Small Cities, Big Ideas: How Local Innovation is Tackling the Housing Crisis

The housing affordability crisis is often framed as a problem facing major metropolitan centers. We picture skyrocketing rents in San Francisco, New York, or Seattle, and multimillion-dollar price tags for modest homes in high-demand urban neighborhoods. But increasingly, small cities and towns across the United States are grappling with their own version of this crisis. These communities — from picturesque coastal enclaves to mountain recreation hubs — are caught between preserving their unique identities and addressing the growing need for housing that’s affordable not only to low-income families but also to the teachers, nurses, service workers, and small business owners who keep local economies alive.

Small cities are finding solutions to the housing crisis with big ideas.

Small cities may lack the financial firepower of big metros, but they often possess something equally valuable: the agility to pilot creative, community-driven solutions. This article explores how places like Hood River, Oregon, and Portsmouth, Rhode Island, are deploying innovative tools — from excise taxes and adaptive reuse to zoning rewrites and urban renewal districts — to expand attainable housing and safeguard community character. These efforts offer important lessons for cities and towns everywhere.

Why Small Cities Are Innovating Now

Over the past decade, small cities and towns have witnessed a surge of challenges that are forcing housing affordability onto the front burner:

• Lifestyle migration and remote work: The rise of remote work, accelerated by the COVID-19 pandemic, has enabled higher-income earners to relocate to scenic small towns. This has driven up demand and prices in places previously insulated from intense housing competition.

• Tourism-fueled housing pressures: Communities like Hood River have seen local housing stock snapped up as vacation homes or short-term rentals, squeezing year-round residents out of the market.

• Limited land and infrastructure: Small cities often face physical constraints (geography, environmental protection requirements) that limit expansion, requiring smarter use of existing space.

• Preservation of community character: Many small towns have rich histories and unique identities they seek to protect. Large-scale, generic development is often viewed as a threat to this character, making sensitive, well-designed infill housing critical.

In response, small cities are stepping up with targeted policy tools designed to fit their specific contexts.

Hood River, Oregon: A Mountain Town’s Push for Attainable Housing

Hood River, a city of just over 8,000 residents on the Columbia River Gorge, is globally known for its windsurfing, mountain biking, and breathtaking scenery. But with desirability has come affordability challenges. A 2021 housing study found that over 60% of renter households were cost-burdened, and home prices had risen beyond what many local workers could afford.

Gary Johnson and Patty Garland in front of their detached garage/ADU building completed last fall. (src: https://cityofhoodriver.gov/june-2019-city-enews-adu-zoning-improvements/)

Key Innovations:

✅ Construction Excise Tax: Hood River adopted a 1% construction excise tax on residential, commercial, and industrial development. The funds flow into a local Affordable Housing Trust Fund, which has financed land banking efforts, supported nonprofit developers in acquiring sites, and provided gap funding for affordable housing construction. The city has also allocated funds toward emergency housing assistance during economic downturns, illustrating the tax’s flexibility in meeting community needs.

✅ Accessory Dwelling Units (ADUs): Hood River’s zoning reform for ADUs went beyond streamlining permits. The city introduced pre-approved ADU designs to lower architectural costs, offered technical assistance to homeowners unfamiliar with development processes, and coordinated with local credit unions to provide ADU-specific financing options. The result has been a surge in ADU applications, many of which house teachers, hospitality workers, and seasonal employees vital to the local economy.

✅ Urban Renewal Districts: The city’s urban renewal efforts focus on revitalizing older commercial corridors and underused industrial zones. By reinvesting tax increment revenues into infrastructure — such as new sidewalks, bike lanes, and upgraded utilities — Hood River has made sites viable for mixed-use projects that include affordable housing. Some urban renewal funds have also been used for site remediation, removing barriers for development on previously contaminated lands.

Community Engagement:

Hood River’s approach to community engagement is multifaceted. Beyond hosting design workshops and housing forums, the city conducts walking tours of proposed development sites, allowing residents to visualize potential changes. Pop-up engagement stations at farmers markets and festivals ensure broader outreach. The city collaborates with high school civics classes and community colleges to involve young people in planning, fostering the next generation of housing advocates. Partnerships with nonprofits like the Columbia Cascade Housing Corporation have strengthened capacity to deliver housing that reflects local priorities.

Early Outcomes:

Since adopting these measures, Hood River has achieved several notable outcomes. ADU permits have increased by over 50%, and many of these units have been rented at below-market rates thanks to homeowner incentives. Mixed-use developments in urban renewal districts have added both market-rate and income-restricted units, with several projects leveraging state and federal tax credits to maximize affordability. The construction excise tax has generated hundreds of thousands of dollars, funding land purchases for future affordable projects, grants for rehabbing aging housing stock, and partnerships with local employers to provide workforce housing. Early data suggests these efforts have helped stabilize rental prices and slow the displacement of long-term residents.

Portsmouth, Rhode Island: Adaptive Reuse and Smart Zoning on the Coast

Portsmouth, located on Aquidneck Island, is a small coastal community rich in maritime history. Like many New England towns, it faces housing pressures driven by tourism, an aging population, and limited land availability. The town’s median home price has risen steadily, pricing out many middle-income residents.

Portsmouth, Rhode Island: Adaptive Reuse and Smart Zoning on the Coast (src: https://www.ds-arch.com/blog/rhode-island-clears-the-path-for-more-adaptive-reuse-projects-in-2024)

Key Innovations:

✅ Adaptive Reuse: Portsmouth’s zoning reforms actively encourage the conversion of underused or historic structures—such as former mills, schools, churches, and commercial buildings—into residential units. The town provides expedited review for adaptive reuse proposals and offers property tax abatements for approved projects. This approach has resulted in several successful conversions, including a historic school turned into senior apartments and a former textile mill reimagined as a mixed-income housing complex.

✅ Cottage Clusters and Small-Scale Multifamily: Through targeted zoning amendments, Portsmouth has allowed for small cottage-style clusters and duplexes or triplexes in areas that were previously restricted to single-family homes. These developments must follow design guidelines that ensure compatibility with surrounding neighborhoods. The city offers density bonuses and reduced parking requirements for these projects if they include affordability components.

✅ Inclusionary Zoning in Redevelopment Areas: Major redevelopment projects in designated growth areas are now required to include a percentage of affordable units, either on-site or through in-lieu fees that support local housing funds. This policy ensures that larger-scale growth contributes to housing solutions rather than exacerbating inequities.

Community Engagement:

Portsmouth planners have conducted a variety of public engagement efforts, including multi-day charrettes where residents, architects, and planners co-create design concepts for redevelopment areas. The town has hosted pop-up input stations at community events and libraries to gather feedback on zoning changes. Online surveys and mapping tools have allowed residents to identify areas they believe are suitable for infill development or adaptive reuse. Collaboration with local historical societies has ensured that housing innovations respect Portsmouth’s rich architectural heritage.

Early Outcomes:

Adaptive reuse projects have delivered unique housing options that blend new uses with historic character, helping the town maintain its identity while adding much-needed units. Cottage cluster developments have drawn strong interest from seniors seeking to downsize, young families, and first-time homebuyers. These forms of gentle density have expanded housing choice without significantly altering neighborhood scale. Inclusionary zoning requirements have begun generating affordable units within private redevelopment projects, with funds also supporting partnerships with nonprofits to develop affordable housing on publicly owned land.

Lessons for Small Cities Everywhere

The experiences of Hood River and Portsmouth highlight several key principles that other small communities can adapt and tailor to their local context:

🌟 Pair Growth with Community Benefits: Successful small cities ensure that new development actively supports community priorities. Tools like construction excise taxes and inclusionary zoning help channel the value created by growth directly into housing affordability, infrastructure improvements, and public amenities. This approach fosters public trust in new development and demonstrates that growth can serve the common good rather than exacerbate inequities.

🌟 Embrace Gentle Density: Adding housing does not have to mean towering apartment blocks. ADUs, cottage clusters, duplexes, and triplexes offer "gentle density" — increasing housing choice and supply while respecting existing neighborhood character. Such approaches support aging in place, provide entry-level housing for first-time buyers, and allow families and communities to stay together across generations.

🌟 Value What Exists: Adaptive reuse turns historic or underutilized structures into vibrant housing without consuming additional land. By preserving beloved buildings and reimagining them for modern needs, cities can reinforce their unique identity while meeting housing demands. This also reduces environmental impact compared to new construction and can catalyze broader neighborhood revitalization.

🌟 Engage the Community: Policies rooted in robust community engagement have greater legitimacy and staying power. Public workshops, design charrettes, walking tours, and digital tools that gather resident feedback ensure that housing strategies reflect local values. This inclusive process helps surface creative solutions and builds lasting support for change.

🌟 Align Tools with Context: There is no universal template for success — strategies must be adapted to a city’s geography, economy, history, and culture. What works in a tourism-driven mountain town may differ from solutions in a coastal community or post-industrial city. The key is for small cities to blend proven tools with a deep understanding of local conditions, tailoring policies to address both housing challenges and community aspirations.

By integrating these principles, small cities can shape housing policies that are not only effective but also equitable, resilient, and reflective of local character.

The Path Forward

Small cities are increasingly at the forefront of housing innovation. Their size allows for more flexible policymaking and the ability to test and refine solutions that larger cities may struggle to implement quickly. These communities act as living laboratories for housing policy — demonstrating how targeted interventions can meaningfully address affordability while strengthening community bonds.

Moving forward, small cities will need ongoing support to scale their efforts. This includes alignment with state and regional policies that provide incentives for affordable housing production, funding streams such as housing trust grants and infrastructure dollars, and technical assistance programs that help local governments navigate complex planning, legal, and financing challenges. Partnerships with nonprofits, regional housing authorities, and private sector actors will also be key to sustaining momentum.

Moreover, small cities must continue to share lessons with each other, building peer networks that promote collaboration and knowledge exchange. Platforms like UrbanWise play a vital role in amplifying these success stories and offering actionable insights for communities of all sizes striving to create inclusive, resilient housing solutions.

Ultimately, tackling the housing crisis in small cities is not only about producing more units — it’s about doing so thoughtfully, inclusively, and in a way that reinforces what makes these places special: their sense of identity, connection, and care for the people who call them home.