Relaxed exclusion zoning: the impact on REI

President Biden has been clear on many points, and his position on exclusionary zoning certainly is. His countryside The website states, “Exclusion zoning has been strategically used for decades to drive people of color and low-income families away from certain communities. As president, Biden will enact legislation requiring that any state receiving federal dollars … develop an inclusive zoning strategy.

With a push towards a more inclusive zoning regime, President Biden hopes to make housing more available and affordable than before. In addition, inclusive zoning practices generally allow for densification and higher uses, which can have a positive impact on investors and developers.

What is exclusionary zoning?

First and foremost, zoning is how local jurisdictions manage and approve different types of real estate uses. Think of a traditional town, usually zoned for commercial use downtown, residential areas, and an industrial area somewhere on the outskirts. This type of town planning is achieved by zoning particular lots or neighborhoods for the type of use that a city wants: low density residential, high density residential, commercial, tourist, agricultural and industrial.

The downside to traditional zoning practices is that they tend to isolate residential single-family homes in one area and more affordable, higher-density rental housing in other neighborhoods. This leads to the unintended consequence of having poorer residential units in one location. Additionally, single-family home neighborhoods tend to be less affordable, creating a separation between the “rich” and “poor” neighborhoods of a city.

This traditional zoning scheme is “exclusionary” because in a neighborhood of single-family homes it is very difficult to build a higher density and affordable residential apartment.

Exclusion zoning simply refers to local land use rules that exclude certain types of housing. There is no reason why a low-rental housing co-op should not be allowed in a residential area, but it often is.

The impact of inclusionary zoning on investors

The relaxation of zoning laws has several key ripple effects, which the Biden administration is currently pushing by giving more funding to cities that relax their zoning restrictions. Here are some key points for investors to consider.

A logical way to combat exclusionary zoning and housing affordability is zoning. This is where local jurisdictions will increase the area of ​​a particular area, which allows for greater density. There are already many examples:

  • Minneapolis: In 2019, the city passed an inclusionary zoning ordinance increasing the development capacity of a property by at least 60%.
  • Oregon: In 2019, the state legalized zoning by telling cities that they could no longer limit land use to a single single-family dwelling.
  • Seattle: Last year, the city relaxed its zoning code in 27 transit-focused zones.
  • Austin: The city council approved in 2019 an ordinance authorizing the construction of more houses on land in single-family zones.

For investors, this means opportunity. In the past, you usually needed specific zoning for a duplex, triplex, or quadruple. Along with zoning, local regulators will relax zoning laws to allow high density or increase zoning levels upward from all current allocations.

  • Secondary units: Some zoning changes are underway to allow additional densification by allowing the construction of secondary housing. This could include a separate shed from the main building or a secondary unit on the lower level of a property. This could allow investors to add additional income streams to current assets that may not be appropriately zoned for secondary units.
  • Affordable housing: The Biden administration has been explicit about wanting more affordable housing and will support initiatives and local governments to do so. For developers and investors who plan to convert or build a more affordable rental offering, there could be additional incentives ahead.
  • Multigenerational homes: According to media reportsMayor Ras Baraka of Newark, New Jersey, said his city plans to “make full use of” federal dollars, including creating “solutions such as two- and three-family homes that can help ensure the creation of intergenerational wealth for blacks. and brown families across the country. “

Millionacres net profit

There is no doubt that there are many opportunities in the fight against exclusionary zoning. Look for fewer incentives for building typical suburban single-family homes and a greater focus on smart intensification and affordable housing options in the years to come.

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