For real estate developers and investors in the multi-family sector of the market, it’s important to understand how federal policies may impact future development opportunities. While zoning regulations fall primarily under the purview of local and state governments, the Biden-Harris Administration has taken unprecedented steps to address the national housing crisis.
In late 2022, Congress passed a bill approving an $85 million grant program aimed at zoning reform. To be administered through the U.S. Department of Housing and Urban Development (“HUD”), the $1.7 trillion omnibus spending bill created a “Yes In My Backyard” competitive grant program for local municipalities that revise local zoning ordinances and policies to promote the development of multi-family and affordable housing.
In April of 2023, as one of the preliminary steps in its newfound role, HUD released “Pro-Housing Land Use and Zoning Reforms,” which summarizes the impact of restrictive land use policies and highlights reforms that state and local governments can adopt to increase the supply of housing.
HUD’s recommendations include a variety of reforms, all of which can be read in their entirety here. For convenience, we provide a summary of the recommendations below.
- Increase multifamily zoning – “Building anything other than single-family homes is illegal in far too many places in the country. According to one estimate, as much as 75 percent of land in major American cities is zoned exclusively for single family dwellings, and this share is likely much higher outside of large cities. Whether allowing accessory dwelling units (ADUs) or other small multiunit buildings, state and local reforms that eliminate or reduce the dominance of single-family zoning can create more affordable housing in more places, increasing access to neighborhoods and enabling more households to attain homeownership.”
- Allow missing middle and larger multifamily development by-right – “By-right development enables housing that complies with zoning and development regulations to be built without discretionary approval. By-right development creates a faster, more predictable process.”
- Enable adaptive reuse and conversions – “Cities and states can also enable housing production or conversion on land previously zoned for other uses. As work-from-home continues to be prevalent, demand for commercial real estate has plummeted, which could lead to decreased property values and tax receipts. Office-to-residential conversions could help to solve the dual crises of vacant office space and lack of affordable housing, but the number of buildings suitable for conversion is limited due to restrictive zoning and challenges with building footprints (e.g., reconfiguring building systems and the need for windows in every bedroom).”
- Eliminate parking requirements – “Most cities have minimum parking requirements (parking spaces required per residential unit), which often mandate more parking spots than market demand would otherwise bear. These requirements can inflate housing costs, prevent the conversion of buildings into housing, and contribute to sprawl. By one estimate, garage parking drives up rents by approximately 17 percent, and other studies have found even larger impacts of minimum parking requirements on rent.”
- Reduce minimum lot sizes – “Minimum lot sizes are omnipresent in local zoning codes and require that each household occupy more land than is otherwise necessary, raising housing prices and contributing to sprawl. Reducing minimum lot sizes enables the construction of more ‘starter homes’ and decreases the per-household cost of providing water and other utilities.”
- Support equitable transit-oriented development – “Equitable transit-oriented development seeks to promote affordable housing options near transit and create more people-centered neighborhoods while preventing displacement in historically disinvested communities facing increasing housing costs. Chicago’s Connected Communities ordinance expanded city-provided, transit-oriented development incentives to additional corridors, legalized more housing types near transit, and eliminated onsite parking requirements near transit, while also taking measures to promote safe streets and improved walkability.” (Emphasis added).
- Streamline permitting processes and timeline – “Permitting adds costs and uncertainty to the development process.”
It’s important to note that zoning policies are primarily determined at the local and state levels, and the federal government’s influence is limited. Therefore, the success of the Biden-Harris Administration’s zoning-related initiatives relies on cooperation and collaboration with local and state governments. However, federal legislation makes it clear that local progress and commitment to zoning reform will determine who received grant funding, and the recent HUD publications highlights the zoning regulations and policies that are likely to be changed by municipalities striving to be awarded a federal grant.
If you have questions about zoning, we’d love to hear from you! You can reach us at firstname.lastname@example.org
Disclaimer: This content is for informational purposes only. It is not considered legal advice on any subject matter. The information provided here does not create, and receipt of it does not constitute, an attorney-client relationship. You should not act upon this information without seeking advice from an attorney licensed in your own state or country.