A mix of housing types at the The Bungalows on the Lake at Prairie Queen in La Vista, Nebraska. (Opticos Design)

With an increasing shortage of housing across the United States driving up home prices and rents, communities and developers need to adopt a broader strategy.  An important part of that approach will be infill development, adaptive use, and changes in zoning regulations to encourage the development of so-called “missing middle” buildings with multiple units that younger couples and families can afford to purchase, according to speakers at a recent housing conference at George Mason University in suburban Northern Virginia.

The event was sponsored by the Northern Virginia Association of Realtors (NVAR), along with GMU’s Center for Regional Analysis and Center for Real Estate Entrepreneurship.

The panel was moderated by NVAR CEO Ryan McLaughlin, who pointed to Arlington as a microcosm in some ways for the nationwide shortage of attainable housing. “We just got the numbers for September,” McLaughlin said. “The average sales price is up about four percent, year-to-date, to $809,000, with low inventory and supply challenges.”  Employers moving into the area—including Amazon, which is building a second headquarters, with completion scheduled for 2023—are putting even more pressure on the housing market.

It’s Already Happening

McLaughlin cited Boston, Miami, New York City, San Francisco, San Diego, and Portland, Oregon, as some of the many communities across the U.S. that are facing similar stresses.  Even increased construction activity around the nation can’t keep up with the demand.

Eric Maribojoc, executive director of the Center for Real Estate Entrepreneurship, noted that Arlington’s shortage of housing is a problem that’s been developing over the past decade, in which too few units have been produced to meet the demand. And although the supply problem has affected low-income residents the most, “it’s actually being felt by families of all incomes, across the board.”

Maribojoc said that two of the three main strategic options for remedying the shortage in Arlington come with significant downsides. Developing low- and -mid-rise wood-frame homes farther out from established business centers and residential neighborhoods traditionally has been the least costly option, but it’s hindered by the shortage of remaining undeveloped land in northern Virginia, and it also runs the risk of worsening traffic congestion and making commuting more arduous, he said.

Alternatively, building high-density, transit-oriented development closer in would create fewer traffic headaches, but land is expensive and concrete construction with underground parking makes it more costly, Maribojoc said.

Click to zoom. A graphic exploring the range of possibilities in for missing middle housing types. (Opticos Design)

While those approaches can contribute to a solution, Maribojoc also advocated infill development as a third strategic direction.  He envisions infill that includes adaptive reuse, such as converting obsolescent office buildings into multifamily housing, as well adding a “gentler density” with accessory dwelling units on existing properties, as well as smaller Missing Middle housing.

Maribojoc defined Missing Middle housing as house-scale buildings with multiple units, compatible in scale and form to the family homes located in a walkable neighborhood. (The term was coined by Daniel Parolek, founder of Berkeley, California-based architecture and urban design firm Opticos Design, which created this website about the concept.)

“This is not new,” Maribojoc said. “Many of our older cities have older neighborhoods that show forms of Missing Middle [housing], such as duplexes, triplexes, and so forth.” Those units were built before the rise in recent decades of restrictive zoning laws.  Even so, there are relatively recent examples of suburban development, such as the Kentlands planned community, built in the 1990s in Gaithersburg, Maryland.

“In the last 10 years, there’s been a revival of this strategy as the issues of housing keeps growing in our major cities,” Maribojoc said.

What’s Working

Sandra Wood, principal planner for the Bureau of Planning and Sustainability for the city of Portland, Oregon, described various steps by which that city encouraged the development of Missing Middle infill development. In 2020, for example, the city enacted an ordinance that permitted the rezoning of areas that previously allowed only single-family homes. That law was expanded in June 2022 to allow additional types of housing, such as clusters of cottages with a shared open space, to keep up with a new state law.

Portland also introduced a sliding scale to regulate the floor-area ratio of residential infill, with the portion of the lot that the structure is allowed to fill based on the number of units. Additionally, Portland has eliminated parking requirements.

Building more relatively small housing units is an effective way to reduce the cost of housing, in part because the land cost can be defrayed across multiple housing units, Wood said.

Since during the first year of implementation from August 2021 to August 2022, 196 sites have been redeveloped or developed for the first time. Nearly half of the time—45 percent—developers opted to produce buildings with two to four units, Wood said. That resulted in creation of about 200 more units than the city would have had if the zoning restriction that allowed only single-family homes had been continued.

In Arlington, officials are weighing the possibility of legislation similar to what Portland has done.

Meanwhile, the housing shortage has been projected to worsen. Michelle Krocker, executive director of the Northern Virginia Affordable Housing Alliance, cited a 2019 Metropolitan Council of Governments study projecting that the Washington, D.C. region needs to add at least 230,000 new housing units by 2030, in order to meet demand. “I believe those numbers have increased even more,” she said.

Charles Taylor, acquisitions manager for Classic Cottages, an Arlington-based homebuilder, noted that Arlington’s proposed legislation also would streamline the regulatory process.

Missing Middle housing would enable a developer to take a lot and build four units that could be sold  for $500,000 or $600,000 apiece, instead of single home that could be sold for $2 million.  “That’s good from a business perspective, because there are many more people who can afford a $500,000 or $600,000 house,” Taylor said. “It’s also good to give some more people the opportunity to buy a house,” he said.

Taylor said Missing Middle developers probably will put in some parking even if it isn’t required, especially if buildings aren’t close to public transit.

Many Approaches

ADUs are another part of the multi-pronged strategy for solving the housing shortage, panelists said. Terry L. Clower, director of the Center for Regional Analysis, said that addressing affordability might also require public policy changes that would encourage mortgage lenders to consider the revenue stream from having an accessory dwelling unit in the backyard of a home. “Who can afford to be in there [increases] dramatically, if they can generate $1,000 a month on net rent,” Clower said.

Taylor noted that obtaining financing for ADUs is a significant obstacle to creating more of them.

“People want to do them, but they can’t get banks to finance those things, because [banks] don’t understand how to value them,” Taylor said. “It’s hard to find comps, because not a lot of them out there.”