One year later: Pre-approved home plans to fill the South Bend area
Building a house is an expensive undertaking. Although many disparate factors contribute to rising prices, the lion’s share comes from land costs, hard costs, and soft costs. Land costs are best thought of as the cost of land per unit. Zoning rules affect it by restricting the number of units over which land costs can be distributed. Hard costs include lumber, windows, or insulation, which are subject to the whims of supply chains and complex tariffs. Finally, soft costs—such as design, permits, and government review—grow over time and when approvals are uncertain. Like land, it can often be spread across multiple units.
Soft costs typically make up 30 percent of total homebuilding expenses. When combined with land and hard costs, home construction prices rise dramatically. Once zoning reform is achieved to allow denser growth in the first place, soft costs become a binding constraint on housing growth and affordability because one-time developments cannot incur soft costs across multiple units like larger projects.
Last year, the city of South Bend, Indiana, took an innovative approach to mitigate residential development costs. The idea — inspired by previous zoning reforms and the 2019 model-based ordinance — was to create a catalog of pre-approved plans, matching the city’s zoning districts, that a developer could turn to a general contractor and build without any further architectural work or discretionary approvals from the city. The plans also indicate the zoning districts in which each model can be built, creating greater certainty and removing zoning analysis and approvals from the soft cost equation.
Our South Bend pre-approved home catalog is clear, concise and includes a selection of building plans. The smallest is a mobile home with living quarters above the garage. There are also two single-family home plans, one duplex, and a six-unit apartment building.
There are two projects now Under construction. According to local city planner Michael DeVita, ten other projects are also in development using previously approved plans. Most developers are nonprofits, with some tax-exempt and workforce developers considering using the plan catalog as well. Divita explains that this is consistent with current infill development, where other developers are seeing higher margins outside of the city, or near the University of Notre Dame.
While the plan catalog contains options for several zoning districts, most projects will be in urban zoning districts, which contain primarily single- and duplex development and some four-plex development. These areas are characterized by modest building setbacks and a pedestrian-scale development pattern.
One project underway and perhaps a dozen waiting to get off the ground doesn’t sound like a lot, but South Bend has seen a relatively steady population trend over the past few decades. The city’s peak population was 132,000 in 1960. The population is 103,000 as of the 2020 census. The city issued 89 home construction permits in 2021, meaning pre-approved home catalog projects could make up more than 10 percent of annual housing starts in the city.
With low growth and falling home prices and rents, building infill homes is mostly about replacing destroyed or existing buildings. Reducing soft costs improves the feasibility of each of these scenarios rather than simply walking away and building elsewhere. Lower soft costs also enhance growth prospects by lowering the feasibility threshold for more intensive development slightly.
Population growth is essential in a city like South Bend because it stabilizes the tax base to fund public services with high fixed costs, such as water and sewer infrastructure, public schools, and first responders. In this case, growth is not only welcome: it is critical to the city’s long-term financial health.
Other cities have also adapted this approach. Kalamazoo, Michigan, and Spokane, Washington have similar programs. Los Angeles, San Diego County and Seattle have pre-approved plans for accessory dwelling units. These programs have succeeded in lowering the entry barrier by thousands of dollars for new housing construction and boosting production. In Seattle, for example, the city issued 130 permits based on previously approved ADU plans between 2020 and 2022.
Overall, the pre-approved plan program is an evolution rather than a revolution in in-fill home construction. Pre-approved designs in most markets are a useful supplement to zoning reform generally, not a substitute: pre-approved multifamily designs that are still only permitted through zoning on a small share of residential units will have no impact beyond the land on which they will be zoned. , For example. However, this promising initiative should help ease the burden of housing replacement and development in South Bend, allowing the city to grow in a financially sustainable way that maximizes existing public infrastructure and services.
Image credit: iStock