The housing market needs more small homes. Here's why that's unlikely to happen.

USA Today

29-05-2025

The housing market needs more small homes. Here's why that's unlikely to happen.
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In 1998, Zinie Chen Sampson and her husband, Craig, bought a 1,400-square-foot home in the near West End of Richmond, Virginia, when she was newly pregnant with their daughter, Sabrina.
It's an early-1940s beauty in a desirable neighborhood of brick colonials and Cape Cods with slate roofs. When families start to outgrow their homes, many sell, often reluctantly, and move on to something bigger.
But the Sampson family stayed and raised Sabrina until she went to college. As relatively high-earning professionals, the couple could have afforded more, but they loved where they were, and with Sabrina their only child, they didn't need to upsize.
'We're sort of anti-consumerist,' Sampson said. 'It fits with our desire not to have higher energy costs, or buy more things to fit the space, or have more space to clean.'
Now, the Sampsons' first home has become their empty nest. The couple was able to pay off their mortgage years ago, and while money hasn't generally been a challenge, they appreciate the financial flexibility – especially with home prices skyrocketing all around them.
'We've been content here over the years,' Sampson told USA TODAY.
Why the housing market needs small homes
In the U.S. housing market, there's a crying need not just for more homes, and not just more affordable homes, but for smaller homes, specifically. Those properties, defined loosely as 1,500 square feet or less, punch above their weight, offering Americans an entry into the housing market, a place to retire to after raising a family, and for plenty of families, a step in between.
In addition, their relative scarcity – making up only 20% of newly built homes, according to a recent report – also makes the market 'less liquid,' according to its author.
'Any choke point in one part of the market creates fewer potential matches for the first time home buyer,' said Thomas Malone, an economist with real estate data provider Cotality. 'It's a cascading effect. There's less supply in one pocket of the market. This in turn creates less availability for the people who are looking for it, which means they stay in their homes, which chokes up that point, and so on.'
Malone's report traced the history of America's love affair with bigger properties, noting that the higher margins on bigger homes was one important factor in boosting suburbanization in the 20th century.
But as developers move increasingly outward, Malone wrote, 'these far-flung lots eventually have diminishing returns. At the periphery of suburbia, land becomes cheaper to the point where the economies of scale can no longer offset the price to build, and developers turn back to urban environments to redevelop existing properties.'
Chris Herbert is managing director for the Harvard Joint Center for Housing Studies, a think tank whose signature annual publication, the State of the Nation's Housing, documents the challenges in the market.
'When the top line numbers say we need to have more units, it gets a lot of attention, as it should,' Herbert said. As previously reported, the general consensus among analysts is that the nation is short approximately 4 million housing units.
'But I think the attention needs to be focused on the fact that it's not just any old units, but smaller ones that we need,' Herbert said in an interview. 'It's not like we're not building anything, but what we are building is very large, very expensive apartments and single family homes.'
Newly-constructed homes are still large
It's in single-family homes where the bloating of the American Dream can be seen most clearly. In the first quarter of 2025, the average square footage for newly-built single-family homes was 2,408 square feet, an analysis from the National Association of Home Builders found. Those numbers were even higher in the years after the housing bubble burst in the 2000's, when homebuilders were picking up the pieces from the crash and constructing only the highest-margin properties.
But it's not just homebuilders protecting their margins that conspires to keep properties larger and thus less affordable. Herbert thinks regulations play an outsized role. In the Cotality report, Malone wrote about builders retreating from exurbs to redevelop existing properties, adding that such projects, often called 'infill,' 'are limited by a variety of interests that restrict the type of new homes that are acceptable.
Herbert sees that first-hand in the expensive suburbs around Boston and Cambridge: municipal codes that insist on larger lots, minimum home sizes, parking for new development, and so on.
'We don't allow density for single family housing in a way that we really need it,' he said.
More: 'The civil rights issue of our generation'? A battle over housing erupts in Massachusetts
Homes aren't just houses
Lowell, Massachusetts is about 30 miles away from and a world apart from Harvard. Cathy Mercado grew up there in public housing, and now serves as executive director of the Merrimack Valley Housing Partnership, a nonprofit that offers homeownership counseling, affordable housing development, and more.
One of MVHP's proudest recent accomplishments is the Acre Crossing Residences, affordable condos for low and moderate income residents.
Mercado calls the condos 'stepping stones.' They can be starter homes for building equity and then moving on – or a place to settle for empty-nesters who can no longer afford the utilities or insurance in a larger property.
Or they can be a forever home, Mercado said. Having grown up in the neighborhood herself, she chafes at the notion that a 'real home' is synonymous with living in suburban sprawl. 'You don't have to have a house with a white picket fence,' she said. 'Housing is not a luxury. It's about sustainability and stability and a roof over your head.'
In 2013, Michelle Leder and her husband bought a modest house in Los Angeles County for themselves and their young son. While the family has since added on, the house at its core is a basic two-bedroom, 1-bathroom house built in the late 1940s that is common all over California and other suburban areas of the country.
Unlike in Sampson's corner of Richmond, plenty of new owners in Leder's neighborhood do choose to 'tear down' an existing home and build something new – usually a house that's large enough to loom over the older properties that remain.
'We could be doing that too, but we chose not to,' Leder told USA TODAY. 'I think this house works for our size family and quite frankly, the idea of having to clean a big house is not very appealing to me. I don't need to have a showcase house to show off.'
Living within their means has meant more flexibility for big life changes: the family spent a year living in Paris recently, and Michelle and her husband returned to the east coast for two years to take care of aging parents.
But the reality of the housing market is that the 1,250-square foot home built for returning GI's and others making the first trek out to a suburban American Dream will never be affordable to anyone starting out, Leder says. Her home has roughly doubled in value in a little over a decade.
"It's our retirement fund now," she said.