Tacos, Sandwiches, and Zoning

Happy Tuesday and welcome to another edition of Rent Free. This past week was a good week for YIMBY reforms, with big states and big cities passing or enacting significant zoning changes. That includes:

• Austin shrinking its minimum lot size rules and upzoning near transit lines.
• Florida adding predictability and parking reform to its much-touted Live Local Act.
• The Arizona Legislature passing accessory dwelling unit (ADU) and missing middle reforms.

But first, our lead story about an Indiana court case that settles a long-standing Twitter food debate while highlighting the absurd particularities of modern zoning code policies.

Tacos are Sandwiches. Therefore, You Can Eat Them in a C2/Limited Commercial Zone.  

Last week, Allen County Superior Court Judge Craig J. Bobay made national news when he ruled that tacos and burritos are sandwiches. This decision allowed a Mexican restaurant to legally open in a Fort Wayne, Indiana, strip mall where the zoning allowed for sandwich shops but restricted other fast-food restaurants.

"Tacos and burritos are Mexican-style sandwiches," wrote Bobay in a decision first reported on by local outlet WishTV.com. A restaurant that served them would be just as code-compliant as one that served American-style hoagies, Greek gyros, Indian naan wraps, or Vietnamese banh mi at the property, ruled Bobay.

Fort Wayne's zoning code doesn't directly regulate the properties of sandwiches. This particular case arose from the conditions the city established when it rezoned the property on which the strip mall now sits.

The background

In 2019, property owner Martin Quintana applied for a rezoning of the future strip mall site from its then-residential zoning to commercial zoning.

Rezonings are discretionary actions cities can say no to (and often do). They're also more likely to say 'no' when the neighbors of a property object to the zoning changes being asked for.

Such was the case with Quintana's strip mall, which had received early opposition from the adjacent condo association.

To win over the condo association, Quintana agreed to adopt restrictions that went beyond limits in the city's commercial zoning, including a prohibition on fast-food restaurants, outdoor seating, and alcohol sales. Their agreement explicitly established that fast food did not include made-to-order sandwiches.

With the condo association won over, the city eventually agreed to rezone the site. In 2022, Quintana agreed to rent space in his strip mall to the Famous Taco Mexican Grill.

The condo association objected on the grounds that the grill would be a prohibited fast-food restaurant. To settle the dispute, Quintana and the association agreed to amend their restrictive covenant to explicitly allow a Famous Taco, but nothing else.

This raised the hackles of the Fort Wayne Plan Commission, which also had to agree to the change. The plan commission said that its purpose was setting general zoning rules, not vetting individual business plans. It therefore rejected the amendment.

Bobay sided with the plan commission on that point. But he reasoned that because tacos and burritos are sandwiches, the covenant covering Quintana's strip mall didn't need to be amended to allow the Famous Taco.

Arbitrary Lines

There's a certain logic to the plan commission's initial rejection. Ideally, we wouldn't want government bodies deciding which specific businesses can be located on which properties.

The trouble is that the "arbitrary lines" that zoning codes draw will always end up producing these situations. Planners can't know in perpetuity whether some land is best used for residential or commercial purposes. Property owners looking to do something different than what the zoning code allows will often be forced to ask the city for permission to do otherwise legal, unobjectionable things like rent to a burrito shop.

The dispute about tacos being sandwiches in this particular case arose from a private agreement between Quintana and the neighboring condo association. Nevertheless, Quintana wouldn't have been forced to make such an agreement with the condo association if he had no need to rezone his property in the first place.

The plan commission said it should only be in the business of setting general rules. That's a good instinct. Surely, though, a better set of general rules would say that it's okay to use your property as you see fit; whether that involves building homes or serving taco "sandwiches."

Another YIMBY Triumph in Austin

After a marathon night of testimony, the Austin City Council passed a suite of zoning reforms Friday morning known as HOME II. The reforms collectively shrink minimum lot sizes, allow more density near transit lines, and whittle away at the city's large "compatibility" buffers restricting multi-family and commercial development near single-family neighborhoods.

The changes are another triumph for Austin's YIMBY activists who say the new changes will enable thousands of new units in the booming city. It comes on the heels of Austin's HOME I reforms from late last year, which allowed "missing middle" housing developments of up to three units on all residential lots.

"It seems like a dream that all these things are happening all at once, but it's really just political will. It's getting a group of people in who clearly understand the problem and have a solution and are working together," says Chris Gannon, an Austin architect who advocated for the reforms.

Jack Craver, writing over at his Austin Politics Newsletter, argues that the new reforms represent a permanent "triumph" for YIMBY reforms that even an anti-housing city council will have a hard time undoing.

Minimum Lot Sizes

The most eye-catching features of Austin's HOME II reforms are its minimum lot size reductions. Previously, the city had required that homes in single-family areas sit on 5,570 square-foot-lots. Now, homes can be built on lots of only 1,800 square feet. The new reforms also eliminate side setbacks. Together, these changes should allow smaller starter homes and townhome developments.

Similar minimum lot size reforms passed in Houston, Texas, produced a boom in townhome construction.

Austin's minimum lot size reforms will likely have a more muted impact. That's because dividing existing large lots down to the 1,800 square foot ones now allowed by the city will require builders to go through the city's arduous site plan process. That, in turn, can take up to 18 months and costs tens of thousands of dollars at a minimum, says Gannon. That's a huge headwind on small home construction.

Equitable Transit-Oriented Development

The Equitable Transit-Oriented Development (ETOD) reforms in the HOME II package—which allow taller buildings near transit lines and offer density bonuses for projects with affordable units—could prove more productive.

The new rules allow for 120-foot-high residential projects within a quarter mile of transit lines, and 90-foot-high projects within half a mile, on properties already zoned for multi-family or commercial uses.

The city nevertheless weighed down the EDOT changes with some seemingly perverse incentives.

With an eye toward preventing rapid gentrification, Austin's new ETOD rules only allow redevelopment of existing apartment buildings if the costs of repairing the building are greater than 50 percent of the property's value.

The idea is to preserve affordable apartments that are still serviceable. The criticism is that this incentivizes property owners to let their properties fall into disrepair. The new EDOT rules also forbid new car dealerships and gas stations in affected areas.

Compatibility Standards

Gannon says that the biggest changes in HOME II are the reforms it makes to Austin's compatibility regulations. These limited how large multi-family and commercial buildings could be based on how close they were to single-family neighborhoods.

Under the old standards, multi-family buildings could only be built at the highest heights allowed by the zoning code if they were 540 feet away from single-family homes. The new reforms shrink that buffer to 75 feet.

Under the old rules, you had to be 300 feet away from a single-family property line in order to construct buildings 60 feet high. Now, 60-foot-high buildings can be within 50 feet of single-family neighborhoods.

The effect is to allow a closer co-mingling of low-density, single-family housing, and higher-density multifamily housing.

Florida's Live Local Act Lives Again

In 2023, with little fanfare and no mention of zoning, Florida Gov. Ron DeSantis signed S.B. 323 (or the Live Local Act) into law. As it turned out, it was one of the more significant zoning reforms to pass that year.

The original version of the law allowed developers to build residential developments that contained affordable units in commercial, mixed-use, and industrial zones at the highest allowable residential density in the jurisdiction. The new buildings could also be as tall as the tallest building within a mile radius.

Because the additional density allowed by the law was often significant and the affordability mandates turned out to be pretty modest, developers rushed to take advantage of the law.

Local governments none-too-keen on the new residential towers they were being told they had to allow started to seek loopholes in the law to stop Live Local development.

Enter S.B. 328, which DeSantis signed into law last week. The bill's amendments try to close some of the loopholes local governments have leaned on to stop Live Local projects while also putting some guardrails on the most potentially obnoxious developments.

The new amendments make clear that the Live Local Act also preempts local floor-area-ratio restrictions—wonky rules that establish a ratio of buildable floor area to a property's overall area. Developers will also be allowed to build 20 percent less parking than what local zoning requires if their Live Local project is near a transit line or a parking garage.

The amendments also allow Live Local projects to offer for-sale units. The original law required projects to be 100 percent rentals.

In exchange, the new amendments apply additional height limits to projects next to single-family zones. It also limits project heights near airports and military installations.

"It's great that Florida passed a really impactful, high-leverage housing bill that's clearly getting projects moving," says Salim Furth, a researcher at George Mason University's Mercatus Center. By incorporating floor-area-ratio rules into the law's preemptions, the new amendments close an important loophole, he says.

Furth nevertheless questions the general wisdom of the Live Local Act's approach. By tying the density of Live Local projects to the highest residential densities that cities allow, the law gives localities a powerful incentive to downzone.

Over time, that could see localities reduce the overall amount of housing that they do allow, he says.

Furth suggests a better approach would be to have the state set objective height and density standards for projects that aren't pulled from existing local zoning codes.

Arizona's Zoning Reformers Try Again

This past week, the Arizona Legislature approved two bills that would collectively require localities to allow ADUs of up to 1,000 feet (or 75 percent of the primary dwelling, whichever is smaller) on single-family properties and require localities to permit "missing middle" housing (including up to five-unit homes) on single-family properties.

The changes apply to cities with populations of 75,000 people or more.

This is a major win for advocates of "light-touch density." The ADU bill's restrictions on additional fees, setbacks, owner-occupancy rules, and parking requirements localities can slap on new ADUs has advocates calling the bill "one of the strongest ADU laws in the country."

The bills have now been transmitted to Gov. Katie Hobbs for a signature. The big question now is whether she'll sign them.

Earlier this year, the governor infamously vetoed a "starter homes" bill that would have shrunk minimum lot sizes across the state and preempted local design requirements. Arizona's cities, which hold a lot of sway with the governor, lobbied heavily against the bill as state overreach into municipal zoning.

Hobbs, in her veto, message cited some very late-in-the-game (rather bizarre) objections from the U.S. Department of Defense to the starter home bill as her reason for vetoing it. In earlier comments on the starter home bill, she cited the cities' opposition as a reason she might not sign the bill.

In that same veto message, Hobbs said she was supportive of "ongoing efforts in the legislature to reach a more balanced solution" to housing affordability like the ADU and missing middle bills.

That might indicate that Hobbs will sign these bills. On the other hand, Arizona's cities were opposed to these efforts as well. It's anyone's guess where the governor will come down.

Quick Links

• In Castle Rock, Colorado, the Good Samaritan is once again fighting against the zoning code. There, a local church is suing the city to stop its crackdown on a temporary emergency shelter it's set up on its own property. The church is being represented by the First Liberty Institute, which is litigating a number of other cases of cities using their zoning codes to stop churches' efforts to shelter the homeless.
• Washington, D.C.'s Zoning Commission is considering reducing its parking minimum requirements for affordable housing developments.
• After the city told him he had to hide his boat behind a fence, Seaside, California, homeowner Etienne Constable engaged in a little fiendish compliance. He hid the boat behind his fence, but then hired his neighbor to paint a mural of the boat on the fence.
• The relatively new business of larger investors buying up and renting out single-family homes (or constructing whole build-to-rent neighborhoods) is generating increasing opposition from politicians. In an April essay, housing writer Kevin Erdmann argues that investors productively are supplying capital that individual homeowners can't access because of post-Great Recession restrictions on mortgage financing.
• After a Florida man erected a "Little Free Library" on his property, he was promptly sued by his homeowners association and slapped with a $2,500 fine. Local governments have a history of cracking down on little free libraries, but the public backlash at such petty restrictions usually gets them to back down. HOAs are proving to be a little more shameless. This is more evidence that these private associations are both the most, and least, libertarian form of government around.