Permitted Starter Homes Sit Unbuilt as Regional Infrastructure Funding Gaps Emerge

Written by:

Rudi Davis

Date:

27 Feb 2026

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Across Utah, cities are approving new starter home developments that remain unbuilt, revealing a critical breakdown in how regional infrastructure is funded. The issue is not regulatory resistance or lack of builder interest, but rather the absence of roads, water lines, and utilities needed to support these higher-density communities. As a result, zoning reform alone has failed to deliver the housing supply that state and local leaders had hoped for.

Steve Waldrip, Senior Advisor for Housing Strategy and Innovation in Utah’s Office of the Governor, says the gap between what is permitted and what is actually built is now driven by infrastructure constraints, not by local government reluctance. “We have these homes that are papered but not being built,” Waldrip says. “This really highlights the fact that we don’t have the infrastructure on a regional level to support the construction of those homes.”

This problem has become more urgent as Utah and other states push cities to approve more starter homes amid rising housing costs. While many municipalities have updated zoning to allow denser, more affordable housing, developers cannot proceed without the basic infrastructure that makes neighborhoods functional. No clear system exists to fund the large-scale roads and utility upgrades needed to support new growth, leaving many projects stalled indefinitely.

Economic Pressures

Even when infrastructure is available, builders often have little incentive to focus on entry-level homes. Higher interest rates and construction costs have slowed overall housing starts, but the effect is most pronounced for starter homes, which generate thinner profit margins than move-up housing.

“Starter homes have always been the hardest thing to get built over the last 10 years, because they’re the least profitable product to put on the market,” Waldrip says. He notes that most builders prefer larger, more expensive homes that offer greater returns.

This creates a persistent market failure: the homes most needed by first-time buyers are the least likely to be built. Developers focus on higher-margin projects, leaving a shortage of affordable options. Recent increases in interest rates and material costs have only widened this gap, as builders have become more risk-averse and have prioritized financially safer projects.

Waldrip explains that these macroeconomic pressures have intensified the problem. With higher costs and tighter lending, many builders are scaling back or delaying projects, especially those at the lower end of the market. As a result, cities are left with approved plans that never translate into actual housing, undermining efforts to improve affordability through zoning changes alone.

State-Level Infrastructure Solution

Recognizing that local governments and private developers cannot fund large-scale infrastructure on their own, Utah is proposing a $350 million infrastructure loan fund aimed at regionally significant projects. The fund would finance roads, utilities, and other systems serving multiple developments or entire communities, rather than project-specific infrastructure that developers typically cover themselves.

“Traditionally, government has always had a role in providing regional infrastructure, and that’s what we’re looking at,” Waldrip says. He emphasizes that while developers and homeowners will still pay for internal roads and utility connections, the broader infrastructure needed to support new neighborhoods requires public investment.

This approach marks a shift in housing policy. Instead of focusing only on regulatory reform or subsidies for buyers, the state aims to address the infrastructure bottleneck that prevents approved developments from moving forward. Offering low-cost financing for regional projects could reduce the upfront costs that make starter home construction financially unattractive.

However, the effectiveness of this strategy depends on how the loans are structured. If the cost of infrastructure is passed along to future homeowners through higher fees or taxes, the affordability problem may persist. For the fund to make a real difference, it must relieve enough financial pressure to close the profitability gap that currently discourages builders from pursuing entry-level projects.

Broader Market Implications

The lack of regional infrastructure funding has far-reaching effects on housing markets. In areas where basic systems are inadequate, neither strong demand nor favorable zoning can generate new supply. This mismatch leads to persistent shortages, continued price increases, and fewer options for first-time buyers — even as cities approve more projects on paper.

Waldrip’s assessment points to a new direction for housing policy: treating infrastructure financing as a distinct and urgent challenge, separate from zoning and construction costs. Without dedicated funding and coordinated planning, the gap between permitted and completed units will widen, and the impact of regulatory reform will remain limited.

If Utah’s infrastructure loan fund succeeds, it could serve as a model for other states facing similar barriers. By creating a dedicated mechanism for regional infrastructure, states can remove a key obstacle to starter home production and ensure that approved projects become actual housing. Yet the scale of funding required and the complexity of coordinating investments across multiple jurisdictions mean that this solution will demand sustained political will and careful execution.

Looking ahead, the ability of states to close the infrastructure gap will determine whether zoning reforms translate into real gains for housing affordability. For now, the lesson from Utah is clear: permitting more homes is not enough if the systems that support them remain unfunded.