The Texas legislature recently passed SB 840, which now heads to Governor Abbott’s desk for signature. There are distinct advantages for developers who move strategically and quickly to capitalize on this opportunity.

SB 840 stands to be one of the most transformative legislative changes affecting how certain Texas cities regulate multifamily housing development as it: (i) opens existing developed sites and projects for multi-family development; (ii) clears regulations that may require zoning district reclassification or amendments, exceptions, or variances approvals to a particular zoning district; (iii) eases the ability to convert existing buildings intended for commercial use into multi-family uses; (iv) causes municipalities to assess, evaluate, and respond to this new paradigm shift which will impact adopted comprehensive plans and city development and growth plans; and (v) leaves cities to navigate infrastructure challenges which will likely result in a rollout of new local rules designed to navigate the bill’s impact.

At its core, the bill allows multifamily housing to be built or existing buildings to be converted in areas zoned for commercial, office, warehouse, retail, or mixed-use without the need to rezone (as rezoning can be, and frequently is, opposed by surrounding communities) – essentially allowing multifamily housing use by right.

Developers that are interested in building new multifamily projects or converting existing commercial buildings (such as unused office buildings) into multifamily units stand to benefit while developers that felt insulated by favorable zoning districts surrounding their multifamily developments that limited the scope of any new multifamily developments may feel their economic models as being threatened.

Key highlights from the perspective of developers include:

• Select Cities Only. The bill applies only to cities with populations of 150,000 or more that sit in a county with populations of 300,000 or more (which results in the impact being limited to less than 20 cities across Texas including McKinney, Frisco, Irving, Plano, Arlington, Dallas, Fort Worth, Austin, San Antonio, and Houston).
• Administrative Focus. The bill is designed to avoid the need to seek amendments or variances and rather have permits and authorization administratively approved.
• Density. Multifamily density can be (1) the highest multifamily density allowed in the municipality, or (2) 36 units per acre, whichever is greater.
  • Since cities have allowed for higher densities in select projects, this may result in all projects city-wide receiving the same favorable treatment.
• Height. Height limits for multifamily developments can be: (1) the tallest building height allowed on the site by the zoning code, or (2) 45 feet, whichever is greater.
• Setbacks. Setbacks cannot exceed: (1) the required setback for buildings on the site by the zoning code, or (2) 25 feet, whichever is lesser.
• Parking. Parking requirements cannot surpass 1 space per dwelling unit or require a multi-level parking structure.
• FARs. No imposition on the ratio of total building floor area to lot size.
• Waiver of Fees. Certain fees (e.g., building permit, street closure, expedited review, impact, and parkland dedication fees) in connection with building conversions will not be required.
• Waiver of Studies and Mitigation. Certain studies (e.g., traffic) and mitigation requirements (e.g., additional parking, mitigating traffic effects, etc.) in connection with building conversions will not be required.

We have previously reported on similar programs and legislation across the nation.