We Legalized It. We Just Never Financed It

Eleven months ago Metro rezoned 300-some acres of The Nations to allow 40 units an acre. Missing middle, by right, no lawyer required. The fight was ugly.

But here's what actually happened. Nothing.

Eleven months in, triplex deals aren't getting to a lender at all — they're dying at the land price, before anyone breaks ground. The only news we have been hearing about recently is a large scale fight over SP Zoning for an Atlanta developer trying to build a 300 unit project.

Why?

Land in The Nations doesn't trade at 2024 prices anymore, and the reason is that sellers read the same zoning update developers did. Upzoning doesn't create supply. It creates a new asking price, immediately, and the seller gets paid for density that hasn't been built yet.

So now developers need three units to carry the new high-water mark plus construction plus carry plus a fee. Fine — except a lender needs comps, and there are no comps, because nobody's built one. No comps, no appraisal. No appraisal, no loan. And even if a lender does get there, what's the exit? Rents are down and vacancy's the worst it's been in years. Sell them? To who — the same buyer who stretches to afford the $500K median home?

The deal dies. It always dies. It dies at the same place every time - before a transaction ever happens.

Meanwhile, everyone's fighting about a mural.

I'm not against the 300 units. I'm saying we changed the rules on paper and nothing changed on the ground…that should tell us something. We keep treating zoning like the binding constraint. It isn't. The constraint is that the capital stack has no product for a building with three units in it. There's money for 300. There's money for one McMansion. There's nothing in between, which is exactly where the missing middle lives.

We legalized it. We just never financed it.