Texas S.B. 840 has the potential to unlock meaningful multifamily development opportunities in major cities across the state, but developers and their project teams will need to closely review how each affected city is interpreting and implementing the new law.

S.B. 840 preempts local zoning authority in certain medium and large Texas cities, mandating permissible multifamily and mixed-use residential development in zoning districts that allow office, commercial, retail, mixed-use or warehouse uses.

Some jurisdictions have responded with new regulations or administrative procedures aimed at limiting the law's practical reach and retaining some measure of local control. Others have outwardly embraced S.B. 840 but are nonetheless grappling with its practical implementation.

While S.B. 840 unquestionably creates new development opportunities and offers more streamlined approval processes, zoning due diligence under this new framework requires heightened scrutiny to ensure project feasibility.

Law Expands Where Multifamily Housing Can Be Located

S.B. 840 became effective Sept. 1, and applies only to cities with over 150,000 residents, located in counties with populations over 300,000. Qualifying cities include Dallas, Fort Worth, San Antonio, Austin, El Paso, Corpus Christi, Lubbock, Arlington, Plano, Irving, Garland, McKinney, Frisco, Grand Prairie and Denton.

The new law requires those cities to allow multifamily and mixed-use residential uses in every zoning district that already permits office, commercial, retail, warehouse or mixed-use development.

Cities' regulation of qualifying projects is further throttled: They cannot restrict unit density to less than the highest residential density allowed in the city, and in no case less than 36 units per acre.

Maximum height and minimum setbacks cannot be more restrictive than those imposed on office, commercial, retail, warehouse or mixed-use development on the same site, and in no event less than 45 feet in height or more than 25 feet in setbacks.

No more than one parking space may be required per dwelling unit, and multilevel parking structures may not be required. Floor area ratio may not be restricted.

The law also simplifies the municipal administrative process for commercial-to-residential adaptive reuse.

Developers converting buildings that have been used for office, retail or warehouse uses for at least five years before the residential conversion cannot be required to submit a traffic impact study or pay traffic mitigation fees; provide more parking than already exists on-site; pay new impact fees; or adhere to any additional building design requirements beyond the minimum set forth in the International Building Code.

If a project meets these and other city standards, then the city must administratively approve it without planning commission or city council approvals, and without zoning changes, variances or special use permits — at least in theory.

How Cities Are Pushing Back

In practice, seven affected cities have adopted new regulations intended to reassert some measure of local control and/or generally discourage new multifamily and mixed-use residential development.

The remaining cities have either tacitly embraced the new law (subject to new administrative procedures) or have yet to respond with substantive regulations.

The result is a patchwork of approaches that will require deep analysis and ongoing tracking of local laws.

Once a site is identified in an S.B. 840 city, the following steps can help identify and assess new multifamily development opportunities.

1. Evaluate new regulations in pushback cities.

Several cities have adopted, or are in the process of adopting, new zoning regulations that place additional requirements on multifamily and mixed-use residential projects.

If a potential development site is located in Arlington, Frisco, Garland, Grand Prairie, Irving, McKinney or Plano, land use counsel should dig deeper into new local codes to evaluate how they may affect a proposed multifamily project.

Examples of new municipal S.B. 840 regulations include:

• Minimum heights for multifamily and mixed-use residential buildings, which may eliminate the option of more economical wood-frame over podium construction;
   
• Updating public facilities ordinances to increase minimum capacity standards for utility and transportation infrastructure; 
   
• Mandating a particular multifamily unit mix, which may be contrary to market demand;
   
• Requiring considerable treed landscape buffers adjacent to single-family, townhome and duplex districts, as well as public streets and masonry screening walls next to single-family properties;
   
• Requiring balconies or outdoor patios for ground floor units, as well as laundry hookups for each unit;
   
• Covered parking for some portion of surface parking;
   
• Mandating multifamily amenities, such as gyms, club houses, business centers, bike storage rooms, yoga rooms, pet washing stations, media rooms and dog parks;
   
• Requiring the submittal of exterior lighting plans for city approval;
   
• Creating new design standards addressing articulation and features such as stoops, covered porches, gables and chimneys; and
   
• Requiring certain types of exterior building material for multifamily (though it remains to be seen how such a regulation would not be voided by H.B. 2439, passed in 2019 and codified as Texas Government Code, Chapter 3000).

No doubt a number of these new local regulations will be contested in the courts over the next several years, and the state legislature will likely revise S.B. 840 in coming legislative sessions.

While the legal landscape evolves, understanding the opportunities and risks for multifamily development in affected cities will require a deeper dive into zoning ordinances, particularly in the seven cities mentioned.

2. Closely scrutinize sites located in planned development districts.

S.B. 840 does not distinguish between sites located in standard base zoning districts and those in planned development, or PD, districts, so arguably, a property in a nonresidential PD that allows office, retail or warehouse uses should be subject to S.B. 840. However, several cities disagree.

Garland and Frisco, for example, have noted in public briefings that the law does not apply to their PDs. Grand Prairie has committed to moving at-risk commercial sites into PDs before S.B. 840 requests begin in earnest.

Dallas, which has been more accommodating to the new state law, is nonetheless requiring preapplication screening to determine whether S.B. 840 is applicable in planned development districts and other specialized zoning districts, or where multifamily or mixed-use residential is already allowed by base zoning.

So if a site is located in a PD or other special zoning district, further research will be needed to determine whether that jurisdiction agrees that S.B. 840 applies.

3. Determine whether heavy industrial uses are permitted.

S.B. 840 does not apply in areas where heavy industrial use is allowed. To further limit S.B. 840's applicability, Frisco has revised its zoning code to permit heavy industrial uses in its commercial districts via specific use permits, effectively exempting those areas from S.B. 840.

Other cities have not yet adopted this approach, but since heavy industrial use wholly defeats S.B. 840, and since it is an easy procedural change for cities to enact, it is recommended to check each city's current use chart to ensure heavy industrial uses have not been quietly added.

4. Strategically leverage S.B. 840.

Based on city lobbying efforts during the legislature's consideration of S.B. 840, as well as cities' postapproval discussions about responding to the new law, it is clear that many affected cities are wary of the effect S.B. 840 could have on their residents and view it as a significant intrusion on local zoning power.

On those sites where S.B. 840 technically applies, but a city has either explicitly (through new multifamily regulations) or tacitly (through new administrative procedures) put hurdles in the way of new multifamily development, it may be advantageous to discuss rezoning options with city staff as a mutually acceptable alternative.

A negotiated rezoning could include a density cap, building height transitions near single-family districts, enhanced landscaping or other design elements, while preserving overall project viability.

Cities risk losing even more zoning authority if they aggressively resist S.B. 840's mandates, and a rezoning option may offer a controlled path forward that avoids costly litigation and reduces the likelihood of further state intervention.

The implementation of S.B. 840 will introduce many opportunities for multifamily developers across the state.

However, developers and their counsel should closely monitor how the statute is interpreted and applied at the local level, assess project-specific risk early in the entitlement process, and proactively engage with municipalities to address compliance and implementation issues.

A careful, informed approach will be essential to navigating S.B. 840 effectively and minimizing uncertainty.

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