Housing Reform in the States: A Menu of Options for 2026

Although state legislatures took unprecedented strides toward releasing the housing supply from its regulatory straitjacket in 2025, most pro-housing policies have not yet been adopted in most states.^[1] Finishing the work of restoring the right to build housing for everyone will require widespread adoption of best practices.

Rents and home prices rose sharply in 2021 and 2022 amid high general inflation and a unique postpandemic macroeconomy. That moment has passed, but few cities have found relief from the high cost of housing. Instead, higher rents and prices seem like a new normal. Voters are right to expect their elected officials to do something about this persistent problem, because it is the result of rules and regulations put in place by earlier generations of officeholders. 

Restrictive local zoning that prevents builders from meeting housing demand is the fundamental cause of America’s housing shortage. As counteractive measures, states can put guardrails around local zoning, fix building codes, and reform the processes that make land use regulation a source of frustration for so many local officials and citizens.

In this policy brief, we offer a menu of proven housing policy reform options for lawmakers around the country to consider in the upcoming 2026 legislative sessions. These reforms largely fit into four categories: 

• Reverse regulatory overreach, as Texas did in relaxing minimum lot size restrictions in major cities.
• Streamline procedures, as Rhode Island has done by requiring regulatory clarity.^[2]
• Improve legal frameworks, such as by protecting cities from antihousing lawsuits, Wisconsin-style.^[3]
• Update construction standards to enable creative solutions like the Seattle Special.^[4]

Reverse Regulatory Overreach

Cities and counties have employed their state-delegated zoning power to outlaw certain housing types or to impose costly mandates on builders for land or parking. States can roll back this regulatory overreach with legislation specifically targeting critical local impediments to housing production.^[5] The following suggested interventions would make more housing possible at a lower cost.

Option 1: Permit accessory dwelling units

Eighteen states have passed laws permitting homeowners to build and rent accessory dwelling units (ADUs), which can take the form of backyard cottages, basement apartments, or garage conversions.^[6] In California, the push to allow ADUs statewide began in 1982, but it took a recent series of laws eliminating remaining barriers to their construction, such as excessive fees, owner-occupancy requirements, and parking minimums, to really open up the market.^[7] Policymakers in other states, including Iowa and Oregon, have learned from California’s trial-and-error process and passed stand-alone bills that address many of the common barriers to ADU construction.^[8] AARP has published an excellent model ADU law as part of its effort to promote communities that are convenient for people of every age.^[9]

Option 2: Allow residential uses in commercial zones

States can pass legislation allowing residential uses on sites zoned primarily for commercial uses. The COVID-19 pandemic and the normalization of remote work have resulted in long-term office vacancies. Some poorly located retail buildings have equally dim prospects. Most commercial buildings are ill suited to residential conversion, but many commercial sites—or their parking lots—can easily be redeveloped. Turning this simple idea into a statute turns out to be tricky. A 2024 policy brief analyzes the various approaches states have taken and offers best practices for future statutes.^[10] Texas’s House Bill 840 (2025) offers a similar road map to enacting an effective policy.^[11]

Option 3: Cap minimum lot size requirements

Minimum lot size mandates present a major obstacle to entry-level housing construction, because they force builders and buyers to purchase more land than needed for a single home.^[12] State policymakers can set a ceiling on local minimum lot sizes, particularly where sewer and water services are available.^[13] Houston’s successful minimum lot size reform provides one potential model. In 1998, Houston legalized residential lots as small as 1,400 square feet, which led to the construction of tens of thousands of small-lot single-family houses.^[14] Texas and Maine enacted minimum lot size reforms at the state level in 2025, capping lot sizes at 3,000 and 5,000 square feet, respectively, where the laws apply.^[15]

Option 4: Allow transit-oriented development

Many states subsidize transit systems that have excess capacity because local zoning laws block development dense enough to support their operation. Legislatures can allow dense multifamily development in areas served by state-subsidized transit. Bills introduced in California provide one model for state-led reform to permit transit-oriented development.^[16] Colorado’s 2024 legislation provides another.^[17] But perhaps more can be learned from proven local models of zoning for transit-oriented development, including the Tysons area of Fairfax County, Virginia. In Tysons, transit-oriented planning has led to the construction of tens of thousands of new apartments and condos on land that was formerly limited to offices, big-box stores, and car dealerships.^[18]

Option 5: Limit parking mandates

On-site parking spaces, frequently mandated by cities, occupy valuable urban land and can add tens of thousands of dollars to the cost of each dwelling unit. Recognizing these costs, legislators in both Washington and Montana passed laws in 2025 to cap parking requirements for new single-family residences at one space per unit, to limit them even more sharply for new multifamily construction, and to eliminate parking requirements for buildings undergoing a change of use.^[19] Policymakers in other states can consider going further to eliminate residential parking minimums in larger geographical areas or even eliminating parking requirements entirely for all uses, as cities from Bridgeport, Connecticut, to Corvallis, Oregon, have done.^[20]

Streamline Procedures

Every builder knows that approval delays can add costs and kill projects. Discretionary review procedures also introduce bias into the approval process and invite corruption. Crafting appropriate reforms to procedural rules requires detailed conversations with city employees, builders, developers, and lawyers who know the formal and informal rules that govern building processes in each state. This variety in approach means that not all the ideas included in this section may be feasible in every state, and they will need to be adapted to fit existing institutions.

The payoff to all this research, however, can be immense. In some cases, state-level procedural reforms have had a significant effect on housing market outcomes without raising controversy.^[21]

Option 6: Require “specific and objective” approval criteria

A typical zoning ordinance provides that uses are allowed “by right,” “with conditions,” or “by special permit” in each zone. Conditional uses and special permits are often subject to discretionary votes by a council or board or to discretionary decisions by administrative staff with little or no advance guidance to assist the applicant. This discretionary system of approvals creates uncertainty and is susceptible to corruption.^[22]

To reduce opportunities for self-dealing, states can require that development approvals be linked to clear, published criteria. If an application satisfies these criteria, approval must be granted. In 2023, Rhode Island passed reforms that require “specific and objective” criteria for a variety of permits.^[23] Tennessee followed in 2025 by requiring specific and objective criteria for certain special exceptions.^[24] Washington and Montana have enacted similar restrictions on the enforcement of design review rules, which can be especially vague and open to abuse.^[25] Legislators in other states should identify confusing or discretionary land use processes and craft bills requiring predictability and clarity.

Option 7: Allow third-party reviews of building plans

Developers submit a variety of documents in their applications for permits. Backlogs or understaffing at city permitting departments can result in long delays. Many cities allow developers, at their own expense, to hire third-party reviewers—private companies or other cities—to ease the city’s workload. Third-party reviewers are subject to auditing and licensing requirements.

Some cities do not allow third-party review, however, which contributes to slower permitting processes. Florida and Tennessee are among several states that have passed laws to ensure that builders have recourse to third-party reviewers.^[26] 

Option 8: Reform protest petitions

In 20 states, small groups of neighbors can use an obscure state law, the protest petition, to block rezonings.^[27] As practiced, protest petitions privilege the interests of deep-pocketed objectors over the broader community, interfere with the ordinary process of democratic decision-making, and impinge on individual property rights. But from Texas to Massachusetts, six states have reformed or repealed their protest petition laws. Other states can follow suit to make rezoning processes fairer and to better protect property rights.

Improve Legal Frameworks

In addition to targeted interventions in zoning policy, state lawmakers have the authority and responsibility to develop an overarching land use framework that safeguards individual property rights and recognizes the importance of robust housing production to all state residents. To this end, state legislation can provide broad protections for all property owners and offer less uncertainty and greater flexibility for builders.

Option 9: Block zoning that makes existing conditions illegal

In older areas of many cities, zoning has become so restrictive that most existing buildings are noncompliant. Boston, Massachusetts, audited its own zoning and found that less than 1 percent of residential buildings in the entire city complied with its zoning code.^[28] Zoning that doesn’t reflect reality can make it infeasible to redevelop vacant sites and replace decayed buildings. To address this problem, states can invalidate restrictions on siting, use, parking, or bulk on blocks where at least one-quarter of the buildings don’t comply.

Option 10: Adopt protections against downzoning

In 2006, Arizona voters passed a ballot initiative that requires municipalities to compensate landowners if a new land use restriction lowers their property’s value. Restrictions that preserve public health and safety are exempt, as are preexisting restrictions. Affected landowners must submit a claim for compensation to their local government and bear the burden of demonstrating any property value decrease.^[29] The initiative places citizens and cities on a more equal footing before the law without changing any existing regulation. The law has discouraged local policymakers in Arizona from adopting new land use restrictions, such as multifamily bans or historic districts, that could lead to widespread reduction in property values.^[30] Policymakers in other states should consider similar measures.^[31]

Option 11: Limit objectors’ standing to sue

Many states have enacted legislation that gives opponents of development special privileges in filing lawsuits. Some such laws, including environmental protection acts and land use appeal statutes, allow objectors to sue to block housing even if they cannot demonstrate an injury to themselves or their property. These laws greatly expand the pool of potential plaintiffs and increase the likelihood of litigation. Litigation, in turn, can delay the timeline for housing production by many months or even years. In Virginia, for example, lawsuits have recently halted zoning reforms in Roanoke and Charlottesville.^[32]

In 2023, concerned about the use of lawsuits to delay needed housing, the Wisconsin legislature passed a bill requiring objectors to demonstrate personal damages, as opposed to damages against the public at large, in their court challenges of land use approvals.^[33] With lawsuits of questionable merit capable of tying up housing approvals in years of litigation, states should consider amending rules that grant special legal rights to opponents of new housing.

Option 12: Unlock duplex zones with Tennessee’s homeowners association law

Many cities and states have chosen to legalize duplexes, triplexes, and fourplexes in many zoning districts. But relatively few of these housing types have been built. An exception is in Nashville, Tennessee, where a unique state homeowners association (HOA) statute^[34] has opened up the city’s duplex zones to tens of thousands of new homes.^[35] Some states have no HOA statute; others have overly complex ones designed for large subdivisions. The simplicity of the Tennessee law allows two-home and other small-scale HOAs to flourish and unlocks conventional mortgage financing.

Option 13: Secure zoning rights at application time

In many states, a locality can change the zoning requirements even after a developer has obtained permits and arranged financing, pulling the rug out from under the developer. This creates political uncertainty that can chill investment in housing. To address this problem, Tennessee, in 2025, enacted legislation providing that owners’ entitlement to current zoning is secured at the time of a development application.^[36] States can consider adopting Tennessee’s approach in addition or as an alternative to the broader protections against downzoning outlined in Option 10. 

Option 14: Limit fees exacted by local governments 

Impact fees levied by counties, municipalities, and other local governments can add tens of thousands of dollars to the cost of building a home, thereby driving up housing prices and setting a floor on the price of new residential construction. A recent Supreme Court decision, Sheetz v. County of El Dorado, has established that standardized impact fees aren’t exempt from stricter judicial scrutiny, but states can press ahead by adopting clear legislative guardrails that protect against excessive fees that hamper housing production.^[37] Florida, which imposes statutory requirements for nexus and proportionality on local governments’ use of impact fees, among other restrictions, is one model for other states to consider.^[38]

Update Construction Standards

Where the developer’s work ends, the builder’s begins. In places where land is inexpensive, construction costs are the key determinant of new home prices. Policymakers should review and update their building codes to ensure that cost-effective types of housing remain available across their states.

Option 15: Allow HUD Code manufactured homes

HUD Code manufactured homes are those inspected and certified by the US Department of Housing and Urban Development (HUD). HUD Code housing is one of the country’s most important sources of houses affordable to low- and moderate-income people without subsidy. But far fewer of these homes are shipped today than during the peak of factory-built housing in the 1970s.^[39] Zoning codes are one factor limiting the use of manufactured homes, because many localities allow them only in mobile home parks or not at all. States can require that HUD Code homes be allowed on any residential lot that allows a single-family home without being subject to additional construction standards or redundant inspections. Making manufactured housing feasible for use on all residential lots will often require preempting local requirements for custom design that make manufactured housing infeasible.^[40] Several states have already enacted legislation adopting some or all of these recommendations, most recently Kentucky in 2025.^[41]

Option 16: Eliminate aesthetic mandates and materials bans

Neither zoning authority nor building code enforcement should extend to home aesthetics. Materials bans should be justified only by unique climate or health and safety conditions. States can follow the lead of Arkansas, Iowa, Texas, and Washington and eliminate aesthetic requirements except in existing historic districts, which can continue to require period aesthetics.^[42]

Option 17: Allow single-stair multifamily design

The International Building Code, used across most of the United States, requires that multifamily buildings with more than three stories include two staircases that are accessible from each unit. This requirement leads to multifamily buildings that have long corridors with units on each side.^[43] Such buildings require large sites. 

Like cities in most European and Asian countries, New York City, Seattle, and Honolulu have building codes that permit multifamily buildings up to six stories high with a single staircase if they have other fire-safety features, including sprinklers and materials with slow burn times.^[44] Such provisions create opportunities for lower-cost construction and apartments large enough to accommodate families.

States that allow local building code customization can follow Tennessee’s model, which gives local governments the authority to adopt single-stair liberalization.^[45] States with a uniform building code can follow Connecticut and allow taller single-stair buildings statewide.^[46] Bills that would advance single-stair reform have been introduced or passed in 19 states.^[47]

Option 18: Allow lower-cost elevators

Installing an elevator costs about three times as much in the United States as in high-income countries in Europe and Asia, owing to state rules that require excessive cabin size and exclude elevators and components produced for global markets.^[48] State policymakers should revise their building codes to allow smaller elevator cars in multifamily buildings with fewer than 20 units above or below the ground floor.^[49] To open the market to more competition, state policymakers should allow elevators that meet standards set by the International Organization for Standardization, which serves the global market, as well as the latest standards set by the American Society of Mechanical Engineers, which serves the US market.^[50] In 2025, Washington legislators introduced a bill that would have allowed smaller elevators to be used in some apartment buildings up to six stories, which would have complemented Seattle’s single-stair policy.^[51]

Conclusion

As the US economy responds to a rapidly changing world, state legislatures can ensure that their housing markets are a source of economic strength and opportunity. Limiting the scope of local zoning authority preserves local leadership in land use planning and allows cities to creatively address unique local challenges while averting abuses of regulatory power.

About the Authors

Salim Furth is a senior research fellow and director of the Urbanity Project at the Mercatus Center at George Mason University. His research focuses on housing production and land use regulation. He frequently advises local governments and testifies before state and federal legislatures. He earned his PhD in economics from the University of Rochester.

Emily Hamilton is a senior research fellow and director of the Urbanity Project at the Mercatus Center at George Mason University. Her research focuses on urban economics and land use policy. Hamilton has testified before several state legislatures and the US House of Representatives. Hamilton serves on the advisory boards of Up for Growth, a national network tackling the housing affordability crisis, and Cityscape, a journal published by the Department of Housing and Urban Development. She received her PhD in economics from George Mason University.

Charles Gardner is a research fellow at the Mercatus Center at George Mason University. His research focuses on planning law and housing affordability, and he has testified before state legislatures and advised policymakers on housing matters. Gardner has also worked on zoning and land use issues as a local elected official and as an active participant in state policymaking, where he has served on the Connecticut Advisory Committee to the US Commission on Civil Rights and on the Commission on Connecticut’s Development and Future. He received his JD from Vanderbilt University Law School. 

Notes