How Many Homes Will the New Housing Bill Build? 

Eleven months and a veto later, Connecticut has a comprehensive new approach to housing. 

“Connecticut’s housing shortage is among the most severe in the country,” Gov. Ned Lamont said following passage of the housing bill last month.

“It is driving up costs for working families, deterring businesses from investing or growing, and worsening homelessness. Simply put, the status quo is unsustainable.

“While we have made significant steps forward in recent years to increase our housing stock, we need to do more to address this urgent need.” 

So after all of that effort and hand-wringing, will this bill produce more housing? It’s complicated. 

Supply, Demand

Leaders in both parties and across the political spectrum have generally agreed that the primary issue concerning the Connecticut housing market is a lack of available supply, and the root cause of that lack of supply is a lack of new construction.

As we discussed in our housing research this spring, over the past 15-plus years the state has generally languished compared to the nation with respect to new housing construction, often ranking among the bottom two or three states in housing construction per capita.

Over the past 15-plus years the state has generally languished with respect to new housing construction.

Now, after an influx of new residents post-COVID, the state has some of the hottest housing markets with among the lowest vacancy rates in the entire country. 

As such, it seems reasonable to evaluate the bill, in broad strokes at least, based on its ability to promote new construction.

Here is the breakdown. 

Production Incentives 

The bill contains several strong supply-side interventions that directly attack the friction and costs associated with building. 

A key provision is the allowance for municipalities to adopt priority housing development zones.

The zoning changes are opt-in, meaning their impact depends on the likelihood that towns adopt them.

Within these zones, multifamily housing is permitted as of right, meaning it bypasses the public hearing processes that often kill projects through delay and discretionary denial.

By removing this friction, the bill lowers the risk for developers.

However, the zoning changes are opt-in, meaning their impact depends on the likelihood that towns adopt them at all. 

Transit, Regional Plans

Similarly, “qualifying transit-oriented communities” (towns with rail or bus stations) must allow middle housing developments (two–nine units) as of right within designated districts.

This targets the state’s most valuable land—areas near transit—and allows for more density in a streamlined fashion.

Like the priority zones, this reduces friction toward development and should increase density at the margin, but it remains dependent on communities designating those districts effectively. 

It should result in a more coherent strategy for accommodating housing growth across the state.

A major change is the shift of housing planning responsibilities from a local to a regional level.

Regional Councils of Governments are now responsible for creating a regional housing plan that describes the estimated units required across their regions.

By creating a regional housing plan, it should result in a more coherent strategy for accommodating housing growth across the state and allow flexibility for municipalities to fit within those plans. 

Parking, Commercial Properties 

Parking structures are prohibitively expensive, often adding up to $50,000 in construction costs per apartment.

The bill prohibits zoning regulations from requiring more parking than deemed necessary (capping rules at one space for studios and one-bedrooms and two spaces for larger units).

It also prevents the rejection of applications based solely on parking counts without a specific safety finding.

The bill prohibits zoning regulations from requiring more parking than deemed necessary.

This provision should reduce the per-unit cost of construction in municipalities that previously had high per-unit requirements. 

The bill also creates the conditions to allow for the conversion of commercial properties into middle housing or mixed-use developments.

This encourages construction in underutilized office parks and strip malls—areas that often have existing infrastructure but no residential zoning. 

Financial Incentives 

Finally, the bill puts money on the table to incentivize housing production.

It establishes grants-in-aid to help towns pay for new infrastructure (water, sewer, roads), addressing a key issue that limits the expansion of housing stock in areas that lack said infrastructure.

The creation of tax-advantaged savings accounts will help buyers save for a down payment.

Additionally, it offers a 5% bonus on school construction reimbursement rates for towns that comply with housing growth plans, incentivizing local governments to align their zoning with the need for more construction. 

The creation of tax-advantaged savings accounts will undoubtedly help individual buyers save for a down payment, expanding the opportunities for homeownership to households that previously were locked out of the market.

However, as a demand-side subsidy, this will not likely have a large impact on new housing construction, although it potentially creates an indirect subsidy for the creation of starter homes. 

Rental Properties

While the zoning reforms press the accelerator, other sections of the bill tap the brakes by increasing operational risks and costs. 

The bill lowers the threshold for mandatory Fair Rent Commissions, requiring all municipalities with a population of 15,000 or more to create them.

While these commissions serve a role in protecting tenants from unconscionable rent increases, expanding their scope creates a less favorable regulatory environment for landlords.

Expanding their scope creates a less favorable regulatory environment for landlords.

Investors often view such regulatory bodies as a form of “soft” rent control, which can deter capital investment in the state. 

New operational rules—including extended rent grace periods (mandatory nine days), caps on late fees ($50 or 5%), and stricter notice-to-quit procedures—increase the administrative burden of property management.

While these may appear minor, at least in the context of larger corporate owners, they may more heavily affect smaller landlords who operate on thinner margins, potentially discouraging them from bringing new rental units to market. 

Rent Controls, Security Deposits

The bill prohibits landlords from using algorithmic revenue management software (like RealPage) to set rents. While proponents argue this stops price-fixing, the impact on supply is likely negligible.

Evidence suggests that any upward rent pressure created by these platforms is minimal; for instance, when San Francisco banned RealPage, rents there continued to outpace nearby areas that had no such ban.

This is a negative regulatory signal, but unlikely a driver of construction volume. 

The bill restricts landlords to only charging one-month’s security deposit.

This funding is restricted to projects that utilize project labor agreements and secure co-investment from union pension funds.

While on its face, this is meant to increase access to rentals for households with limited credit, it also likely raises the average credit required to rent, creating new barriers to previously qualified tenants.

The net result is an increase in risks to landlords (especially smaller landlords), and a disincentive to invest in units that might serve lower income, or less credit-worthy populations. 

The bill creates a new pot of funds for affordable housing, which should theoretically expand supply. However, this funding is restricted to projects that utilize project labor agreements and secure co-investment from union pension funds.

While this supports labor goals, PLAs typically increase hard construction costs.

Relative to a counterfactual scenario where these funds were available to all developers, this restriction means the state will likely produce less housing for the same amount of money. 

Mixed Bag 

Ultimately, HB 8002 is a mixed bag with respect to encouraging more housing production, but one that tilts toward growth.

As is the case with all legislation, implementation will dictate much of the long-term impact of this bill.

If municipalities adopt less stringent zoning and land-use policies in broader swaths of their towns, then we should see much greater housing production as a result.

Implementation will dictate much of the long-term impact of this bill.

New incentives should help, but it remains to be seen if those incentives are enough to spur the development required to address the shortage of homes in the state. 

In the years ahead, it is crucial that we avoid expanding expensive mandates on landlords that drive away investment.

If we agree that the key issue at hand in our housing market is the lack of new construction, then our policy should reflect that by avoiding regulation that discourages construction. 

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About the author: Dustin Nord is the director of the CBIA Foundation for Economic Growth & Opportunity.