This paper argues that to make substantial progress in addressing these difficult challenges, the housing community needs to look beyond the normal housing policy levers to seek reform of the federal transportation funding system. Congress is presently in the process of debating the reauthorization of the federal transportation programs that provide over $50+ billion annually for transportation planning, maintenance, and infrastructure. This legislation could serve as a vehicle for better aligning housing and transportation policy in a way that advances core national objectives for transportation reform – especially reductions in greenhouse gas emissions and improvements in energy security by increasing the share of the population that could be efficiently served through public transportation – while also providing the “game-changer” needed to make substantial progress in meeting the nation’s housing challenges.

The most important change needed is a modification in the way that transportation funding is allocated to provide strong financial incentives for states, metropolitan areas, and local communities to: 1) Increase the compactness of residential development; 2) Expand the availability of homes affordable to families with a mix of incomes near public transit, job and retail centers, and other essential destinations; and 3) Better coordinate affordable housing, transportation and workforce policies. These changes could be transformational. If local communities knew they had to make substantial progress toward these objectives to achieve their full allocation of federal transportation dollars, they would have a strong incentive to do so. In many communities, this could help break down traditional barriers to affordable housing development.