Economic Diversification Roadmap: Housing Capacity Analysis

Determining how many and where new housing units can be built in a community is essential to supporting growth and economic development. Nuclear host communities tend to be located in rural areas, with smaller populations and fewer options for economic diversification. Supporting new, affordable housing is one strategy to diversify a local economy. Focusing development in compact, location-efficient places can help a community be well-prepared to attract new businesses and residents, protect open land and the environment, and set a path forward for intentional growth.

Who can use this whitepaper?

  • Local elected officials
  • Municipal planners
  • Economic development managers
  • Zoning Board representatives
  • Community members & organizations

Summary of Technical Assistance Work – Case Study

Southern Vermont, Vermont Yankee Nuclear Plant, Windham Region, VT

Since the closure of the Vermont Yankee Nuclear Power Plant in 2014, the Windham Region in Southern Vermont has been a leader in highlighting the economic impacts that result from nuclear decommissioning and how to recover from the loss of jobs, tax revenue, and regional economic activity.

To support and build from that work, SGA’s Nuclear Communities TA team performed a housing capacity analysis on five towns—representing a range of sizes, environments, and economic contexts—and identified several opportunities to draw economic growth and investment to the region. The five towns, ranging in size from 600 to 5,000 people, indicated a desire to retain the individual historic character of their communities but cited rising housing costs as a persistent issue that threatened the small-town feel and style of the area.

The final report grounded the findings and recommendations in existing town plans, local zoning practices, and Vermont’s land use and permitting processes, which regulate projects based on potential environmental impacts.1 The team also used several case studies of comparative rural areas from across the country to further contextualize the report’s findings and recommendations.

Recommendations included:

  • Align zoning with housing goals and capacity. Most of the area’s existing housing capacity is found in rural conservation and rural residential areas, where development is less likely to occur and is located far from existing community assets.
  • Invest in compact settlements. The five towns included in this analysis generate a net economic return from their town centers. However, there are still areas within these centers that do not significantly contribute to the economic vitality of the region. The Windham Region should seek to draw development and activity to these areas to support more activity, foster economic growth, and preserve the existing character of the region by leaving development patterns essentially unchanged.
  • Allow and encourage a mix of uses through zoning. There are very few zoning designations in the studied towns that allow a mix of residential and commercial uses. Allowing a greater mix of uses concentrated in specific areas helps the region realize its larger economic development goals by attracting a diverse array of businesses and stimulating a wide range of economic investment while protecting the small-town feel of existing areas.

Walking through a housing capacity analysis

Undertaking a housing capacity analysis can inform a community of its current capacity for growth, providing guidance on where to concentrate future development to preserve community character.

A housing capacity analysis is often preceded by a zoning analysis. When a community understands the rules and restrictions in its zoning code, it can then assess how much residential growth is possible under the current conditions and can help inform future planning decisions. The potential housing capacity is determined by considering the existing housing and what could theoretically be developed according to the current zoning regulations.2

In this analysis, every available parcel for development is evaluated to determine its full potential capacity. For instance, a parcel that currently has one dwelling unit but is permitted to have two has unused capacity according to the current zoning rules.

Communities often focus their higher-density housing developments in specific areas like town centers or downtowns, where a mix of uses such as residential, commercial, and office space is allowed.

Step 1: In a similar exercise to a zoning analysis, the following example is what is required for a housing capacity analysis:

Zoning Designation

Housing Capacity Limit Allowable Per Zoning Designation

Total Number of Allowable Units Per Zoning Designation

  Total Number of Units in Currently Each Zoning Designation

Percentage of Total Capacity

Residential (R)

2 units/parcel

 3 units/parcel



Multifamily (M)

30 units/parcel

45 units/parcel



Mixed Use (MU)

15 units/parcel

20 units/parcel



This housing capacity analysis will provide a detailed description of current occupied housing and where more housing could be accommodated to support future economic development and growth.

This resource is part of the Community Economic Diversification Roadmap, a new tool created by Smart Growth America and the Nuclear Communities TA team, to support communities in planning for the challenges and opportunities that stem from hosting energy infrastructure.

Economic development