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A zine produced by members of ARCH 5602, Kean University School of Public Architecture

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Vol. 1

Letter from the Editor - 
Davis Richardson
Reclaiming 432 Park Ave - Kamila Diaz Calderon
Ultrathin Worlds - 
Anyi Liranzo-Payamps
Finance Over Function - 
Jared Britton
The Housing Shepherd - 
Kacper Kowal
Livestream Dystopia - 
Jake Haenggi
VR Architecture - 
Ryan Barbour
Metaverse Architecture - 
Danny Gavino
From Fi-Fi to De-Fi - 
Scott Gleason
Realistic or Reality? - 
Stephan Argent
Dubaifying Saudi Arabia- 
Rasha Labibidi
NEOM’s Sustainability Mirage - Andrew Lazarte
Living in the Model - 
Bryan Tome
Planting the Illusion - 
Lauren Taravella
Critical Regionalism - 
Nolan Aucone

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CGZ-VOLNO1-ARCH5602-FA2025-E3

Finance Over Function: 
How Underwriting, Zoning, Tax Laws, and Appraisals Have Defined Single-Family Housing
Jared Britton



To what extent are U.S. single-family houses “following finance” rather than the Modernist mantra of “following function,” and through which mechanisms does capital shape their size, layout, and siting? The contemporary form of American single-family housing is the material outcome of financial rules and incentives as much as the requirements of everyday use. Finance is writing the script of how homes are produced and appraised, rather than simply facilitating the building and purchase of a home. Four different financial phenomena, spanning the lifespan of a home, will be explored in this essay which have resulted in measurable shifts in average home size and neighborhood layouts: mortgage underwriting and property standards, local land use and subdivision regimes that lenders and builders treat as bankable risk, the tax code subsidy to owner-occupied debt, and post-construction appraisal practices. The question is not: does function matter anymore? It is: how do financial logistics privilege certain functions over others in shaping the United States’ most common building type?

Underwriting and Standards   

Examining underwriting as a form of design allows us to look at how federal lending standards became codes for house and subdivision forms that define a large sector of the built environment in America. American mass home building took shape alongside federally-backed mortgages. The Federal Housing Administration’s manuals and Minimum Property Standards (MPS) contain detailed criteria about lots, streets, utilities, materials, and site planning. Meeting these standards helps unlock cheaper, standardized capital; if you fail to meet them, you will have to look elsewhere for financing. Underwriting thus doubled as urban design guidance. The FHA Underwriting Manual between 1936-1947 allowed staff to evaluate not only borrowing credit, but also the neighborhood’s stability, street patterns, and subdivision design as part of their risk assessment, creating a compounding effect of ramifications in the insurance industry.1
   
The HUD’s MPS still sets minimums for new HUD-assisted homes’ safety, durability, and site factors. HUD manages over 20,000 privately owned multifamily properties consisting of approximately 1.4 million rental units. The MPS provides safety and accessibility standards relating to street design layout, reading like a quasi-building code. Combined with HOA subdivision rules, a template of automobile-scaled local streets and cul-de-sacs intended to manage traffic patterns and risk is created.2  
   
These road geometries are reinforced by transportation and planning standards. The guidance from the Institute of Traffic Engineers (ITE) recommended limited access subdivisions with discontinuous local streets and cul-de-sacs, which then proliferated as the default in greenfield developments nationwide. When lenders, appraisers, and builders learn this as “normal,” design variation is assumed to be financially costly. Finance — and its allied standards which serve to reduce perceived risk — helps determine key design details long before an architect meets a client. When the mechanisms of money reward certain layouts with cheaper debt and quicker approvals, these layouts become preferred, regardless of the alternative functional possibilities that may better suit everyday life.3
   

Zoning Regulations

The notion of zoning as capital’s filter exposes how ‘financeable’ has long meant single-family housing, consequently shaping development patterns nationwide. What channels capital and constrains form is the dominance of single-family exclusive zoning. Zoning channels capital by creating a predictable framework for land use and influences the financial viability of different types of development. It can impact property value and the flow of capital. Research by UC Berkeley’s Othering and Belonging Institute in California estimated that 95.8% of residential land area in California, for example, is zoned single-family only, and 30% of all land area in the state is restricted to single-family homes. Typically, these single-family zoning ordinances restrict building to detached, single-unit homes on relatively minimal areas of lots. This essentially prohibits the possibility of denser and lower-cost forms of dwelling.4
   
Zoning shapes “bunching” at formal thresholds. Bunching is a term used in economics and real estate to describe the phenomenon where a disproportionately high number of homes are built with characteristics that are exactly at the minimum threshold required by local zoning regulations.  An empirical study this year found that 18.5% of single-family home construction bunches at minimum lot size requirements. This implies a push towards larger lot minimums, and by association, larger dwellings; larger houses command higher prices. This study estimates that with a smaller lot size, home sizes, sale prices, and rents are increasing, clear evidence that regulatory constraints translate into the financial characteristics of the built product. We are overdeveloping, as lot sizes are getting smaller to squeeze in as many homes as possible, while big beautiful homes increase in size, resulting in houses blending together as one continuous suburban mass without corresponding unit density. Jurisdictions dominated by single-family zoning tend to prevent opportunities for lower-cost housing types, producing tenure and more affluent income patterns that reinforce themselves.   The dominance of single-family zoning will continue to determine which projects are economically feasible. Single-family zoning could be said to act like a switch that converts capital’s feelings towards housing into a specific low-density land consumption house type: clear, individuated, low-risk assets. Form follows finance because the only financeable thing is also the only legal thing.5  

Tax Code    

Through the Mortgage Interest Deduction (MID), the United States federal tax code puts a gentle hand on the scale in favor of homeownership. The MID reduces the after-tax cost of borrowing for owner-occupants, particularly for higher-income households who itemize their annual deductions in lieu of the standard deduction. The MID increases the amount spent on housing while having little to no effect on the overall homeownership rate; it pushes up housing consumption rather than helping renters become owners. This deduction affects both the decision to own in the first place and the size of homes purchased by those already buying. Tax system rewards leverage on owner-occupied housing, nudging households towards larger mortgages and thus larger houses (which may not be necessary for the functional needs of the family), compounded by zoning which steers them into standalone homes on sizeable lots.6

Appraisals

After houses are designed and permitted, another financial mechanism works to continue shaping their value: appraisals. Appraisals and comparables work to reproduce the status quo and set the market norms. Residential buildings are appraised based on the USPAP —the Uniform Standards of Professional Appraisal Practice — which notably requires the analysis of other comparable sales. “Comps” in the Appraisal Institute Dictionary are described as similar property sales used as evidence to support an opinion of value. Similar mass-produced subdivisions result in the same plan family, elevation type, garage configuration, and lot size; this is the system’s method of risk prevention.  For example, an atypical, smaller plan that included a courtyard and excluded a third garage door might be determined to be a more functional layout for the owners and their lifestyle.  The comps, however, may not support the targeted valuation because the local sales are based on a garage-forward house on a minimal lot which doesn’t support or include a courtyard. Lenders could then discount or even decline the loan completely. Builders and owners are therefore effectively constrained to only certain typologies. Appraisal practices are ostensibly intended to address liquidity and risk rather than prohibiting design innovation, but the result in practice is a favoring of financeable forms over potentially functional alternatives.7  
   
Observable outcomes like size, timeline, and pulse of capital reveal how financial forces shape the built environment. House size data between 2010-2020 shows how finance plays a role in form development. During the low-rate/high-leverage phase (2020-2022), new homes got larger. The National Association of Home Builders’ (NAHB) analysis of census data reported that by Q4 2021, the median new single-family home reached 2,338 square feet, and the average rose to 2,561 square feet, continuing a post-Great Recession climb as cheap credit expanded purchasing power. In 2023-2024, costs began to rise but sizes fell. Over three straight years, the median size of new single-family homes declined to 2,150 square feet. As rates increased, so did affordability constraints. NAHB’s 2024 construction cost survey reported the average finished floor area as 2,647 square feet, up from 2022. After the Covid-19 pandemic, though supply chains have eased and construction timelines have re-shortened, builders continue to manage cycle risk and capital carry by adjusting product and delivery in response to financial conditions. Cyclical swings in size track more closely with the cost and availability of mortgage credit and materials than any abrupt change in daily routines.8


We understand how capital shapes the spaces we inhabit by understanding how financial logistics migrate into everyday design features. The chain of money-rules-form is very clear in design traits of the single-family house and subdivision. Subdivision geometry reflects midcentury standards that lenders and cities still treat as the low-risk default, optimized around the automobile and predictable frontages.9 Lot size thresholds and setbacks generate bunching; once minimums define the base land package, builders rationally pair it with house plans that maximize sale price per regulated lot, often pushing garages forward while habitable rooms recede to meet turning radii and parking expectations for personal vehicles.10 Plan families are tuned to appraisals: multiple elevations and marginal options keep “comparables” thick in each phase, protecting valuation. Production builders avoid compact forms (e.g. cottage courts or ADU clusters) where comps are sparse, lacking not necessarily function but financeable precedent.11 Square footage volatility corresponds to financing conditions: as rates fall, buyers stretch for bigger models; as rates rise, plans shrink or trade down features, with builders protecting gross margins through specification management.12
   
There are obviously counterpoints or limits where function does still assert itself. Climate considerations, hybrid work trends emerging from Covid-19, aging in place, and household composition, for example, have resulted in features like flexible bedrooms, covered outdoor spaces, and energy performance being included in where we might like to live out the rest of our days. But even here, we see fictional “innovations” if they fit the comp set: adding a dwelling unit which functionally serves a multigenerational household theoretically should also increase the market value by adding an additional bedroom or unit, but in practice may be restricted by single-family zoning or covenants or undervalued by appraisals relative to their actual rent potential. This serves to filter and de-prioritize difference.


We can consider policy paths that rebalance alternative functions without starving finance, where governance can recalibrate development norms while sustaining capital flows. If form follows finance is a policy choice, we could do it differently. Here are four proposals:

  1. Modernize underwriting and property standards to reward useful, space-efficient forms. HUD’s MPS can keep emphasizing durability and safety while explicitly welcoming compact, walkable subdivision geometries that have solid safety records—just as mid-century manuals once normalized cul-de-sacs. Updating what counts as “insurable” design would let lenders treat cottage courts, missing-middle types, and narrow-frontage homes as ordinary rather than exceptional.13

  2. Reform single-family exclusive zoning. California shows how a single legal category can foreclose alternatives over vast territory; targeted upzoning or form-based codes can legalize smaller lots, duplexes/fourplexes, and ADU clusters while maintaining clear, financeable standards. Evidence that minimum lot sizes raise home size and prices suggests that reducing or eliminating those minimums could unlock more right-sized homes.14

  3. Re-target the mortgage interest deduction. The literature finds the MID pushes housing consumption instead of ownership. Capping or converting it into a credit targeted to first-time, lower-income buyers—or conditioning benefits on energy or space efficiency—could dampen the incentive to over-consume square footage while still supporting access to new or upwardly mobile buyers.15

  4. Revise appraisal models to better incorporate income-producing or compact typologies where legally permitted. Eliminate the “no comps problem” which works to destroy innovation.16

To revisit the initial question, to what extent do U.S. single-family houses follow finance rather than function? The answer is clearly: a lot, evidenced by underwriting rules, land use regulation, tax subsidies, and appraisal practices. Underwriting manuals and HUD standards made certain subdivisions financeable standard practice; single-family zoning forecloses alternative forms, pushing developers to meet binding minimums, while the mortgage interest deduction rewards larger houses for higher-income buyers, and appraisal norms reproduced these typologies by privileging comparability.
   
Single-family housing in the United States is not a cultural idea; it is a financial product. But adjustments to the financial environment could realize that Modernist ideal of “form follows function” to reflect caregiving, aging, adaptation to climate change, and affordability. We could welcome compact, durable forms, zoning that legalizes missing middle scales, and taxes that should target access over excess.17 Let’s reward performance rather than loan size. We don’t have to end finance, but it should better reflect the actual functional requirements of the assets it holds – how people can live and thrive within them.


  1. Federal Housing Administration Underwriting Manual. Accessed December 9, 2025.  
  2. “Minimum Property Standards: Hud.Gov / U.S. Department of Housing and Urban Development (HUD).” Minimum Property Standards | HUD.gov / U.S. Department of Housing and Urban Development (HUD). Accessed December 8, 2025. 
  3. C.1.3 Modern Period (1930-1960). Accessed December 9, 2025. 
  4. “Single-Family Zoning in California: A Statewide Analysis.” Othering & Belonging Institute. Accessed December 8, 2025. https://belonging.berkeley.edu/single-family-zoning-california-statewide-analysis.
  5. Https://www.sciencedirect.com/science/article/abs/pii/s1051200421000968 | request PDF. Accessed December 9, 2025. https://www.researchgate.net/publication/351163114_httpswwwsciencedirectcomsciencearticleabspiiS1051200421000968.
  6. This PDF is a selection from a published volume from. Accessed December 9, 2025. https://www.nber.org/system/files/chapters/c11534/c11534.pdf.
  7. “Appraisal Institute Guide Notes.” Appraisal Institute. Accessed December 8, 2025. https://www.appraisalinstitute.org/insights-and-resources/resources/standards-of-professional-practice/guide-notes.
  8. “New Single-Family Home Size Continues to Grow.” NAHB. Accessed December 8, 2025. https://www.nahb.org/blog/2022/03/new-single-family-home-size-continues-to-grow.
  9. C.1.3 Modern Period. 
  10. Https://www.sciencedirect.com/science/article/abs/pii/s1051200421000968
  11. “Appraisal Institute Guide Notes.” Appraisal Institute. 
  12. “New Single-Family Home Size Continues to Grow.” NAHB.
  13. “Minimum Property Standards.” Hud.Gov 
  14. “Single-Family Zoning in California: A Statewide Analysis.” Othering & Belonging Institute. Accessed December 8, 2025. https://belonging.berkeley.edu/single-family-zoning-california-statewide-analysis.
  15. https://www.nber.org/system/files/chapters/c11534/c11534.pdf.
  16. “Appraisal Institute Guide Notes.” Appraisal Institute.
  17. “New Single-Family Home Size Continues to Grow.” NAHB.