For more than a decade, Eric Thompson built high-end spec infill homes in Portland, Oregon. His company, Oregon Homeworks, had 10 to 15 starts a year, which sold for $1 million and up. But about three years ago, Thompson started building homes with accessory dwelling units (ADUs), splitting the lots, and selling the ADUs separately in anticipation of Portland’s zoning reforms. Today, his business model revolves around building multiple homes on lots previously zoned for single-family housing.
“There’s a whole host of people that don’t need three-plus bedrooms, but nobody has been building for these people—outside of apartments—for decades. They are the bulk of the bell-shaped curve of buyers,” says Thompson, who is seeing the same profit margins as before but on more revenue, resulting in a healthier bottom line. “We’re excited about being able to build architecturally designed, energy-efficient, brand-new homes in these great walkable neighborhoods at prices people can afford.”
These small homes, along with duplexes, triplexes, and other variations that are commonly referred to as “missing middle” housing, are making a comeback at a time when more housing is desperately needed. The U.S. is experiencing a nationwide lack of inventory, particularly at attainable price points, after decades of underproduction. The NAHB estimates the shortage at about 1 million homes, while other studies have quantified the shortage at 4 million or 5 million homes. Among other upzoning efforts, some cities and even states are taking the controversial step of eliminating single-family zoning, reflecting an increased awareness that these planning regulations originated as a way to enforce racial and socioeconomic divides. In 2021, California became the third state to end single-family zoning, joining Oregon and Washington.
It’s a bit too early to say that single-family zoning will be jettisoned throughout the U.S., but it’s safe to say that policymakers in the largest metro area near you are talking about it. At press time, cities on the brink of rezoning include Gainesville, Florida; Charlotte, North Carolina; and Arlington, Virginia.
“So many cities are thinking about it right now, I’ve stopped keeping track of them and just look at regions,” says Lydia Lo, a research associate at the Urban Institute. “We’ve done an abysmal job at meeting demand, and single-family zoning serves a limited purpose. We want multigenerational housing and mid-density housing.”
While builders are natural allies for this reform movement, the language is off-putting, says Robert Dietz, chief economist for the NAHB. “We should say ‘eliminating single-family-only zoning,’ because there’s a natural tendency to think that it means that you can’t build single-family homes any more—that you have to build multifamily,” he explains. “Builders are used to dealing with development agencies and government authorities that make demands in order to develop a community: ‘You have to build X to build Y.’”
Here’s a look at three metro areas where single-family-only zoning is a thing of the past, and what the consequences have been.
Very Incremental Change
In 2018, Minneapolis beat everyone to the punch by becoming the first major U.S. city to eliminate single-family-only zoning. The Minneapolis 2040 plan attempts to address the shrinking amount of affordable housing, which disproportionately burdens residents of color, by encouraging the development of more and less-expensive housing. As of January 2020, the city has allowed duplexes and triplexes to be built on single-family zoned lots—which make up about half of the city. Since then, the city has permitted only 64 duplexes and 21 triplexes, and half of the duplexes are on lots unaffected by the rezoning. The slow uptake is by design, according to city planners.
“The change is playing out as we expected,” says Minneapolis planning manager Jason Wittenberg. “We figured that duplexes and triplexes would be very incremental. We didn’t intend to dramatically change those single-family neighborhoods in a quick way.”
The plan’s potential impact has been blunted by restricting duplexes and triplexes to the size of single-family homes. “Height and FAR [floor area ratio] are the two biggest limitations,” says Bruce Brunner, who has been developing two- to four-unit rental properties in Minneapolis for more than a decade. “Small-scale multifamily is the least profitable form of housing to build, and, if the building envelope stays the same, it makes it harder to pencil out.” In addition, minimum lot size requirements (5,000 or 6,000 square feet) effectively prohibit lot splits.
However, Brunner says the rezoning does allow him to take advantage of “small-scale opportunities,” such as empty lots and teardowns in neighborhoods with lower zoning. “We build and renovate at our own pace, and don’t go out looking for financing,” he says. “We stay small and are very productive at what we do.”
Minneapolis’ most significant reform has been the removal of all parking requirements, which other cities, including San Francisco and Buffalo, New York, have also done away with in the past several years. “It saves tremendously on costs when you don’t have to provide as much housing for cars,” says Wittenberg, who cites a big jump in small apartment buildings with 15 to 30 units. In addition, the plan allows for larger apartment buildings near public transit hubs and commercial corridors. Even while the number of duplexes and triplexes remains modest, the city has permitted around 9,000 units since the passage of Minneapolis 2040. Another metric that shows the plan is working: Rental prices have actually dropped slightly instead of increasing, which has been the trend elsewhere.
Getting Used to the Idea
California has the biggest housing shortage of all the states, and the Greater Los Angeles metro area has the biggest housing shortage of all U.S. cities. Like other California cities, Los Angeles is figuring out whether it wants to lean into SB 9—Senate Bill 9, which eliminates single-family zoning and technically allows you to split a lot into two and build two units on each lot. But cities can continue to limit buildable area, FAR, and maintain parking requirements, which can constrain potential development.
Around the same time SB 9 passed, the city approved an update to its housing element, which has a target of 465,000 units over the next decade. Among the plan’s 15 strategies for getting there, rezoning to allow multifamily housing along commercial corridors populated by strip malls is the most popular way to add units, according to a city planning spokesperson. Changing single-family-only zoning is also one of the strategies; and given that 78% of the Greater L.A. metro area is zoned for single-family, the potential to add units that way is theoretically very high.
However, city code doesn’t yet reflect more than basic compliance with SB 9. Though lot splits are now allowed “by right,” Los Angeles has gotten only about 100 submittals for SB 9 projects so far. The ordinances governing single-family-home development are likely dampening enthusiasm. As in Minneapolis, constraints that limit the size of single-family homes are still in place, which means that a fourplex can’t be any bigger than a single-family house. A 20-foot-wide driveway for fire access needs to run to the back of the lot, which takes away space that could be used for housing. And lot splits are quite onerous, because the applicant has to deal with 10 different city agencies in a process intended for developers of 50-unit subdivisions. In addition, SB 9 requires that one of the units be owner-occupied for three years, in order to alleviate concerns that developers would come in and change neighborhoods rapidly.
Working within these constraints, however, a Los Angeles company called Homestead is partnering with home buyers to purchase single-family homes and redevelop the rest of the lot. In most cases, the net result is three lots, each with its own home. Homestead sells the existing home as a condo to the buyer, and then develops homes on the other two lots, relying on its network of prefab suppliers and builders. Two more home buyers are thus able to purchase a home in a prime neighborhood for, say, $600,000 instead of $1.5 million. While it has pilot projects in other California cities, L.A. is ideal, according to Homestead co-founder Sam Schneider, because lots already have driveways that run through to the back of the house, making them easy to split. It is raising an initial fund to construct 50 to 100 units in Los Angeles.
“Every project that requires subdivision, upzoning, or subjective review has the opportunity to go very sideways,” says Schneider. “Hopefully SB 9 will allow builders to go gung-ho into a project, knowing that it can be done.”
Return of the Fourplex
Of all cities tinkering with single-family zoning, Portland appears to have come up with a winning strategy. Key to tackling this sacred cow, according to city principal planner Sandra Wood, was bringing together all the stakeholders. The city began planning its Residential Infill Project (RIP) in 2015 with an advisory group that included nonprofit and for-profit developers, builders, and housing advocates. In 2020, the city approved RIP, which allows developments of up to four units on single-family lots (and up to six units if half of the units meet affordability requirements), and makes it easier to split lots.
The formula that the housing coalition hit upon provides incentives to build more units: A single-family home can have a FAR of 0.5, but a duplex can be 0.6 and a triplex can be 0.7. “Raising the FAR was important in our calculations of when it would be economically viable to demolish an existing house,” says Wood. By reducing FAR for single-family homes, RIP also addressed the public’s concerns about “McMansions.”
Along with creating density bonuses, the RIP eliminated parking requirements for all new homes, freeing up more space for housing units. Fourplexes have been the most popular new housing type; since the passage of RIP, the city has permitted 53 fourplexes, 22 duplexes, and 10 triplexes on lots previously zoned for single-family. On Portland’s typical 5,000-square-foot lot, Thompson is building four two-story homes, each around 900 square feet, with private outdoor space but no on-site parking.
Another reason why Portland has had a relatively smooth path to ending single-family zoning: The city has a long history of encouraging ADUs, beginning in 1996. Also referred to as in-law units and guest cottages, ADUs are technically not missing middle housing, but they provide modest increases in housing with minimal disruption to a neighborhood. ADUs, which can be rental units, typically have fewer bureaucratic hurdles and lower costs to build. In Portland, ADUs do not trigger a property tax reassessment, can be built according to residential instead of multifamily code, and do not require their own water and sewer lines. Described by Wood as “the sweetheart of Portland development,” ADUs became much more popular after the city waived impact fees for them in 2010, reducing the cost by as much as $20,000. The state of Oregon now allows ADUs to be easily “condoized,” as Thompson began doing early on.
RIP is just one part of Portland’s plan to increase its housing stock to accommodate 135,000 additional households by 2035. According to Wood, the city has rezoned with the expectation that 30% of new housing will be downtown, 50% along commercial corridors, and 20% will be in the traditionally single-family neighborhoods. Of the more than 3,000 units that Portland permitted in 2021, nearly 700 units were “middle housing” and ADUs—or about a quarter, which is on track with the projected percentages.
A Light Touch
Researchers at the American Enterprise Institute’s Housing Center in Washington, D.C., have come up with another term for housing enabled by single-family zoning reform: “light-touch density.” In a 2022 report of the same name, they state that if light-touch density construction increased to its 1940 share of the market, it could contribute 8 million housing units over the next 20 years.
Even if that projection turns out to be wildly optimistic, changing single-family zoning represents an important cultural shift. “The micro scale is important,” says Brian Loughlin, chair of the housing and community development division at the American Planning Association. “One person creating a small ADU in their garage helps us recognize as a community that the housing issue isn’t just something experienced by other people—that it’s not an urban-only or rural-only or poor people–only problem, it’s an everybody problem right now.”