Residential in Commercial Model Legislation

 Section 1

Purpose and Legislative Intent

1. The purpose of this Act is to increase the availability of residential and mixed-use developments on sites zoned for commercial, office, retail, or parking uses. This Act allows residential projects as a permitted use without requiring a zone change. The Act also establishes a streamlined ministerial review process to expedite approvals and preempts conflicting local ordinances. By providing consistent statewide standards, this Act aims to support the development of affordable housing in commercially active areas. 

Section 2

Definitions

 For purposes of this Act: 

1. “Affordable Housing” means residential units designated for households earning no more than 80% of the Area Median Income (AMI), with affordability maintained for at least 55 years. 
2. “Serviced Lot” refers to a legal parcel of land connected to both municipal water and sewer systems or has access to equivalent water and sewer infrastructure to ensure adequate service availability. 
3. “Ministerial Review” means a non-discretionary approval process based on objective planning standards, without public hearings or subjective local review. 
4. “Mixed-Use Development” means a project that includes both residential and non-residential components, with the residential portion making up at least 65% of the total floor area.
5. “Commercial Zone” refers to areas designated under the local zoning code primarily for commercial, office, retail, or parking uses. This excludes zones primarily designated for industrial purposes, except where residential uses are expressly permitted under the applicable municipal zoning regulations. For the purposes of this Act, “parking uses” refer exclusively to sites zoned solely for parking purposes, with no allowance for other types of development or uses. 
6. “Eligible Project” means a residential or mixed-use development that meets the criteria outlined in this Act for streamlined approval. 
7. “Historic Resource” refers to any building, structure, site, that is officially listed on a federal, state, or local historic register, or designated as a historic resource under a local ordinance. 

Section 3

Eligibility for Residential Use in Commercial Zones

1. In any Census Urban Area, residential and mixed-use developments shall be permitted by right on legal parcels that meet all of the following criteria:
   1. Are located in Commercial Zones or are designated for commercial, office, retail, or parking uses; and 
   2. Are Serviced Lots connected to municipal water and sewer systems, or have access to equivalent water and sewer infrastructure to ensure adequate service availability.
2. Projects on eligible sites are not required to undergo zoning changes, special exceptions, variances, conditional use reviews, or comprehensive plan amendments. 

Section 4

Development Standards

1. A municipality may not impose density restrictions on eligible projects that are lower than:
   1. The highest residential density permitted in any residential zone within the municipality; or 
   2. A minimum density of 75 dwelling units per acre, whichever is greater. 
2. Height restrictions shall not be imposed on eligible projects that are lower than:
   1. The maximum height allowed within a one-mile radius of the development site; or 
   2. A minimum height of three stories or 45 feet, whichever is greater.
3. The maximum developable Floor Area Ratio (FAR) for eligible projects shall not be restricted below:
   1. 150% of the highest currently allowed FAR within the jurisdiction; or 
   2. One-half of the maximum number of stories allowed on the development site, whichever is greater. 
4. Floor Area dedicated to on-site parking facilities shall not be included in the calculation of a project’s FAR.
   1. If commercial space is required under the provisions of this Act, the square footage allocated for such commercial space shall not count towards the project’s FAR calculation.
5. Eligible projects may utilize any additional density and height bonuses provided by local or state incentive programs without requiring further discretionary approvals or amendments from the local governing body. 

Section 5

Preemption of Local Zoning Restrictions

1. Notwithstanding any local ordinance, rule, regulation, or policy to the contrary, the provisions of this Act shall preempt all conflicting local laws, which shall be deemed null and void to the extent of such conflict. 
2. Municipalities are expressly prohibited from imposing any of the following requirements on eligible projects as defined under this Act:
   1. Density, Floor Area Ratio (FAR), or height restrictions that are lower than the maximum standards currently permitted in the municipality. 
   2. Minimum lot size, or street frontage requirements that would preclude the development of a project set by standards on this Act. 
   3. Additional parking requirements beyond the minimum standards set forth in this Act. 
   4. Required setbacks that prevent development of eligible mixed-use or residential projects at the FAR permitted in Section 4 of this act.. 
   5. Restrictions on lot size or lot coverage that prevent development eligible mixed-use or residential projects at the FAR permitted in Section 4 of this act. 
   6. Mandatory installation of walls, fences, screening, or impervious outdoor pavement unless required for compliance with the Americans with Disabilities Act (ADA), public health, or safety based on a preponderance of credible evidence. 
   7. Requirements for non-public open space, private common areas, or recreational amenities beyond those necessary for public health and safety. 
   8. Impose other design standards that preclude development at the intensities permitted under this act. 
3. A municipality may:
   1. Establish standards requiring eligible projects to include a commercial component on the ground floor, provided that such standards do not exceed the requirements of this Act. 
   2. Mandate that, for mixed-use residential projects, at least 65 percent of the total floor area must be dedicated to residential purposes. 
   3. allow existing covenants, design standards, and historic district regulations to remain unaffected, provided they do not conflict with the lot size and setback flexibility afforded under this Act. 
   4. Prevent the demolition of a Historic Resource. 

Section 6

Affordable Housing Requirements

1. Eligible Projects must reserve at least 15% of residential units as affordable housing for households earning no more than 80% of AMI, with affordability restrictions maintained for 30 years. 
2. Affordable units must be integrated throughout the development and constructed concurrently with market-rate units. 
3. Off-site construction of affordable units and in-lieu fees are not permitted under this Act. 

Section 7

Parking Requirements

1. There shall be no minimum parking requirements for the residential component of eligible projects, except as necessary to comply with the Americans with Disabilities Act. 
2. For the commercial component, parking shall not exceed one space per 1,500 square feet of commercial floor area, except that no parking shall be required within one half mile of a rail transit station or stop. 
3. Off-site parking and shared parking agreements are permitted to meet parking requirements for the commercial component. 

Section 8

Streamlined Approval Process

1. The local government must review and approve eligible project applications within the following timeframes: 60 Days for projects with fewer than 150 units, 90 Days for projects with 150 units or more. If the local government fails to meet these deadlines, the project shall be automatically deemed approved. 
2. The local government shall provide public access to a standardized process for ministerial review, including clearly defined timelines and submission requirements. 
3. If a municipality rejects an application, it must provide a letter identifying the specific eligibility standards and/or zoning requirements that the proposal is not compliant with 
4. A municipality may conduct non-binding design review hearings for eligible projects, provided that such hearings do not extend the review timelines specified in this section. 

Section 9

Environmental Exemptions and Compliance

1. Parcels located within 1,600 feet of Title V industrial uses are ineligible for residential or mixed-use development under this Act. 
2. Parcels located in designated environmental protection zones, such as wetlands, wildlife habitats, or critical environmental areas, are exempt from the provisions of this Act. 
3. This act’s preemption of minimum setback and lot coverage requirements shall not apply to parcels adjacent to critical infrastructure, including highways, railroads, or major utility lines. 
4. Parcels individually listed as a state or local historic resource; or of a contributing structure located within either a historic district included on the State Historic Resources Inventory, or a historic district listed or designated pursuant to a city or county ordinance. 

Section 10

Reporting and Accountability

1. Municipalities must submit an annual report to the state housing agency detailing the number of applications received, approved, and denied under the streamlined approval process. 

Section 11

Appeals Process

1. Developers may file an appeal if a permit application is denied or delayed beyond the specified review timelines. Appeals must be submitted within 15 business days of the decision. 
2. The state housing agency shall review appeals and issue a decision within 30 business days. If no decision is reached within this timeframe, the application shall be deemed approved. 

Section 12

Enforcement and Penalties 

1. Municipalities failing to comply with the requirements of this Act may face civil penalties, including fines allocated to a state enforcement fund for compliance monitoring. (2) Developers violating the affordable housing may be subject to penalties, including revocation of permits 
2. No additional state-level commission approval shall be required to implement this law and allow the permitting of eligible projects. 

Section 13

Severability

1. If any provision of this Act is found invalid, the remaining sections shall continue in full force and effect. 

Section 14

Effective Date

1. This Act shall take effect on January 1, 2025, and apply to all municipal zoning ordinances and permit applications submitted after this date. 

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 Reforming Zoning Policies to Enable Residential Development in Commercial Zones 

Zoning reform is essential to address housing shortages and revitalize underutilized commercial areas. Many zoning codes restrict residential development in commercial zones, limiting opportunities to create affordable housing and transform vacant business districts. Allowing residential use in commercial areas supports housing diversity, reduces urban sprawl, and promotes vibrant, mixed-use communities. 

Zoning restrictions in commercial areas are outdated: 

Traditional zoning often separates residential areas from business zones, making it illegal to build homes in many commercial districts. This outdated approach rigidity limits the flexibility of land use and keeps commercial zones underutilized, particularly as shopping patterns shift and more retail spaces sit vacant. Updating these zoning laws to permit residential development in commercial areas allows cities to adapt to changing urban dynamics and maximize land use. 

Commercial zoning restrictions worsen housing shortages and reduce housing options: 

A 2015 study by the Mercatus Center highlights that restrictive zoning artificially limits land for housing, driving up costs and reducing access to affordable homes. Allowing residential use in commercial areas can increase housing supply and provide diverse housing options, such as apartments above stores or low-rise units in business districts, without using undeveloped land. This approach helps meet housing demand, supports affordability, preserves green spaces, and reduces urban sprawl. 

Commercial-to-residential conversions can revitalize communities: 

Research shows that mixed-use development encourages economic growth. Allowing residential development in commercial zones brings life to declining business districts by increasing foot traffic, attracting local businesses, and fostering a sense of community. By integrating residential uses in these areas, cities can support local economic growth and create safer, more vibrant neighborhoods where people live, work, and shop. 

Zoning reforms promote social equity and environmental sustainability: 

Increasing the supply of affordable housing, especially for lower-income households, these changes help reduce socioeconomic disparities and enable more people to live near jobs, schools, and essential services. Additionally, flexible zoning policies encourage walkable, mixed-use communities that reduce car dependency. A 2012 EPA report states that mixed-use development typically has a lower environmental impact and offers more transportation and housing choices. 

Examples of zoning reform success: 

Several states and cities have adopted policies allowing residential development in commercial zones, resulting in more housing units and revitalized business districts. For example, Florida’s “Live Local Act” (SB 102) permits high-density housing in areas previously limited to commercial use, helping to alleviate housing shortages. Oregon’s HB 2984 and Rhode Island’s SB 1035 have also allowed more flexible zoning in commercial areas, creating new housing opportunities while reducing the strain on residential-only neighborhoods.