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Housing Reform in the States: A Menu of Options for 2026
To address the high cost of housing, lawmakers can learn from states across the country
| This Policy Spotlight distills the core findings and recommendations from the Policy Brief on this topic. For the complete analysis and data, please see the full paper here. |
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. Finishing the work of restoring the right to build housing for everyone will require widespread adoption of best practices.[1]
In 2021 and 2022, rents and home prices rose sharply amid post-pandemic economic conditions and widespread inflation. In most cities, those costs have remained obstinately high, seemingly settling at a new normal.
High housing costs are primarily sustained by restrictive local zoning laws that prevent builders from meeting housing demand. Through bipartisan efforts, state legislators have already begun to curb excessive local regulatory power. Notable accomplishments include Texas reversing regulatory overreach by relaxing minimum lot size restrictions and Wisconsin improving its legal climate by insulating cities from anti-housing lawsuits (figure 1).
Our proposals fall into four broad categories:
1. Reverse regulatory overreach
Permit ADUs
Limit Parking Mandates
Cap Minimum Lot Size Requirements
Allow Residential Uses in Commercial Zones
Allow Transit-Oriented Development
2. Streamline procedures
Require “Specific and Objective” Approval Criteria
Allow Third-Party Reviews of Building Plans
Reform Protest Petitions
3. Improve legal frameworks
Block Zoning That Illegalizes Existing Conditions
Adopt Protections Against Downzoning
Limit Objectors’ Standing to Sue
Simplify HOA Laws
Secure Zoning Rights at Application Time
Limit Fees Exacted by Local Governments
4. Update construction standards
Allow HUD Code Manufactured Housing
Eliminate Aesthetic Mandates and Materials Bans
Allow Single-Stair Multifamily Design
Allow Lower-Cost Elevators
Notes
[1] See Salim Furth et al., “Housing Reform in the States: A Menu of Options for 2026” (Mercatus Policy Brief, Mercatus Center at George Mason University, September 2025) for the full report and sources.
