Missing Middle, What Is It Good For?

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28-01-2025

Happy Tuesday and welcome to another edition of Rent Free.
Government rules on new home construction make routine real estate development more difficult and expensive than it needs to be. Overly restrictive land use regulations also make it difficult to provide housing in more extreme circumstances. This week's stories cover a couple of examples of the latter phenomenon, including:
Los Angeles looks to use the latest fires as a reason to exempt itself from state-level zoning reform bills.
A Reason report from last week found that the island of Maui has managed to rebuild just three homes 18 months after the devastating wildfires on the island in August 2023.
In Ohio, a pastor has been convicted of criminal violations of the fire code for sheltering people in his commercially zoned church.
But first, the newsletter covers a slew of "missing middle" reforms being introduced this year, and what they can and can't do for housing supply, choice, and affordability.
Few cities get more plaudits from Yes in My Backyard (YIMBY) zoning reformers than Austin, Texas. It's a rare boomtown that's adding jobs, people, and housing while also seeing rents fall.
It's also one of the cities in the country that has adopted signature YIMBY "missing middle" reforms.
In December 2023, the city approved HOME I reforms that allow three units to be built on residential lots where previously single-family-only zoning had allowed one primary dwelling.
A natural assumption to make is that Austin's high construction rates are partially explainable by its abolition of single-family-only zoning. This would be a mistake.
Late last year, the city released data on the first six months of the HOME I reforms. From when they went into effect in February through August, builders have submitted 159 applications to build duplexes, triplexes, and two-home detached projects under the city's new HOME I rules, potentially resulting in 300 new dwelling units, according to the report. Of those applications, 99 projects totaling 220 units have already been approved by the city.
That's not nothing. But it's also a small sliver of Austin's total housing production.
In 2024, Austin permitted 8,179 units, according to data collected by the U.S. Department of Housing and Urban Development (HUD). Assuming builders filed applications for HOME permits at the same rate from August through the end of the year, the HOME reforms are responsible for about 5 percent of the city's overall housing production.
Again, that's not nothing. Local builders note that the increased construction of new HOME-enabled units is coming at a time when rents, home prices, and construction rates are all cooling fast.
Austin's housing production in 2024 is down some 40 percent from its peak in 2021.
"300 [units] doesn't sound like a lot but in the worst real estate market in decades here, that's saying something," says Scott Turner, an Austin infill developer.
Modest Missing Middle Results
The past few years have seen YIMBY zoning reformers train their fire on single-family-only zoning that blankets most residential land in most American cities—and for good reason.
Zoning rules that allow just one home per property, and that often come paired with large minimum lot sizes, are the most restrictive (or exclusive, if you prefer) form of residential zoning.
They keep apartments and businesses out of neighborhoods where there might otherwise be a lot of demand for them. In many cities, single-family zoning was also adopted with the explicit intent of excluding racial minorities and working-class people from town.
And yet, wherever cities and states have replaced single-family-only zoning with more permissive missing middle regulations that allow small multi-unit developments, the impact on overall supply and construction rates has been exceedingly modest.
In 2022, Spokane, Washington, enacted code changes that allowed up to four units of housing to be built in single-family neighborhoods and eliminated residential parking minimums.
Those reforms served as a model for Washington's statewide middle housing reforms that passed in 2023. Spokane made them permanent in November 2023 with code changes that technically allow an unlimited number of units in low-density areas (although bulk and height restrictions impose practical limits on how many units will be built.)
Spencer Gardner, director of Spokane's Department of Planning Services, tells Reason that 80 units were built as a result of the city's interim code reforms—which amounts to about 5 percent of the city's overall housing production.
Since the missing middle and parking reforms have been made permanent, Gardner says that the city has continued to see a "significant increase" in townhome and duplex development, but this newly allowed infill development is still only around 5 percent of the city's overall residential construction.
It's the same story in Portland, Oregon, and Minneapolis. Missing middle reforms have netted, at best, a few hundred additional units per year in cities that build a few thousand annually.
Short Supply
In one sense, that's to be expected. Middle housing reforms are pitched to an often skeptical public on the promise that they will only result in modest changes to existing neighborhoods.
These reforms pair the legalization of more units per lot with small increases in the amount of floor space that can be added to each lot. These incremental increases in density are what's politically realistic in most places. But the results in terms of new supply are also consequently incremental.
"Altogether, HOME was an incremental reform—and it is having an incremental effect, as advertised," says Ryan Puzycki, a member of Austin's Zoning and Platting Commission, of his city's reforms.
The temptation might be to dismiss middle housing reforms as ultimately inconsequential to the YIMBY goal of ending a nationwide housing shortage of millions of units.
If every jurisdiction in the country adopted Austin's missing middle reforms and got Austin's results, America would see maybe another 50,000 or 60,000 units a year. That doesn't go very far to closing a housing shortage that low-end estimates peg at a few million units.
More Choice
But dismissing even modestly productive missing middle reforms as unimportant would be a mistake. Raw numbers of new units produced and lower per-unit prices are not the only metrics of successful zoning reform.
Free markets aren't just about maximizing total production. They're also about the efficient satisfaction of preferences.
Expanding the types of housing available and affordable to people in more neighborhoods is still a worthy goal of reform. On that front, middle housing reforms offer a lot of promise.
There are plenty of people who could comfortably afford a new single-family home on the edge of town or a small condo downtown but not an older home in a closer-in neighborhood of their choice.
Under single-family-only zoning, the only thing that's going to be built in that neighborhood is another single-family home—and that'll have to be a more expensive home in order to justify the redevelopment costs.
Missing middle reforms allow developers the option of constructing smaller, more affordable housing types in those neighborhoods as well.
A few hundred duplexes and townhomes aren't going to push down citywide rents. They might not even lower the amount of rent any one family pays. But they will give a few hundred house hunters the option of living in a location that better suits their preferences.
An Abundance of Options
America's housing shortage could conceivably be fixed by building nothing but exurban, auto-oriented subdivisions. It could be solved by building block after block of high-density social housing.
But that's not the only thing people want, and it's not the only thing free markets would produce.
This point is easy to grasp outside of the housing context. The point of allowing more restaurants to open in town isn't just that the aggregate price of food goes down. The point is that people have more variety and convenience about what to eat and where.
Indeed, missing middle reforms might offer the most promise in cities where housing is already relatively affordable but the types of housing available are constrained by overly prescriptive zoning rules.
None of this is to say that zoning reforms to single-family neighborhoods couldn't make a more meaningful impact on overall housing supply. The more units and floor space that middle housing reforms allow, the more they'll add both supply and choice.
The libertarian ideal would be to have no legal limits on residential density so developers could build the housing people want where they want it at whatever price the market will bear.
(It's worth noting that cities like Austin and Portland have adopted both missing middle reforms and restrictions on large single-family home development, so they aren't totally unambiguous wins for choice themselves.)
Sadly, that libertarian ideal is not the world we live in now. It's probably not the world that politically realistic land use reforms will get us to any time soon.
Where they've been adopted, middle housing reforms haven't solved any city's dire housing insufficiency. But they do provide more choices for more people. That's a worthwhile outcome even if it's not a silver bullet.
In the aftermath of this month's devastating fires in Los Angeles, state and local officials have issued or are considering policies to speed up the building process.
Gov. Gavin Newsom invoked his emergency powers to waive environmental review and coastal zone regulations for people rebuilding their fire-damaged properties. City of Los Angeles Mayor Karen Bass has likewise ordered the expedited issuance of permits for fire rebuilds.
Today, the Los Angeles County Board of Supervisors will consider a resolution that would create a fast-track permitting process for people rebuilding "like-for-like" structures damaged by the fire.
All these streamlining policies come with a major catch, however. They only apply to people rebuilding more or less exactly the same structure, and not a single unit more.
Newsom's order only waives regulations for rebuilds that are up to 110 percent as large as whatever was destroyed by the fires. Bass' order has the same limitation and also prevents any change of use—so a fire-damaged home can't be rebuilt as a business or vice versa.
The resolution that Los Angeles County will consider today hopes to be even more restrictive.
It calls for sending a letter to the governor and the area's legislative delegation asking for a suspension of a slew of state housing laws.
Some of the requested suspensions around laws requiring solar panel installations and public hearings would conceivably speed up development. Many of the requested suspensions would not.
The county is asking the state to suspend laws that restrict downzoning, limit public hearing requirements, waive parking requirements, require the expedited issuance of accessory dwelling unit permits, and more.
Fast-track permitting for "like-for-like" rebuilds seems reasonable but could slow down projects that add more units to Los Angeles' housing stock. Waiving state rules that themselves waive local regulations would seem to actively sabotage not just rebuilding efforts but building efforts generally in the county.
The Hawaiian island of Maui offers a cautionary example of trying to rebuild from wildfires while keeping burdensome building regulations in place.
As I reported last week, it's been 18 months since wildfires devastated the island of Maui in August 2023, and yet only three homes have been completely rebuilt. That means almost all of the 2,000 or so residential properties damaged by the fires have yet to be rebuilt.
Reasons abound for why it's taking so long to get homes and businesses rebuilt. Maui's ultraregulated land use regime (which was slow to approve projects and issue permits even before the disaster) isn't helping. As I wrote:
Permit fees can add tens of thousands of dollars to the cost of a rebuild. County permitting data show that some applicants have had to wait over a year for permits to rebuild single-family homes and wait times of six months are not atypical.
…
Tightened zoning regulations have also made many structures on Maui "non-conforming" before the fire. County zoning law requires that buildings that have been at least 50 percent destroyed must be rebuilt under newer, more restrictive zoning codes.
Since many of Lahaina's buildings were "non-conforming" structures before the fires, they can't be rebuilt as they once were. The new rules require that some damaged apartments would have to be rebuilt with fewer units, for example.
The county's establishment of a privately operated permitting center is helping to get building permits out the door. Another 228 building permits for wildfire reconstruction have been issued, and 112 homes are currently under construction.
Nevertheless, a lot more regulatory reform could be done to get the island rebuilt to its pre-fire state.
Last week, Chris Avell, a pastor of Dad's Place in Bryan, Ohio, was convicted of criminal violations of the fire code for allowing people to stay in his church's building overnight.
Avell has been in a year-long legal fight with Bryan officials over what the city considers an illegal residential use of his commercially zoned church building. Avell has consistently argued that he is well within his rights to keep his church doors open 24 hours a day and let people rest inside overnight.
"We will appeal today's decision that found Pastor Chris Avell guilty of criminal charges for providing temporary shelter to those seeking to escape the frigid temperatures," said Ryan Gardner, an attorney with the First Liberty Institute, which is representing Avell. "It is a ludicrous argument to say these people are safer in the sub-zero temperatures on the street than inside the warmth of the church."
"No decision has been made to prevent Dad's Place from operating as a church. However, the residential operations of the facility must cease until proper building and fire code applications are filed and approved by the State of Ohio," said Bryan Mayor Carrie Schlade in a press release.
You can read Reason's past coverage of the case here, here, and here.
The Los Angeles Times reports on how price-gouging rules in Los Angeles that bar people from renting out units for over $10,000 a month are keeping units off the market and exacerbating the city's post-fire housing crunch.
President Donald Trump wants to prevent the California Coastal Commission from kneecapping the city's wildfire rebuilding efforts.
As it turns out, there's a bill for that.
San Francisco takes nearly two years to approve new detached accessory dwelling units, according to a new analysis.
Why construction costs for affordable housing are ballooning in Chicago
And why insurance costs are ballooning everywhere
The post Missing Middle, What Is It Good For? appeared first on Reason.com.