States Race To Unlock Starter Homes as First-Time Homebuyers Get Priced Out

A growing number of states are moving to ease local zoning laws to encourage the construction of more starter homes.

Idaho, Connecticut, and Colorado lawmakers introduced bills aimed at statewide changes to local zoning laws, joining at least eight other states that are currently deliberating on similar bills.

The bills take aim at the kind of smaller, more affordable home that builders say has disappeared from many cities. This type of home can now run to seven figures in some states.

Each of the three states' bills is slightly different, but with largely the same powers: Preventing local governments from crafting laws to restrict the construction of starter homes. In each case, the state is set to allow a smaller lot size and forbid rules like setbacks and lot size restrictions.

These rules, critics say, drive up the cost of building new homes.

Similarities in starter-home bills

Idaho's Senate Bill 1279 would allow up to 12 units per acre in "starter home subdivisions." It would reduce lot size requirements, forbid restrictive covenants, and penalize anyone who attempts to prohibit or unreasonably restrict the construction of such subdivisions after July 1.

Connecticut's Senate Bill 151 would cap residential lot sizes at 5,000 square feet—less than an eighth of an acre—in areas connected to public water and sewer. It would also curtail some government ability to create setback and other lot restrictions. And, it would require townhomes be allowed in land now zoned for single-family homes.

Colorado's HB26-1114 would set a ceiling on how large minimum lot sizes can be, and prohibit cities from requiring that single-family-zoned parcels be larger than 2,000 square feet, starting in 2031. Parcels not served by water and sewage would be deemed exempt, as would historical properties.

The bills have already begun to line up proponents and detractors. The Colorado Association of Home Builders' Government Affairs Committee, meanwhile, voted to support its state's bill.

Connecticut's conservative-leaning Yankee Institute said its bill would "override local zoning authority and impose uniform rules" and called for a more tailored approach.

Starter-home bills are gaining traction

Indiana's House approved a starter-home measure in January, the same day that a Florida Senate committee moved a similar bill. Legislators in Maryland and Utah have also moved similar bills, each backed by the state's governor, Democrat Wes Moore and Republican Spencer Cox, respectively.

Other legislation has been put before lawmakers in Hawaii, New Mexico, Rhode Island, and Kansas, all of which are being discussed in committees.

But the bills have met a wide range of reception. Some of Maryland's lawmakers were skeptical that their bill properly handles communities with nuance. Indiana's local government officials sounded off that their bill could preempt local governance.

But lawmakers are bringing forth legislation for starter homes because potential first-time homebuyers are increasingly priced out of other buying options, and are forced to buy later or find other sources of funding to get a home, says Niles Lichtenstein, co-founder and CEO of Nestment, which coaches first-time homebuyers.

"A positive side effect is that these trends are drawing attention to alternate paths to homeownership and bringing more renters off the sidelines," Lichtenstein says. "Assumable loans, programs that can eliminate PMI and even lower down payments, and alternative financing solutions such as shared appreciation and land leasing are all seeing more traction."