More People Want Walkable Communities, but Outmoded Regulations Get in the Way

Growing numbers of Americans want to live in walkable communities -- neighborhoods where residents can walk to the store or to school and where parks and public transportation are easily accessible. Yet outdated federal restrictions make it harder to build the types of buildings that make these communities work, new RPA research has found.

The supply of walkable communities, brought to life by mixed-use developments where residential units are paired with non-residential space for businesses, community services and other uses, is falling short of demand, our study found.

The Department of Housing and Urban Development, the Federal Housing Administration, Fannie Mae and Freddie Mac all place regulatory limits on the amount of non-residential space that a development can have and still qualify for federally guaranteed loans and loan insurance. Usually, these cap the non-residential share of a project at percentages that are too low for low-rise communities.

For example, loans and mortgages from these entities typically cap commercial floor space or income at 15% to 25% of multi-family projects, leaving out most buildings with fewer than five stories.

This limits the ability to renovate existing buildings or create mixed-use development that allows people to walk to stores and services. For the many low-income neighborhoods with low-rise buildings, the rules make it harder to reinvest in better housing and services.
These federal housing rules date back to the mid-20th century, when planning emphasized the separation of residential and commercial uses. The inclusion of retail and office was perceived as adding too much risk for loans that were intended to fund housing. But today the opposite might be true, recent research shows. Loans in walkable, mixed-use neighborhoods are less risky than those in single-use, residential neighborhoods, and the inclusion of non-residential uses can be essential to the success of housing development.
The federal government can improve housing choices and remove barriers to investing in both urban and suburban areas, especially in poor neighborhoods, simply by reforming the outdated program rules inhibiting mixed-use. Learn more about the changes that can be made by reading “The Unintended Consequences of Housing Finance.”

Photo credit: Doug Kerr, Wikimedia Commons