Every year, commercial real estate developers must endure a myriad of new regulations—and they are almost always unwelcome and unpleasant. Regulatory hurdles are one of the biggest obstacles to new construction. A joint report from The National Association of Home Builders and the National Multifamily Housing Council found that regulation increased the cost of construction by more than 40%, and it’s only getting worse. Yet, every year, many state and local municipalities roll out new regulations for developers to learn and follow.
This year, however, the regulatory rollout looks a little different.
Several state and local municipalities have launched pro-development reforms to make it easier for commercial real estate developers to build. The housing crisis is at the center of trend. People need more houses, and governments are removing the red tape to make it happen. But it isn’t only housing. New policies are removing hurdles to new construction for commercial properties that communities need to thrive, like retail amenities and offices that support jobs.
New York Governor Kathy Hochul summed it up perfectly when she launched the state’s Let Them Build campaign: “New York has always been a place of boundless ambitions: from the Erie Canal to the Empire State Building. But for too long, unnecessary red tape has stood in the way of new housing and critical infrastructure.” Governor Hochul said. “If local leaders want to deliver new investments for their communities, I say ‘Let Them Build.’” The campaign will focus on eliminating prohibitive regulations in the state that have prevented developers from delivering critical projects, like housing and infrastructure.
New York is not alone. State governors and local elected officials across the country are increasingly looking at opportunities to eliminate restrictive policies, from the end of CEQA in California to Florida’s strategic shift toward state oversight—all signs of an exciting new era of pro-development policy and regulation unfolding across the country. Here is a closer look at the how state and local governments are opening new doors for developers.
A Housing Crisis Catalyst
The rise in pro-development sentiment is transformative—and much different than what developers have experienced for decades. Since at least the 1970s, state and local governments have heavily regulated new construction through a series of laws and practices, including restrictive land use, zoning policies, building requirements, community and environmental surveys and lengthy permitting processes. The pro-regulatory sentiment was born from the growing NIMBYism movement and a general embrace of sprawl—even in urban environments.
Overregulation has had disastrous results.
The suppression of new real estate construction has created a severe national housing crisis. While everyone has a different number, there is near universal consensus that the nation needs millions more housing units at every end of the financial spectrum to meet current demand.
According to the National Low Income Housing Coalition, the nation is short 7.2 million affordable and low income homes to meet current demand. Freddie Mac data shows a 3.7 million housing unit shortfall, and the Brookings Institute estimates a shortage of 4.9 million units. The disparity in these numbers generally comes from the definition of “shortage.” Some sources include new household formation, or households that would have formed if a home had been available, while others simply look at current supply versus demand. Either way, the shortage is significant—and it doesn’t stop at housing. The dearth of housing units has deprived many communities of the essential resources required for neighborhoods to thrive, leading to the emergence of food deserts and healthcare facility shortages.
The number of new housing units needed is only growing every year, and developers are struggling to keep up. In 2025, nearly 1.5 new housing units delivered to market—a combination of both multifamily units and single-family homes—and yet, 1.41 million new households were formed, meaning that the new construction didn’t help reduce the housing shortage. Even worse, new construction deliveries slowed 7.9% in 2025 compared to 2024.
This dynamic shows the difficulty of truly addressing the housing crisis—and it has catalyzed an important change in construction sentiment. Government leaders are beginning to understand the very real impact regulatory barriers can have on the new construction pipeline, and the way that limiting new construction can starve communities. Elected officials are now looking for opportunities to partner with real estate developers and encourage new construction by removing prohibitive regulations and clearing a pathway for developers to build.
State Governments Cut Red Tape
Flexible Zoning
Several states are loosening zoning regulations to allow for developers to build projects on land sites where they would have otherwise been prohibited. California and Arizona are leading the way with several policies that eliminate restrictive zoning. California has limited zoning restrictions on new construction near transit and increased density allowances, including allowing up to four units on a single-family lot. Arizona has also redefined zoning laws, allowing for up to four units on a single-family lot and opened up 10% of commercial land sites for multifamily use, as well as allowing for the construction of ADUs on single-family sites.
Several other states are making similar moves to create flexible zoning, including Utah, Vermont, Montana, Oregon and Washington. Many of the new laws focus on ending single-family zoning practices, expanding zoning on commercial sites to allow for multifamily, legalizing the development of ADUs on single-family sites and establishing by-right development practices. In addition, many states are allowing density bonuses near transit.
Limitations on Regulation
Development is a local game—and so are the laws that govern it. Developers have always needed to know and comply with city-level policies and regulations, which can vary significantly from city-to-city. States are looking to override these challenges by limiting city’s authority to overregulate new construction.
Florida is taking the lead on this trend. The state has passed the Live Local Act and SB 180, which protect developer rights and limit local municipal authority over zoning, hearings and setback restrictions. With these regulations, developers in the state can effectively ignore local laws related to new construction.
While the Florida law explicitly limits city authority, other states are moving in a similar direction by passing overarching legislation meant to override local laws and place control in the state’s power. California has also made unprecedented moves to bypass local authority, and has taken aggressive action to keep cities in line. Since 2023, for example, the state has won multiple lawsuits with the city of Huntington Beach over housing regulations. This is a growing trend that allows states to truly address new construction needs and unify regulation within the state.
Fast Tracking Permits
Long permit timelines are one of the costliest aspects of new construction—and often one of the biggest complaints among developers. States are looking for opportunities to streamline the permitting process. Limiting public reviews and using third-party inspectors are commonly adopted to help improve the permitting process, but some states are going further.
California has made a big splash by suspending CEQA requirements for assets affected by the fires in Los Angeles. This will effectively make permitting three-times faster to expedite the rebuild of those projects, but it could also be the early steps of a more widespread suspension or limits on CEQA, often known as the state’s biggest roadblock for developers.
Other states, like Delaware and Florida, has placed approval timelines on local agencies; Massachusetts has mandated the fast-tracked review of permit applications; and Wahington has mandated that cities update, modernize and streamline permitting processes at the local level.
Asset Conversions and Adaptive Reuse
As people and communities evolve, real estate use must evolve, too. This is a lesson that many state governments are learning quickly as some assets, like office, stand vacant while housing supply falls short. To address this challenge, states are opening opportunities for developers to convert obsolete properties or assets into essential community resources, like apartments.
California, New York, Wisconsin, Arizona, New Hampshire and Connecticut have all passed some sort of law to fast-track these conversion opportunities. Some laws simply, but explicitly, allow for the conversion through flexible zoning and land use practices or through adaptive reuses laws. Other laws in states like Wisconsin, New York and Connecticut are supporting conversion projects through tax incentives and even interest free loans. In Arizona, local governments cannot require a conditional use permit for conversion projects.
Tax Incentives
In addition to eliminating current regulation to create a more welcoming environment for developers, states have also launched new construction tax credit programs.
The federal government has a popular and recently expanded Low Income Housing Tax Credit program, to offer tax credits for affordable housing and reduce construction costs. Many states have developed similar state-level models to similarly incentivize new construction. Many address the need for affordable housing, as the federal program does, but states are also utilizing tax credits to incentivize sustainable development, rehabilitation projects and farmworker housing.
The list here is long, with states across the country operating tax credit programs. Illinois, Missouri, New Mexico, New York, California, Maine and Oklahoma are among the states with state-specific LIHTC programs for new affordable housing construction; California has multiple tax credit programs for rehabilitation and neighborhood revitalization; and Michigan, Minnesota, Pennsylvania, Rhode Island, Utah and New York are among states with programs and incentives for energy-efficient development or projects utilizing solar energy.
Success in Existing Models
The push for deregulation is not a new or novel idea. In fact, developers have long understood the negative impacts of overregulation on new construction, and sought to reduce the regulatory burden through lobbying efforts in Washington and public education. Some states and cities listened earlier than others, and those places can now serve as an example for other states to follow.
In Sunbelt states like Texas, Florida and Tennessee, developers have already enjoyed limited regulation, and the states have seen the benefits in their housing availability and housing costs. Houston is a prime example. The city has a no conventional zoning code, and when the city finds obstacles to development, local officials quickly remove them. That happened in 1998 when developers had difficultly building new homes under the Houton’s 5,000-square-foot minimum lot size. The city reduced the lot size to 1,400 square feet, and as a direct result, the city saw 75,000 new homes come to market between 2005 and 2018, double the amount in similarly sized cities like Oakland and San Francisco. Today, Houston’s median home price sits below the national average.
Houston’s housing policy is a great example the benefits that emerge when local and state governments work with real estate developers and not against them. State governors that are looking to build more housing and bring down the cost of housing are now looking to the policies in these states as an model.
Technology and AI Supports the Transformation
Aside from policy changes, several states are also changing the tools to process new construction projects. AI-supported tools and programs can provide efficiency and speed developers through approvals processes. AI is being tested in multiple ways, including automating permit approvals, project planning and modular planning to create more density. These programs are currently being piloted for more widespread use.
California, Hawaii and Washington are early adaptors of these tools, but many states are watching. The success of these programs could mean widespread adoption of AI into the permitting and approval process—and that will be a win for everyone. State and city governments are currently suffering from labor and funding shortages that have exacerbated long wait times for project approvals. AI can automate the process, freeing up government workers to focus on other tasks while fast-tracking approvals for developers, saving time and money.
For developers, this is a natural transition. Many developers are already using AI internally to manage construction. Software programs like Northspyre have revolutionized the project management of ground-up construction projects by incorporating AI and machine learning into the process.
Northspyre already automates invoicing and vendor management and tracks permits and approvals, as well as manages project schedules, budgets and spending to ensure developers achieve their goals. As more cities and states begin to use AI to automate permits and approvals, developers already using Northspyre will have an advantage. There will be a natural alignment in processes and developers will have an upper hand in understanding the city’s toolkit.
Cities and states want to partner with developers to rebuild, reimagine and expand communities and meet the evolving needs of residents. By removing regulatory hurdles and adopting new tools and processes, cities are launching the beginning of a new era in real estate development.
