State lawmakers are scrapping old zoning rules to expand the housing supply, betting that smaller, denser units can ease the affordability crisis without alienating multifamily investors. A new report from The Pew Charitable Trusts highlights policy shifts in Hawaii, Washington, and Colorado aimed at clearing the way for co-living, microunits, and other flexible housing types.

Pew estimates that there is a shortage of 4 million homes in the U.S. and that affordability is reaching crisis levels in many high-demand markets. Rental costs have soared in recent years and left policymakers under pressure to boost supply while addressing investor concerns about profitability, and roughly 22.4 million households spending more than 30% of their income on rent.

To tackle the housing shortfall, states are embracing creative solutions that push the boundaries of traditional housing models. From microunits to co-living arrangements, these approaches aim to maximize space and affordability without sacrificing the bottom lines of developers