“The Status Quo is Unsustainable”

Facing one of the tightest and most expensive housing markets in the nation, Connecticut this year launched a novel housing plan that incentivizes regional strategic planning, encourages zoning reform, and contains a wide array of policies to spur greater access to affordable housing through increased development and rental assistance.

After vetoing similar — but broader — legislation in July of last year, Governor Ned Lamont spearheaded the current effort, which passed the legislature in November and was signed into law in December. As of January 1, the bill — H.B. 8002 — has taken full effect. H.B. 8002 sets incentives for cities and towns to work with regional Councils of Government (COGs) to approach planning on a regional basis. The bill also eases some zoning requirements by streamlining the conversion of commercial zones into residential housing zones and abolishing some parking requirements for new development.

“Connecticut’s housing shortage is among the most severe in the country. It is driving up costs for working families, deterring businesses from investing or growing, and worsening homelessness,” Lamont stated in a press release in November after the Legislature approved the bill. “Simply put, the status quo is unsustainable.”

H.B. 8002 also contains funds to expand the state’s capacity to financially support housing, including new housing bond authorization of $1.044 billion.

“This is a step in the right direction,” says Dara Kovel, chief executive officer at Beacon Communities, a nationally active affordable housing firm with a significant presence in the state. “H.B. 8002 has clear benchmarks for towns and cities to identify planning objectives, and encourages, through incentives, those communities to plan for their housing needs. It outlines a new reliance on COGs, giving them a larger role in planning for housing.”

Connecticut Housing Crisis
Connecticut has a significant shortage of affordable housing both for renters and homeowners, according to several studies.

A 2025 report from the Partnership for Strong Communities found half of renters in the state to be cost burdened, spending more than 30 percent of income on rent. These numbers are slated to rise, as some 11 percent of Low Income Housing Tax Credit (LIHTC) properties in the state are at risk of losing affordability restrictions in the coming year because they are exiting the compliance period or the properties are uninhabitable.

This all leads to an estimated shortfall of 63,918 affordable homes for those making less than 30 percent of area median income (AMI).

“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,” Lamont added in his November release.

Emphasizing Smart Growth, Transit-Oriented Development
While the state could approach its severe housing needs from many directions, it has chosen to both empower and encourage municipalities through H.B. 8002. Under the bill, cities will receive state infrastructure grant funding for advancing housing growth plans and Transit Oriented Developments (TODs) and are incentivized to work with COGs and the Connecticut Municipal Development Authority to develop these plans. The bill also makes COGs eligible for $200,000 in grants for providing planning and technical assistance to municipalities and another $200,000 for storm management, flood mitigation, and recycling planning.

In addition to cash incentives, H.B. 8002 also requires towns to adopt a housing plan or work with their regional COG to do so. COGs, in turn, will set towns’ affordable housing goals.

The bill also establishes a Council on Housing Development (CHD) which will evaluate towns’ growth plans. “The legislation recognizes that housing growth requires coordinated investment,” explains Nandini Natarajan, chief executive officer and executive director of the Connecticut Housing Finance Authority. “When communities plan for housing and address infrastructure needs, it reduces uncertainty and helps unlock both state resources and private capital to support new development.” Natarajan also serves on the new CHD.

The bill prioritizes density around transit hubs, giving towns with TOD access better school construction reimbursement rates, sewer construction loans, and other TOD-exclusive grants while also helping towns that may not have existing infrastructure to support development today.

“The investment in infrastructure is important,” says Kovel. “There are a lot of communities in Connecticut that are not well served by water and sewer, and making sure they have the resources they need to allow development to occur is critical.”

Additionally, the bill provides grants to Public Housing Authorities (PHAs) that create middle-income housing. It creates an Affordable Housing Real Estate Investment Trust Pilot Program that provides grants to PHAs and nonprofits to buy existing homes and place affordable deed restrictions on them. It also creates a first-time homebuyers savings program and allows the state Department of Housing and PHAs to grant funds to nonprofits to deliver cash payments for housing assistance to those eligible for housing vouchers.

One subtle, but impactful, change is the easing of parking requirements: H.B. 8002 prohibits towns from enforcing minimum parking requirements on developments with fewer than 16 units and allows developers to pay a fee instead of providing the spaces to projects with greater than 16 units.

Charlie Adams, president of development for Pennrose, says that “reduced parking requirements is a huge benefit,” given the occasionally onerous burden that parking requirements can place on site layout and overall project budget. Still, Adams cautions that owners shouldn’t take this as a free-for-all to reduce on-site parking to the absolute minimum. “At end of the day, providing enough parking is the responsibility of the developer; if you don’t provide enough it can negatively impact your ability to lease units,” he says.

Additionally, the bill:

• Provides bespoke grants to Public Housing Authorities that create middle-income housing;
• Creates an Affordable Housing Real Estate Investment Trust pilot program that provides grants to PHAs and nonprofits to buy existing homes and place affordable deed restrictions on them;
• Creates a first-time homebuyers savings program and allows the state Department of Housing and PHAs to grant funds to nonprofits to deliver cash payments for housing assistance to those eligible for housing vouchers;
• Contains eviction protections;
• Bans algorithmic rent setting;
• Allows for the conversion of commercial or mixed-use zones to housing development zones;
• Establishes initiatives to rapidly house homeless or at-risk individuals and families.

Are Incentives Enough?
The housing system overhaul proposed in H.B. 8002 has been widely praised by housing advocates for its effort to address housing affordability through multiple initiatives. Some question, however, whether the incentive approach is sufficient to actually result in more affordable housing units statewide.

It is “hard to imagine producing housing at the levels that we need without consequences for not performing to certain targets,” Kovel says, suggesting that future measures would benefit from more “teeth” to have the speed and impact necessary to make a difference.

“This is a step forward for incentives in the zoning reform and planning arena,” Kovel continues. “We would love to see it followed up by more additional measures to aim higher on production which we have seen successfully drive housing creation in other states.”

Brian O’Connor, director of public policy and advocacy at the Connecticut Conference of Municipalities, says that the bill still maintains a level of local control as municipalities work with the COGs on planning.

“One of the main drivers of the bill is through the COGs. It’s a regional approach that gives everyone a seat at the table,” says O’Connor. “Towns will still have the ability to do a local plan, but it will be incorporated in the regional plan as well. You look at things more holistically.”

Adams, of Pennrose, praises what the bill does to “support getting through local zoning in a better way.”

“Greater flexibility on approvals is certainly a huge benefit to the affordable housing community,” Adams says. “We’re cautiously optimistic this will actually result in more housing. If it doesn’t, then I hope the legislature will come back together to do more so that it does achieve the results that it is seeking to achieve.”

Natarajan calls it a “fascinating, multifaceted bill.”

“Bringing planning, infrastructure, and investment together creates a real opportunity to move production forward,” Natarajan says. “The work ahead is significant, but the ambition matches the scale of the housing challenge we face as a state.”