Upzoning: Only Part of the Housing Affordability Fix

After decades of NIMBY domination, U.S. state and local governments are pursuing the “upzoning” trend. Legislation has passed recently to eliminate single-family-home (SFH) exclusive zoning and allow moderate-density construction, with bills passing in California, Oregon, and other select states and cities. But so far results have underwhelmed: California’s SB9, which legalized construction of duplexes and lot combinations to build two homes in formerly SFH-only neighborhoods, spurred meager new construction in the largest metros. In Minneapolis, where council approved upzoning for three units as the maximum allowable density in residential neighborhoods, very few such projects have proceeded. 

The problem, as became clear in recent interviews with developers who build these formats, is the other regulations that exist. Rezoning a small SFH lot for another home or two won’t spur redevelopment if a competing set of laws remain, which can be said of all these newly-rezoned jurisdictions.

Take Minneapolis: some of the poor results stem from a high interest rate environment and low demand. Minneapolis’ reforms went into effect early 2020 amid the pandemic and local race riots. Another factor, says Twin Cities Housing Alliance executive director Cathy Bennett, is that SFH neighborhoods lack the walkability that attracts renters and buyers to dense areas. That might explain why Minneapolis’ other reform – allowing denser upzoning along transit corridors – has proven more successful in adding supply.  

But these factors likely don’t explain the bills’ underperformance in California, with its estimated 1.4 million unit deficit. Something bigger is going on – and it’s the other regulatory barriers.

Most SFH neighborhoods have wide minimum lot sizes, often dating to the 1950s. This is even true in locales with less zoning or no formal zoning, like Houston. According to UC Berkeley’s Terner Center, SB9 itself set a minimum lot size, requiring newly-created lots to “be at least 1,200 sq. ft. in size or 40 percent of the existing lot size” and that new structures be at least 800sqft. Other new upzoning bills (including one just passed in my hometown of Charlottesville, VA) come included with these minimums, along with similar laws regarding building width, lot coverage ratio and more. It makes redevelopment difficult to impossible on smaller infill lots, which are the ones most appropriate for redevelopment. 

Some cities want to address this. Austin’s council proposed in 2023 to reduce its minimum lot sizes on single-family zoned properties and legalize triplexes in single-family neighborhoods by-right.

But building size regulations may ultimately be more troublesome. In Minneapolis, new buildings could only be as wide as single family homes previously allowed on the same lots, local developer Cody Fischer said by Zoom. This was viewed as a necessary compromise to get the upzoning passed, but limits the market viability of denser development. 

“It quickly becomes more sensible…to just build a single family home and sell that,” Fischer said.  

Similarly, setback regulations exist in most jurisdictions, requiring physical structures to be located a given minimum distance from the property boundary. This too makes it hard from a site engineering perspective to fit multiple units on a given lot. 

Minimum parking rules can also frustrate missing-middle development. Having to build on-site parking can distort, spatially, the possible pro formas for a lot, and adds to construction costs. In some cases, missing middle reforms have anticipated these problems and reduced or eliminated parking minimum rules for these developments.

Most municipalities have stringent design review policies. In California, the Terner Center reports, one city requires all new developments to conform to Spanish colonial style architecture while micromanaging “the exact size and materials needed.” Other times, boards police height and bulk, which becomes yet another thing that project architects must reconfigure. 

If all these additional regulations prohibit denser development, effectively nullifying any gains from the upzoning bill, then the bills themselves may increase home prices. After all, upzoning increases land values, since there’s now more development potential. That land value increase is supposed to be offset – in theory – by having more units on lots, which divides costs between units. A developer I spoke with recently in Charlottesville estimated that the rezoning of his own lot from 1 to 4 homes would reduce per-unit costs by nearly 10%. But again, that’s if the housing gets built. 

Mild upzoning reforms are promising in their potential to increase home supply in areas where more intense upzoning isn’t politically possible. But the regulatory soup of other restrictions must be addressed for these bills to be effective. Otherwise they won’t produce much housing and may even increase prices, fueling the critics who were against the bills all along.  

This article featured additional reporting from Market Urbanist content staffer Ethan Finlan. 

Cover image use authorized under the Creative Commons Attribution-ShareAlike 4.0 license.