Re-zoning land zoned for single-family housing to allow low-density multifamily units could help ease the housing shortage.

Enterprise Community Partners said re-zoning land to allow low-density multifamily housing could help communities address the negative impacts of exclusionary single-family zoning. In a white paper, Barriers and Opportunities to Creating Low-Density Multifamily Housing, Enterprise Community Partners Senior Research Analyst Ahmad Abu-Khalaf said allowing LDMF housing on land that was previously zoned for single-family development “can help state and local jurisdictions address some of the negative impacts of exclusionary single-family zoning on their housing markets’ supply and affordability issues.” The report noted there is no single agreed-upon definition of LDMF development. Zoning regulations vary by jurisdiction, but there are prominent zoning requirements that affect the feasibility of LDMF housing development. “For example, when land is rezoned to permit this type of development, municipal governments must ensure that underlying zoning regulations, including requirements governing minimum lot size, development bulk such as floor area ratio, maximum lot coverage and setbacks and minimum on-site parking allow for and do not negatively impact LDMF development,” the report said. In addition, communities can allow for the by-right development of this type of housing. “This allows developers to receive building permits without additional reviews and public hearings or meeting additional conditions,” the report said.  One key factor affecting LDMF housing’s financial viability is the cost of land. “Developers may have to acquire adjacent parcels from multiple owners,” Enterprise said. “This often leads to higher purchase prices to incentivize holdouts to sell their lots. The characteristics of developable land can also have a significant impact on cost. For example, the cost will increase if lots that will be combined have existing structures that add value.” Access to financing is another common challenge to developing LDMF housing. “Barriers stem from the scale of development and the fact that these properties are often pursued by small-scale developers,” the report said. It noted common barriers to financing LDMF development include challenges in securing equity financing and challenges in securing debt capital including mortgage origination and servicing costs, restrictive loan underwriting capacity requirements and perceived risk in loan underwriting.

Source: Mortgage bankers Association