Building High to Qualify

Midrise mixed use buildings in Annapolis

Montgomery County, Maryland has a plan to encourage more walkable transit-oriented development. So the County Council is considering a new zoning code that encourages residential buildings in commercial corridors (i.e., strip malls). The idea is to build housing near transit and shopping and thus reduce car trips and help people live more efficiently, in accordance with the county’s goals. However, local opposition is building, and the fears are focused on the height and scale of apartment buildings that are permitted in the code.

Is mixed use commercial inherently better than strip malls? Yes. Does high-rise residential scare people? Yes. Is it always appropriate? No, not always. Medium-rise residential would often be more appropriate, but little-known Federal regulations have restricted this type of development for decades.

FHA, Fannie Mae and Freddie Mac have rules on the books favoring separate-use zoning, which makes it difficult to finance 2-7 story residential buildings with retail on the first floor. There are percentage limits, typically 25% of value of a building that can be a non-residential use, on condo mortgages from FHA's and Fannie-Freddie's secondary mortgage markets. There is also a 15% cap on the HUD 221d4 program that finances most multi-family rental buildings in the US, forcing developers to "build high to qualify". All of these restrictions combine to undermine existing Main Streets and obstruct new ones.

Meanwhile, the demand for urban living and transit ridership is way up, particularly in the DC Metro area. Yet, opposition builds when nearby residents contemplate living in the shadow of high-rise buildings.


If these rules capping retail at a small percentage of total value were eliminated or relaxed, cozy Main Streets like in old downtown Annapolis (above) would be more likely to be built in mixed use commercial zones instead of the Condozillas (like at left) that opponents of the zoning change fear. This is one case where Federal involvement in housing policy has had some bad side effects. CNU has a solution: get rid of the caps on non-residential and we'll see more traditional Main Streets like Annapolis'. Opposition to density often focuses on building height. Density can be achieved in other ways by constraining room size, lot size and surface parking.

With the Sustainability Partnership of USDOT, EPA and HUD having declared its support for walk-able communities, its time for HUD to get with the program. HUD's housing policies encouraging separate-use development work at cross purposes to the Partnership's stated goals. HUD/FHA raised the allowable % of non residential for FHA's mortgage program from 25 to 35% a year ago. That was a small step in the right direction. Now it's time for HUD to further relax restrictions on housing connected to retail. The real estate market has been leaning toward urban places recently. People want Main Streets like in Annapolis. HUD regulations should encourage this trend rather than stifle it.

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