Lizzie Dickerson

2 April 2024

The Problem

Today, housing affordability is an issue for more and more Americans. An affordable home, defined by the Department of Housing and Urban Development as taking no more than 30% of a household’s income, is increasingly inaccessible for middle and lower-income families. For the past two years, median-priced single-family homes have become less affordable in 99% of U.S. counties with enough data to analyze (1). Having a place to call home, especially one that you own, is a vital part of the American dream. Homeownership builds upward mobility and generational wealth. A large part of modern racial wealth disparities is due to historic redlining and discrimination that prevented people of color from owning a home (2). To correct this, we need innovative policies that create affordable rental units and pathways to home ownership. Policymakers should approach this process with excitement. Housing is complicated, but it does not need to be grim. Imaginative solutions and experimentation are exactly what America needs to ensure that everyone has a home (3). This paper will examine three policies that do just that.

Solution #1: Missing middle housing

Loosening zoning laws to allow “missing middle” homes is perhaps the most important building block for creating nationwide affordable housing. These homes include any multi-family building between a single-family house and a mid-rise apartment building. Duplexes, townhouses, and small apartment buildings are all part of this category (4). Today, 75% of American residential areas are exclusively zoned for single-family homes (5) via laws enacted to exclude low-income renters and people of color (6). After fair housing laws enacted in the 1970s prohibited racist private housing covenants, local officials leaned on zoning that prioritized large, single-family lots to regulate neighborhoods’ income levels (7). As a result, large swaths of land are locked up in low-density development, preventing many millions of homes from being built (8). 

Untying this restriction could give the market free rein to rectify America’s housing shortage. Landowners could take advantage of their property’s value and match supply to demand by retrofitting their homes to accommodate multiple households or replacing them with larger buildings. A variety of missing middle homes could be built as infill in existing neighborhoods, allowing people in a range of income levels access to homes in desirable areas near job centers. Infill construction is more efficient than building traditional low-density tracts (9). It also has greater potential to embed people in the life of a city than developments on the outskirts of metropolitan areas (10). 

Palisades Park, New Jersey, is a great example of a successful missing middle policy. Unlike many neighboring towns, Palisades Park’s zoning does not have any exclusively single-family detached zones. Its neighborhoods include a mix of traditional single-family homes and side-by-side duplexes. This small difference in zoning has allowed Palisades Park to be a center of regional affordability. In contrast to nearby jurisdictions, Palisades Park has seen more housing construction and greater population growth (11). 

However, there is no guarantee that newly built multi-family homes will be affordable. In order to make a good return on their investment, people developing missing middle units in an already pricey city will likely price them at the same level as existing, expensive apartments. The creation of missing middle housing will be a slow trickle that depends on market forces and piecemeal property redevelopment. Subsidies for housing projects that include units priced below market rate or investments in housing vouchers would be necessary to create affordable housing in the short term (12). Still, adjusting zoning regulations to allow multi-family home construction is an important first step toward making the American housing supply more responsive to market demands (13).

Solution #2: Modular housing

Modular houses, or prefabricated houses, are built off-site at a factory and then transported to the construction site where they are assembled. Currently, modular homes make up a very small part of the American housing market (14). Standardizing building codes across states is crucial for resolving this problem. Local governments should also consider revising zoning to encourage the use of modular construction, especially for affordable or missing middle homes (15). This cost-effective construction method could relieve the cost burden on developers building these projects (16). Policies that encourage modular home construction could create housing that is new, rather than retrofitted single-family homes, built in bulk instead of piecemeal development, and affordable, unlike most new homes. 

The popular perception of modular homes is of tacky, cheaply built houses. Although modular houses are constructed in factories, they are assembled on-site and attached to a permanent foundation, making them as safe as traditionally built homes (17). In many cases, modular houses give little indication that they were prefabricated. Modular homes are also cheaper and faster to build since the same models can be built repeatedly, and construction can happen while the home’s permanent site is being developed (18). These homes can also help resolve the construction industry’s labor problem, allowing companies to concentrate manufacturing where labor is cheap (19). 

The Biden administration has encouraged the construction of more modular homes through financial assistance for manufacturers and revising the loan process for manufactured housing (20), but the majority of policy work in this area must be done by local and state governments. Modular home companies must contend with a tangle of local and state regulations, preventing them from achieving economies of scale (21). In Colorado, for instance, localities have over 300 different building codes. It is unlikely that these places have such varying climates that they each need their own unique regulations (22). To streamline construction, state policymakers should create one standard building code that applies across the state. A model for overarching building codes already exists in the Department of Housing and Urban Development (HUD)’s Minimum Property Standard, which supersedes local regulations in 36 states (23). Of course, states like Minnesota and Florida will need specific regulations to handle different climates. But, building codes within states and even across regions can be simplified to diversify housing stock. HUD guidelines need a refresh as well. Currently, a law codified in the 1970s requires that all modular homes be manufactured on a trailer. Developers have argued that this rule prevents housing innovation, keeping several new types of modular housing from achieving federal approval (24). Ironing out these bureaucratic wrinkles is a process worth tackling to enable the large-scale creation of new, reasonably priced housing. 

Solution #3: Single Room Occupancy (SRO) housing

In the late 19th and early 20th centuries, people who had recently arrived in a new city or experienced a period of economic hardship could rent a single room in a boarding house or single-room occupancy (SRO) hotel for an extended period of time. Indiana University professor Wendy Gamber estimates that “between one-third and one-half of nineteenth-century urban residents either took in boarders or were boarders themselves.” (25) This model of housing, which functioned like a large-scale, long-term Airbnb, has almost disappeared thanks to zoning restrictions which limit the number of unrelated people who can live in a single house (26). Between the 1970s and 1990s, American cities removed around one million SROs (27). Today, if people can’t afford to rent an entire house or apartment, they have little choice but to sleep on the street. 

Many people still associate SROs with seedy flophouses, making local governments understandably hesitant to encourage their growth. But homelessness is far more problematic for cities. Although building permanent, supportive housing for chronically homeless or mentally ill people is an important goal for urban areas (28), SROs are an efficient, market-based solution for hardworking people who are threatened with short periods of homelessness. Relaxing zoning regulations to allow homeowners to take in boarders could increase and diversify an area’s housing supply (29). Unlike multi-family or modular homes, we have the resources to enact this housing solution right now. Census data indicates that there are tens of millions of empty bedrooms in American homes (30). Meanwhile, an increasing number of Americans live in single-person households (31). This is a supply-and-demand mismatch that can be easily solved by a change to zoning laws. Increasing the number of unrelated people who can live together may also be a helpful social policy, alleviating the loneliness and isolation experienced by many people who live alone (32). Allowing SROs gives a legal stamp of approval for group living arrangements, older couples sharing space with young families, or recently arrived immigrants renting a room from their more established countrymen. 

A few SROs do exist today. Many operate illegally, dodging restrictions that could ensure the  safety of their residents. In Philadelphia, one local nonprofit mapped 40 illegal rooming houses in their neighborhood. Although the city has recently struggled with high rates of homelessness, less than 50 SROs have been issued legal permits in the last decade. Philadelphia’s Department of Licenses and Inspections has not given any of the 40 identified illegal SROs violations, and the head of the department has pushed for zoning reforms that would legalize broader SRO creation across the city. The creation of illegal rooming houses points to existing demand, and this change in zoning could allow the city to track and regulate them (33).

As cities consider loosening zoning laws to allow SROs, they must also ensure that landlords and tenants are aware of their legal rights and restrictions. Modern SRO or temporary housing experiments such as startup PadSplit have shown that shared housing tenants, who tend to be low-income, are vulnerable to exploitation from absentee landlords (34). To create accountability, local governments should encourage the creation of SROs where the landlord still lives in the home. Rather than allowing corporations to snatch up houses and rent them to dozens of needy people, SROs should be a grassroots initiative. Governments can reward homeowners for creating smaller, rentable units on their properties, generating the affordable, convenient housing American cities desperately need (35).

In summary

Each of these housing solutions is linked to zoning laws and housing restrictions. To tackle the housing crisis, policymakers must allow supply to match demand, boosting housing creation and innovation. Of course, governments should not take an entirely hands-off approach to housing and hope everything works out. Rather, localities must weigh the benefits and drawbacks of restrictions and decide which ones to keep. An expensive neighborhood of beautiful, historical homes should receive some infill construction to make it accessible to younger families—but perhaps a single historic home in an otherwise built-up neighborhood can be protected from redevelopment. In many cases, relaxing zoning regulations can both create more housing units and provide paths to affordable home ownership for people of color. This policy shift will not solve every housing problem. But it far outweighs our current housing situation: unaffordable houses, little new construction, homelessness. Revising zoning is a bold move toward resolving the American housing crisis.

Image via U.S. DHS in the public domain, https://en.m.wikipedia.org/wiki/File:Secretary_Kelly_In_Texas_Pool_Photos_%2831808970414%29.jpg

Works Cited

1. ATTOM Team. 2023. “Home Affordability Gets Even Tougher Across U.S. During Third Quarter As Home Prices And Mortgage Rates Rise Further.” ATTOM Data. https://www.attomdata.com/news/market-trends/home-sales-prices/attom-q3-2023-u-s-home-affordability-report/.
2. Choi, Jung H., and Janneke Ratcliffe. 2021. “Down Payment Assistance Focused on First-Generation Buyers Could Help Millions Access the Benefits of Homeownership.” Urban Institute. https://www.urban.org/urban-wire/down-payment-assistance-focused-first-generation-buyers-could-help-millions-access-benefits-homeownership.
3. Varela, Allan. 2023. “Housing in America: A Profectus Roundtable.” Profectus Magazine. https://profectusmag.com/housing-roundtable/.
4. n.d. Missing Middle Housing: Diverse choices for walkable neighborhood living. Accessed March 7, 2024. https://missingmiddlehousing.com/.
5. Meyersohn, Nathaniel. 2023. “The invisible laws that led to America’s housing crisis.” CNN. https://www.cnn.com/2023/08/05/business/single-family-zoning-laws/index.html.
6. Haskins, Glencora, and Joseph Parilla. 2022. “Diverse neighborhoods are made of diverse housing.” Brookings Institution. https://www.brookings.edu/articles/diverse-neighborhoods-are-made-of-diverse-housing/.
7. Fischel, William A. “An Economic History of Zoning and a Cure for Its Exclusionary Effects.” Urban Studies 41, no. 2 (2004): 317–40. http://www.jstor.org/stable/43100684.
8. Pinto, Edward, Tobias Peter, and Emily Hamilton. 2022. “Light Touch Density.” American Enterprise Institute. https://www.aei.org/wp-content/uploads/2022/01/Light-Touch-Density-Compiled-FINAL-1.12.2022.pdf?x91208.
9. Ibid
10. Varela, Allan. 2023. “Housing in America: A Profectus Roundtable.” Profectus Magazine. https://profectusmag.com/housing-roundtable/.
11. Pinto, Edward, Tobias Peter, and Emily Hamilton. 2022. “Light Touch Density.” American Enterprise Institute. https://www.aei.org/wp-content/uploads/2022/01/Light-Touch-Density-Compiled-FINAL-1.12.2022.pdf?x91208.
12. Stacy, Christina P., Christopher Davis, Yonah Freemark, Lydia Lo, Graham MacDonald, Vivian Zheng, and Rolf Pendall. 2023. “Land-Use Reforms and Housing Costs.” Urban Institute. https://www.urban.org/research/publication/land-use-reforms-and-housing-costs.
13. Lowrey, Annie. 2022. “The U.S. Needs More Housing Than Almost Anyone Can Imagine.” The Atlantic. https://www.theatlantic.com/ideas/archive/2022/11/us-housing-gap-cost-affordability-big-cities/672184/.
14. Jones, Kierra B. 2024. “Increasing Affordable Housing Stock Through Modular Building.” Center for American Progress. https://www.americanprogress.org/article/increasing-affordable-housing-stock-through-modular-building/.
15. Ibid 
16. Appelbaum, Binyamin. 2023. “Opinion | Why Do We Build Houses in the Same Way That We Did 125 Years Ago?” The New York Times. https://www.nytimes.com/2023/12/18/opinion/editorials/housing-costs-modular-homes.html.
17. Park, Michael Y. 2024. “Modular Homes: Everything You Need to Know About Going Prefab.” Architectural Digest. https://www.architecturaldigest.com/story/modular-homes-everything-you-need-to-know-about-going-prefab.
18. Jones, Kierra B. 2024. “Increasing Affordable Housing Stock Through Modular Building.” Center for American Progress. https://www.americanprogress.org/article/increasing-affordable-housing-stock-through-modular-building/.
19. Appelbaum, Binyamin. 2023. “Opinion | Why Do We Build Houses in the Same Way That We Did 125 Years Ago?” The New York Times. https://www.nytimes.com/2023/12/18/opinion/editorials/housing-costs-modular-homes.html.
20. Jones, Kierra B. 2024. “Increasing Affordable Housing Stock Through Modular Building.” Center for American Progress. https://www.americanprogress.org/article/increasing-affordable-housing-stock-through-modular-building/.
21. “President Biden Announces New Actions to Ease the Burden of Housing Costs.” White House, May 16, 2022. The White House. https://www.whitehouse.gov/briefing-room/statements-releases/2022/05/16/president-biden-announces-new-actions-to-ease-the-burden-of-housing-costs/. 
22. Appelbaum, Binyamin. 2023. “Opinion | Why Do We Build Houses in the Same Way That We Did 125 Years Ago?” The New York Times. https://www.nytimes.com/2023/12/18/opinion/editorials/housing-costs-modular-homes.html.
23. Rogove, Jordan, and Wayne Norbeck. 2023. “Advocating for code change to increase modular/emergency housing.” The Architect’s Newspaper. https://www.archpaper.com/2023/12/advocating-code-change-increase-access-modular-emergency-housing/.
24. Ibid
25. Hester, Jessica. 2016. “A Brief History of Co-Living Spaces: From 19th Century Boarding Houses to Millennial Compounds.” Bloomberg. https://www.bloomberg.com/news/articles/2016-02-22/a-brief-history-of-co-living-spaces-from-19th-century-boarding-houses-to-millennial-compounds.
26. Kristof, Nicholas. 2023. “Opinion | If Homelessness Is About a Lack of Housing, This Could Be an Answer.” The New York Times. https://www.nytimes.com/2023/12/09/opinion/homelessness-housing-shortage.html.
27. Burns, Rebecca, and Nicole Rifkin. 2021. “PadSplit Is Silicon Valley’s Answer to the Affordable Housing Crisis.” The New Republic. https://newrepublic.com/article/162513/affordable-housing-cheap-rent-padsplit.
28. Dickerson, Lizzie. 2023. “It’s Time to Refine Our Approach to Homelessness.” Policy and Political Review. https://pittpoliticalreview.wordpress.com/2023/12/28/its-time-to-refine-our-approach-to-homelessness/.
29. Kristof, Nicholas. 2023. “Opinion | If Homelessness Is About a Lack of Housing, This Could Be an Answer.” The New York Times. https://www.nytimes.com/2023/12/09/opinion/homelessness-housing-shortage.html.
30. Ibid
31. Husock, Howard, and Caitlin Clark. 2024. “Harvard (Mis)Leading Housing Study.” American Enterprise Institute. https://www.aei.org/domestic-policy/harvard-misleading-housing-study/.
32. Ibid
33. Blumgart, Jake. 2022. “SRO Housing, Nearly Zoned Out of Existence, Could Re-Emerge.” Governing. https://www.governing.com/community/sro-housing-nearly-zoned-out-of-existence-could-re-emerge.
34. Burns, Rebecca, and Nicole Rifkin. 2021. “PadSplit Is Silicon Valley’s Answer to the Affordable Housing Crisis.” The New Republic. https://newrepublic.com/article/162513/affordable-housing-cheap-rent-padsplit.
35. Kristof, Nicholas. 2023. “Opinion | If Homelessness Is About a Lack of Housing, This Could Be an Answer.” The New York Times. https://www.nytimes.com/2023/12/09/opinion/homelessness-housing-shortage.html.