The majority of developed land in Westerly is used for residential purposes. Unlike many other towns in South County, the density of housing is rather high, especially along the western boundary. Density is lower in the northeast quadrant due to the large area of wetlands and a DEM wildlife management area.

Westerly's successful tourism industry results in a large percentage of seasonal homes. Along the coastline, more than 50% of the residences are occupied by seasonal residents. Although these residents demand fewer services, such as schools, they significantly increase the demand for water during the summer months when supplies are lower.