Mike Pettit, economic development director for the City of Lancaster, had never heard of “missing middle” housing or Opticos, the California-based design firm that coined the term. But he knew what his city needed in some of its working-class neighborhoods.
Opticos would probably approve.
For a number of reasons, Pettit and Mayor David Scheffler settled on a strategy of developing small infill buildings with three or more housing units on vacant or stressed properties in two older census tracts. Those tracts – one west and one southeast of downtown – are in a federal Opportunity Zone. With the downtown census tract added, they are part of a Community Reinvestment Act (CRA) overlay. The neighborhoods are eligible for property tax abatements and federal tax breaks.
In recent years, dozens of blighted homes have been razed, exacerbating a need for low-income and workforce housing.
“How can we make a better opportunity here?” Pettit wondered. A notion that appealed to him was to build new and additional housing in those neighborhoods at a slightly higher density, but in a way that blends in with the existing housing stock.
That, in a nutshell, fits the Opticos definition of missing middle: “A range of multi-unit or clustered housing types—compatible in scale with detached single-family homes—that help meet the growing demand for walkable urban living.” Lancaster officials add “market-rate affordability” to that definition.
To qualify for the property tax abatement, new buildings must have at least three units. Lancaster expects most construction to be on two or more adjacent lots to meet that requirement, as these are older neighborhoods with narrower lots – sometimes of varying widths. The city will purchase the lots, and it has identified a local construction firm (which also has a property-management portfolio) to build and manage the buildings — which will in turn be owned by small investors seeking capital gains benefits and CRA credits.
When the investors buy the property, the city plans to use the proceeds to buy additional lots for similar development.
Pettit described the concept last year to the Lancaster Port Authority, of which he is director. Board members were receptive and helped flesh out the idea. Officials have reached out locally to certified public accountants to see if some of their clients might be attracted enough by the capital gains benefits to invest in the projects. The also have contacted CPA groups around the state.
Pettit and Scheffler are now happy to talk about the concept of missing-middle housing.The see their adaptation as the way for the city to have a revolving source of money to redevelop stressed properties, strengthen neighborhoods, work with construction and investment partners, and boost the quantity and quality of housing.
“When you look at your need,” Pettit said, “you learn how you can make a real impact.”