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How zoning reform can increase housing development and affordability

Authors

  • Michael Anders

    Principal, Strategy and Execution, EY-Parthenon, Ernst & Young LLP

  • Michael Selinger

    Senior Director, Strategy and Execution, EY-Parthenon, Ernst & Young LLP

6 minute read 03 Sep 2025

By reimagining how cities and counties are planned, more affordable and adaptable communities can be built.

In brief
  • Cities and counties across the US are facing a severe housing shortage, resulting in home prices and rents outpacing incomes.
  • Through reforming zoning, local governments can create more capacity and flexibility within their housing stocks.
  • Effective zoning reforms result in increased housing and economic development, greater affordability, and more sustainable communities.

The US is currently facing a crisis of housing affordability. Due to a recent decline in housing development relative to demand, the country is facing a deficit of around 5 million housing units. As a result, home prices have skyrocketed relative to incomes, leading to significant barriers to homeownership.1 In addition, as rents rise, more Americans are becoming cost-burdened, with more than 50% of renter households spending more than 30% of their income on housing.2

How EY can help

A major factor limiting the ability to build housing is how local governments zone their land. Zoning policy is used to regulate how land is used and what can be built on it. This can take the form of assigning specific uses like residential, commercial, mixed or industrial, as well as restricting how tall or wide a building can be, or how many housing units it can have. While zoning is an important tool for planning communities strategically, when zoning is too restrictive, fewer housing units can be built, leading to more people chasing fewer homes and driving up costs. As a result, zoning reform is critical in addressing affordability.³

 

How zoning reform increases affordability and creates better communities

 

Effective zoning reform has a wide variety of positive outcomes for communities. The main benefit of zoning reform is increased housing development — as governments ease the restrictions on what can be built, it increases the capacity of how much housing can be developed. Because these housing units will be new, it will lower the age of the housing stock and increase its quality. Furthermore, this has the benefit of not only increasing the number of homes, but also increasing economic development through the new construction, increasing spending and employment.⁴

 

As a result of this new supply, more homes are available for residents, leading to more affordable communities. Several studies have demonstrated that zoning for more housing has positive effects on home prices, rent levels and the cost-burden of residents, resulting in more affordable communities.⁵ The increased housing production also creates more sustainable communities that can house the needed workforce for the region while promoting more adaptable and environmentally friendly cities that are denser and more walkable.⁶

 

What types of zoning reform can be utilized

 

There is a wide variety of zoning reforms that can increase housing capacity and development. Depending on the needs of the community, a mix of types can be used to improve housing outcomes.⁷

Type

Components

Impact

Increasing zoning density to expand the number of units able to be built
  • Limit single-family zoning in urban areas
  • Increase the minimum number of units
  • Promote missing middle housing like duplexes and triplexes

The capacity for housing will be increased, leading to more construction and supply, driving down housing costs.

Allowing mixed-use zoning to have housing coexist with commercial spaces
  • Allow for housing to be built on the same parcels as commercial stores
  • Incentivize housing to be built on or near land used for transit

In addition to more supply being allowed, residents will be able to live where they shop and spend, increasing walkability and reducing car congestion.

Reducing restrictions on development
  • Raise minimum height sizes
  • Expand minimum lot sizes
  • Reduce parking minimums

Less restrictions on development will lead to more housing construction.

Allowing adaptable housing options
  • Allow for accessory dwelling units
  • Convert underutilized commercial spaces into housing
  • Allow for micro-units

Housing will be able to adapt to the needs of the area and provide a wider variety of options.

Zoning for affordable housing
  • Incentivize additional affordable units with density bonuses
  • Require a baseline percentage of affordable units through inclusionary zoning 

In high-demand urban cores, more units will be more likely to be specifically affordable based on incomes.

How zoning reform is implemented effectively

Successful zoning reform takes a commonsense approach that captures local circumstances:

1. Zone where it makes sense: While zoning reform is a comprehensive policy solution, its utility is dependent on where the land is. For example, upzoning to greater density makes more sense for a downtown urban core in denser areas of job centers, grocery stores, and health systems, as opposed to more rural locations with less people. It is up to local governments to determine where to upzone, though it is beneficial to look at the entire jurisdiction to determine types of zoning needed.⁸

2. Support transit-oriented development: One of the best ways to implement zoning reform is to utilize transit-oriented development, where upzoning for more housing is centered on transit corridors and stations. This allows for more housing in areas of high demand to create walkable, connected, and productive communities.9

3. Utilize a regional perspective to limit local opposition: A major hindrance to zoning reform is the “Not In My Backyard” (NIMBY) movement, where local homeowners prevent reforms and development due to concerns about home values and neighborhood change. One major way to resolve these tensions around development is moving the reform to a regional perspective – both through focusing on city-wide efforts and surrounding cities in the region. There is often less opposition to region-wide zoning reforms versus changes to a specific block.10

4. Provide affordable options to prevent displacement: Another consideration to zoning reform and development is limiting the displacement of residents that may arise from rising rents. While increasing the housing stock generally will help slow rent increases, ensuring that development is paired with affordable options (e.g., through density bonuses or inclusionary zoning, depending on the area) will help local residents stay in their communities as development takes place.11

Kyle Madura, Associate at Ernst & Young LLP, contributed to this article.


Summary

Through successful implementation of its policies and strategies, local governments are utilizing zoning reform to increase housing supply, address rising housing costs and build better communities. That being said, zoning reform is one of many solutions that needs to be utilized to comprehensively address the housing affordability crisis. By pairing these efforts with a wider range of policies and strategies, local governments can increase the housing and economic development of their region to ensure it is an affordable place to live.

About this article

Authors

  • Michael Anders
    Principal, Strategy and Execution, EY-Parthenon, Ernst & Young LLP
  • Michael Selinger
    Senior Director, Strategy and Execution, EY-Parthenon, Ernst & Young LLP
Related topics
Government and Public Sector

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