A cap on minimum lot sizes could help Illinois housing affordability

Housing for sale in the state remains far below pre-pandemic levels.

A bill that would limit minimum lot-size requirements for detached homes could help Illinois homebuyers facing higher prices and fewer choices.

Minimum lot size mandates are a major barrier to entry-level housing, according to a new brief from the Mercatus Center, a research organization at George Mason University. Easing lot size requirements can allow more homes on available land and reduce the land cost for a home, enabling builders to offer more homes at lower prices.

August housing numbers in Illinois show why expanding those options matters.

The typical Illinois home value has risen 49.9% since August 2019, going from $198,526 up to $297,573, according to Zillow’s Home Value Index.

Some communities saw even larger increases: 76.6% in south suburban Chicago Heights, 71.8% in Waukegan and 69.3% in far northwest suburban Lake in the Hills.

Meanwhile, the number of Illinois homes on the market is just 39% of pre-pandemic levels, according to Realtor.com Economic Research. Listings nationally have recovered to 93%.

Chicago-area inventory has fallen 53% since 2019, according to Zillow. Nine Illinois metro areas experienced steeper declines, led by downstate Lincoln’s 69% drop.

Smaller lots offer one way to expand buyers’ options. Where water and sewer infrastructure exists, Mercatus recommends that states limit lot size mandates in such areas.

Illinois Senate Bill 4060 would cap minimum lot-area requirements for detached single-family homes at 2,500 square feet in any zoning district that permits such homes.

Princeton, in north central Illinois, requires lots for detached homes of at least 6,000 square feet and as much as one acre, depending on the residential district. Even its smallest minimum is more than twice the 2,500-square-foot limit proposed in SB 4060.

Easing the minimum would give builders and buyers more flexibility to choose how much land a home needs. Combined with simpler approvals and fewer unnecessary parking or design requirements, smaller-lot housing could make starter homes more practical to build.

Paired with lower property taxes, these reforms could make buying and keeping a home more affordable for Illinois families.