Cities in developing countries seldom consider the cost increases that regulations impose on development. To build legal housing, developers must meet a high minimum cost threshold established by mandatory standards. Many standards impose costs on building construction, make them less affordable to low-income households, deprive them access to legally built housing, and fuel the formation of slums. This study analyses the impact of relaxing a few mandatory building and site planning regulations on the cost of small two-room homes in Ahmedabad by developing two alternative layouts for the same site, one in accordance with prevalent regulations, and another after modifying a few regulations. It shows that rationalizing regulations can reduce housing cost by 34% and increase supply by as much as 75% without significantly lowering quality or compromising safety. It also shows that for a large portion of poor households, the costs imposed by mandatory standards are not trivial and have a high impact on the affordability of legally built housing. It recommends that if municipal authorities are interested in tackling the rapid growth of slums by expanding the supply of affordable housing, they should critically examine their building regulations and modify them to address the housing needs of their low-income residents.