As data center backlash grows, cities turn to AI to lower housing costs

As the housing rebellion against data center development gains steam nationwide, the AI technology they power may hold the solution to another problem plaguing the market: red tape.Regulatory costs add $131,734 for a typical home—a significant portion of the $499,500 sticker price for an average house, according to a new survey from the National Association of Home Builders (NAHB).Those costs have jumped almost 40 percent in five years and now account for 26.4 percent of the average sales price of a home.Those regulatory burdens are one of the primary drivers of the nation’s housing shortage, now estimated at more than 4.03 million homes, according to research from Realtor.com.

And by that measure alone, it might seem like the exact solution local governments should rush to adopt.But at the same time, data centers are causing a crisis in their own right—robbing communities of their water supplies, spiking electric bills, and causing a whole host of other problems.Caught in a vise between high housing costs and soaring utility bills, communities are left wondering whether AI is actually solving the affordability equation, or just rewriting it.To understand how AI could transform the market, one must first look at the sheer volume of bureaucratic friction currently baked into residential construction.

Builders encounter regulatory costs at nearly every step of the process, according to the survey from NAHB—and at each of those steps, it comes at a price.“As we all know, time is money, and a faster, more efficient permitting process means more money in the pockets of everyone along the chain,” Jacksonville, Florida, Mayor Donna Deegan said in August.In 2025, her office announced an eight-point plan to streamline review and permitting processes in hopes of addressing the local housing crisis.Currently, the city faces an estimated shortage of some 50,000 affordable housing units.In Jacksonville, that means a home would need to cost no more than...