Understanding your local zoning ordinance is a critical component of being a successful real estate investor. This is because a zoning ordinance dictates what you can and can't do with your assets. They are your rulebook and can make or break your investing strategy.
There is a significant and ongoing debate about zoning regulation, its effect on cities and housing, and whether it should be tightened or loosened to solve various social ills.
Exploring this debate is not the purpose of this article. Instead, we will dive deeper into the practical aspects of zoning and how it affects your real estate investments. Here's an overview of local zoning ordinances, how you should navigate them, and how to locate your specific municipal zoning guidelines.
What is zoning?
Zoning can appear complicated as you scroll through hundreds of pages of municipal legalese trying to figure out if you can convert a duplex to a triplex. Simply put, zoning is the rules under which property is allowed to be used and developed in specific geographic areas.
For example, on a main road, many local zoning ordinances allow for businesses to operate under commercial zoning rules, whereas in the suburbs, you're typically only allowed residential land uses. You wouldn't want someone buying a lot next to you in the suburbs to build a factory, right? This is why a typical city has industrial areas of town, a downtown business core, and residential suburbs. You don't often see these areas mixed.
Zoning allows the local government to regulate land use to optimize usage, traffic, and density. With conditions and approval processes, zoning can be changed if it can be justified and meets certain requirements. For example, if a vacant lot is zoned for residential density 2 (typically means only two living units allowed), you may be able to rezone to density level 3 to build a triplex. Or, a lot that is zoned agricultural may be rezoned to residential to allow the building of single-family homes.
Different types of local zoning laws
There are thousands of different categories and subcategories of zoning, depending on the desired usage of that land and the municipality governing it. Here are some of the most common types of local zoning laws:
- Residential: The vast majority of property in the U.S. is zoned as residential, particularly for single-family homes (often called R1). But there are other types of higher density residential zoning that allow for multifamily apartments.
- Commercial: This type of zoning deals with businesses such as office space, retail stores, shopping centers, restaurants and bars, and so on.
- Mixed-use: This zoning combines commercial and residential zoning allowances. Think of an apartment complex that has a commercial operation on the main floor or an office building with a food court.
- Industrial: Typically limited to specific areas within a municipality, industrial zoning includes factories, manufacturing, machine shops, labs, and more.
- Agricultural: This type of zoning allows for farming and usually low-density, dispersed residential living.
- Greenspace: This zoning includes parks and protected natural land, or any place that a municipality wants to restrict development.
- Tourism: There are specific zoning laws that allow for tourism businesses, such as short-term rentals and hotels.
In addition to these zoning functions, there are also intensities. In our example above, we went from an intensity of 2 to 3, meaning you can generate more livable units. Further, the above zoning types typically have intensities that dictate the size and scale of physical property that can be built or converted. There are also incentive-based zoning laws that attempt to promote development such as affordable housing.
What do local zoning laws dictate?
Just like any laws, local zoning regulations vary widely depending on the jurisdiction and the elected decision-makers in office. That said, there are key characteristics of local zoning laws that are common. Here are a few:
- Permitted uses: By legal right, you are allowed to use a particular lot of vacant land for that zoned use.
- Conditional uses: Under specific requirements, a lot may be used for a conditional purpose that doesn't fall under a legal right but is still allowed by a jurisdiction.
- Accessory uses: As an accessory to a permitted and conditional land use, you're also allowed certain additional uses to your land. Think of decks, sheds, accessory dwelling units (ADUs), pools, and so on.
- Nonconforming uses: This is where you often hear the term "legal nonconforming." This is the "grandfather" clause, where the property was once "conforming," but due to zoning changes, it is now nonconforming but legal because it preceded the law change.
- Parking: Each zoning category will require a certain amount of parking, depending on the usage. For instance, in low-density residential zoning, you may be required to have at least two parking spaces per liveable unit, whereas in a commercially zoned shopping center, the parking ratio will be completely different.
- Setbacks: This is the minimum required distance a structure on the lot has to be from the road and adjacent lots.
Can zoning be changed? Absolutely. This is done primarily through one of the following two processes:
- Variance: A variance is a discretionary change to a zoning law that is typically considered minor. If a specific zoning category has a requirement that can be considered unnecessary or practically difficult to comply with, a city council will generally allow for a public hearing to approve this zoning variance.
- Rezoning: Rezoning creates an amendment to the local zoning plan and is an official application and process. This typically involves meetings with city planners, community consultations, and legal and administrative fees.
Where to find local zoning laws
Now that we know the types of zoning and the clauses most zoning laws contain, how do you find your local zoning regulations? All jurisdictions have to make local zoning laws publicly available. This means they're typically available online, including interactive zoning maps and zoning requirements.
The easiest way is to go to the website of your municipality and try to find a section named zoning, development, ordinances, or land use. If this doesn't work, you can try the following internet search using the root domain name of your municipality: example "Site:localgov.gov zoning".
Failing all of this, you can call your city council office and ask. Should you think you need to make a rezoning or variance application, it's critical you get in touch with your local zoning officer to understand the process and viability of your project.
Zoning: The bottom line
Zoning is critical for the healthy growth of communities, as well as the safe and profitable use of property all over the world. Local zoning laws dictate exactly what you can and can't do with that specific parcel of land, which can have significant impacts, good and bad, on your real estate investing.
Fortunately, there are ways to change or seek amendments to zoning laws, but before you do, it's critical to understand how zoning laws work and how to find and understand your local regulations.