New Laws Could Add an Estimated 103,000 Homes a Year, Study Finds

New state laws to encourage homebuilding could bolster the nation's home production by six figures in coming years—but there’s a small catch.

The American Enterprise Institute tracked 10 state bills passed this year and estimates they could potentially lead to 103,000 new homes a year across the country. It's positive progress to solving the nation's housing supply shortage, which is complicated by red tape.

AEI’s data, though, shows that about half of those housing units are accessory dwelling units, or ADUs. But dozens more bills and legislative efforts put forth this year could bring more progress, AEI said at a housing conference in Washinton, DC, this week.

This has been the “year of the starter home,” said Ed Pinto, co-director of AEI’s Housing Center. Thank the bipartisan 21st Century Road to Housing Act, the largest housing reform package in decades. Americans are broadly concerned about affordability, and many young people have grown pessimistic that owning a home will be attainable. 

The two largest contributors are California's AB 956 and Washington state's SB 6026.

California's AB 956 loosens requirements around building ADUs. AEI thinks that could result in 48,000 new units a year. Behind that is Washington state's SB 6026, which allows homes in commercially zoned areas. AEI thinks it could mean 37,000 new homes a year.

Other big contributions come from Idaho's SB 1352, which allows homes on smaller lots and could mean 5,000 new homes a year. Kansas' SB 418 brings similar potential in that state. Maine, Virginia, and North Carolina also passed new pro-housing laws.

Tobias Peter, co-director of AEI’s housing center, noted that doesn't necessarily mean every new home will come to fruition. Other kinds of reforms could also unlock hundreds of thousands more homes a year.

Good and bad signs

At the same time, AEI released a study that found broad support for changes to housing policy. Two rounds of polls of about 5,000 people this year found about 83% support a state law allowing more affordably priced starter homes on smaller lots in new neighborhoods.

AEI found 61% said they’d rather see a torn-down home replaced with two smaller homes, compared to a larger and more expensive home. But people’s opinions trading housing development versus individual property rights can be complicated. 

Two of the most popular pushbacks on housing reform fit into two categories. “Supply skeptics” don’t think more homes will improve affordability. Others oppose change to the character or scale of established neighborhoods. Bur rather than housing reform being a "YIMBY versus NIMBY" debate, AEI pictures a spectrum of reform supporters and skeptics.

Some of the largest efforts have focused on the legal red tape around where homes can be built. For instance, several states have put forth laws to allow homes on smaller lots.

But more legislation is needed to correct the slowing construction of starter homes in the nation. Freddie Mac found the U.S. built an average of 418,000 new starter homes a year in the 1970s, 34% of all new housing starts. By 2020 that fell to 65,000 starts, or less than 10%.

“You really need a local champion, a quarterback who organizes at the state level,” Peter said, noting some successful bills where the governor, lieutenant governor, or a group of legislators shepherd a bill. “And it’s also important you have the evidence in your back pocket to counter some of the narratives."

In practice

Affordability also requires local governments to respond—because zoning and building code reform, by and large, happens at the local level.

Local government controls some of the most significant levers of affordability, says Yadira Ramos-Herbert, mayor of New Rochelle, NY. And that city's updates to its zoning code have meant incremental progress over time.

New Rochelle developed a form-based code that allows developers to build with fewer requirements around building use. It also streamlined its approval process for new developments, with some taking as few as 90 days to achieve approvals.

The program has helped it approve 4,500 new homes since 2020. New Rochelle, a winner of the University of Utah's 2026 Ivory Prize for Housing Affordability, has seen its median rent decline as national averages surge.

"Our core objective is to ensure New Rochelle remains affordable, accessible, and economically resilient," Ramos-Herbert tells Realtor.com. "Affordability remains the defining challenge of our time, and cities have a responsibility to respond with urgency."