Shapiro Unveils A $1b Plan To ‘go Big’ On Housing And Zoning Reform

With housing affordability front and center nationally, Democratic Pennsylvania Gov. Josh Shapiro proposed a $1 billion program to build more housing across the state.

Shapiro’s Critical Infrastructure Fund – nested within his broader $53.26 billion budget recommendation – would support housing and infrastructure projects and fund them with capital raised through new bonds.

“Rather than tinker with this, let’s go big and make a real impact,” Shapiro told legislators in his annual state-of-the-state address Tuesday. “We need hundreds of thousands of new homes.”

In an hour-and-a-half-long speech unveiling his 2026 state budget plan, Shapiro outlined a sweeping state strategy for zoning reform and ground-up home development. Measures would allow accessory dwelling units, promote transit-oriented development and streamline mixed-use development on main streets and commercial corridors, paving the way for adding tens of thousands of new homes across Pennsylvania’s cities and towns.

Shapiro’s push toward zoning reform reflects a pattern of solutions pursued by governors and legislators across political parties as they confront the collapse of affordable housing access for more and more Americans. Texas, Florida, Colorado, Washington and California have passed zoning reforms that preempt local governments, often with bipartisan support.

Pennsylvania Republican lawmakers, however, signaled after Shapiro’s speech that they’ll push back on his proposed budget because of its size.

“The affordability crisis is real and people are struggling,” House Republican Whip Tim O’Neal said in a statement. “This proposal by Gov. Shapiro is irresponsible and will contribute to rising costs across the state.”

Missing the housing boom

Pennsylvania has its own housing crisis, a plight common across the United States. In his speech, Shapiro noted that more than half of the state’s housing stock is more than 50 years old.

“If we don’t take action now, we’ll be short 185,000 homes by 2035,” he said.

Unlike Sun Belt states, Pennsylvania – and other Rust Belt states – missed the surge in new residential development in the pre- and post-pandemic era. Home prices in the state spooled upward as even a modest level of demand collided with a long-running, structural shortage of homes, especially starter and mid-priced units, according to a Pew Charitable Trusts analysis last March.

The report notes:

“From 2017 to 2023, local governments issued building permits for only enough units to increase the state’s housing stock by 3.4%—well below the United States as a whole, which had a 7.5% increase during that seven-year period. Meanwhile, the number of households in Pennsylvania increased by 5.1%, which is above the increase in the housing stock. Fewer permits issued leads to fewer homes built—a major reason that rents have increased dramatically in Pennsylvania.”

The authors of the Pew analysis recommended that the state follow the zoning reform path pursued by other states, including allowing missing-middle housing in single-family zones, reducing parking minimums, and permitting accessory dwelling units.

Cities have taken steps on their own

Pittsburgh adopted zoning reform roughly five years ago to address its own escalating housing crisis. The city created neighborhood-based inclusionary zoning districts requiring larger new developments to reserve a share of units as affordable in hot-market areas.

The Builders Association of Metropolitan Pittsburgh sued the city over the new rules, but neighborhood groups stepped up to support the city. A federal judge dismissed the case last year, ruling that the association filed the lawsuit prematurely.

The builders could not show harm yet because the local law is so new.

In 2025, Pittsburgh’s City Council advanced the Housing Needs Assessment bill, which would legalize ADUs citywide, eliminate minimum parking and create a voluntary Affordable Housing Bonus Program tied to affordability or in-lieu fees. The ordinance is still pending.

Philadelphia, across the state to the east, has taken modest steps on affordability.

The City Council created a mixed-income neighborhoods overlay, which requires residential projects with 10 or more units to set aside 20 percent as income-restricted housing. Developers can receive added height and reduced parking requirements in exchange.

Separately, the citywide Mixed Income Housing Bonus gives developers extra density, floor area, or height if they include affordable units or make in-lieu payments.

Reforming zoning codes across the state

Shapiro said there is no catalog of the varying rules and laws across 2,560 municipalities.

“We need to make one, so that we can help local governments understand what works best to build more affordable housing,” he said. “That also means working with local communities to modernize the Municipalities Planning Code to build where it makes sense — and cut red tape where it’s unnecessary.”

Politics will determine whether Gov. Shapiro succeeds in cutting red tape, just as it has in other states. Republicans have a narrow edge in the State Senate, while Democrats have held a one-seat majority in the House since 2022. The split Legislature has slowed policymaking, particularly on housing.

Shapiro tried last year to revive a program to repair homes so occupants could stay in them. The Whole Homes Repair program began in 2022 as a one-time initiative funded by federal dollars under the American Rescue Plan. He could not get state appropriations through the Legislature for a third consecutive year.