- The U.S. is experiencing a housing shortage, estimated to be between 1.5 and 8 million homes, which is making housing less affordable for everyone.
- Rules and legal processes are responsible for approximately $94,000 of the cost of each new house.
- Housing built in modules and accessory dwelling units (ADUs) present practical and economical options that can be expanded, but they encounter obstacles related to zoning and funding.
- Professionals suggest linking federal money for infrastructure to changes in zoning regulations to encourage building at the local level.
- Loans for construction are not used as much as they could be because of perceived risk and excessive bureaucracy, which limits essential housing development.
The U.S. Housing Crisis: Obstacles and Solutions for a Nationwide Shortage
The U.S. housing crisis is becoming a pressing problem for the economy and society. Millions in America are dealing with increasing rent prices, high home prices, and a limited number of homes available. Estimates indicate that the housing shortage ranges from 1.5 to 8 million homes. Communities throughout the nation, from big cities on the coasts to growing areas in the desert like Las Vegas, are searching for real ways to increase the number of homes and make them more affordable. Fortunately, there is growing energy to address this. Policymakers, builders, and supporters are suggesting workable plans to simplify complex procedures and build homes more quickly. However, difficulties persist, including zoning limitations and worker shortages. Let’s examine the fundamental reasons for this situation and consider the most effective strategies for tackling the housing crisis directly.
The Five Ls: Basic Causes of Undersupply
Robert Deitz from the National Association of Home Builders points out five fundamental issues that negatively affect new home construction. These are known as the “Five Ls.” These issues together slow down the building process and increase prices.
1. Labor
The building industry is struggling with a continuous lack of skilled workers. The Home Builders Institute states that the U.S. needs over 2 million additional workers in the next three years just to keep up with demand. As older workers retire and policies on immigration limit the arrival of new workers, builders are finding it hard to find enough staff for projects. This leads to increased wages and longer project times.
2. Lots
It’s not just about having enough workers; there is also a limited supply of land that is available. City centers, which often have the highest demand, are facing a shortage of land that can be developed. Rules and regulations make things even harder, as land that is designated for housing is frequently restricted to very low-density building. This lack of available building sites limits the quantity of construction and pushes prices higher.
3. Lending
Another issue that is not as obvious is the difficulty in obtaining financing. Construction loans, especially for projects that aim to create affordable housing, are still hard to get. Lenders frequently see these loans as carrying too much risk, and local rules about financing can differ significantly. Tighter monetary policy only makes this problem worse. Developers are caught in a difficult position as interest rates rise and the amount of available money decreases.
4. Lumber and Other Materials
Problems with the supply chain during the pandemic showed just how fragile the supply of materials for housing is. The price of lumber jumped by over 250% in 2021 before going down again, but prices of materials continue to change unexpectedly. Rising prices for building materials add uncertainty, which discourages developers and puts pressure on project budgets.
5. Legal and Regulatory Costs
Perhaps the most annoying of the five issues, legal and regulatory obstacles now add about $94,000 for each new home, according to studies done in the industry. From delays in getting permits to zoning restrictions, reviews of site plans, and rules about including certain features, developers lose both time and money long before they even begin construction. These expenses make homes too costly for many buyers and make affordable housing projects not financially viable.
How Zoning Codes Stop Development
Zoning laws were originally created to keep industrial and residential areas separate. However, they have become complicated sets of rules that, in practice, limit housing development. The U.S. has thousands of different zoning authorities, and each one has its own specific rules, approval processes, and political factors.
Patchwork Zoning Slows Affordable Housing
Unlike countries like Sweden that have simple laws for building houses offsite, cities and counties in the U.S. have different and inconsistent codes that make things difficult for developers. Even within the same metropolitan area, the rules can be very different from one place to another. This forces developers to employ large teams of lawyers to understand the land use laws. These legal costs are then passed on to the people who will eventually buy or rent the homes.
Residential Builds Get the Short Stick
Findings from Ivory Development show something very important: local governments often demand much more paperwork and examine residential projects much more closely than they do for business or industrial projects. One city required three pages of documents for industrial zones but an incredible 90 pages for documents related to housing. This difference shows that local governments are unintentionally (or intentionally) making it harder to build homes, which makes the housing shortage even worse.
Las Vegas Case Study: Missed Potential
Even though Las Vegas has space to expand, its zoning rules limit the building of higher-density housing near the Strip, where jobs and infrastructure are located. Projects that could create affordable housing closer to where people work are either delayed or stopped completely. By modernizing zoning rules, Las Vegas, and other cities like it, could greatly decrease the costs of commuting, reduce pollution, and address the housing shortage at the same time.
Local Permitting and Bureaucracy Bottlenecks
Even when zoning allows a project, the process of getting permits creates another complex set of delays and costs.
Legacy Technology Slows Approvals
Many planning departments use outdated technology. Jenny Song from Infilla points out that several agencies still depend on computer programs from the 1990s that don’t handle documents very well. Also, as many experienced planners retire, their knowledge is lost, which adds to the problem of inefficiency.
Death by a Thousand Reviews
Getting permits often involves many rounds of revising documents, resubmitting them, and getting approvals from engineers. This can stop even developers with plenty of money. One project in Las Vegas reportedly waited for more than two months to receive a certificate of occupancy because of a mistake in the address. If this happens with many projects, it’s easy to see why the rate of homebuilding is much slower than the growth of the population.
Making these approval processes more efficient by using digital systems and providing temporary help with reviews, especially when there are backlogs, could quickly increase the number of homes being built.
Homebuilders and Developers Push for Change
The private sector is not just standing by and doing nothing. Across the country, innovative developers are urging local governments and state legislatures to seriously consider making changes.
Ivory Development’s 70-Policy Win
Ivory Development, which is based in Utah, worked with the Utah League of Cities and Towns to help pass 70 changes in regulations that were designed to reduce building restrictions. These changes included:
- Getting rid of overly strict requirements for bonds
- Putting in place required deadlines (or “shot clocks”) for engineers to review project plans
- Making zoning codes simpler by using clear, consistent definitions
Together, these changes have made it simpler and quicker to get approval for new housing projects, without reducing safety or good design.
Other States Follow Suit
Colorado, Oregon, Nebraska, and other states have taken similar actions. In Oregon, HB 2001 eliminated zoning that only allowed single-family homes, now allowing duplexes, triplexes, and fourplexes in cities with more than 10,000 residents. These changes demonstrate that the correct combination of encouragement and laws can make a real difference in the supply of housing.
Developers in Las Vegas, along with state lawmakers, could adopt similar strategies that are specifically designed for Nevada’s growth needs and its political environment.
The Political Tightrope of Housing Reform
Even when practical solutions are available, politics can prevent development from moving forward.
The NIMBY Barrier
NIMBYism, which stands for “Not In My Backyard,” is still a significant problem. People who live in neighborhoods often oppose increasing housing density because they worry about property values going down, traffic increasing, or changes to the character of their neighborhood. While some of these worries are valid, strong opposition to any new building makes it harder to put changes into effect.
Federal Carrots (and Sticks)
Mike Kinsella from Up for Growth suggests connecting federal grants for infrastructure to policies that support housing. Essentially, cities and states that want funding for roads, public transportation, and utilities must show real progress in modernizing their zoning rules. This would push areas that are unwilling to change to update their codes quickly, or they would lose out on important funding.
Nevada could also benefit from these kinds of policies. If state leaders use funds for highways or water infrastructure as incentives for updated zoning, cities might have no choice but to make it easier to build new housing.
Economics of Affordable Housing Construction
Building affordable housing is more complicated financially than building housing that is sold at market prices.
Rising Costs, Thin Margins
The costs of materials, permits, and labor are increasing rapidly. When profit margins are already small, many developers choose to avoid affordable housing projects and instead work on projects that will make more money. Government subsidies are helpful, but they often are not enough.
Regulatory Conflicts
Federal requirements like the Davis-Bacon Act require that workers on any project that receives federal funding must be paid the local prevailing wage. While it is important to pay fair wages, these rules can greatly increase the cost of building affordable housing, making it financially impossible without very large subsidies.
The result is that fewer homes are built, projects take longer, and families with low incomes face even greater housing insecurity. It is urgently necessary to make sure that following regulations is balanced with financial practicality so that building these essential homes can continue.
Innovations in Homebuilding: Modular & Manufactured
Technology is providing solutions in areas where policy is slow to change. Modular and manufactured housing options are becoming more popular as less expensive and faster ways to build homes compared to traditional construction methods.
What is Modular Construction?
Modular components are built in factories and then moved to building sites to be put together quickly. This process reduces waste, shortens construction time, and decreases delays caused by bad weather.
Companies like Boxabl and Blueprint are leading the way in modular construction, offering practical options that greatly reduce the costs for each unit. Boxabl is headquartered in Nevada, so Las Vegas has the opportunity to become a leading city for these new ideas.
Financing Modularity
Jonathan Lawless and other supporters are urging Fannie Mae and Freddie Mac to not only accept modular homes for financing but to actively encourage them. By offering good financing options, modular homes could change from being a less common idea to a standard solution.
Unlocking Backyard Housing: The ADU Push
Accessory Dwelling Units (ADUs), which are small, separate or attached units on residential properties, could create a large number of new homes within existing neighborhoods.
The Wealth Beneath Our Feet
According to housing experts, making ADU regulations less strict could free up over $30 trillion in home equity that could be used. Homeowners could use this money and also create additional housing at the same time.
Financing Friction
Lawless suggests allowing lenders to consider the expected rental income from an ADU when they are deciding on a loan. This could help more families, especially middle-income families, to build ADUs. Modern financial products that are secured by a second lien could provide the initial money needed with less risk compared to traditional second mortgages.
In Las Vegas, where zoning still limits ADUs on large properties in suburban areas, relaxing these rules could quickly result in thousands of new homes without increasing urban sprawl.
Construction-to-Permanent Loans & GSE Reform
The methods used to finance construction are outdated. Developers and people wanting to build homes need simple, low-risk financing tools to speed up new construction.
Single-Close Construction Loans
Currently, construction loans are risky and complex, often requiring separate loans for the construction phase and for the permanent mortgage. Fannie Mae could remove obstacles by supporting single-close construction-to-permanent loans. These allow borrowers to set the terms at the beginning of the project, which reduces risk and delays.
Strengthening Takeout Financing
Dan Brendes from Berkadia emphasizes how important it is to have strong takeout financing, which refers to long-term loans that pay back banks after construction is finished. Increasing Fannie and Freddie Mac’s ability in this area would allow banks to finance more projects at the same time.
With better availability of funds and less perceived risk, banks and lenders would be more willing to provide funding for new construction, which would increase the housing supply for people at all income levels.
Privatizing FHA’s Aging Programs & Fast-Tracking Permits
Federal programs that have been around for a long time may have good intentions but use outdated methods.
Streamlining FHA 221D4
The FHA’s 221D4 program helps finance the repair and building of multi-family housing, but getting approvals is very slow. Lisa Davis from Vistria Group points out that there is a need to partially privatize the administration of this program, possibly through partnerships with efficient third-party platforms.
Maryland’s Permit Fast Track
In Maryland, a smart solution fixed the problem of regulatory delays: if a permit is delayed for more than 12 months, a certified third party is authorized to complete the process, with the city paying for it. This keeps projects moving forward without allowing bureaucracy to stop housing production.
Nevada and its cities, including Las Vegas, could adopt similar automatic processes for handling permit delays.
Policy Recommendations: State & Federal Paths Forward
To really solve the housing crisis, leaders at all levels must adopt bold, practical policies:
- Make building codes and zoning rules simpler across different areas to reduce problems
- Put in place required time limits for reviews and permit approvals
- Connect infrastructure and HUD funding to following pro-housing changes
- Increase loan programs for modular, manufactured, and ADU developments
- Change Davis-Bacon and other federal regulations that increase costs in affordable housing
- Encourage cooperation across cities, counties, and state lines within metropolitan areas
These workable steps can increase the housing supply, lower costs, and encourage fair urban growth.
What This Means for Las Vegas
Las Vegas is in a critical position with both opportunity and risk. With plenty of land available and growing pressure from demand, it could be a place to show the nation’s next steps in housing innovation.
Steve Hawks argues for significant zoning changes and strategic use of modular and ADU construction. By making it possible to build denser housing near city job centers and cutting through red tape for new ideas, Las Vegas can become an example city in solving America’s housing crisis.
The future of affordable housing may begin right here, but only if policies change quickly enough to meet the current needs.
Citations
- Deitz, R. (2021). Regulatory costs added about $94,000 per new home. National Association of Homebuilders.
- Lawless, J. (2025). Remarks on GSE reforms for modular and ADU financing. Housing Supply Summit 2025.
- Song, J. (2025). Planning department workforce suffering from outdated technology and institutional knowledge loss. Infilla.
- Kinsella, M. (2025). On tying federal infrastructure funds to reform-friendly zoning. Up for Growth.
- Brendes, D. (2025). Takeout financing needed to free up bank capacity for construction loans. Berkadia.
- Ivory Development (2025). Worked with Utah League of Cities and Towns to pass 70 regulatory bills simplifying building and zoning processes.