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Senate Bill 840, passed by both the Texas Senate and House, and now awaiting the governor’s signature, will permit multifamily housing or conversions on land zoned for commercial, office, warehouse, retail, or mixed-use — no rezoning required.
Experts estimate that Texas faces a housing shortage exceeding 300,000 homes across the state. In response to this growing challenge, the Texas Legislature has taken decisive action with the passage of Senate Bill 840 (SB 840), which is set to take effect on September 1, 2025. This landmark legislation fundamentally changes and transforms how multifamily housing can be developed in Texas’s largest urban centers.
By allowing multifamily housing or conversions on land zoned for commercial, office, warehouse, retail, or mixed-use without requiring rezoning, the bill removes one of the most time-consuming and uncertain aspects of the development process.
The core innovation of SB 840 is its “by-right” development approach for multifamily housing on commercially zoned properties. This means that qualifying projects can proceed without the traditionally required rezoning process, public hearings, or city council votes that often delay development for 18 months or more.
The SB 840 multifamily provisions specifically target cities with populations over 150,000 in counties exceeding 300,000 residents. This geographic focus ensures the legislation impacts approximately 20 Texas cities where housing demand is highest, including areas like Dallas, Fort Worth, Arlington, Plano, McKinney, Frisco, Irving, Garland, and Grand Prairie in the DFW Metroplex.
Under the new law, development standards include:
These standards strike a balance between enabling higher-density development while maintaining reasonable community standards for building scale and parking.
For decades, many Texas municipalities—particularly in suburban areas—have used zoning regulations, density restrictions, and parking requirements as tools to control multifamily development. While cities like Dallas have frequently approved rezoning requests, suburban communities have often maintained stricter controls. SB 840 removes these tools for commercially zoned properties, creating a more predictable and streamlined path to development.
Texas multifamily developers will benefit from the streamlined approval process, potentially saving months or even years in the development timeline, reducing carrying costs and financial uncertainty.
The new legislation creates significant opportunities for Texas multifamily developers looking to convert underutilized commercial properties. Dead malls, vacant big-box stores, and underperforming strip centers now represent immediate multifamily development opportunities without the typical extended approval process.
Consider this concrete example: Imagine a 4.35-acre vacant Sprouts pad in West Frisco, currently zoned retail. Under previous rules: maximum 82 units at 19 units per acre. Under SB 840: 156 units by right at 36 units per acre, four stories, no public hearing required.”
This Texas legislation multifamily housing reform addresses the estimated shortage of over 300,000 homes in the state. By targeting larger urban areas, the bill focuses on communities where housing demand is highest and where commercial properties suitable for conversion or redevelopment are most abundant.
The Texas legislation multifamily housing changes will take effect on September 1, 2025. This implementation timeline gives municipalities, developers, and property owners time to prepare for the new regulatory framework and begin planning potential projects.
The impact will vary across different urban areas. In cities like Dallas that already frequently approve rezoning requests, the change may be less dramatic. However, in suburban municipalities that have historically used zoning and parking requirements to limit multifamily development, the impact could be substantial.
The new law is expected to significantly increase multifamily development Texas in urban areas with high housing demand. By removing regulatory barriers and creating a more predictable development path, SB 840 could accelerate housing production in precisely the areas where it’s most needed.
Experts predict that multifamily development Texas will see a surge in commercial-to-residential conversion projects. This trend aligns with national patterns of retail contraction and growing demand for housing in urban and suburban locations with good access to amenities and employment centers.
Understanding how SB 840 impacts multifamily development in Texas requires examining both the regulatory changes and market implications. While the bill removes significant barriers, market forces will ultimately determine which projects move forward. Properties in high-demand locations with strong fundamentals for residential use will likely be the first to take advantage of the new provisions.
Commercial to residential conversion Texas projects will benefit from fee waivers for buildings over five years old. This provision specifically targets existing structures that might be suitable for adaptive reuse, providing financial incentives to repurpose rather than demolish these properties.
The conversion opportunity is particularly relevant given the changing landscape of retail and office space demand. The growth of e-commerce and remote work has left many commercial properties underutilized, creating an inventory of potential housing sites in locations that often already have good access to transportation, utilities, and other infrastructure.
For developers, these conversions can sometimes be more cost-effective than ground-up construction, particularly when the existing structure is sound and adaptable to residential use. The fee waivers further improve the economics of these projects.
The impact of SB 840 on urban planning in Texas will be particularly significant in suburban municipalities. These communities have often used zoning and development regulations to maintain lower densities and limit multifamily housing. The new legislation effectively creates a parallel approval path for qualifying projects that bypasses these local controls.
This change represents a shift in the balance of power between state and local governments in land use decisions. While municipalities retain control over many aspects of development, the state has carved out a specific category of projects—multifamily housing on commercial land—where local discretion is limited in favor of addressing the broader housing shortage.
From an urban planning perspective, the bill could accelerate the trend toward mixed-use, walkable communities by encouraging residential development in commercial areas that are often located along transportation corridors and near employment centers.
A thorough SB 840 analysis for developers reveals potential for increased unit density and reduced parking requirements. These changes directly address two factors that often limit the financial viability of multifamily projects: the number of units that can be built on a given parcel and the amount of land that must be dedicated to parking.
For developers considering projects under SB 840, key considerations include:
The response to SB 840 has been mixed across different stakeholder groups. Developers have generally welcomed the legislation as a positive step toward increasing housing supply and creating new opportunities for property development and conversion.
Municipal leaders have shown varied reactions. In larger cities already facing housing pressures, the bill aligns with existing efforts to increase housing production. However, some suburban communities have expressed concerns about losing local control over development decisions and the potential impact on community character.
In a parallel effort to address Texas’s housing challenges, lawmakers have also passed Senate Bill 15, authored by Senator Paul Bettencourt. This complementary legislation tackles another critical aspect of housing development: the minimum lot size requirements for single-family homes in the state’s largest urban areas.
SB 15 directly addresses the inefficient use of land in residential development by limiting how much property cities can require for single-family homes. The legislation prevents major Texas cities from mandating lot sizes larger than 3,000 square feet for homes in new subdivisions—a significant reduction from current practices.
Research conducted by the Texas Tribune revealed that many of Texas’s largest municipalities currently impose requirements of 5,000 to 7,500 square feet for single-family residential lots. These extensive land requirements have contributed to higher housing costs and limited supply in urban areas experiencing rapid population growth.
The fundamental principle behind SB 15 is straightforward: when homebuilders can construct residences on smaller parcels of land, they can reduce costs while simultaneously increasing the number of homes that can be built within the same area. This approach aims to address both affordability and supply challenges simultaneously.
SB 15 draws inspiration from Houston’s successful implementation of similar reforms. Beginning in 1998, Houston reduced its minimum lot size requirements from 5,000 square feet to just 1,400 square feet, with further expansions of these reforms in 2013. The results have been remarkable.
While Houston’s population grew by approximately 20% between 2000 and 2023, its housing supply increased by 40%—creating a market where supply growth outpaced demand. This stands in stark contrast to cities like Los Angeles, which saw only 3.5% population growth during the same period while maintaining strict land use requirements.
Housing researchers and advocates point to Houston’s approach as a key factor in containing home prices despite substantial population growth. The city has emerged as one of the most affordable large metropolitan areas in the United States, demonstrating the potential effectiveness of lot size reforms.
Importantly, SB 15 applies specifically to cities with populations exceeding 150,000 in counties with more than 300,000 residents. The legislation also includes several protective measures to address potential concerns:
These provisions ensure that while new development can proceed more efficiently, established communities maintain their character and existing property owners’ interests are protected.
SB 840 and SB 15, both approved by the Texas House and Senate, have been sent to the governor’s desk for signature. When viewed alongside SB 840’s provisions for multifamily development on commercial land, SB 15 represents part of what Senator Bettencourt describes as a “six-shooter firing bullets at housing affordability problems.”
Together, these legislative measures create a multi-faceted approach to addressing Texas’s housing shortfall, estimated at over 306,000 homes.
By reforming both single-family and multifamily development regulations, Texas lawmakers have taken significant steps toward increasing housing supply, diversity, and affordability across the state’s growing urban centers.
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