Of Dreams and Duplexes

Single-family zoning, "Mom and Pop" landlords and the American Dream

My hometown of Charlotte is planning for the future. Or at least we’re trying to. The city’s 2040 Comprehensive Plan is supposed to guide decision-making on neighborhood and transit corridor development over the next two decades. After a few years in development and a few months of discussion, it’s become stuck in marathon City Council sessions of language parsing and paralysis by analysis.

And while planning meetings are usually mired in the minutia of setback requirements and traffic impact studies, the arguments around this plan cut deeper and across typical party lines.   

The main sticking point is a provision allowing property owners to build duplexes and triplexes on any lot in the city, and fourplexes on many others. Arguments against it have spanned the political spectrum, often contradicting one another. Allowing fourplexes would be a “developer giveaway,” speeding gentrification and limiting home ownership opportunities in vulnerable neighborhoods. From the right, council members have invoked single-family neighborhoods as “American traditions” where duplexes and triplexes “really wouldn’t fit in” and might reduce property values.

The development community is also opposed to the plan more broadly. Less, as far as I can tell, because of the single-family zoning piece and more because of the prospect of impact fees for new development, which have previously been struck down by the state’s Supreme Court.

Defense of the plan from the left invoked long history of exclusionary zoning as a tool of racial segregation. Which, while based in fact, did little to convince skeptics on the council.

Other defenses from more centrist council members focused on housing supply’s role in reducing rents, the idea of 15-minute neighborhoods, enabling workers from across the income spectrum to live close to their jobs, and the high cost of zoning as a barrier for smaller developers. Under current regulations, someone wanting to add a second unit to their single-family parcel would need to petition for rezoning, a lengthy and expensive process.   

But the nuts and bolts of the zoning process was hard to hear over soaring rhetoric about the American Dream. And the number of houses for sale kept declining, while the average sales price crept higher ($377,000 according to the most recent data from Canopy Realtor Association, a 16% jump since last year).

Inventory of homes for sale vs average sales price, March-March. Source: Canopy Realtor Association

“What is our American Dream for Charlotte?” Mayor Vi Lyles asked, cutting through some of the rancor.

Dreams are as diverse as people, and while the exclusive single-family neighborhood might be the most recognizable form of the post-WWII American Dream, it is certainly not the only one.

The downsides of sprawling single-family developments have been covered elsewhere ad nauseum by strident urbanists. What I haven’t seen much is the role of small multi-family development as an American Dream of its own. Generations of immigrants in large American cities have saved money and built wealth by accumulating small multifamily properties. Buying a two- or three-family home to live in one unit and rent out the others can offer a college fund or a revenue stream in retirement, something becoming more and more important in a time of squeezed Social Security projections.

According to research from the Urban Institute in Washington, duplexes, triplexes, and fourplexes account for about 6.2 million rental units in the United States, about 13% of the total. Duplex-fourplex landlords make up a unique category of small business owner. They are much more likely to be individual investors (“mom and pop landlords”), less wealthy, more diverse, and older. Duplex-fourplex properties tend to be less expensive to rent, with lower rent growth, and have more diverse tenants.

Some more facts from the Urban Institute study.  

Duplex-Fourplex property owners:

• 77% individual investors

• $67,000 median income (compared to $81,000 single-family and large building landlords)

• 13% Black; 15% Hispanic

• 34% 65 or older  

Duplex-Fourplex renters:

• $35,500 median income (single-family $47,400; medium-size building, $37,800; large building $36,000)

• 44% Black or Hispanic (Single-family 37%; medium-sized building 42%; large building 35%)

• 35% work in food, hotels, construction, entertainment and retail (Single-family 34%; medium-sized building 33%; large building 27%)

Duplex-Fourplex rental units:

• $940 average rent (as of 2018)

• 22% rent increases 2008-2018 (30% medium-size buildings, 42% in large buildings)

Much of these buildings’ affordability stems from the fact that they tend to be older. Single-family zoning and deed restrictions have limited where they can be built (see my article for the UNC Charlotte Urban Institute on the history of the Charlotte fourplex.)  But newly built duplexes have sold for less than new single-family construction.

Ultimately, there’s more than one American Dream; and duplexes-fourplexes have played a part, both for landlords and renters, in growing American cities.