Minimum Lot Sizes Thwart Small-Scale Development
This one's for you, local planning commissions.
Hey — Jonah here. This is Brick + Mortar where I talk about the acquisition, financing, design, construction, and operations of small-scale real estate development projects.
Big news from Vermont.
Exciting, even (for some of us).
S.100 is the same housing bill I talked about at the Governor’s press conference and provided testimony to the state House and Senate a few months ago.
Some highlights:
Single-family zoning is gone—duplexes allowed in all residential zones, up to a 4-plex if a parcel is on town water and sewer
Minimum density of 5 dwelling units per acre in any residential zone with town water and sewer
Affordable housing gets a 40% density bonus and ability to go up one more floor
The 10-5-5 rule (an Act 250 trigger if a developer builds more than 10 units in a 5 mile radius in 5 years) is updated to 25-5-5. Four or fewer units in an existing structure only count as one unit
Establishment of the Rental Housing Revolving Loan Program which provides favorable financing to small-scale workforce housing projects
A great step forward.
There’s one glaring hole, however. And, I’ll admit, this is something I’ve only recently become more aware of:
Minimum lot sizes.
That little piece of zoning policy that dictates how small parcels can be.
In Fairlee, it looks like this:
A minimum of 20,000 SF (0.45 acres) is needed to develop a piece of land.
Twenty. Thousand. Square feet.
That’s a lot of land.
To put it in perspective, here are 501 Main’s lot lines (both red and yellow areas together).
In total, the parcel is 20,000 SF. For no reason other than because that’s what the town bylaws dictate.
That yellow area is unused—the building, parking, and septic are contained to the red area.
We’re left with an untouched 60’x100’ parcel in the village center—an area where the town plan calls for denser infill development.
This plot would be perfect for a smaller, 2-4 unit housing project.
Even with the insane 15’ setback requirements (so much wasted space in an area designated for dense development) plus parking and septic, you could comfortably fit a two-story structure with a 30’x50’ footprint. That’s four units at 750 SF each.
I’ll even throw in a little inspiration:
To develop this smaller 6,000 SF parcel, I’d need to subdivide and purchase it with a new entity.
Otherwise, financing both debt and equity would be near impossible. 501 Main LLC already has debt on the property and a partnership structure based on existing equity investment.
No bank is going to write a new loan to build a 4-plex without restructuring the current debt (subject to prepayment penalties and higher rates). And new equity investment would dilute ownership in the existing, income-producing asset (simply not going to happen).
To avoid this, I’d want to subdivide, sell to a separate entity, and raise new debt and equity accordingly.
But, alas.
Because of the 20,000 SF minimum lot size requirement, I can’t do it.
And the town won’t entertain a waiver or variance.
Here’s the kicker—when you look at other parcels around the village center, almost half don’t comply with the current minimum lot size requirement.
In fact, there are several parcels nearby that are 8,000 SF or less:
It’s an odd move to arbitrarily limit the size of new parcels when the many of the existing ones don’t adhere to that requirement.
But even if they did, the question is—why does it matter?
Forget about the philosophical property rights debate for a second.
Really just—what is fundamentally wrong with smaller lots?
As long as you can get the right infrastructure on site (utilities, septic, internet, parking), it seems counterintuitive to the long-term vitality of a place to prohibit smaller developments.
Smaller lots:
Are more affordable to build on
Efficiently use otherwise vacant land
Create cool spaces for people to discover. The same reason why everyone loves a good alley—these bitesize morsels of creative land use make you feel comfortable, excited, and attached. They are what give a place its unique charm
Everyone talks about how we need more infill housing development. And more small-scale developers tackling these projects.
There isn’t one culprit here preventing this—but I can confidently say we would have more activity if the minimum barrier to entry wasn’t developing an entire half acre of land at a time.
My scenario at 501 Main isn’t isolated, either. Just this year, I’ve had two other small subdivision concepts with 2-4 unit buildings fall through for the same reason. All within Fairlee’s village center.
There are countless opportunities for these types of projects. And it’s what our communities need.
If towns are serious about promoting denser, small-scale development in core areas, they should take another look at their zoning bylaws. They might actually be doing more damage than they think.
Until next time.
— Jonah 🧱
P.S. Want to connect? Find me on LinkedIn.
Great read Jonah, thank you. I think the small housing unit next to Chapman's is a great addition to the village center, both functional and looks good. I support your ideas for more small housing units going up in the Village. It would be so good for Fairlee in so many ways, jobs, people, businesses.
An insightful post, thank you! As towns update their zoning bylaws, it's worth taking a closer look at village zoning and whether they in fact are encouraging greater density. Question for you Jonah - Does Fairlee have community water and septic? or does each downtown lot have to allocate space for well and septic?