HB 1137 can expand residential development on underused commercial land
Salim Furth of Mercatus.
"Maryland House Economic Matters Committee
HB 1137: Land Use - Multifamily Developments and Mixed-Use Developments - Authorization (Bring Back Main Street Act)
Chair Valderrama, Vice Chair Charkoudian, and Members of the Committee:
Thank
you for providing me with the opportunity to testify on HB 1137, the
Bring Back Main Street Act. I am an economist at the Mercatus Center and
a resident of Takoma Park, Maryland. The Mercatus Center is a
nonprofit, nonpartisan policy research institution at George Mason
University.
Two years ago, the General
Assembly considered, and passed, a bill that attempted to enable housing
growth on underused commercial land (HB 538, 2024). At the time, I
cautioned a Senate committee that the bill was weakened by incorporating
a false choice between abundance and affordability.Although
it allowed builders to provide homes on some commercial land, this
option was, practically speaking, available only to projects already
using dedicated affordable-housing funding, such as the Low-Income
Housing Tax Credit.
Today, the committee can advance HB 1137, which would build on that small beginning by opening up more
underutilized commercial land for housing and welcoming any builder to
the opportunity. Homes built under HB 1137 must still abide by
affordable housing set-asides. But, as I noted in 2024, recently built
apartments in Maryland are generally affordable to working-class
households anyway. Increasing the supply of market-affordable
apartments, condos, and—in other legislation—starter homes will allow
Maryland and her counties to focus housing assistance on those with the
lowest incomes.
Many Maryland cities and
counties have already embraced, at least in concept, allowing homes on
most commercially zoned land. Not all have done so, however, and in many
cases there are additional barriers to housing that make
it more difficult to build on those sites. And most jurisdictions simply
have other priorities. Rather than proactively making land available
for housing, they wait for a developer proposal or a small area plan.
For example, Howard County does not allow residential uses in its B-2
Office Commercial zone, which is frequently employed in areas directly
abutting homes.
With colleagues, I have
studied the adoption of residential-in-commercial-zone (RICZ) laws like
HB 1137. To date, 11 other states have such laws, which I summarize
below.
- Arizona: Allows residential redevelopment of commercial properties with high vacancy rates.
- California: Allows RICZ subject to affordability and labor requirements.
- Florida: The Live Local Act allows RICZ up to the zoned limit in other residential zones.
- Hawaii: HB 2090 (2024) allows RICZ, but it may be limited to upper stories.
- Maine: LD 997 (2025) allows RICZ, but it may be limited to upper stories.
- Montana: Allows homes in RICZ with limits on local parking and height regulation.
- Nevada: AB 241 (2025) requires all localities to rezone for RICZ.
- New Hampshire: HB 631 (2025) allows RICZ, but it may be limited to upper stories.
- Oregon: HB 3395 (2023) allows deed-restricted affordable housing in commercial zones.
- Rhode Island: Statutes 45, 24, 33, and 37 each allow residential uses in some commercial zones, under differing parameters.
- Texas: SB 840 (2025) legalized RICZ in major cities under clear parameters.
From observing other RICZ laws, I have two technical critiques of HB 1137:
- The
bill sets a standard for allowed density based on the county’s
highest-density zone. This approach was pioneered in Florida, and it
works there. However, Florida has a law against downzoning. Without that
protection, counties would likely respond by reducing the density
allowed in their densest zones, since that density would implicitly be
the countywide density for residential projects in commercial zones. A
better approach, which I laid out in a 2024 policy brief, is to set an
absolute base standard and allow contextual deviations where the
existing regulations or built pattern are more permissive.
- The
bill allows counties to require first-floor retail uses in a highly
prescriptive way. That element should be either dropped or given more
flexibility on the space that nonresidential uses will occupy and the
nonresidential uses that a county can allow, beyond just retail.
Maryland’s
housing challenges did not emerge overnight, and they will not be
solved by a single bill. But allowing residential uses in commercial
districts statewide would be a meaningful step toward attainability,
predictability, and market responsiveness.
Thank you, and I welcome your questions.