housing providers and will
result in higher rents and add a disincentive to create new housing. The City of
Albuquerque is creating a fund that “will provide support to landlords and tenants
by providing incentives, risk mitigation and assistance” to help offset risk from
residents who might have bad or no credit, a criminal record, or a negative housing
history.
Proposal: Create an easy-to-use program for local jurisdictions to offset risk for
renters who might be riskier to house.
Status in Ohio: This kind of fund would help people find housing and offset bad
policy proposals.
Read More: “Efforts in housing still leave cities in housing crises,” by Roger Valdez,

FoxNews.com, May 8, 2023.
Conclusion (and a Note on Home Rule)
The Ohio legislature has already demonstrated strength by eliminating the possibility of
local politicians imposing rent control. It should act again and just as decisively to reduce
the kind and number of bad interventions at the local level. At the same time, the
legislature can offer solutions for real solutions for real people struggling to pay for
housing in Ohio.
Ohio is in a unique position. Aggressive city councils see an opportunity to score political
points by passing onerous and bad housing policies. When housing prices continue to rise,
those councils ask the state for more money and tax credits to subsidize their bad
decisions. The Port of Cincinnati is actually using public resources to irresponsibly punish
investment in housing there.
The legislature can stand by and watch this unfold, or it can act decisively and
comprehensively to set the state’s cities in a direction that will benefit current residents
and encourage future growth. The first step is to get a solid legal opinion on how the
legislature could act within the framework of Ohio’s strong home rule. The rent control
preemption was well crafted, and a larger piece of legislation would need the same honing
and careful design.
Many resist the notion of abrogating local control. But in this case, Ohio’s cities—if left to
their own devices—will make life worse for their citizens and then spend state and federal
resources that could be used elsewhere to dig themselves out. The legislature can prevent
this by acting now and with purpose. People in Ohio need more housing, not more money
or divisive rules and inflationary regulations.
What does meaningful deregulation look like?
At the state level, there are few examples of legislation that truly and fundamentally
reforms land use and housing regulation. Usually, legislatures will remove some limits, but
then impose affordability requirements that generate subsidies and add costs that get
passed on to consumers; that’s just more inflation. Legislation that would change housing
in Ohio and the rest of the country would include the two important elements.

End Zoning as We Know It – This is a big task. Ohio is the birthplace of modern zoning
ordinances and, with strong leadership, the legislature could change how Americans think
about and create land use policy. The 1926 U.S. Supreme Court decision Euclid v. Ambler
shaped the complex land use laws and policies constraining housing supply. Building codes,
basic rules about preventing fires, and ensuring safe electrical and plumbing are daunting
enough. But in every jurisdiction in Ohio, local government puts its foot on the brake of
housing production, regulating everything from pitched roofs versus flat ,to the color of the
hardy panel. Here are some examples.
 Minimum Lot Size – Ohio is ranked 10th in a survey with a median lot size of about
10,000 square feet, with Nevada having the smallest median lot sizes, about 7,500
square feet. Lot size requirements at the local level can reduce density and thus
housing supply which can mean higher prices when demand surges.
o Texas: House Bill 3921/Senate Bill 1787 – These companion bills prevent
cities from requiring lots to be larger than 1,400 square feet. They also
prevent jurisdictions from banning small-lot developments in single-family
neighborhoods.
o Montana: House Bill 337 – This bill proposes that jurisdictions can’t
mandate a lot larger than 2,500 square feet.
Neither of these examples have passed their respective legislatures.
 Allow More Density – Nationwide, numerous efforts have been made to increase
density. Some have included mandates for more density around mass transit, while
others have pushed for more density in single-family zones. Still others have made
state laws more permissive to allow detached accessory dwelling units, or DADUs.
The problem is that legislators have typically included affordability requirements or
other limits that add costs or that cancel out the benefits of density. Two better
examples at the local level are worth noting.
Albuquerque: Housing Forward – Mayor Tim Keller has proposed a major
revision to the City’s code that would allow two houses on single-family lots,
DADUs by right, and broad height increases across the city.
Cincinnati: Modest Density Increases – Councilmember Liz Keating
proposed modest density increases in areas already zoned for multifamily
housing.
Albuquerque’s proposal is in process and Councilmember Keating’s proposal failed
in the face of neighborhood opposition, even though single-family neighborhoods

were unaffected.
Require Significant Reform for State Subsidies – Since the inception of the Low Income
Housing Tax Credit in 1986, an industry of non-profits, consultants, lawyers, and
accountants has coalesced around the credit. Additionally, other subsidy programs have
been added at the federal, state, and local level. In each case, costs for this housing have
risen and so have overall housing prices. There is only one example of a proposal at the
state level to address this.
Montana: Governor’s Housing Task Force – For the first time, a state
“contemplates tax credits, grants, trusts, loans or other incentives which would
reward local governments that have proactively implemented key regulatory
reforms.”

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FREOPP Policy Memo - State Level Reforms - Senator Reynolds Word.docx