Experts Warn Regulatory Barriers Still Threaten Missing Middle Development

California is poised to implement one of its most significant housing reforms in years as Senate Bill 79 takes effect July 1, expanding opportunities for higher-density housing near major transit hubs while limiting local governments’ ability to block qualifying residential developments.

Supporters say the legislation could unlock enough land to accommodate more than 1 million new homes, potentially easing California’s longstanding housing shortage. But housing advocates caution that zoning reform alone is often insufficient, pointing to a web of building codes, utility regulations and tax policies that continue to discourage construction of “missing middle” housing.

According to a recent analysis by California YIMBY, many jurisdictions continue to impose regulatory barriers that make small-scale multifamily housing financially impractical even after zoning restrictions have been relaxed.

California YIMBY notes that adding a third housing unit to a duplex can trigger an entirely different regulatory framework. In many jurisdictions, a triplex must comply with commercial building codes rather than residential standards, may face commercial utility rates and, in some states, significantly higher property tax assessments.

The organization cited Tennessee as an example, where converting a duplex into a triplex results in a commercial property classification that increases assessed property values by approximately 60 percent.

As California continues to legalize duplexes, triplexes and other forms of missing middle housing, advocates argue that reforms extending beyond zoning will be necessary if those housing types are to become economically viable.

Meanwhile, SB 79 represents a broader effort by the state to increase overall housing production by encouraging denser development around public transportation infrastructure.

The law applies primarily in counties with at least 15 passenger rail stations and generally requires approval of qualifying housing developments near major rail stations, bus rapid transit stops and other transportation hubs, even when local zoning rules would otherwise restrict building height, density or housing type.

Local governments will continue reviewing development proposals, but their discretion to deny qualifying projects is substantially reduced under the new law.

State officials argue the legislation aligns housing production with decades of public investment in transit infrastructure.

Gov. Gavin Newsom said, after signing the legislation, that “for too long, California has poured billions into transit without building the housing density needed for those systems to reach their potential.”

According to Newsweek, the legislation seeks to increase housing supply, encourage greater transit use, reduce traffic congestion and emissions, improve access to employment and services, and concentrate residential development where public transportation already exists.

Residents living near transit corridors could see larger apartment and condominium developments replace lower-density neighborhoods over time as developers take advantage of the new rules.

Supporters contend these changes could allow more Californians to live near jobs, schools and transit while reducing dependence on automobiles.

Critics, however, argue the legislation could substantially alter neighborhood character while increasing demands on roads, schools, utilities and other public infrastructure.

Economists generally agree that increasing housing supply places downward pressure on housing costs over time, but many caution that affordability gains will likely occur gradually rather than immediately.

SB 79 does not require all new developments to be affordable housing, nor does it impose rent controls. Many projects approved under the legislation are expected to be market-rate housing.

Construction costs, financing challenges and labor shortages also continue to constrain the pace of new housing production, potentially limiting how quickly additional supply reaches the market.

Housing advocates argue those economic realities underscore why removing zoning barriers alone may not be enough.

California YIMBY contends that unless building codes, utility regulations and tax policies are modernized alongside zoning reforms, many small multifamily housing projects will remain financially infeasible despite being legally permitted.

As SB 79 takes effect, California’s housing strategy increasingly reflects a shift toward prioritizing statewide housing production over local land-use restrictions in transit-rich communities. Whether the legislation ultimately delivers lower housing costs will depend not only on the legal authority to build more homes, but also on whether developers can navigate the remaining regulatory and financial obstacles that continue to shape housing production.

Follow the Vanguard on Social Media – X, Instagram and Facebook.  Subscribe the Vanguard News letters.  To make a tax-deductible donation, please visit davisvanguard.org/donate or give directly through ActBlue.  Your support will ensure that the vital work of the Vanguard continues.

Categories:

Tags: