Zoning & Land Use: The Systemic Gatekeeper of Scalable Housing

Housing scarcity in the United States is not a policy glitch—it is a systemic failure. As highlighted in The Housing Shortage Is a Systems Failure — Here’s the Framework to Fix It, scarcity emerges from five interdependent bottlenecks: restrictive zoning, inefficient delivery mechanisms, misaligned capital flows, low construction productivity, and underutilized existing stock. Among these, zoning and land-use regulations serve as the structural backbone of housing systems: they define the city’s physical capacity, determine what can be built, and shape the conditions under which housing can scale efficiently. Without reform, even optimized financing, streamlined delivery, and industrialized construction cannot produce units at the speed or scale required to meet demand.

Zoning is not just a bureaucratic framework—it is the DNA of urban housing. It dictates which homes can exist, where they can be located, and how neighborhoods evolve. When zoning codes are overly restrictive, they propagate bottlenecks that ripple through every other systemic lever, from delivery mechanisms to construction productivity to utilization of existing stock. Critically, these restrictions hurt not only high-density or mid-rise development but also smaller, single-family starter homes, the very units essential for young families, first-time buyers, and workforce households.

How Restrictive Zoning Harms Starter Homes

Across most U.S. metros, zoning favors large-lot single-family homes or isolated towers while limiting smaller lots and missing-middle forms (Gyourko, Hartley & Krimmel, 2021; Quigley & Raphael, 2005). The consequences for smaller homes are striking:

• Artificial lot minimums make it nearly impossible to build affordable starter homes in high-demand neighborhoods. Families seeking their first home are priced out before even entering the market.

• Density caps prevent smaller homes from clustering efficiently, meaning developers cannot build multiple starter units on one parcel without navigating costly variances or discretionary approvals.

• Discretionary review processes and high impact fees disproportionately burden lower-cost housing, making single-family starter homes financially unviable in urban and suburban markets (McKinsey Global Institute, 2017).

Econometric studies confirm that these restrictions inflate land costs for smaller units and exacerbate price growth. In high-opportunity metros such as San Francisco, Los Angeles, and New York, starter homes have become nearly inaccessible, with median prices increasing 3–5% above inflation annually, partly because zoning restricts lot size flexibility and new supply (Zillow, 2025; Been, Ellen & O’Regan, 2019). Meanwhile, regions that permit smaller-lot, missing-middle housing see greater entry-level affordability and higher homeownership among younger households (Been et al., 2019).

Insight: Zoning is a double-edged sword. While often justified as a tool for neighborhood character, it structurally excludes smaller, starter homes and perpetuates scarcity, creating a market where affordability is inversely related to opportunity.

The Case for Mid-Rise and TOD Without Sacrificing Starter Homes

Mid-rise buildings—4–8 stories—and TOD corridors do not inherently displace starter homes; in fact, thoughtful zoning can protect and complement smaller units. Panelized studies from Europe show that mixed-density neighborhoods, combining mid-rise buildings with smaller single-family homes, maintain affordability while achieving higher overall unit counts (OECD, 2021).

• Mid-rise buildings maximize land use without requiring demolition of existing small homes when located strategically along transit corridors.

• TOD corridors increase urban density while preserving surrounding neighborhoods of starter homes, creating a balanced housing ecosystem.

• Overlay zoning or “infill-friendly” codes allow duplexes, triplexes, and fourplexes alongside single-family homes, expanding supply for both first-time buyers and renters.

This approach demonstrates that scalable density and starter home preservation are compatible when zoning is designed as a systemic lever rather than a blunt instrument.

TOD as a Multiplier Without Displacing Affordability

Transit-oriented development (TOD) amplifies housing system efficiency without undermining starter homes. By concentrating 8–12 story buildings along high-capacity transit nodes, cities can deliver high unit counts on parcels that are underutilized or commercial in nature, leaving starter homes intact in surrounding neighborhoods (Suzuki et al., 2015). TOD thus becomes a mechanism to protect affordability, not erode it:

• Vacant parcels and underutilized commercial stock are redeveloped for mid-rise housing.

• Starter homes remain preserved, preventing neighborhood gentrification from purely supply-driven high-rise towers.

• Infrastructure investments—transit, utilities, and streetscape improvements—benefit both new developments and existing starter-home communities.

Empirical evidence from Portland, Oregon, and pilot programs in California confirms that careful integration of TOD with zoning reform produces more units at multiple price points, supporting entry-level homeownership while attracting mid-rise development (Urban Institute, 2023).

Zoning as a Systemic Multiplier Across Housing Types

Zoning reform interacts with all other systemic levers to amplify impact:

1. Capital Flows: Predictable, by-right zoning attracts investment for both mid-rise developments and smaller starter homes, making projects financially feasible (Urban Institute, 2023).

2. Delivery Mechanisms: Clear lot and building standards reduce discretionary delays, benefiting all housing types—from multi-family TOD buildings to smaller single-family units (McKinsey Global Institute, 2017).

3. Construction Productivity: Standardized envelopes allow prefab and modular techniques to scale efficiently, lowering costs for both mid-rise buildings and starter homes (World Economic Forum, 2022; OECD, 2021).

4. Existing Stock Utilization: Smaller lots and underdeveloped parcels can be aggregated for infill without displacing starter homes, preserving community character while densifying the city.

Modeling shows that cities adopting mid-rise by-right zoning combined with infill-friendly starter home provisions can increase housing production by 15–25% over five years while maintaining affordability for first-time buyers (Gyourko, Hartley & Krimmel, 2021).

Insight: Thoughtful zoning reform does not force a trade-off between scalability and affordability. When designed as a systemic lever, it protects starter homes, unlocks mid-rise density, and leverages TOD, producing a balanced, resilient housing ecosystem.

Policy Recommendations

To maximize housing supply while preserving starter homes:

• Permit mid-rise, by-right housing (4–8 stories) along strategic corridors.

• Enable 8–12 story TOD buildings on underutilized or commercial parcels, leaving starter-home neighborhoods intact.

• Introduce infill-friendly overlays allowing duplexes, triplexes, and fourplexes within single-family zones.

• Standardize design and massing guidelines to maintain neighborhood character.

• Integrate zoning with capital, delivery, construction productivity, and existing stock strategies to maximize systemic impact.

Insight: Restrictive zoning is the systemic bottleneck that keeps both mid-rise and starter homes scarce. Reforming it creates the structural backbone for scalable, resilient, and equitable urban housing.