Upzoning: Building More to Rent for Less
- Sep 25, 2019
To mitigate what many agree is an affordable housing crisis, a number of cities, like Minneapolis and Seattle, are approving massive rezoning plans.
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Rezoning or “upzoning” of entire neighborhoods is undertaken to, on the one hand, increase the density of housing and, on the other, provide cheaper rental units. Neighborhoods that were occupied strictly by single-family homes and low-rise multifamily dwellings, for example, may now include high-rise apartment properties and single-family land tracts may include more homes than previously allowed.
Density for affordability
The most recent to join the list of areas that modified zoning legislation to allow more density is Oregon. Last summer, lawmakers approved House Bill 2001, which authorizes the construction of duplexes on single-family parcels in cities with at least 10,000 residents. For cities with a population above 25,000, duplexes, triplexes, fourplexes and cottage clusters will be allowed on single-family lots. Larger cities have until June 2021 to update their zoning regulations, while smaller cities get an extra year. A similar initiative—dubbed Affordability Unlocked—passed in Austin in May, but it only applies to affordable and mixed-income developments.
Minneapolis 2040—the city’s Comprehensive Plan that was approved last December—aims to create more housing options, make the city more resilient to climate change and improve access to transit, goods and services. One of the plan’s 14 goals refers specifically to creating affordable and accessible housing, as the two largest groups of residents in the city right now are renters earning less than 30 percent of the area median income or are homeowners earning more than 100 percent of AMI.
In Seattle, an upzoning initiative for 27 neighborhoods was approved by the City Council on March 18. The initiative is set to create 6,000 new rent and income-restricted homes for low-income residents.
“It has taken too long for the upzoning to pass and it cost the city in lost production of housing at all levels over these past four years,” said Kristin Ryan, a partner at local development firm Barrientos Ryan, noting the largest gap to fill is between the high and low ends of the affordability spectrum. “Our urban vitality will suffer if there aren’t more workforce—60 to 100 percent of AMI—units developed. This is starting to get traction and is more of a focus.”
Scott Koppelman, senior vice president of Seattle-based AMLI Residential, agrees that more housing is necessary in the city. “Since the Great Recession, the demand for housing in Seattle has far outstripped housing production and this imbalance has resulted in rapidly rising housing prices,” he said. “AMLI supports policy decisions intended to facilitate increased housing production as a means to allow housing supply to keep up with housing demand.”
The nation is watching
Will upzoning be enough to solve these cities’ housing woes? Maybe or maybe not, but these plans are certainly sending a signal out to the rest of the country.
“It (affordable housing) hasn’t always had as much attention from elected officials as it does now,” said Christopher Ptomey, executive director of ULI’s Terwilliger Center for Housing. “It’s a top priority for mayors. Governors are talking about it, which is pretty unusual. In the 20 years that I’ve been working in the housing space, it was a rare occurrence.”
Upzoning plans take time to implement and results may not always be as expected. According to Ptomey, particularly regarding the Minneapolis initiative, there will most likely be owners who will not agree to have multifamily built on their parcels, so maybe it will be necessary to wait for the next trade to see the new zoning regulations become reality.
“It almost always takes a pretty substantial amount of time in order to get new units off the ground and I don’t think this would be any different,” Ptomey said. “In places like Minneapolis, it may be a bit slower because this (increasing housing density) is in neighborhoods that have long been single-family neighborhoods.”
In Seattle, the conversation has not stopped at upzoning. There are ongoing discussions about bringing back rent control and a proposal that would require developers who demolish more affordable homes to replace them with low-income units or pay more in fees. All these efforts are aimed at obtaining balanced housing markets.
“Real estate is complex. You don’t avoid a housing bubble with any single tool,” Ryan explained, “because the housing market is the result of a multitude of factors.”
Indeed. According to Kopelman, rapidly rising construction costs, slowing employment growth and policy decisions that result in reducing housing production―such as misaligned impact fees―are all threats to the health of housing markets.
Upzoning regulations are becoming more and more popular across the country, driven by the affordable housing shortage. This is also fueling rent control laws, now a reality across markets in Oregon and California. Both initiatives have their share of supporters and opponents, although all agree that it will take time to fully grasp the consequences.