New Federal Housing Act Opens Doors for States, Cities

The 21st Century ROAD to Housing Act, the bipartisan housing legislation passed overwhelmingly by Congress this summer, contains dozens of provisions designed to speed up housing production and lower costs—the right approach to addressing the country’s housing shortage of an estimated 4 million to 7 million homes. The legislation removes federal regulatory barriers—outdated manufactured-home building code mandates and permitting rules among them. And although this is necessary, it will not sufficiently tame housing costs, which are near all-time highs.

State and local housing barriers are also stifling home production and driving up costs. Analysts across the political spectrum and from industry, academia, and nonprofits agree that the only way out of the housing shortage is to remove these barriers. Though some fear that such action will take decades to improve housing affordability, recent examples suggest otherwise.

Minneapolis reduced its off-street parking mandates for new homes in 2015 before eliminating them in 2021, which allowed more homes to be built at lower cost. The city also updated its zoning in 2020 to permit apartments on large roads with stores and transit. Since then, apartment construction has surged, and the city began producing housing at triple the rate of that in the rest of Minnesota. During the past nine years, inflation-adjusted rents have fallen about 20% because the new housing supply reduced landlords’ ability to ask tenants to pay more. In 2017, affording the median rent in Minneapolis required a resident to earn 80% of the area’s median income, but by 2024 that figure had dropped to 67%.

Austin, Texas, has a similar story. The city has enacted a wave of reforms to ease restrictions for building apartments, as well as to add homes on small lots and create accessory dwelling units (ADUs), popularly known as granny flats or in-law suites. Permitting times have been nearly cut in half, and as a result, Austin has been adding housing at the fastest rate of any city its size, while inflation-adjusted rents have fallen nearly 20% since 2021. In 2017, affording the median rent in Austin required someone to earn 83% of the area's median income, but in 2024, that percentage fell to just 65%.

New Rochelle, New York, experienced the same pattern. In late 2015, the city adopted a zoning reform for over 300 acres near its downtown train station, allowing a range of apartment types to be built on land that had mostly been surface parking lots, while streamlining the environmental review that made building slow and costly. The change was transformative: New Rochelle permitted an average of just 37 new homes a year in 2017 and 2018, but that number jumped to 989 per year from 2019 to 2021—more than double the national rate of housing growth. As a result, inflation-adjusted rents in this Westchester County city decreased by 13% from 2017 to 2023. In 2017, affording the median rent in New Rochelle required an individual to earn 85% of the area's median income, but in 2023, that figure dropped to just 63%.

These cities show how serious improvements can produce positive results over a short period of time. But additional steps would help ease the housing shortage even more.

1. Use more manufactured housing. These homes are as durable as site-built houses, but because they are made on assembly lines and built to a single national standard, they are produced more quickly and cost much less than traditional homes. More than a dozen states have passed laws making it easier to deploy manufactured homes—and the new federal law will make using them even easier. States should go further still by deeming them legally equal to site-built houses so that buyers can access mortgages, which are often unavailable because most manufactured homes are still titled as personal property (like a car) rather than real estate.
2. Legalize accessory dwelling units. ADUs can be built more quickly than other homes and are among the lowest-cost ways to add housing due to their smaller size. And because these converted basements or garages, or structures in a backyard that are located on the same lot as single-family homes, they have no land costs. They also rent for less than houses or newly built apartments. Twenty-one states have passed laws to allow ADUs on all or on many single-family lots. All states and cities should take advantage of this option.
3. Convert vacant offices into dorm-style housing. Only a small share of the country’s one billion square feet of vacant office space has been converted into individual apartments, due in part to awkward layouts and high conversion costs. But converting offices into dorm-style housing takes about half the time of new building construction and costs about 25% to 35% less than conversions into conventional apartments. This option features small, private apartments along a building’s perimeter with kitchens, laundry, living rooms, and bathrooms in the center, which triples the number of homes that can be created in each building. Rent would also cost about half of the market median rent in a city.
4. Utilize vacant bedrooms. Despite the housing shortage, the U.S. has a record number of empty bedrooms. Many cities and towns prevent house sharing by limiting the number of unrelated people who can live together—only a few states have passed bills to prevent local anti-roommate codes. Allowing home sharing makes better use of existing housing stock by enabling landlords to earn more by renting rooms to individuals while each tenant pays lower rent than one would for an apartment.

Solutions such as these can add large amounts of housing quickly and inexpensively, as Minneapolis, Austin, and New Rochelle have shown. In addition, bringing more housing to market even faster would push rents down rapidly and allow more families to buy homes.

The new federal housing package is a clear step forward, but its ultimate impact—and whether it bears fruit swiftly or takes many years to improve affordability—will be largely determined in places closer to home. States, cities, and communities should seize the moment by taking additional steps bring down housing costs. American families can’t wait.

Alex Horowitz and Tara Roche are project directors with The Pew Charitable Trusts’ housing policy initiative.