Insights On Today’s
Challenges to Homeownership

Market Perspective

Insights On Today’s
Challenges to Homeownership

How Easing Regulations Can Boost Housing Supply and Affordability

Posted: December, 15, 2023

It has been well documented that the past decade has witnessed a growing housing crisis in the United States, characterized by soaring demand and a stark shortage of supply. The aftermath of the Great Recession, coupled with robust job and population growth, has resulted in historically low vacancy rates and rapidly escalating housing costs. Researchers estimate a national shortfall of approximately 3.8 million homes1, with certain regions, such as coastal California, Greater Boston, New York City, and South Florida, grappling with housing shortages for over three decades according to research done by Brookings Metro2.


We believe that the lack of evolution of housing policies has played a pivotal role in the current crisis. When single-family zoning laws were introduced in the early 20th century only eight cities had adopted them but by 1936 more than 1,200 cities had zoning laws. While these regulations initially aimed to shield residential areas from encroaching industrial development, their widespread adoption in the early 20th century had far-reaching consequences 9. The Supreme Court's 1926 decision to uphold the constitutionality of single-family zoning laws enabled communities to restrict higher-density residential development, inadvertently excluding lower-income individuals and minorities.


Over time, the perception of housing has shifted from a basic necessity to an investment asset class. “Housing started to be viewed as a growth stock instead of a blue-chip stock,” said William Fischel, an emeritus professor of economics at Dartmouth University and historian of zoning laws in America. “This made homeowners more inclined to stop development that might have the slightest risk of harming their house or providing competition.”3 Environmental legislation enacted during the 1970s provided additional tools for citizens to impede new developments, and local governments, fearing homeowner backlash, became reluctant to amend zoning laws.


Despite these challenges, a nationally representative survey conducted by The Pew Charitable Trusts in September 2023 revealed widespread support for policy initiatives aimed at enhancing housing availability and affordability. The survey highlighted a broad concern about rising housing costs, with rents reaching all-time highs and a significant portion of renters allocating more than 30% of their income to rent.


Americans expressed varying degrees of support for different policy initiatives, with nearly 9 in 10 individuals endorsing efforts to expedite permitting processes. Additionally, more than half of respondents supported the idea of allowing smaller lots and homes to be built closer together. The survey results underscore the urgency of addressing the housing crisis, with an estimated shortage of 4 to 7 million homes nationwide4.


States and localities are increasingly exploring measures to facilitate housing construction, particularly for more affordable options like apartments. Recent laws in California, Montana, Texas, and Washington aim to simplify permitting for new housing 5. However, industry experts highlight challenges such as rising construction costs, regulatory fees, high-interest rates, and time-intensive processes as potential obstacles to sustained growth in multifamily construction 6.


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It is our opinion that the undersupply of housing relative to demand has far-reaching implications, affecting families, municipalities, and even the environment. While the survey identified policies with widespread support—primarily adding housing in commercial areas—a second tier of policies, such as reducing minimum lot sizes or allowing multifamily housing on single-family lots, also garnered significant backing7.


Notably, respondents across political affiliations supported efforts to create more housing, citing reasons such as improving housing affordability and allowing more people to live near their preferred jobs and schools8. Successful state-level initiatives indicate that bipartisan support is possible, offering hope for effective policies to end the housing shortage and affordability crisis.

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In response to the challenges, federal-level efforts are also underway, with the Department of Housing and Urban Development (HUD) taking steps to support first-time buyers and buyers of color. Reductions in mortgage insurance premiums and the exploration of incorporating positive rental payment history into creditworthiness assessments signal a commitment to addressing housing disparities at the national level7.


Easing regulatory barriers to new development, particularly for smaller homes, is crucial to increasing housing supply and improving affordability. At The True Life Companies we strongly feel that by revisiting zoning laws, expediting permitting processes, and exploring innovative solutions, policymakers can pave the way for a more accessible and affordable housing market, addressing the pressing needs of individuals and families across the nation.

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