Harvard University’s annual report on US housing markets estimates the national housing shortage at more than one million units and finds a growing housing affordability problem fueled by robust household growth and high housing costs. Joint Center for Housing Studies of Harvard University, The State of the Nation’s Housing 2024, tinyurl.com/hshvm. Households increased by 1.7 million between 2022 and 2023, a significant change from the 1.1 million annual average for new households in the 2010s. The cost of owning a home increased, with home prices rising at an annual rate of 6.4% in February 2024. Home insurance premiums added to costs by increasing an average of 21% from May 2022 to May 2023.
High affordability slowed homeownership growth over the past year. The monthly payment on a median-priced home is now $3,096 after taxes and insurance and requires an annual income of at least $119,800. Only one in seven renter households meets this threshold. High interest rates for mortgage loans, peaking at 7.79% in October 2023, limit homeownership for many potential first-time buyers. High home ownership costs continue to act as a barrier to reducing the wide homeownership rate gaps among racial groups. These gaps are significant. In the first quarter of 2024, Hispanic (49.9%) and Black (46.6%) homeownership rates were significantly lower than white household rates (74.0%).
Housing cost burden is an indicator of housing affordability. A household is housing cost-burdened if it spends more than 30% of its household income on housing and utilities. Nearly one in four homeowner households (23.2%) is stretched worryingly thin because cost-burdened households grew by 19.7 million between 2019 and 2022.
The housing market remains challenging for renters. Rents have increased faster than incomes for decades, and a pandemic-era rent surge produced an unprecedented affordability crisis. Half of all renter households were cost-burdened in 2022, the highest number on record. Severely cost-burdened renter households, who spend more than half of household income on housing and utilities, hit a new high.
Rental construction showed strength. Multifamily completions rose 22 percent in 2023, the highest annual level in over three decades. Units under construction in March 2024 remained near a record high despite sizeable increases in new renter households. Patrick McAnaney, Debunking the Vacancy Myth, Greater Washington (Dec. 19, 2024), tinyurl.com/rentvac, explains that a significant construction boom in 2022 and 2023 significantly increased housing supply, which cooled rent inflation because it caused higher vacancy rates. Higher interest rates have now reduced housing production dramatically, placing upward pressure on rents, which can cause an increase in rent inflation. In October 2024, the national vacancy rate of 6.8% was slightly above historic levels but still tight, which could also place upward pressure on rents.
An accessory dwelling unit (ADU) is a smaller, independent residential dwelling unit located on the same lot as a single-family home. ADUs include workforce housing for persons who work in communities where they cannot afford housing, housing needed by single-person households, and housing that allows seniors to be near their families as they age. ADUs make better use of the existing housing fabric in established neighborhoods and provide an alternative type of affordable housing.
An ADU is not usually allowed as a permitted use in an exclusive single-family zoning district and requires a zoning permit or a rezoning to another residential district. Neighborhood opposition frequently occurs because of the expected effect of ADUs on property values and the neighborhood’s character, their use of on-street parking, and service costs caused by increased density. Opposition can also occur because ADUs may introduce residents with lower incomes into a neighborhood and because of fears that they will strain public services, especially public schools.
Opposition may then spring into action to obtain restrictive zoning regulations that make the construction of ADUs impracticable. Density restrictions limit the number of ADUs allowed on a lot. Minimum onsite parking requirements make finding space on the same lot for parking and an ADU difficult. The number of occupants permitted in an ADU is restricted.
Restrictive minimum lot-size requirements can be adopted, and how much of a lot an ADU can cover can be restricted. A minimum and maximum absolute unit size, a maximum floor area, a minimum and maximum ratio of unit size to the size of the main dwelling, and a minimum and maximum ratio of unit to lot size can also be adopted.
Where an ADU can be placed on a lot can be restricted, and the visibility from the street can be prohibited. Architectural design requirements can demand changes that increase construction costs. For example, costs may increase when an ADU’s architectural design must be similar to the architectural design of the main dwelling.
An owner-occupancy requirement is common, which significantly affects the availability of ADUs and impedes their financing. Owner occupancy is a unique property restriction not usually attached to the ownership of a single-family home. Finally, homeowners must often navigate challenging procedural requirements, such as high permit costs and approval delays, that can occur if a permit or rezoning is required. For an analysis of ADU zoning in the Boston metropolitan area, see Amy Dain, The State of Zoning for Accessory Dwelling Units 7, Pioneer Institute (July 2018), tinyurl.com/bostud.
The American Association of Retired Persons prepared influential model legislation to protect ADUs. AARP, Accessory Dwelling Units: Model State Act and Local Ordinance (2020), tinyurl.com/actmod. In an important provision, the Act requires local governments to adopt ordinances “authorizing accessory dwelling units in single-family zones or districts and on appropriate lots in other zones that allow housing … and authorizing their use as rental housing.” Id. at 14.
The Act also prohibits restrictive regulation by authorizing only “reasonable local regulations governing ADUs, addressing height and bulk, setback, lot coverage, and regulations generally applicable to other residences in the same zones.” Id. at 17. This provision prohibits discrimination against ADUs and is explicitly intended to prohibit owner-occupancy requirements.
Fees can be regulated. Id. at 19. A minimum lot size may not be larger than the minimum lot size for single-family houses and townhouses in the same zone or district. Id. at 20. ADUs may be any size, but an ADU’s total square footage must be less than that of the primary dwelling. Id. at 21. Additional off-street parking may not be required. Id. at 21. Setbacks from side and rear lot lines must not exceed four feet. Id. “A permit application for an accessory dwelling unit shall be approved or denied ministerially without discretionary review or a hearing …within 90 days after receipt of a completed application,” even though a local ordinance regulates “the issuance of variances or special use permits.” Id. at 23. This provision prohibits discretionary reviews that would provide an opportunity for rejection and procedures that would cause approval delays.
The 2024 Harvard report finds that most of the land in cities across the country is zoned exclusively for single-family use, a zoning restriction that creates an obstacle to an increase in the housing supply. The report argues for improving housing affordability by allowing higher residential densities and more diverse housing. See also Allison Hanley, Rethinking Zoning to Increase Affordable Housing, 80 J. Hous. & Community Dev. (Fall/Winter 2023), tinyurl.com/zonreth.
Cities and states nationwide have adopted zoning reforms that improve housing affordability and diversity, such as reforms that protect ADUs. My Land Use Update, Zoning Reform, Prob. & Prop., May/June 2024, at 50, discusses state reform statutes. Oregon abolished single-family zoning. Here are some additional zoning reforms that state and local governments should consider:
Eliminating Exclusive Single-Family Zoning. Exclusive single-family zoning, the bedrock of the zoning system, covers 75% of the land in American cities. It encourages sprawl, prohibits densities needed for mass transit, and excludes affordable housing such as multifamily housing, ADUs, manufactured housing, and two-family and three-family dwelling units. Reform should modify exclusive single-family zoning by allowing affordable housing types to be permitted for use in exclusive single-family zones. It should also allow higher residential densities along transit corridors where public transit is available.
Walla Walla, Washington, went further and adopted a “Neighborhood Residential” (RN), a near-universal residential zoning designation that allows builders to build as dense as 75 units per acre if they meet existing standards like landscaping, height, setbacks, parking, and lot coverage. Property owners can create duplexes, fourplexes, cottage homes, and even tiny homes with some relaxed parking requirements.” Patrick Sisson, Zoning Reform Creates New Model for Smart Growth in Walla Walla, Washington, Planning Magazine (Sep. 22, 2022), tinyurl.com/walzon.
Eliminating Minimum Parking Requirements. Parking is a standard feature in zoning ordinances, based on arbitrary formulas that have created an astounding surplus of two billion parking spaces nationally for about 250 million cars. Unused parking spaces sit empty, increasing land and construction costs, robbing developers of usable space, creating sprawl, making cities less walkable, and adding to air pollution by encouraging driving. Rainfall runoff from impervious parking surfaces carries pollutants, and asphalt parking traps heat. More than 50 cities and towns have adopted reforms that repeal parking minimums for businesses and residential use. See Katie Gould, Parking Reform Alone Can Boost Homebuilding by 40 to 70 Percent (Sightline Institute, Dec. 10, 2024), tinyurl.com/pkelim.
Adaptive Residential Reuse. Adaptive residential reuse has increasingly repurposed nonresidential property in the last few decades. See Tatiana Walk-Morris, How Adaptive Reuse Can Help Solve the Housing Crisis, Planning Magazine (May 1, 2021).
Zoning creates difficulties for adaptive residential reuse. It cannot be done in industrial or commercial areas or school sites because they are usually not zoned for residential use. Adaptive reuse for housing usually requires a special permit or a rezoning that can be costly. The adoption of a flexible adaptive reuse zoning ordinance avoids the need for case-by-case approvals that can create these problems. Adaptive reuse zoning can increase density and allow additional uses, such as housing in an office building. Flexibility can be provided for dimensional requirements such as setbacks and lot coverage, and parking can be eliminated. Building codes with modern rules that do not fit older structures, such as stair width requirements, can be a barrier and can be modified. Adaptive reuse of historic buildings must comply with historic preservation requirements.
