Duplexes? Doable. Triplexes? Trouble.
In pursuit of more affordable housing for young families and first-time homebuyers, cities across the US are legalizing “missing middle” housing. But the reforms passed in many cities often fail to produce new homes. A deep dive into a Memphis, Tennessee, project reveals why: local building, utility, and tax regulations penalize small multifamily projects, making them as complex and expensive as costly high-rises.
In “Beyond Zoning: Hidden Code Barriers to Middle-Scale Housing,” John Zeanah analyzes how this web of non-zoning regulations stifles the development of “missing middle” housing.
Key Takeaways:
- Moving from two to three homes in a new building triggers a costly shift from the simple International Residential Code (IRC) to the complex International Building Code (IBC), a “make-or-break factor” for a project’s budget.
- Utilities often classify small 3 to 4-home buildings as “commercial,” which requires expensive hardware that increases costs per home.
- In Tennessee, a fourplex owner pays “60% higher property taxes” because the small rental building is assessed at a higher commercial assessment rate (40% vs. 25%).
The author uses a case study approach, documenting the actual permit battles and invoices for Malone Park Commons, a 35-unit “missing middle” project in Memphis that included six separate fourplexes and 11 detached cottages. This analysis exposes the specific regulatory costs that block small projects:
Building and fire code barriers. The most significant hurdle is the 3-unit cliff. While a duplex is built under the simple IRC, adding just one more home classifies the entire building as a commercial “apartment” under the IBC. This single classification change triggers a cascade of requirements meant for much larger buildings, including commercial fire alarm systems and expensive sprinkler systems. The report argues that these rules are not proportional to risk, and that safe alternatives, such as 2-hour-rated fire separations, are a more cost-effective trade-off for small buildings.
Utility and infrastructure barriers. After clearing the building code hurdle, developers face a second set of obstacles from utility providers. Because these small 3-4 home buildings are now legally “commercial,” utilities treat them as such. In the Memphis case study, this forced the developer to pay for commercial water tap fees and to install a $3,000- $5,000 backflow preventer on each small fourplex—a cost the developer called “financially destabilizing”.
Local policy and tax barriers. Even if a developer clears both building and utility hurdles, a third set of local policies can still kill the project. In Tennessee, for example, any building with more than one rental unit is taxed at the 40% commercial assessment rate, not the 25% residential rate. This 60% higher tax burden, combined with ineligibility for municipal trash pickup, forces owners into expensive private dumpster contracts – and adds operating costs.
Given these barriers, the analysis concludes that cities in pursuit of “missing middle” housing should pass a series of reforms. The report recommends that states amend laws to allow 3 to 4-home buildings to be built under the simpler residential code. It also urges planners to work directly with utilities to stop classifying small multiplexes as “commercial.”
Zoning reform is a necessary first step to housing abundance – but it clearly is not sufficient on its own. Communities must also reform the building codes, utility rules, and tax policies that actively punish the exact “missing middle” housing our cities need to achieve broad affordability.
Photo by Alfred Twu, CC0, via Wikimedia Commons