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Imagine if the Inflation Reduction Act had included the housing supply provisions from the House-passed Build Back Better Act. Based on the magnitude of the investments, the package would have provided tens of billions of dollars to build or rehabilitate millions of units of housing. That resulting influx of affordable housing would have dramatically increased the supply of affordable units and therefore had the potential to help millions of Americans save on rent in a period of record rent growth. 

But similar to other recently enacted infrastructure programs, these housing supply investments would have contended with federal requirements that would have limited the number of resulting units and delayed their completion. Environmental reviews under the National Environmental Policy Act (NEPA), add cost to and delay housing projects that rely on federal funds, but little attention has been paid to how to reform these federal requirements to support increased housing production. This paper examines how NEPA is applied to federally-supported housing projects and proposes reforms that would make it faster and easier to build while maintaining key environmental safeguards. It offers two main strategies: 

1. Limiting the programs and projects subject to NEPA review. This paper proposes exempting HUD’s main supply grants from NEPA on the grounds that HUD funding does not constitute a “major federal action,” a key test to determine whether NEPA should apply. In addition, the paper proposes excluding infill developments from environmental review, effectively nationalizing a recent statewide reform in California.

2. Streamlining the review process for projects still subject to NEPA. The paper also offers smaller tweaks that could be implemented in addition to, or in lieu of, the larger reforms. These include shrinking the scope of NEPA reviews, revisiting the “choice-limiting action” standard that prevents projects from moving forward until environmental review is complete, and expanding existing categorical exclusions to include a greater swath of projects.

While NEPA reform alone will not lead to a surge of federally-supported housing units, it is a critical part of a larger strategy to make federal programs more effective by making them easier to use, enabling taxpayer dollars to go further, both under current funding levels and if Congress were ever to adopt a spending package on the scale necessary to meaningfully address the housing shortage.