What Trump’s Tariffs Can Teach Us About Housing Permitting

Or: why do we have so many freaking “variances”?

“These countries are calling me, kissing my ass, they are dying to make a [trade] deal… ‘please please sir let me make a deal, I’ll do anything, I’ll do anything sir.’”

President Donald Trump

Let’s take it as a given that Trump, who prides himself on making deals, enacted his now-paused tariffs as a negotiating position. With this pause, we now have another 90 days of behind-closed-doors negotiations.

It’s one of his common tactics: To start with a position that other countries or companies find untenable, and count on them to come kiss the ring, offer concessions. This strategy sets Trump up to be personally appeased. At least that’s what Secretary of the Treasury Scott Bessent said on Wednesday when he announced that Trump would be “personally involved” in talks to do just that. “Each one of these is going to be a separate, bespoke negotiation,” he added.

To anyone who has watched a city council debate a new housing proposal, those words should have sent shivers of recognition down your spine. Because “separate, bespoke negotiations” are how most large developments get approved — or disapproved — in cities and towns around the country.

So what can the Art of the Tariff teach us about housing?

As it turns out, a lot.

I pine for a time housing permitted is boring and standardized. In a saner world, there would be rules (called zoning) that are written down and clearly enable housing to be built. A developer would propose something that fits the criteria and then build it. This would be a reasonable, normal way to do it. And in some places, that’s even how it works some of the time.

But as you probably know, most cities have deeply restrictive zoning codes (explore them in the ever-growing National Zoning Atlas). And zoning is just the tip of the iceberg. Cities have a complex web of regulations, like “floor area ratios” and “parking minimum requirements,” on top of restrictive zoning that often bars multifamily housing.

Most cities treat zoning as the beginning of a negotiation. Zoning is so restrictive, so obviously impossible to use as written, that planners and city councils have a process where developers beg for changes. After months of negotiations, “benevolent” planning commissions and city councils will offer zoning concessions to those who have successfully fought for their favor.

Smart, well-connected developers become experts at navigating these formal systems with informal practices. They know which community groups need to be met with. They know which city council members will need to be shown how the project benefits their district. They learn to bundle sweet Community Benefit Packages with beautiful presentations about their community-serving amenities. These elaborate negotiation games create delays, increase costs, decrease units and height, and, in the end, can lead to abandoned projects. And it creates a much smaller industry of savvy developers and consultants whose competitive advantage is their deep knowledge of who’s back needs scratching.

It’s hard to know exactly what causes decisions to be made, and that makes everyone desperate to be as close as possible to the capricious decision-makers. (Remind you of anyone?)

Sure, we might let you build a new apartment building, but have you considered donating to the local parks fund? How about some money for the buses? What about building a little extra space for a politically-favored nonprofit to have an office — and what about not charging them very much rent?

When the approval process turns into an elaborate negotiation, local governments can ask for all kinds of side-payments. And, by definition, these side-payments are awesome things that everyone in the community loves! One person’s coalition-building is another’s exclusionary housing policy.

If you see new housing as a burden that harms the existing community, it makes sense to force these negotiations. Check out this adorable and compelling video on the topic from a group in Somerville, MA:

Who doesn’t love this stuff?!

But instead of having clear set rules about what we require of developers, these lengthy processes ends up giving leverage to whoever can jam things up the most. And we know that this process ends up benefitting whiter and wealthier citizens. The uncertain and inconsistent decision-making process allows for the “extraction of benefits,” which is why so many city planners and residents love it. After all, who doesn’t like putting the squeeze on your perceived enemies?

But the cost of this extraction process is high. Bespoke negotiations drives up the cost of housing and slow down production. As a 2016 report by the American Planning Association put it, “discretionary approvals are time-consuming and costly, and discretionary review processes often culminate in uncertain, inconsistent, and unpredictable decisions.” One study found that by-right projects were permitted 28% faster than discretionary projects. Another argued that “a key driver of higher housing costs in the state is the development costs associated with lengthy entitlement processes. California’s entitlement process is unusually complicated and cumbersome: the permitting process for new development in coastal communities in California takes a third longer than in the average American city.”

Instead of doing the politically painful thing of taxing current residents and having public debates about how to spend public money, this sidebar process allows for “free” benefits that appear to be picking the pockets of evil developers. But in practice, these benefits are bought on the backs of future residents.

Mega-projects are perceived to be a golden opportunity for deal-making. In Santa Barbara, California, a developer is trying to build 443 new units of housing on the site of an old Sears department store. Because the project is subject to discretionary review, city officials have lined up to complain about it, saying that the developer ought to go above and beyond the legal requirements for affordable unit subsidies and impact fees.

When zoning is deliberately too restrictive, most projects — especially large scale projects that could put a significant dent in housing supply — are kicked out of any possible by-right process and thrown into an uncertain world of endless negotiation. Over time, this incentivizes sprawl, because there are fewer people to negotiate the further out you go.

As the economy struggles, the margins developers used to have to play the negotiation game have disappeared. Decades of restrictive zoning and complex permitting had nurtured a niche community of developers who were experts in negotiation and community engagement. But as costs rise, even they have hit pause on projects in cities like San Francisco, Los Angeles and more because they no longer have the wiggle room to play the negotiation game. And by the way, this isn’t a coastal, blue-state problem. Oklahoma and Illinois, just to name two examples, have some of the very same problems that California has.

Beyond the normalized, warm-and-fuzzy corruption of Community Benefit Packages, the open-ended nature of these negotiations and the arbitrary decision-making means that payoffs are inevitable. For example, Los Angeles City Councilmember José Huízar was arrested in 2020 for allegedly taking $1.5 million in bribes to support real estate developers.

How do we get real estate developers to stop attempting to work the system? Make it predictable, uniform, and boring!

If we want developers out of politics, we need to take the politics out of development.

We ought to zone for the housing we need. The rules should be clear and built to achieve the goal of an accessible, affordable community. Once that zoning is in place, cities have to allow housing to get built without separate, bespoke negotiations. That's no way to run a city.