MASSACHUSETTS IS NOT building enough homes to keep up with demand or address existing overcrowding, but a new report finds that the state is specifically lagging in building the type of houses particularly suited to young families and elder residents: small ones.

The Pioneer Institute report released Wednesday describes a dramatic mismatch between the size of homes people need for their household size and the homes actually being built.

Household sizes are shrinking – from an average Massachusetts household size of 3.23 people in 1970 to 2.52 in 2024 – while small home construction nationally has hit a wall. In 2024, 63 percent of Massachusetts households had one or two people, but just 44 percent of occupied housing units had two or fewer bedrooms, according to the report.

In part because of the trend toward knocking down smaller houses and replacing them with larger ones, there are 8,000 fewer single-family homes with two or fewer bedrooms in the state since 2010, according to Andrew Mikula, the report’s author.

Massachusetts has become “a victim of our own affluence,” said Mikula. “It’s like we forgot how to build smaller homes that can be more affordable for folks.”

The real obstacles, he said, are a “cornucopia of regulations, and bureaucratic processes, and land values rising, and other trends that make it very difficult to build new homes that are small and low-cost in the same way that a ranch style home or bungalow would have been 50 years ago,” he said.

Mikula is also the leader of a ballot measure campaign that would make it easier to build single-family homes on smaller lots. “The Legalize Starter Homes” measure, which is set to appear on the November ballot, would prevent communities from requiring lot sizes greater than 5,000 square feet or more than 50 feet of frontage to build single-family homes anywhere that has public water and sewer access.

The Pioneer Institute is not involved in the ballot campaign.

The report offers a suite of policy recommendations to encourage more starter home construction, including, but going beyond, similar zoning changes to the ballot question. These range from zoning changes, to boosting the state’s accessory dwelling unit law, to allowing denser construction in certain areas.

Land is expensive in the Bay State, with the average value of a single-family residential land parcel in Massachusetts exceeding $1 million per acre in 2022.

The report says this argues for allowing denser housing in pricey areas, like townhomes or multifamily buildings, without special variances. It also means that smaller lot size requirements could make building small homes more affordable for developers, Mikula said.

To make building a new 1,600-square-foot home financially viable, the math could pencil out if it was built on a roughly 4,000-square-foot lot, he said. This is far smaller than most square footage requirements under local zoning codes.

Pushing for smaller houses collides with recent trends toward larger homes and the difficult discussion of what it means to “right-size” housing.

“It’s a tricky scenario,” Mikula said, “because, in the abstract, people will say, ‘I want extra bedrooms.’”

“But for most first-time homebuyers,” he said, “it’s daunting enough to try to save up for a down payment without having to save up to buy a house that’s much larger than your household size would suggest you need.”

Pro-housing groups have long struggled with the third rail of downsizing discourse: the idea that many older residents are “overhoused.”

In 2005, then-Gov. Mitt Romney’s second-in-command, Lt. Gov. Kerry Healey, faced the ire of advocates for the elderly when she invoked that term in addressing senior housing woes related to high property tax bills. Rather than offering seniors property tax breaks, she suggested we should “bring them into our city and town centers, into more appropriate housing and free up those properties to get back on the tax rolls of the community.”

Last year, Ben Forman and Elise Rapoza of the MassINC Policy Center argued that Healey was on the right track.

In 1980, they wrote, only about one-third of households headed by an adult who was 65 or older occupied a home with three or more bedrooms. In 2025, more than half of such households still live in these family-sized homes.

“We might chalk this trend up to homes generally getting larger in recent decades,” they said. “But the data show a striking pattern—younger households in Massachusetts are far less likely to occupy a family-sized home today than they were four decades ago.”

This means a constriction at both ends of the small-home market: ever smaller young households stuck in renting cycles with no starter homes available, and a growing population of older residents who couldn’t downsize if they wanted to, given the dearth and expense of available housing.

Recent studies from AARP and National Association of Realtors research found that older adults tend to want to stay in their homes and communities as long as possible, but smaller and easier to manage homes are on the priority list. About a fifth of respondents in a survey by the realtor group said their reason for buying a new home is “desire for a smaller home,” second only to being closer to family.

“I’m certainly not suggesting seniors should do something that they don’t want to do,” Mikula said, “but I think when we look at the polling data, we see a lot of seniors very interested in downsizing, or at least that they expect to have to downsize at some point, based on either mobility challenges or financial challenges.”

One answer to the demand for smaller homes among seniors is the much-touted promise of accessory dwelling units, also known as ADUs or “granny flats.”

The housing bond bill passed two years ago legalized ADUs in all single-family districts in the state, and permitting is rising but slowed by local regulations, according to research from Boston Indicators.

These small units are ripe for reform, the Pioneer report argues. Lawmakers should standardize ADU dimensional rules, increase allowable ADU sizes, and loosen related septic regulations, Mikula wrote. According to 2024 AARP research, older adults are more likely than other age groups to choose an ADU if they were to downsize from their current home.

The housing crisis in Massachusetts is pushing young people out and tying some seniors in place as they age, Mikula said.

If this housing stock remains scarce, he said “I think we’ll continue to see a lot of out-migration of young people when they’re in their prime family formation years,” and “I think we’ll also continue to see, in a way that’s harder to quantify sometimes, seniors continuing to be trapped in their homes, having difficulty meeting their own mobility needs, and maybe more difficulty moving closer to family as they age.”