Is Missing Middle Housing an Obstacle to Home Affordability?

The United States has a housing deficit by the millions. Honest-to-goodness real estate pundits and policymakers know the nation is in this predicament because of decades of underconstruction. Since sharp mortgage rate hikes have failed to bring the median sales price of sold houses down to prepandemic levels, it’s high time to address the elephant in the room — missing middle housing.

What Is the Concept of Missing Middle Housing?

Missing middle refers to the need for more medium-density housing projects in most American urban areas. Residential real estate is a spectrum with detached single-family homes on one end and mid-rise and high-rise apartments and condominium buildings on the other.

The middle consists of various property types designed to house multiple families. Examples include:

• Duplexes: Duplexes consist of two adjoining housing units with separate entrances, living areas, kitchens, bathrooms and bedrooms but may share communal spaces. Duplexes can be side-by-side, front-back and stacked, allowing them to adapt to the size of the land they sit on.
• Triplexes: Triplexes are similar to duplexes, except they comprise three residential units. These properties usually have two or three shared walls.
• Quadplexes: Quadplexes are multifamily buildings made up of four separate residences. Sometimes called fourplexes, their architects can place the housing units side by side, stack them with two on each floor and draw inspiration from both configurations.
• Townhouses: Townhouses are adjoining multistory city and suburban dwellings. Individual units share one or two walls with adjacent residences and may vary in height, width and/or number of stories.
• Row houses: Row houses are what townhouses would be if they were more uniform.
• Courtyard houses: Courtyard houses are large houses whose main rooms surround a central courtyard on three or four sides. They can accommodate multiple families’ space and privacy needs, making them perfect for multigenerational living.
• Cottage courts: Cottage courts are intimate groups of smaller, detached houses around a communal space visible from a street.
• Live-work units: Live-work units are professional workspaces with living quarters. The residential space can be above, alongside or behind the commercial space.

Middle housing options suit various lifestyle needs and budgets, splitting the demand for all residential property types.

Obstacles in the Middle Road

You don’t need an economics degree to see why middle housing options can solve the housing crisis. These properties can house more families with less land, increasing the housing stock in urban areas without building out. Unfortunately, these housing types are few and far between across the U.S. for many reasons.

Restrictive Municipal Policies

Building codes dictate how big a house should be within a jurisdiction, how to construct it and which building materials are acceptable. Exclusionary zoning ordinances determine what type of property you can build where.

These regulatory barriers discourage middle housing development projects, causing developers to focus on detached single-family homes and tall multifamily buildings. Building codes and zoning ordinances also often restrict tiny house construction, forcing those wanting to go small to move into rural regions and out of urban and suburban areas to start a community.

Prevailing Bias Toward More Space

The Americans who prefer walkable communities are in the minority. Fifty-seven percent of U.S. adults prefer to live in a neighborhood where the houses are bigger and farther apart — even if it means the schools, restaurants and other local amenities are several miles away.

Regarding home ownership, exclusivity seems to be the top priority of most Americans across all adult age brackets, political party affiliations and educational attainment levels. The only exception is American citizens of Asian descent. More of them don’t mind population density.

Rampant NIMBYism

Sixty-six percent of Americans are homeowners, and 84% of them live in detached single-unit properties. Many homeowners — especially those from middle- and upper-class neighborhoods — believe the aura of exclusivity makes their communities attractive. They benefit from the status quo because their wealth grows when home prices surge and stay high.

It’s in the best interests of homeowners to oppose any medium-density housing development in their backyards to protect their property’s value. Many have successfully influenced local policymakers to limit population density by not reforming zoning ordinances and minimum lot size requirements.

Uncompelling Financial Incentives

Communities wanting more affordable housing favor large-scale multifamily property developers. Meanwhile, middle-housing builders typically don’t receive similar financial support. Limited tax credits, grant programs, fee waivers, and expedited permit processing render small housing projects less viable.

How Federal and State Governments Have Taken the Middle Ground

Uncle Sam has minimized red tape to address missing middle housing, which should help lower home prices nationwide.

Borrowing a construction loan through the Transportation Infrastructure Finance or Innovation Act or Railroad Rehabilitation and Improvement Financing may exempt you from a stringent environmental analysis. This exemption applies when you tackle a commercial-to-residential conversion near a transit, provided that you don’t expand the property’s footprint.

Community Development Block Grant program recipients can now access low-cost, low-interest financing for transformative housing developments. This affordable funding source can encourage communities to increase local housing stock by investing in housing-enabling infrastructure projects and existing housing rehabilitation.

The Department of Housing and Urban Development has also modernized the Manufactured Home Construction and Safety Standards. The code now permits the production of up to four-unit manufactured homes, making them more feasible in denser urban areas and suburban infill development projects.

Aside from the federal government, some states have made great strides toward middle housing availability.

Oregon

Oregon has required all medium-sized cities within its jurisdictions to permit duplexes on a single lot in residential zones. The state has also required cities with a population of over 25,000 and those within the Portland metro to allow middle housing projects — including quadplexes, townhouses and cottage clusters — in residential areas.

The Beaver State’s trailblazing policy has inspired similar statewide legislation in California, Connecticut, Maine, Maryland and Nebraska.

Massachusetts

Massachusetts’ Affordable Homes Act includes an office-to-residential conversion tax credit. This financial incentive is the first of its kind, and it may catch on nationwide due to high office vacancy rates across the U.S.

Colorado

Colorado has seen a series of laws designed to house more people with less land. The state now allows single-family homeowners in large cities and towns to build accessory dwelling units on the same lot and rent them out. The Centennial State’s rules establishing minimum parking requirements for apartments and outright limiting the number of unrelated people living together — unless the roommate count poses health or safety risks — are also gone. These changes give homeowners and developers more latitude in pursuing middle housing options.

Make Missing Middle Housing Reappear

Middle housing options won’t spring up like mushrooms nationwide overnight. Neutralizing the influence of restrictive building codes and exclusionary zoning ordinances on the image of the detached single-family house as the ideal home would take time. Still, reform is ongoing, so developers should have fewer barriers to construct from here on out. Hopefully, the next generation of homebuyers and renters will have more affordable options than the current one when they leave the nest.