Texas Senate Bill 840: Unlocking Austin’s Next Era of Housing Opportunity
Austin Zoning 2025
Austin’s housing crisis has long been characterized by a paradox: strong demand for “missing middle” housing — townhomes, brownstones, courtyard apartments, and small multifamily flats — yet a regulatory environment that has made such development practically infeasible. The result? A city struggling to deliver attainable housing options between detached single-family homes and large apartment complexes.
With the passage of Texas Senate Bill 840 (SB 840), that dynamic is poised for a transformative shift — one that opens new opportunities for both developers and residents, and redefines how Austin can grow more equitably and sustainably.
A Landmark Change: Residential Uses by Right in Commercial Zones
At its core, SB 840 allows residential development by right in existing commercially zoned properties in cities over 150,000 people and counties over 300,000 people — including those within the City of Austin. This means parcels once limited to offices, retail centers, or light industrial uses can now be developed with single-family homes, townhomes, condominiums, and apartments without the need for a zoning change or conditional use permit.
Equally significant, the legislation removes floor area ratio (FAR) caps that traditionally constrained building form in these districts. For infill and redevelopment sites, this change creates a vastly more economically advantageous framework for residential projects that might have previously been infeasible.
Why This Matters for Austin
Austin’s development code has historically made it challenging to produce housing that meets the needs of modern households — particularly for those seeking ownership or attainable rental options near employment centers. Zoning hurdles, lengthy entitlement processes, and restrictive land use definitions have limited innovation and kept land and housing prices high.
SB 840 directly addresses these pain points, enabling immediate activation of underutilized commercial corridors for housing, diversification of housing products without rezoning battles, and protection of established neighborhoods by shifting density toward commercial nodes. In effect, the bill allows the city to absorb growth where infrastructure already exists, promoting more sustainable and fiscally responsible development patterns.
A Win for Residents, Developers, and the City
This policy is not merely a win for the development community — it’s a win for Austinites. By encouraging housing in commercial districts, SB 840 supports affordability, mobility, and preservation.
Affordability: By expanding the supply of smaller-scale housing types, market competition increases and land value pressure on traditional neighborhoods may ease.
Mobility: Many commercial corridors are already transit-served, making them ideal for mixed-use redevelopment.
Preservation: Allowing residential uses outside of single-family zones can reduce gentrification pressure in Austin’s historic neighborhoods.
In the long term, this shift promises to reinvigorate aging commercial strips into vibrant, mixed-use environments where housing, retail, and community amenities coexist — echoing the very principles of smart growth that Austin has long sought to implement.
How Developers Can Leverage This Opportunity
For developers, SB 840 represents a rare alignment of policy and profitability. Sites that were once constrained by outdated use tables are now eligible for residential development with minimal entitlement friction.
Projects that might have previously been sidelined due to rezoning risk — such as underutilized retail pads, aging office parks, or shallow commercial parcels along corridors like South Lamar, Airport Boulevard, Burnet Road, or East Riverside — can now be re-envisioned as mid-density residential or mixed-use communities that are both feasible and contextually sensitive.
However, taking advantage of this opportunity requires a nuanced understanding of Austin’s development codes, infrastructure constraints, and site-specific feasibility factors. Not every commercial site will lend itself equally to residential use, and issues like utilities, compatibility standards, floodplain, and transportation access remain critical to navigate.
How LSI Can Help
At Land Strategies Inc., we’ve been at the forefront of shaping Austin’s growth for over four decades. Our integrated team of land planners, architects, landscape architects, and entitlement consultants is uniquely positioned to guide developers through this new policy landscape.
Whether it’s conducting feasibility studies to evaluate development yield under SB 840, preparing conceptual master plans and mixed-use design strategies, or coordinating entitlement pathways and infrastructure design, LSI can help shepherd your project from opportunity to reality — creating developments that are both economically advantageous and community-enhancing.
A New Chapter for Austin’s Built Environment
The passage of SB 840 marks a turning point in how Austin can approach growth: not through contentious upzonings or incremental variances, but through creative reuse and reinvestment in its existing commercial fabric.
As a firm dedicated to advancing attainable housing, sustainable growth, and design excellence, LSI sees this moment as a chance to finally bridge the gap in Austin’s “missing middle” — delivering townhomes, brownstones, and human-scaled multifamily projects that restore balance to the city’s housing ecosystem.
We look forward to working with visionary developers and community partners to make that vision a reality.