Why Aren't We 'Finding' Missing Middle Housing?

New Policy Mandates, Similar Regulatory Hurdles

Lots of places are looking for missing middle housing, but it appears many aren’t finding it - at least not in large numbers. So, let’s go on a journey together and take a look at why.

First, we’ll start with a recap the housing problem in the Puget Sound region, then we’ll check out a video¹ from Uytae Lee of About Here on the challenges our neighbors to the north in BC face with missing middle housing (challenges we should expect there), and review a couple other recent missing middle housing articles, including one from Michael Luis on Post Alley that looks more locally at the challenges. Finally, I’ll dive into some regulatory experiences that represent hurdles to creating infill density and middle housing opportunities.

To understand our regional housing challenge, we first need to understand the size of the problem.

WHAT’S THE PROBLEM (REGIONALLY)

Ultimately, we could get into a lot of statistics and analysis, but I think it’s best to summarize the Puget Sound Regional Council (PSRC) Regional Housing Needs Assessment from January 2022, which found:

• The Puget Sound Region needs a total of 810,000 new housing units to accommodate the region’s population growth by 2050. Yet, the region is two years behind in housing production (approximately 46,000 housing units weren’t created between 2010 and 2020 and they still don’t exist).

• The region’s current housing stock provides limited middle-density housing options, including townhomes and triplexes with many cities having less than 25% of their housing stock in moderate (medium density) housing types. This is a problem the Legislature sought to tackle by passing HB 1110 last year.

• The region needs 254,000 units now to address cost-burdened households and a total of 520,000 units to address both current and future cost-burdened households. In other words, roughly 64% of our future housing must address cost-burdened housing needs.

WHY IS MISSING MIDDLE HOUSING A STRUGGLE?

It’s becoming clear that simply allowing middle housing is not enough. Some communities and builders are starting to identify hurdles, including regulations that haven’t fully adapted to accept middle housing, which are standing between the policy direction and the production of housing.

Uytae Lee of About Here takes a solid look at why cities in our neighbor to the north (British Columbia) are struggling to create missing middle housing. And while a few of the terms he uses are different (like calling them laneway instead of alley-loaded homes) than in the states, the barriers he identifies (development standards, fees, and land costs) are noteworthy as they foretell the future challenges we should expect to encounter with missing middle housing here if we aren’t careful to avoid the same missteps.

Mr. Lee’s analysis of the challenges with infill and middle housing is spot on. Ultimately, successful middle housing goes beyond merely allowing for it in the zoning use matrix. We ultimately need regulations and design standards that don’t continue to be skewed towards single-family style housing - standards that make it challenging and expensive to encourage the creation of the housing we need (especially in infill situations). Some of the challenges noted can be addressed fairly easy. Other externalities, like near 8% interest rates and a lousy bond market for companies building low-income housing, are likely to make the housing marketplace stagnant and rough from small builders (especially new ones) to navigate.

Another challenge to creating middle and infill housing will be the need to cultivate an ecosystem of smaller builders that currently don’t exist.

HOUSING AT SCALE

Local policy consultant, Michael Luis, who wrote a recent piece² on Post Alley, adds that a key hurdle for middle housing in this region is that of scale. These future projects will be smaller, spread out, and more expensive (in land acquisition and building costs). He points out that this will require the industry to make changes to designs and that it will also require cultivating an ecosystem of smaller builders that don’t exist today. Luis notes that local governments have to do more than just stay out of the way, adding “. . . they need need to make middle housing a better business for local builders than the stuff they have been building for decades.”

Luis’ points about the challenge to achieve scale and the need to cultivate small builders matches up well with what I’ve seen in my 20+ years experience. When I started out in the early 2000s there were a significant number of regional and local developers and builders. However, with the housing crash in 2007-2009, there was a transition that attracted large, primarily national builders to the area who were searching for hot markets with larger scale projects. Now as the region’s land supply dwindles, these builders now need to pivot to infill and different housing product types, or retreat from this market. Regardless of this outcome, there will still be a need for new, infill builders and we should expect it will take a few years for this to play out.

To emphasize this point, I’ll note that Daniel Herriges also wrote in a April 2023 post on Strong Towns³ about the lack of small developers and builders and that zoning reform alone doesn’t address what is perhaps the most critical element of the solution.

“Re-creating that ecosystem of small developers and the support systems they need is the real, long-term task required to get us to the goal of cities where neighborhoods can grow and adapt to local demand—where housing production isn’t so artificially constrained. But that is complex work requiring patient cultivation. Zoning reform, while a prerequisite, is not in itself going to get any city there.”
—Daniel Herriges

In a separate article, also published in Strong Towns, Herriges cites work in South Bend which resulted in the city ramping up engagement in informal small-developer meetups and seminars. Alternatively, groups like the Incremental Development Alliance have worked with many communities to train new small developers in hard skills (think feasibiliy, proformas and financing). Yet another example (which actually started in 2017) is the Westside Community Builders program created by Invest Atlanta, whose primary purpose is to help that neighborhood’s local residents “learn how to redevelop vacant, abandoned, and blighted commercial and multi-family properties.”

In all these cases, it’s clear that policy makers can’t rest on the laurels of the “Year of Housing” and must make investments in building a new ‘builder class’ that is equipped to address unique, local challenges.

Over the course of 20+ years, I’ve seen a few things. However, more recently I’m seeing trending issues impacting the success of middle and infill housing.

EXPERIENCES AND SUGGESTIONS

After getting this far in the story, you’re probably asking some questions like:

• Beyond passage of initial zoning reform (like HB 1110 last year) for infill and middle housing, what are some other solutions?

• What’s it like out there trying to create middle and infill housing?

• Are there other policy changes that could help?

These are great questions.

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