Office Overhauls and “God’s Backyard”: Reforms for Housing in Commercial Zones and Faith Land

"Dad’s Place began to offer overnight stays last March, partly in response to the housing shortage in Bryan . . . Soon, the church also faced zoning code violations because it is in a district that prohibits residential use on the first floor of any building." 

—Juliana Kim, NPR[1]

In the small Ohio town of Bryan, Pastor Chris Avell fell afoul of the hair-splitting legalism that divides American cities. To shut down Avell’s shelter, the city of Bryan threw the book at him, alleging (among other things) that Avell’s church was in a mixed-use zoning district that allows residences, but only on upper stories.[2] By allowing residents on the first floor of a nonresidential building, the church was—ironically—violating a law intended to increase mixing of residential and nonresidential uses.

This legalistic upper-story restriction is not unique to Bryan; we also found it in the zoning codes of Richmond, Virginia, and Upper Providence Township, Pennsylvania, among others. In their zeal to make commercial areas vibrant, planners have too often forced out residences, which are not only essential to human well-being but have been vital to the resilience of commercial areas in the post-COVID era.[3] In this policy brief, we offer a road map for enacting effective mixed-use zoning and affirming the right of churches and other charitable organizations to offer housing to those who need it.

This brief covers two policies that state and local lawmakers might pursue for distinct reasons:

1. Allowing residential use in commercial zones to revitalize depressed business districts
2. Allowing charitable groups to build affordable housing on their property as a practical expression of faith

We treat these two together because they pose the same technical challenge with regard to existing land-use policy: enabling housing in places where existing regulations preclude it.

Background

From small-town Bryan, Ohio, to the high-rise apartments of Austin, Texas, Americans face an unprecedented housing crunch: home prices are high, and apartment vacancies are low. Cities and states are reevaluating old land-use policies that were primarily intended to restrict housing development. At the same time, community leaders like Chris Avell are reorienting their services to help people squeezed out of the tight housing market.

Avell’s struggle with local zoning exemplifies two aspects of land-use law that state policymakers are eager to reform. On one hand, lawmakers are increasingly skeptical of zoning policies like Bryan’s, which make it difficult to build housing of all types in commercial areas. At the same time, legislators in several states have taken steps to ease housing development on land owned by religious, nonprofit, and educational institutions, regardless of the local zoning.

These types of reforms—allowing housing in new places—offer both promise and peril. They create opportunities for growth in struggling commercial areas, and they offer a back door for multifamily housing in towns where residential neighborhoods don’t welcome properties with multiple housing units. But these reforms can also be problematic; some run the risk of incentivizing residential development in places that are ill-suited for it. That’s an especially large risk in cities that maintain strict zoning rules in areas that would serve residents best: allowing apartments in industrial zones while keeping them illegal in centrally located residential areas is likely to foster an inefficient and unhealthy development pattern.

In the policy framework below, we propose a “base plus context plus planning” approach that can be widely applied via state legislation. The base aspect ensures that moderate-cost residential uses are broadly allowed. The context aspect allows residential development above the base level where it fits the existing built environment. And the planning part draws on local planners’ knowledge of areas unsuitable for housing, incentivizing cities to work constructively with a state statute.

Problems with Previous Approaches to Reform

Several states have proposed or enacted legislation to allow residential housing in commercial zones (RICZ) or housing on land owned by religious and charitable organizations (often called “Yes in God’s Backyard,” or YIGBY). A full list and summary of the bills can be found in the appendix. For our approach, we borrowed the best aspects of these statutes. But before we talk about what works, we first outline several problems that have undermined the effectiveness of previous statutory approaches:

• Vagueness. Many of the RICZ bills we reviewed were unclear. One example is New Hampshire’s proposed HB 1053 (2024), which allows residential-density regulations that are “no more restrictive than those required for residential dwellings,” a circular reference that might be a drafting error.
• Industrial inclusion. Florida’s Live Local Act, SB 102 (2023), the best-known RICZ statute, allows high-density residential uses in industrial zones as well as commercial ones, which is bad politics and potentially bad policy.[4]
• Reverse planning. Similarly, Virginia’s SB 430 (2024) allows maximally dense housing, but only in districts that previously did not allow any housing at all. This reverses the judgment of local planners and concentrates new housing opportunities in the least-appropriate locations.
• Incentive to downzone. Florida’s Live Local Act allows development up to the height and density allowed elsewhere in a city, creating a strong incentive for cities to downzone to retake control of local planning.
• Adversariality. The hostility of local planning staff can dissuade builders from attempting developments that rely on state preemption that is not written into local ordinances. California’s accessory dwelling-unit preemption statutes have been most effective when integrated into local ordinances, as in Los Angeles.[5]
• Disconnection from zoning as practiced. Montana’s RICZ statute, SB 245 (2023), has not had a discernible effect because Montana cities already allowed residential uses in almost all zones. Instead, legislators could have focused on increasing the density allowed in those zones.

The “base plus context plus planning” approach we outline below is designed to avoid, or at least mitigate, these problems.

Sweating the Details—the Wide Variety of Zoning Codes

To ensure that our approach is connected to existing zoning practices, we gathered data on commercial zoning districts and religious buildings in 62 jurisdictions across five states representative of American zoning norms.[6] The zoning codes were incredibly diverse—some jurisdictions regulate residential density by limiting the number of units per acre, others by regulating height or floor-area ratio, and others by some combination of all these. This diversity implies that adopting legislation merely to limit specific regulatory parameters is likely to miss the mark; rather, statewide RICZ or YIGBY legislation needs to create an affirmative baseline standard of permission that can be expanded within the existing context.

Looking at specific buildings in specific zones also provides examples of real-world needs. In Bristol Township, Pennsylvania, declining enrollment forced St. Thomas Aquinas parish to close its school. The building was demolished, but the site—on a side street located one block from Croydon commuter rail station—was ideal for housing. The parish partnered with Habitat for Humanity of Bucks County to reuse the site.[7] Although the school building was as large as a 20-unit apartment complex, low-density local zoning only allowed for three single-family homes. If a better-designed YIGBY policy had been in effect, the site might have provided well-located homes for several more families while still generating less traffic and noise than the defunct school.

In the appendix, we describe our research process and results.

Base Plus Context Plus Planning

We propose state-level YIGBY and RICZ policies that are harmonized and specify a base building intensity permissible on any site. These policies would also allow developers, by right, to exceed that intensity in ways that would match the site’s immediate context. And cities should be able to limit the application of the RICZ policy in good faith, as some commercial locations are genuinely inferior locations for residences.

Our approach, detailed in table 1, envisions broad but not universal application. We recommend exempting land in proximity to industrial uses, military bases, and airports, all of which are sensitive and potentially harmful to neighbors.[8] For YIGBY, we recommend including broadly defined charitable nonprofit organizations, since charitable motives are not exclusive to religious communities.

We recommend a base building intensity that allows several common, economically feasible housing types, including detached houses, townhouses, and low-rise apartment buildings. But the base density must be allowed almost everywhere, so the parameters are chosen to be appropriate in low-density, auto-oriented contexts. In other places, the contextual rules will allow buildings closer together and with less parking.

Where they do not specify a constraint, our base rules specifically preempt any restriction.[9] We redirect regulation toward tools, such as setbacks and lot coverage, with stronger connections to legitimate objects of regulation, such as the impact on neighbors’ property. Unit counts, by contrast, are a poorly conceived regulatory concept largely detached from potential spillovers. In applying our framework, reformers can dial the base building intensity standards up or down; the concept will work with any reasonable parameters.

Context, the middle term in our “base plus context plus planning” approach, is the most complex, but it is central to ensuring that a RICZ or YIGBY policy allows housing that fits appropriately into its surroundings and builds on each location’s strengths. Housing on a site should, at minimum, be able to match the predevelopment intensity of the site and the intensity and dimensions of neighboring buildings. In the case of building height, which varies more than setbacks from parcel to parcel, we recommend allowing a new building to match the highest existing building within one-quarter mile.

Our procedural recommendations in table 1 are redundant in some states, which already have similar rules in place. But in others, such as Virginia, public hearings are held not only on political matters but also on technical standards.[10] This practice does a disservice to both the developer and the public by blurring the lines between political and technical decisions.

For utilities and improvements, we offer a sketch of reasonable parameters. The overarching principle is that development under a RICZ or YIGBY statute should abide by the rules for improvements and fees that apply elsewhere. We recommend an exception for the adaptive reuse of existing buildings.

To fulfill the religious-freedom aspect of its intent, a YIGBY policy should allow supportive housing and group homes as well as conventional residential uses.

Planning, the final piece of our “base plus context plus planning” approach, applies only to RICZ policies: cities that fully integrate a state RICZ statute into their own zoning codes can exempt up to 25 percent of commercial and mixed-use land if the land is poorly suited to residential uses.

Such a partial opt-out via local planning would strengthen a RICZ statute in two ways. First, it would allow cities to separate residences from heavy traffic, which may be as much nuisance and risk as living in an industrial zone. Several of the best-written zoning codes we reviewed included a “highway commercial” zone, or similar, that bans housing and is intended for large-scale commercial uses along major roads. In cities with otherwise permissive housing regulations, preempting those purposefully constructed zones does not, in fact, promote RICZ policy goals.

Second, and more subtly, partial opt-out encourages city buy-in, which is valuable to the success of any zoning preemption statute. The best way to get cities on board is to induce them to fully adopt the state-mandated policy. The partial opt-out is a potentially valuable incentive to city planners; states might also consider offering technical assistance or grants to smaller cities interested in complying.

Conclusion

Local and state policymakers can create new housing opportunities and revitalize vacant commercial areas by enabling residential uses in commercial districts and on land owned by faith-based organizations. We encourage reformers to take our approach in their own jurisdictions, comparing prospective approaches with current zoning regulations. Policymakers can even go beyond our work by identifying nonzoning housing barriers such as design review, high fees, parking requirements, or duplicative public hearings.

YIGBY policies also raise questions outside of what land use laws normally address. State and local policymakers can choose, for example, whether to allow occupancy restrictions or preferences, such as affordability or affiliation.[11] If the legislators’ goal is to make it easier for nonprofits to house people, they have options other than YIGBY laws: for instance, they could follow South Carolina H 4544 in offering a full property-tax abatement to deed-restricted affordable low-income housing on nonprofit-owned land. In cases where religious organizations intend to manage housing developments themselves, questions of tenants’ rights may become questions of religious liberty: what can a religiously affiliated landlord require of a tenant? Since many houses of worship would likely prefer to sell part of their land to be developed and managed by separate entities, these questions may remain hypothetical, but the risk of conflict along these lines underscores our final argument: that cities and states should not rely on RICZ and YIGBY policies as the principal pathways to housing abundance.

RICZ and YIGBY policies promise significant benefits, but neither should be the centerpiece of a state’s or municipality’s housing-supply strategy. More is needed to generate enough buildable land to significantly lower today’s steep housing prices. Other measures policymakers can follow alongside RICZ and YIGBY policies are discussed in the Mercatus policy brief “Housing Reform in the States: A Menu of Options for 2024,” and include solutions such as removing parking requirements, streamlining permitting processes, and eliminating minimum lot sizes.[12]

Notes

1. Juliana Kim, “Charges Dropped against Ohio Pastor Who Housed Homeless People at His Church,” NPR, February 9, 2024.
2. Codified Ordinances of Bryan, Ohio, 1155.03.
3. Center City District, Downtowns Rebound: The Data Driven Path to Recovery (Philadelphia, PA, 2023).
4. We are unaware of any developer using the statute to build housing near heavy industry.
5. M. Nolan Gray, California ADU Reform: A Retrospective (California YIMBY Education Fund, 2024).
6. The selection process was nonrandom and is explained in the appendix.
7. Dino Ciliberti, “Single-Family Homes Coming To Former St. Thomas Aquinas School,” Patch, August 10, 2023.
8. The military can be a powerful and unnecessary opponent to land-use reform. Military opposition influenced Governor Katie Hobbs’s veto of starter-home legislation in Arizona. And in Florida, the Live Local Act was amended a year after its enactment to exempt land within one-quarter mile of a military base or airport. See Jerusalem Demsas, “Why Did the US Navy Kill Arizona’s Housing Bill?,” The Atlantic, March 29, 2024, and Florida CS/CS/SB 328.
9. This is informed by the experience of Florida legislators, who found that floor-area ratios, which they had not contemplated, were blocking the intent of the Live Local Act. The same follow-up bill that exempted land near military bases preempted floor-area ratios. See Florida CS/CS/SB 328.
10. Salim Furth, Lyle Solla-Yates, and Charles Gardner, “How to Streamline Housing Permitting in Virginia” (Mercatus Policy Brief, Mercatus Center at George Mason University, Arlington, VA, January 2024).
11. For example, a new CBG apartment building, Terwilliger Place, built on American Legion–owned land in Arlington, Virginia, is 100 percent affordable and gives preference to veterans. See “Terwilliger Place,” CBG, accessed April 15, 2024, https://www.cbgbuildingcompany.com/projects/terwilliger-place/.
12. Emily Hamilton, Salim Furth, and Charles Gardner, “Housing Reform in the States: A Menu of Options for 2024” (Mercatus Policy Brief, Mercatus Center at Georgre Mason University, Arlington, VA, August 2023).