Earlier this month, the U.S. Chamber of Commerce and the AEI Housing Center released Strong Foundations: A Playbook for Housing and Economic Growth – the first resource of its kind providing a collection of 6,600+ customized playbooks for the 50 states, 571 metro areas, 1,058 counties, 4,643 cities and places, and 360 HUD continuums of care.
After analyzing terabytes of data and over two dozen case studies, three key solutions to fix the housing shortage and expand homeownership opportunities were identified: Lot size flexibility in new subdivisions, home dwelling type and lot split flexibilities on existing lots, and flexibility to build homes near jobs.
Option #1: Lot size flexibility in new subdivisions
A common misconception is that developers prefer building big homes on large lots because it yields higher profits. In reality, local zoning codes and minimum lot size requirements often dictate the size of a home, usually a larger one – not market preferences. By allowing homes on small lots instead of restricting development to large ones, states can enable the construction of more starter single-family homes and townhomes.
Option #2: Home dwelling type and lot split flexibilities on existing lots
Legalizing single-family 2-4s, 5-8 unit multiplexes, townhomes, accessory dwelling units (ADUs), and lot splits – especially where land values are high – allows land to be used at its highest and best use. This produces more affordable and family-sized homes without subsidies. Both dwelling type and lot split flexibilities can expand the supply of starter homes by using land more efficiently. The result? A greater supply of lower-priced homes that supports both home ownership and rental opportunities for families.
Option #3: Flexibility to build homes near jobs
The concept is simple: legalizing residential development near commerce allows for additional housing supply with downstream benefits. It means more people can live closer to jobs and amenities, businesses benefit from more customers and nearby potential employees, and downtowns – many of which are struggling – are revitalized by new people and investment.
Across the nation, these three options can add up to about a combined 1.5 million homes annually: 587,000 (40%) from Option #3, 482,000 (33%) from Option #2, and 414,000 (28%) from Option #1 (see chart below).
These three options work together in a unique way. Each relies on a different segment of the residential builder and developer ecosystem: Option #1 predominantly engages large single-family residential builders and developers, Option #2 predominantly engages small and medium sized residential builders and developers to deliver single-family 1-4 unit homes, and Option #3 predominantly engages large and medium sized builders and developers of large residential buildings to build townhomes and mid- to high-rise residential buildings. By targeting different parts of the market, these three options allow states to work on all three supply levers simultaneously, helping to avoid ramp-up bottlenecks.
The map below shows the top option for each state. For example, in California, it is to allow home dwelling type and lot split flexibilities on existing lots, which is estimated to add 133,000 homes per year. In Texas, the top option is to allow lot size flexibilities in new subdivisions, with an estimated 61,700 homes added per year. In Florida, the top option is to allow flexibilities to build homes near jobs, which an estimated 54,600 homes added per year.
Some states are already moving in this direction. The Florida Live Local Act, passed in 2023, is similar to Option #3 by legalizing residential development near jobs. Texas SB15 (lot size flexibility for new residential subdivisions in larger cities) and Texas SB840 (residential and mixed use housing on all commercial and light industrial land in larger cities) were enacted in mid-2025. Taken together, these two bills show how states can simultaneously advance multiple playbook options to unlock housing supply.
While we can’t change the past, we can change the future. The Playbooks demonstrate that every state, by moving from low densities to slightly higher densities and smaller lot sizes can increase, often dramatically, the number of homes built in the future without disrupting the existing infrastructure. Together, these three levers can unlock 1.5 million homes annually, but only if more states start acting now.
To access the 6,600+ playbooks, visit: https://www.aei.org/strong-foundations-a-playbook-for-housing-and-economic-growth/
