Austin Business Journal shares, "A new state law that opens more land for residential development should make it easier for multifamily housing to get built in Austin, experts say.
The Texas Legislature approved Senate Bill 840 earlier this year, which allows mixed-use residential housing on any land zoned for office, commercial, retail, warehouse or existing mixed uses without requiring zoning changes from cities.
In Austin, city officials have said SB 840 will increase base zoning entitlements, potentially disrupting the city's existing density bonus programs. That's because developers that participate in the density bonus programs obtain additional entitlements — such as the ability to build denser residential housing — in exchange for inclusion of affordable housing or payment of fees for affordable housing efforts.
“SB 840 will significantly impact the viability of many of the city’s density bonus programs,” Lauren Middleton-Pratt, director of Austin's planning department, wrote in a July Memo.
The city has been aiming to update its density bonus programs to provide a wider suite of options to developers and community organizations looking to shape what gets built in Austin.
SB 840 has already disrupted Austin’s Downtown Density Bonus Program because the law prohibits cities from regulating the size of new projects by floor to area ratio, or FAR, restrictions, which is how the city regulated the size of downtown projects. The City Council recently approved temporary height restrictions for downtown projects while it continues to deliberate and seek input over a more permanent solution.
Impacts of SB 840 on Austin
Alice Woods, owner of Broadleaf Community Consulting that works with affordable housing developers, said one of the main benefits of SB 840 is that it can eliminate the need for sites to go through the rezoning process, opening up more locations that could be conducive for new residential projects.
“When multifamily projects have to fight through rezonings and entitlements, it costs developers a lot of time and money, as we know, and those costs do get passed on to renters and homeowners,” Woods said. “I think SB 840 prevents that in a lot of ways, and does so specifically in commercial areas, which are the kinds of places that are already walkable to grocery stores and schools and other daily needs.”
Alina Carnahan, vice president of advocacy for the Real Estate Council of Austin, agreed that reducing the need for zoning changes in Austin would give property owners and developers a boost.
"Having a guarantee is always a big deal for builders, and knowing what to expect versus having to go through a rezoning” is important, Carnahan said. “I'm picturing a lot of the impact being on those kind of underutilized strip malls and vacant lots that are currently zoned commercial, that people just don't want to take the risk of rezoning to residential.”
Lower rents in the city also could be a byproduct of SB 840, some said.
Alex Horowitz, project director of housing policy for the Pew Charitable Trusts, said Texas isn’t the first place to try to open up more commercial land for residential uses. In cities that have tried it — such as Minneapolis and New Rochelle, New York — renters saw some benefits, he said.
“In all of those places, housing production increased after they began allowing apartments on commercially zoned land, or essentially near their downtowns or near transit stops,” Horowitz said. “In all of those cities, rent growth slowed sharply because of the new supply. So there's a very clear and straightforward improvement in affordability."
While SB 840 is expected to open more sites for multifamily housing overall, developers of market-rate projects should see the biggest benefits in Austin, said Megan Lasch, owner of O-SDA Industries, which builds affordable housing across Texas. That's because Austin has already opened up commercial land for affordable housing through its Affordability Unlocked incentive program, she said.
Lasch also said she doubts that the impact of SB 840 will be immediate in Austin because the city is dealing with high multifamily vacancy rates. According to ApartmentData.com, Austin’s multifamily market had a vacancy rate of 13.9% in October.
"There is an oversupply of units right now in Austin, it's one of the toughest markets in the country right now,” Lasch said. “It will change, but I think there needs to be some thought around how we move forward. We need to be more intentional around where we build and look at resources, job opportunities and transportation."
SB 840 presents a good opportunity for Austin to re-evaluate its density bonus programs and to see if tweaks should be made to further help the development of more subsidized affordable housing, she said.
Woods thinks Austin's density bonus programs will stick around even with SB 840 because the law only sets height and density parameters regarding residential projects on commercial sites. Cities can still enact density bonus programs to encourage more units, she said.
“I think SB 840 just creates the baseline, which is more housing in more parts of the city, especially areas where people can walk to daily needs. But Austin has the opportunity to pair that with density bonuses and capture deeper affordability,” Woods said.
SB 840 allows any residential project proposed on commercial land by right to build up either to the height allowed for commercial buildings on the same site or up to 45 feet. It also allows for a density of 36 units per acre or the highest residential density allowed by a city.
Will SB 840 have a wider impact in Central Texas?
SB 840 won’t have an impact outside of Austin in Central Texas because the new law only applies to cities with more than 150,000 residents located in counties with more than 300,000 residents. Austin is the only city in the region that meets those standards, although a few in Williamson County — which has a population of 728,000 — are close to the criterion. Round Rock has a population of 135,000 and Georgetown has a population of 101,000.
Regardless, Horowitz said Austin should feel the impact of the new law as soon as residential projects built under SB 840 open to residents.
“The rent effects are immediate, because essentially, landlords start competing with each other for tenants as soon as new housing gets built,” he said. "
Source: Austin Business Journal
Written by: Sean Hemmersmeier
Published: October 29, 2025
Posted by Grossman & Jones Group on
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