Creating a missing middle industry

Much has been written about the “Missing Middle” housing in our cities. While regulatory reform and changes to land use policy are an important part of the solution, experience suggests more is needed than just changing codes. Designing, building and developing missing middle housing is a complicated business, one not usually tackled by the mainstream real estate development industry.

Housing choices in most cities are fairly limited: single-family detached tract housing and stacked-flats are often the primary choices. The development industry has become highly efficient at delivering these products, using strategies that deliver housing quickly and (relatively) affordably. It is a volume business, reliant on the acquisition of larger tracts of land, and access to large amounts of capital.

By contrast, developing the missing middle can be more akin to a mom-and-pop business, often using on smaller infill sites in existing neighborhoods. The product type, design, financing and construction has to be customized for each project, increasing costs and risks. The developers are often small-scale builders and property owners, who often lack the know-how and financial resources of established developers. And of course building in existing neighborhoods often causes friction with the neighbors.

While having a pool of off-the-shelf designs is a good start, other initiatives are needed to enable the creation of a sustainable missing-middle development industry. Active help for beginning developers, like that offer by the Incremental Development Alliance, is an important step. But also needed is updated codes, middle-sized financing packages from lending institutions and streamlined entitlement processes from local jurisdictions.