Real Estate Zoning for Dummies

Why Understanding Zoning is Important for Real Estate

Zoning laws are a key part of how land and buildings are utilized in cities or towns.

These laws allow the local governments to try and achieve a city layout that fits the mold of development they wish to see and ensure varied property types can coexist.

Their goals can include:

Increasing housing density in a neighborhood
Restricting the amount of construction permitted
Driving more walking / vehicular traffic
Diverting traffic, etc.

Zoning is a tool intended to make sure these municipalities achieve the desired layout that they and their constituents feel is best for their area.

The Different Types of Real Estate Zoning

There are many different types of zoning, each of which helps accomplish different results.

These types can include:

Residential
Commercial
Agricultural
Industrial
Historical
Recreational
And even aesthetic

These zones all have varying rules that can affect how each parcel of land with a district can be used by applying regulations like maximum or minimum lot sizes, densities, heights, floor area ratios, lot coverages, noise levels, waste management, appearances, and even proximity to other structures.

Basically, these zones have regulations that encompass almost everything you could possibly think about for a piece of land, even down to the number of parking spots a specific commercial business must have.

Effects of Zoning on Your Property

These rules are critically important for you to understand because they affect what you can do with your property as an investor.

Zoning laws are flexible and can drastically vary between communities in order to best fulfill or accommodate the needs of each community.

No zoning law is set in stone - they are purposely adaptive in order to be changed or updated as the needs of the city change; these laws may be amended in their entirety or exceptions (often called “variances”) can be given. A property can also fall under multiple zones (often called “split-zoned”) at the same time, such as an historical residential area, for example.

On a basic level, zoning is intended to keep heavy manufacturing away from residential housing or lower density neighborhoods from higher density commercial districts; however, it will certainly vary heavily by town or city.

These regulations dictate the landscape of the city and it is imperative to know what restrictions and acceptable uses are in place on any piece of property that you own. If you as an investor fail to do your due diligence on zoning laws in a community, you might find a property completely unable to be utilized for your intended purpose.

Consequences of Zoning

While zoning can bring about many positive aspects to a city, it’s also important to note some of the unintended consequences of zoning laws.

These regulations can drive up the price of properties, as well as limit the supply of housing, which has historically played a large role in racial segregation of residential communities in large metro areas and issues with affordable housing in general.

Understanding the city-wide consequences of zoning laws is also an important consideration for any investor, especially when applying for exceptions to the zoning rules for any specific parcel.

One of the only cities in the U.S. without zoning regulation is Houston, Texas.

Despite the metro’s lack of laws, there are districts that have instituted their own ordinances that regulate zoning to some degree. Allowing the free market to determine highest and best use for each piece of real estate has led to many mixed-use neighborhoods, featuring residential housing, businesses, and bars all together.

There have also been many issues in Houston - like the case of the Ashby High Rise, which was a large tower that was planned to be constructed in a residential area. Most of the residents near the area were against the project despite the technical permissions to build the property. Examples like the Ashby High Rise show the importance for any developer to get community buy-in for their projects.

Having the required zoning for a certain type of development does not automatically mean you can build the project you want, since a local councilperson or neighborhood association could potentially work to block your plan.

Get In Touch

If you're considering investing in real estate, it is important to have a team of professionals familiar with the nuances of zoning laws and regulation on your side. Contact office@investwithhamilton.com or tyler@thecaublegroup.com to speak with our team, and we will be happy to guide you through the process.