Think Vertically, Act Horizontally: Affordable Homeownership in Tennessee
While supply-focused housing policy reforms in coastal states usually focus on expanding the stock of multifamily rental housing, cities in the south have pursued a different strategy: making it easier to build and sell small-lot single family homes for ownership.
In Tennessee’s HPR Law And Its Transformation of Nashville’s Housing Market, Charles Gardner and Alex Pemberton look at how Nashville’s Horizontal Property Regime (HPR) process has enabled the development of more than 20,000 for-sale homes since 2010.
Key Takeaways:
- Tennessee’s Horizontal Property Regime created an easy, fast, inexpensive, and predictable process for permitting small-lot single family homes that homebuyers can finance with conventional mortgages in Nashville.
- The HPR process has permitted more than 20,000 infill homes, which are often significantly more affordable than comparable fee-simple single family homes.
- The success of the HPR process suggests that streamlining small-lot subdivision could significantly expand access to lower-cost homeownership.
Tennessee’s HPR law, reformed in 1990, provides a fast, simple, inexpensive process for entitling small infill projects, mostly two-unit developments, for owner-occupancy. Combined with Nashville’s widespread duplex zoning, it grants homeowners and developers tremendous flexibility in site planning, allowing them to build side-by-side townhouses on 50’ wide lots.
The HPR process sidesteps the expensive, time-consuming, and onerous subdivision process to provide a cheaper, faster, and more reliable permitting path for small lot development. Securing permits to build an HPR can take as little as a week and generally no longer than a month; and it costs about $2,000 in attorney’s fees and filing costs. This is in marked contrast to the process for subdivisions, which require extensive application materials that must be submitted 6 weeks in advance of a planning commission meeting, and the HPR process grants significantly more design freedom than a lot split.
Notably, HPR allows buyers to use traditional mortgages to finance their homes, rather than condominium loans.
The HPR law has led to the construction of more than 20,000 homes in Nashville from 2010 to 2023, significantly contributing to the city’s housing stock and making it second only to Houston—and first per-capita—for infill single family housing production near downtown. These homes are significantly less expensive than traditional fee-simple single family homes, going for a 45% discount in wealthier neighborhoods.
This report joins research on Houston’s minimum lot size reforms in demonstrating that single family homes are a viable infill densification strategy with significant affordability benefits; and evidence from California’s ADU reforms that creating simple, predictable, and fast permitting processes for new housing can spur significant construction.