Daughter on father’s shoulders in front of suburban home
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U.S. housing prices remain near an all-time high despite a recent slowdown in demand. The only way to truly make housing cheaper is to build a lot more of it in the places people want to live. The Pew Charitable Trusts recently published a set of four principles* signed by dozens of housing experts that state and local policymakers should follow to increase the supply of housing and improve affordability.
Last week the Fed lowered its interest rate target by 0.25%. Many are hoping this move will bring down mortgage rates that have hovered around 6.5% since late 2022. Higher mortgage rates over the last few years, along with higher prices, have increased the total cost of home ownership for first-time buyers as well as those looking to upgrade or relocate. While lower mortgage rates will help some people, they are not the ultimate cause of America’s housing affordability problem. The real driver is a housing shortage of four to seven million units.
Policymakers can address this shortage by committing themselves to four principles that will increase supply and create more affordable housing options.
First, they should allow more housing of all types, including duplexes, townhomes, and smaller starter homes. Since these homes are smaller, they require less land and materials, which makes them cheaper than larger homes on larger lots.
Several states have already acted. In 2025, Rhode Island passed a law that allows townhomes in more parts of the state. Texas’s Starter Homes Act allows new single-family homes on lots as small as 3,000 square feet, or just 0.07 acres. Other states, including Washington and Oregon, created a streamlined permitting process to make it easier for property owners to subdivide their lots to encourage more density.
Policymakers should also avoid mandates that increase costs and encourage sprawl. Parking minimums are a notable example. Many cities require developers to build a minimum number of parking spaces e.g., one spot per bedroom for a new apartment building. While these rules may sound good to folks worried about finding room to park, they have unintended consequences. Parking spaces are expensive to build—surface lots can cost as much as $10,000 per space, while garage parking can cost up to $50,000 per space. Requiring developers to build parking, even for projects near bus lines, subways, or in walkable neighborhoods, increases construction costs and thus prices.
Washington passed a law that prevents local governments from mandating more than 0.5 parking spaces per unit for multifamily housing and one space per unit for single-family housing. Similarly, New Hampshire passed a law that prevents municipalities from requiring more than one space per residence. Some cities, including Buffalo, Lexington, and Hartford, have eliminated parking requirements altogether. These cities show that we do not need government officials micromanaging the amount of parking developers provide.
Policymakers should also make it easier to build apartments and condominiums, especially in expensive, high-demand areas near businesses, retail, and transit lines. Montana, Texas, and Colorado recently passed laws to allow single-stair apartment buildings up to six stories tall. Single-stair buildings are cheaper to build and because there is only one staircase they can take a variety of shapes. This floor plan flexibility is vital for infill projects in cities where lots are often irregularly shaped.
This year, Rhode Island policymakers enacted another important building code reform. The state now allows developers to build three- and four-family units under the residential building code rather than the more complicated commercial building code. Triplexes and fourplexes are great options for smaller families and Rhode Island’s code changes will make them easier and cheaper to build.
Finally, policymakers should reduce administrative burdens. Developers incur substantial costs navigating complex permitting processes and waiting for permits to be approved. These costs are then passed on to homebuyers. Policymakers can take a variety of steps to reduce these costs.
Arizona allows third-party professionals to approve permits for single-family homes rather than require developers to rely on the limited supply of government approvers. The Grand Canyon State also passed a law that requires municipal governments to establish some preapproved housing designs for single-family homes, duplexes, triplexes, and ADUs. Developers who use these pre-approved designs will bypass some of the permitting process and its associated costs.
State and local policymakers should also use taxes and fees prudently. Property taxes fund important local goods and services like fire departments, police officers, courts, and parks. Local officials should be transparent about how they spend property tax revenue and use any increase in revenue to improve core services. If services are already sufficient, officials should lower taxes or return surplus revenue to taxpayers.
Impact fees are also a useful tool, but local governments should not abuse them. Impact fees that are clearly tied to necessary new infrastructure such as roads or sewage lines are a suitable source of revenue. But impact fees that are excessive or require developers to contribute money to unrelated projects, such as a park on the other side of town, stymie new development and ultimately increase home prices.
State and local policymakers have a variety of tools to lower the cost of housing. The key is not to overcomplicate it. Policymakers who remember a few key principles—enable more housing of all types, including apartments; avoid inflexible mandates; and lower administrative barriers—will arrive at solutions that increase the supply of housing and improve affordability.
*I am a signer on Pew’s principles.
Source: https://www.forbes.com/sites/adammillsap/2025/09/23/four-principles-policymakers-should-follow-to-make-housing-more-affordable/
