Housing Affordability, Served Sandwich-Style: Why Lot Size Matters

In a healthy balance, the bread makes up about a quarter to a third of the total value, with the filling carrying most of it. This is because lenders and appraisers are more comfortable when most of the value is in the building. Homes are easier to measure, insure, and resell than raw land should they come back to them in a foreclosure.

Now picture what happens when zoning requires larger minimum lots. The bread portion grows. To keep the ratio lenders expect, the filling has to grow too. That often means bigger, more expensive houses. Smaller, simpler homes (the ones many people need) don’t fit as easily into that equation, because they become harder to finance. Developers build bigger homes not because buyers necessarily always want them, but because financing smaller, modest houses on large lots becomes difficult when this ratio is out of balance.

This is the ripple effect of minimum lot sizes. A standard that looks like a simple zoning choice shapes the types of homes developers deliver, not just in form, but in price and financing. When we understand the bread-to-filling balance, we see how land use rules and lending preferences together influence what gets built.