The Housing Ceiling

 

The Housing Ceiling: How Red Tape, Local Gatekeeping, and Permit Delays Keep Americans Out of Homes, and Out of Their Own Rebuilds

I. Introduction: The Missing Starter Home

    For most of the last century, buying a home was the clearest way for an ordinary American family to build wealth. A steady job, a modest down payment, and a few years of patience were enough. That deal is broken for millions of people. Today a buyer of a typical starter home needs an income of roughly $86,000, and a median down payment of about $30,400 takes around seven years to save at the median income.

    We covered the general problem in "The Red Tape Tax," which showed how layers of well-meaning regulation pile onto the cost of living. Housing is where that tax is most visible, because a home is the biggest purchase most families will ever make, and nearly every dollar of delay is built into the price.

II. The Scale of the Gap

    The most-cited recent estimate, from Realtor.com, puts the national supply gap at about 4.03 million homes as of 2025. Estimates vary widely by method, and one Washington Post analysis noted credible figures ranging from near zero to as high as 40 million. Still, the direction is consistent: we are not building enough homes where people want to live.

Measure	Figure
Estimated national housing supply gap (2025)	4.03 million homes
New households formed (2025)	1.41 million
Housing starts (2025)	1.36 million
Single-family starts (2025)	940,000, the lowest since 2019
"Missing" Millennial and Gen Z households	1.82 million
Affordable rental deficit for extremely low-income renters	7.2 million units

    At the bottom of the income ladder it is worse. The National Low Income Housing Coalition reports only 35 affordable and available rental homes for every 100 extremely low-income renter households, and no state has enough. Even if building rose 50 percent above 2025 levels, closing the gap would still take about seven years. Waiting to start is the most expensive option.

III. The Red Tape Tax, Applied to Housing

    Politicians like to argue about interest rates, investors, and immigration. Those matter at the margin. The underlying mechanism is simpler: the right to build is controlled by layers of local approval, and the incentives point toward saying no.

    Time is the hidden cost. As we noted in "The Red Tape Tax," median building permit times vary enormously: 34 days in Chicago, 62 in New York City, and 190 in Los Angeles. A builder carrying a construction loan pays interest every day a project sits in review, and that interest does not disappear. It is folded into the price of the home.

    The same system also decides who can compete. A developer with a legal team, lobbyists, and cash reserves can wait out a two-year approval. A small builder, a family adding a unit to their property, or a first-time developer usually cannot. Rules sold as protecting communities end up protecting incumbents and the largest firms, which is the regulatory capture problem in miniature.

The tools of the system are familiar:

• Single-family-only zoning that bans duplexes, townhomes, and small apartments on most residential land
• Minimum lot sizes and parking requirements that raise the cost of every unit
• Discretionary review and public hearings that can delay a project for years
• Environmental review designed for highways and dams but applied to apartment buildings

Each of these had a legitimate original purpose. Together they form an obstacle course that only the best-funded players can finish.

IV. When the Disaster Hits: The Permit Process Becomes the Second Disaster

If the red tape tax is expensive in normal times, it is brutal after a catastrophe. The clearest test case is California.

    The Palisades and Eaton fires in January 2025 destroyed nearly 13,000 homes. Governments responded with real emergency measures: faster approval of like-for-like rebuilds, a self-certification pilot for simple projects, and some waived code requirements. According to CalMatters, those changes cut some approvals to about three days instead of the typical three months, and permits were being issued roughly three times faster than the pre-fire baseline.

    That was a genuine improvement, and it proves something important: when governments choose to move quickly, they can. But "faster than before" is a low bar, and the results show it.

• Roughly 18 months after the Eaton Fire, about 100 homes had been fully rebuilt, 1,796 were under construction, and 2,981 building permits had been issued, against more than 9,000 structures destroyed. For the Palisades, local reporting at the same point found only one building rebuilt.
• A land-use attorney quoted by Crosstown LA said approvals from over a dozen city departments remain a bottleneck. One builder reported needing 16 different clearances for a single house, and plan check can take many months and add tens of thousands of dollars in expenses.
• Builders quote costs well above $1,000 per square foot, and some of the first premium lots sold to developers instead of the families who lost them.

    To be fair, permitting is not the only problem. Insurance coverage, bank negotiations, utility disputes, and construction costs are real obstacles, and one builder warned that a permit does not equal a finished home because some people abandoned their plans when they could not sort out their finances. But that is the point. Every month of delay is a month of rent, mortgage payments, and interest on a family that already lost everything. Red tape is not the only barrier, but it is the one government fully controls.

V. It Is Not Just California

The pattern repeats wherever a disaster meets a heavy approval process.

Lahaina, Hawaii. Three years after the Maui wildfires, nearly 600 homes have been rebuilt, with 315 under construction and roughly 1,000 more units holding permits or in processing. On Front Street, the commercial heart of the town, no businesses have been rebuilt. Residents describe permitting rules that changed about four times, historic district design requirements that slowed approvals, and strict shoreline rules that kept some oceanfront owners from returning. Some residents aged out of ever rebuilding during the wait.

Western North Carolina. Two years after Hurricane Helene, the state's Renew NC program has received 7,924 applications. As of late September, only 159 homes were completed and 170 were under construction, while 317 active applications were still sitting in environmental review. Local reporting has also described updates to floodplain maps stalling rebuilding in the region. Safety matters, and building in a floodplain without precautions is a risk. But rules that take longer than the recovery period itself defeat their own purpose.

Different states, different disasters, and the same lesson. In normal times the process raises prices. In emergencies it keeps families displaced.

VI. The Federal Response: Progress, With a Catch

In July 2026, Congress did something it rarely does. The 21st Century ROAD to Housing Act passed the Senate 85 to 5 and the House 358 to 32, and became law on July 11. It includes practical reforms:

• Environmental review: It expands NEPA categorical exclusions for housing activities and allows state and local governments to take on review responsibilities.
• Manufactured housing: It removes the permanent chassis requirement, making factory-built homes cheaper and more flexible to design.
• Building design: It opens the door to single-stairway multifamily buildings up to six stories through federal guidelines.
• Institutional investors: It restricts large investors owning 350 or more homes from buying new single-family homes, with an exemption for build-to-rent.
• Rewards for results: It creates $200 million a year in competitive grants for localities that can show they increased housing supply.

    This deserves credit from both sides. The catch is that the federal government does not control zoning or local permitting. The law's main zoning provision directs HUD to publish guidelines and best-practice frameworks, and a city council that prefers the status quo can read them and do nothing. The grants are the stronger tool because they reward outcomes, but $200 million a year, ending after seven years, is small against a problem measured in millions of homes.

Congress did the part that is easy to pass. The hard part is what comes next, and that is the rest of this article.

VII. The Structural Solution: Smart Regulation, Not No Regulation

This is where the center aisle matters. The answer is not to abolish building standards, fire codes, or environmental protections. It is to make the rules clear, fast, and accountable. Five reforms would do the most.

1. Conduct a Full Review of Existing Regulations

    No one can say today how many housing rules are in force, who they protect, or what they cost. Rules are added by city councils, county boards, state agencies, and federal departments, and they rarely come with a price tag attached.

    Every level of government that touches housing should be required to complete a full audit of its building, zoning, permitting, and environmental rules. For each rule, the audit should answer three questions: what problem was it meant to solve, does it still solve it, and what does it add to the cost of a home? Rules that cannot answer those questions should be revised or removed. This is not deregulation. It is the same standard we apply to a business budget: if you cannot explain what a line item does, you do not keep paying for it.

2. Give Regulations an Expiration Date

    Government is very good at adding rules and almost never removes them. A rule written in 1975 for a problem that has since been solved, or a standard that has been superseded by better technology, stays on the books because nobody has the incentive to take it off.

    The fix is a sunset clause. Every housing regulation should expire after a fixed period, say five to ten years, unless the responsible body reviews it, publishes the evidence, and votes to renew it. Idaho has already experimented with this approach on a broad scale, letting its administrative rules expire and rewriting what was necessary. Sunsets do not eliminate protections. They force regulators to defend them with current evidence. A good rule will survive the review easily. A bad rule will not, and that is exactly the point.

3. Fast-Track Permits in Disaster Zones, Permanently

    California showed that approvals can take days instead of months when leaders decide to prioritize them. Lahaina and western North Carolina showed what happens when they do not. Emergency speed should not be improvised after every disaster. It should be the law before the next one.

A permanent disaster rebuilding framework should include:

• Automatic approval of like-for-like rebuilds on the same footprint, with a short, published checklist
• Pre-approved standard plans that survivors can pick up and use, with structural, fire, and flood standards already reviewed
• A single coordinating office that issues every needed clearance together, replacing the chain of a dozen departments
• Hard deadlines, with a missed deadline resulting in approval by default
• A temporary freeze on new design, historic, and discretionary requirements for homes being rebuilt, so the rules do not change four times while a family waits

Safety standards still apply. What changes is that the paperwork stops being a second disaster.

4. Release Government-Held Land and Buildings for Housing

    The cheapest lot is one the public already owns. Federal, state, and local governments hold enormous amounts of land and buildings, and much of it sits idle. The Interior Department oversees over 500 million acres of federal land, and in March 2025 HUD and Interior announced a joint task force to identify underused federal land suitable for housing. Meanwhile, the General Services Administration found that thousands of federal buildings failed to meet the legal 60 percent minimum utilization rate in early 2026, and the federal maintenance backlog is estimated between $26 billion and $50 billion.

That is a real opportunity. We recommend:

• A public inventory of all government-held land and buildings, searchable and updated every year
• A requirement that surplus and underused properties in or near existing communities be evaluated first for housing
• Pre-zoning of those sites, so a builder can buy or lease land that is already approved, rather than starting a multi-year fight
• Priority for the places where the shortage is worst, including rural and tribal communities and the metro areas hit hardest by the gap

    Not every federal site is suitable. Some are remote, some are contaminated, and some are historic. That is why an honest inventory comes first. But holding vacant property while families go without homes is hard to defend.

5. Close the Door on Corporate Ownership of Single-Family Homes

    Single-family homes should be homes for families. The 21st Century ROAD to Housing Act made a start by restricting large investors that own 350 or more homes from buying new single-family homes. That is a meaningful step, and it passed with bipartisan votes.

    To be honest about the numbers, institutional investors own about 3 percent of single-family homes nationally, according to the Government Accountability Office. Nationally that is a small share. Locally it is not: between 2018 and 2024, institutional holdings in Phoenix and Dallas each grew by more than 16,000 homes, and in Jacksonville and Nashville by more than 8,000 each. In those markets, a family bidding on a starter home can be up against a company with unlimited capital and no need for a mortgage.

The law should be strengthened in three ways:

• Extend the restriction beyond new homes to cover purchases of existing single-family homes by large corporate owners
• Lower the threshold so mid-sized corporate buyers cannot simply stay just under the line
• Tighten the build-to-rent exemption so it adds new supply instead of becoming a loophole for buying up what already exists

Building new rental housing at scale is good. Outbidding a young couple for a house that already exists is not the same thing.

6. Trim the Bureaucratic Nightmare Facing Home Buyers

    So far we have focused on builders, but the buyer faces a maze of their own. Closing costs typically run 2 to 6 percent of the loan amount, which means $8,000 to $24,000 on a $400,000 mortgage, before the down payment. Buyers pay for appraisals, inspections, title insurance, escrow and attorney fees, origination charges, and recording fees, often in a stack of paperwork few people read in full.

Some of these costs protect the buyer. Many are duplicative or poorly competitive. Reasonable steps include:

• A single, plain-language closing document with every fee on one page, in dollar amounts, before the buyer commits
• Reuse of title searches and inspections when a home has recently changed hands, so buyers do not pay for the same work twice
• Faster, more standardized appraisals, including automated valuation for simple, lower-risk loans
• Stronger oversight of fees charged by businesses the buyer has no real ability to shop for
• Down payment and first-time buyer programs that are easy to find and apply for in one place, not scattered across dozens of agencies

The goal is not to remove consumer protection. It is to make the process something an ordinary family can understand without hiring an expert.

VIII. A Reform Agenda Both Parties Can Defend

    None of this requires choosing a side in the culture war. A conservative can read the agenda as property rights, less red tape, and a smaller, more accountable government. A progressive can read it as affordability, access, and faster recovery for the people who need it most. The policy is identical. Only the vocabulary changes.

That is the center aisle at work. The status quo is not working for renters, buyers, builders, or disaster survivors, and no party has a monopoly on the blame.

IX. Conclusion: Let People Build, Let People Buy, and Let People Come Home

    The country has told its pollsters that housing is too expensive. Congress has now told the country, by a margin of 358 to 32, that it agrees. What remains is turning agreement into action, and that means five things.

    First, review the rules we have, because a regulation no one can justify should not survive. Second, give every regulation an expiration date, so that protections have to earn their place with current evidence. Third, fast-track permits in disaster zones as a standing right, because a family that lost its home should not also lose years to paperwork. Fourth, put idle public land and buildings to work for housing. Fifth, keep family homes in the hands of families, and strip needless complexity out of the process of buying one.

    If you own a home, you have benefited from scarcity. If you rent, hope to buy, or are still waiting to rebuild, you are paying for it. A fair system would not ask any of those groups to feel guilty. It would simply make it legal, fast, and affordable to build a home and to buy one.

    The measure of success is simple, and anyone can check it: more homes, built faster, owned by the families who live in them.

This article is an opinion-based editorial. It reflects the analysis and views of the author, G. Moraga, and does not constitute independent news reporting. Figures are drawn from public reports.

If you liked this article, you may also like: The Red Tape Tax