When it comes to hot topics in the housing industry, upzoning is right at the top of the list.
Cities are now looking at implementing upzoning as a way to expand the housing supply with multifamily units (i.e., duplexes and triplexes).
Upzoning is becoming increasingly popular in cities around the US as a solution to the housing affordability crisis.
Because upzoning increases the housing supply, it makes housing more affordable.
So, as neighborhoods and market dynamics continue to change, upzoning is something you must keep in mind.
In this blog, we’ll address what is upzoning and what you should know about how it’s impacting communities.
1. What is zoning?
Before we get into the specifics of upzoning, let’s talk about zoning.
Zoning determines what can be built on a parcel of land (land use) and how much building is permitted (density).
Cities manage and regulate land through zoning.
Depending on the city, zoning can be a highly complex and contentious issue because it impacts where people can live.
2. What is upzoning?
Upzoning is a change to the zoning code made to increase the amount of development permitted in the future.
In cities specifically, this can mean altering the zoning code to allow taller and/or denser buildings.
Because the buildable capacity of land will increase through this action, cities are able to increase the supply of real estate in desirable areas.
“Upzoning” is rezoning for more intense use.
For example, a single-family neighborhood can be upzoned to multifamily residential or mixed-use zones.
On the hand, areas can also be downzoned.
Downzoning is when an area is switched to less restrictive zoning.
3. Is upzoning the same as rezoning?
No, upzoning is different from rezoning.
During rezoning, there is a zoning change that pertains to the allowable land use of potential developments.
Upzoning alters the zoning code to allow new capacity for development.
An example of rezoning is changing land from residential to commercial.
If someone purchased a building that was previously used as housing and wanted to convert it into a storefront, they would need to have the land rezoned.
An example of upzoning is taking land in a city that was previously used for single-family detached housing and building multi-family units.
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4. What are the pros of upzoning?
Lower housing costs
The US housing market has had a shortage of homes in the past few years.
This has caused prices to skyrocket.
By adding homes into the market, the effects of upzoning are not only to make housing more accessible but also lower prices.
Overall, decreasing housing costs creates a positive economic reaction.
When people pay less for rent or mortgages, they have more disposable income to spend on other goods and services to help stimulate the economy.
Improved housing equity
Zoning reform can improve racial and housing equity as well.
Single-family-only zoning has historically been used to enforce exclusionary zoning, racial segregation and create additional barriers to accruing generational wealth for people of color in the United States.
When areas are zoned for single-family-only zoning, it reduces the number of rentals available in a given neighborhood.
These residents are often disproportionately homeowners, and unfortunately, only about 43% of Black Americans are homeowners in the U.S.
This creates a de facto segregation in neighborhoods for single-family-only development.
Eliminating these restrictions allows integration in neighborhoods.
Lower carbon footprint
Densely developing cities mean a much lower carbon footprint compared to rural and suburban areas.
A single-unit lot in the suburbs uses nearly three times as much energy as an urban multi-family unit.
Housing units in a city are typically much smaller anyway which reduces the energy required to heat/cool a home.
Because upzoning has a low carbon footprint, environmental advocates are often in favor of it.
Fewer impervious surfaces
When we densely develop cities, we reduce the total surface area of impervious surfaces that prevent rainwater from naturally soaking into the soil.
These impervious surfaces include sidewalks, parking lots, roads, etc. that hold pollutants.
When rainwater runs along them before being deposited in nearby bodies of water, it picks up any pollutants it holds.
This can threaten both human health as well as the health of the environment.
Reduced impact on wildlife habitats
Building more densely in the city can reduce habitat destruction and fragmentation.
Suburban living requires more sprawling land which can prompt people to extend their living situations into existing ecosystems.
Building up instead of out minimizes the need for land clearing and habitat destruction.
Access to work
Upzoning enables young professionals to move to cities, which often serve as job centers.
This is a great place to find high-paying work.
Additionally, if there was more housing in the city, families could remain in cities rather than heading to the suburbs when they grew from 2 to 3 or 3 to 4.
Access to resources
Cities also serve as a hub of resources like job opportunities, grocery stores, social services, healthcare services, and public transportation.
Living nearby to these resources allow people to gain access to their necessities easily.
Walkability
Dense neighborhoods are also more walkable.
Who doesn’t want to have work, school, grocery stores, doctor’s offices, public transit, and much more right outside their door and within walking distance?
Studies show that neighborhood walkability improves mental health and creates a sense of community.
5. What are the cons of upzoning?
The primary con of upzoning and the reason that some people are advocating against it is that it contributes to fair housing challenges.
While there is a side that says that upzoning makes homes more abundant and affordable, this doesn’t always play out in practice.
There can be discrimination that occurs when it comes to how this housing is allocated once it exists.
This housing system can also favor high-income individuals.
While lower-income individuals are given a small portion of households that are upzoned, most may be allocated to those with higher-income individuals simply because they’ll cost more.
6. Is upzoning distinct from gentrification?
Yes, upzoning is different from gentrification.
Gentrification is when the character of a poor urban area is changed by wealthier people moving in, improving housing, and attracting new businesses.
This process often displaces current inhabitants.
While upzoning and gentrification aren’t synonymous, upzoning does sometimes take place in gentrifying areas, and it isn’t always a good idea.
One example of this is Langley Park in the Greater Washington, D.C. area.
On the surface, Langley Park may appear to be ripe for upzoning.
The county where it resides is due for an update to its zoning codes, and the area is about to get a major revamp to its public transit situation when the Purple Line is completed.
Because of this, it would be a great place to build dense housing and cut down on car use in the area.
Since the area is already walkable and bustling with activity, denser development could help businesses thrive, especially after some tough years with the pandemic.
However, there are several other factors that should be taken into consideration when it comes to a place like Langley Park.
This low-income neighborhood has both a large and socially vulnerable population with more than 80 percent of its residents being Hispanic or Latino.
Furthermore, many of these residents are also undocumented.
Just under half of the population under 65 doesn’t have health insurance.
Around 9 in 10 households speaks a language other than English.
And the area’s poverty rate is 19 percent which is more than double the county’s rate.
The residential apartment buildings that Langley Park renters are currently living in are in poor shape.
They have absentee landlords that refuse to fix leaks, replace broken HVAC systems, or treat rodent infestations.
Despite this, the land beneath these properties is valuable.
It will become even more valuable once the Purple Line is finished.
If upzoning occurs, the value of the property will increase even more.
Developers and investors will be enticed by the existing garden-style apartment buildings—perhaps looking to demolish and replace them with new buildings that house more units.
If a mass of Langley Park tenants were to lose their homes simultaneously, it would create a dangerous impact on the community.
There could be increased homelessness, poverty, domestic violence, and education loss that the government would struggle to address.
Even now, Langley Park residents are paying $1,500 a month for poor housing conditions and the county isn’t working to address the issue.
Upzoning on top of gentrification will only exacerbate this problem.
7. What is an example of upzoning in the U.S.?
Upzoning occurred in Minneapolis in 2020.
The city voted to upzone single-family home neighborhoods to allow for small multifamily home development.
In this plan, Minneapolis adopted an interim inclusionary zoning ordinance.
This ordinance permits applications to increase a property’s development capacity by 60 percent or more.
They hope to allow more housing options, particularly in areas without many choices or access to resources like frequent/fast transit, goods, services, and employment.
In 2019, Oregon also introduced a bill that requires cities with populations greater than 10,000 and counties with populations greater than 15,000 to allow middle housing lands zoned for single-family dwellings within urban growth boundaries.
In other words, the bill bans single-family zoning.
If a city has 10,000 residents or more, single-family lots are zoned for duplex development while cities with 25,000 residents or more have single-family lots that are zoned to accommodate duplexes, triplexes, and fourplexes.
8. What does upzoning mean for investors and property managers?
Single-family zoning makes up most urban land in cities.
For instance, in cities like Charlotte, Portland, and San Jose, single-family zoning is over 70 percent of all land.
So, even small-scale multi-family development is banned in these locations.
Upzoning will change this and open up development opportunities—including accessory dwelling units (ADUs), duplexes, triplexes, carriage houses, etc.
If developers are building more properties due to upzoning, then they’ll be more properties available for investment as well as higher demand for property managers.
However, it’s important to keep in mind that an increase in the supply of these properties creates downward pressure on property values and rents as well.
In addition, poor execution of the upzoning model can affect real people and their housing security (as we saw in Langley Park example).
To be true community partners, investors, and property managers must build their knowledge of upzoning initiatives and be thoughtful in how they interact with the existing communities.
This way, they’ll better understand the opportunities available to them and invest in locations that are ready for upzoning (unlikely a Langley Park location).
9. Will upzoning neighborhoods make homes more affordable?
It can! Upzoning’s proponents say that removing zoning restrictions on dense housing development will increase equity in housing overall.
This is because it increases the housing supply, which drives down demand and prices.
Their evidence for this is often housing studies in larger cities.
That said, this model doesn’t work for every community.
In some cases, upzoning has been found to decrease affordability, increase property taxes, increase average rents, and reduce affordable housing units.
A good example of this can be seen in this Chicago study.
This study was done over five years, and the research found that upzoning resulted in higher property prices.
Additionally, there was no increase in the construction of affordable properties.
Cities that hope to address the housing crisis will need to look at solutions outside of upzoning.
City planners and developers must take their specific city and its circumstances into consideration when deciding whether to move forward with upzoning.
It can be a great way to boost the housing supply and improve housing equity.
However, some areas aren’t ideal candidates for upzoning.
10. Who benefits?
It depends on the community. In the right scenario, everyone from the resident to the developer benefits from upzoning.
In the wrong scenario, only upper-income residents, big developers, and real estate investors are favored by these types of policies.
This is because it creates opportunities for developers, and because property values are higher, real estate professionals and residents with higher incomes may begin to look at areas that they have not historically considered.
It can also squeeze lower-income residents out of the area.
As a result, there have been several protests against upzoning in large cities like New York, Oakland, Los Angeles, and Seattle.
The core groups of people who are joining the movement against upzoning are housing advocates, people of color, and lower-income residents.
Upzoning can be a solution rather than a problem if it’s thoughtfully considered.
Final Thoughts
What is upzoning? Is it positive or negative?
How you answer these questions will ultimately depend on which side of the table you sit on and how it’s been approached in your community.
Either way, it’s important to remember that upzoning is a new concept.
No one — investor, resident, property manager, government official, etc. — understands exactly what the net impact of upzoning will be.
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Disclaimer: we are not lawyers, accountants or financial advisors and the information in this article is for informational purposes only. This article is based on our own research and experience and we do our best to keep it accurate and up-to-date, but it may contain errors. Please be sure to consult a legal or financial professional before making any investment decisions.
Prior to starting Gokce Capital, Erika received a Bachelor of Architecture from the University of Southern California and a graduate degree in Urban Policy from Columbia University. She worked as both an architectural designer and engineer in New York before joining the New York City Department of Housing Preservation and Development.
Erika currently lives in the New York Metropolitan area with her spouse, daughter and cat. She is originally from Chicago and still considers herself a midwesterner at heart.
Erika also loves to read, write and travel (fun fact, she has visited all 50 states and more than 30 countries!). Her new book, Land Investing Mistakes: 11 True Stories You Need To Know Before Buying Land, is now available on Amazon.