📢 Good morning,
Texas enacted a three-bill housing package that cuts minimum-lot mandates, opens commercial zones to multifamily/mixed-use, and raises the bar for protest petitions that stall rezonings.
Context: SB 15 limits municipal minimums so small single-family lots can be platted and built at materially higher densities; SB 840 enables multifamily/mixed-use in areas now zoned office/retail/warehouse and streamlines conversion of existing commercial buildings; HB 24 rewrites the “valid petition” or “tyrant’s veto,” narrowing when supermajority votes are triggered and imposing new notice rules and presumptions. These laws aim to accelerate starts and conversions in large Texas cities beginning 9/1/2025
Small-lot floor: SB 15 bars cities from requiring lots larger than ~3,000 sf in many contexts and, for qualifying tracts, prevents rules that demand >1,400 sf lot size, >20-ft width, or >60-ft depth. Effective 9/1/2025.
Use unlock: SB 840 permits mixed-use/multifamily in commercial districts of large cities and limits certain city fees/requirements on these projects and conversions.
Protest reform: HB 24 sets two tests—20% of subject-area owners can still trigger a 3/4 vote; 60% of adjoining-area owners within 200 ft triggers only a simple majority—while exempting comprehensive rezonings and adding a 60-day conclusive-validity clock. Effective 9/1/2025.
State stance: Governor’s office frames the trio as affordability measures; ceremonial signing occurred Aug 18, 2025.
Policy lever | What changes | Practical effect |
|---|---|---|
SB 15 small-lot limits | Caps lot minimums and blocks added design mandates on small lots | Enables higher SFR density and “starter” product |
SB 840 conversions | MF/mixed-use allowed in office/retail/warehouse zones; fee/req. limits | Fast-tracks adaptive reuse and infill MF |
HB 24 protests | Higher, split thresholds; new notices; 60-day validity presumption | Fewer supermajority bottlenecks |
Returns / Performance Trends
Small-lot preemption expands feasible SFR yield per acre, lowering land cost per unit and improving builder pro formas on edge-city and infill parcels. Conversion permission in commercial districts creates new MF supply without greenfield entitlements, reducing time-to-CO and capex uncertainty when shells are reusable. Combined, these provisions should tamp lot premiums and raise feasible unit counts, moderating price-to-income pressure over the next 12–24 months.
Lending / Capital Conditions
SB 840 clarity on use rights de-risks conversion underwriting: lenders can ascribe higher certainty to change-of-use, lowering contingency and shortening closing conditions. For small-lot SFR, tighter dimensional minimums compress residual land values and allow smaller bite-size phases—attractive to banks and LOC-backed builders—while agencies and banks can underwrite MF conversions with clearer path-to-stabilization.
Transaction Activity & Investor Flows
Expect site trades near retail corridors, aging office parks, and low-coverage commercial parcels. Protest reform reduces probability-weighted delays that historically forced price retrades late in escrow. As localities adapt ordinances to state law, bid-ask spreads for entitled land should narrow, particularly in Austin, DFW, Houston, and San Antonio suburbs.
Broader Implications
HB 24’s conclusive-validity window (60 days) curtails long-tail litigation risk that chilled rezonings. SB 15’s minimum-lot and design-standard limits check local cost-adders (parking, setbacks, articulation) for small lots. SB 840 allows “office-to-residential” and retail center densification where infrastructure already exists, aligning with municipal fiscal realities if cities embrace housing over vacant strip stock.
Supply unlock begins 9/1: Lot-size caps and conversion allowances become law statewide for large cities, accelerating SFR and MF pipelines.
Protest power curtailed: Supermajorities now harder to trigger; many rezonings default to simple-majority with strict timelines. Faster entitlement = lower carry.
Best near-term targets: Low-coverage retail, older offices, and edge-city tracts with utilities in place; highest IRR on conversion-ready shells.
Pricing effect: Higher achievable units/acre reduces land basis per door; entry cap rates may compress if entitlement risk premium falls.
Institutional Lens: Re-map land banks under SB 15 densities and rerun highest-and-best-use on commercial holdings under SB 840. Prioritize sites where conversion avoids structured parking or envelope rebuilds. Under HB 24, re-sequence rezoning calendars to exploit the 60-day validity and lower protest drag; convert “maybe” sites into near-certain pipelines with revised notice/compliance workflows.
Operator’s Lens: For small-lot SFR, design 20-ft-frontage product with shallow depths and one-space parking where allowed. For conversions, pre-screen MEP, egress, and daylight to minimize change-of-use capex; line up lenders now that SB 840 narrows municipal veto points. On rezonings, push simple-majority paths and document notice signage and timelines to lock the 60-day presumption.
3–6 months: City code updates and administrative memos interpret state law; early projects test HB 24 protest mechanics.
6–18 months: Uptick in small-lot plats and commercial-to-MF filings; first closings price in lower entitlement risk, tightening yields.
Watch points: Local implementation frictions, infrastructure capacity, fire/life-safety on conversions, and any legal challenges to preemption scope
Texas Tribune — Housing package overview and small-lot bill coverage (June 1 & June 16, 2025). Office of the Texas Governor — Aug 18, 2025 press release on SB 15, SB 840, HB 24. Texas Legislature / LegiScan — SB 840 enrolled; SB 15 text/history. Capitol bill analysis — HB 24 engrossed analysis with thresholds, notice, validity. National Law Review; Texas 2036 — Practitioner summaries of SB 840/HB 24 effects
