Real Estate Without Borders: "Missing Middle Housing" Episode Summary

Episode Title: Missing Middle Housing - Can This Real Estate Investment Save the World from the Housing Crisis?
Release Date: May 1, 2025
Host: Real Estate Without Borders
Guests: Speakers A & B
Duration Covered: [00:00] – [39:22]

Introduction

In this engaging episode, Real Estate Without Borders delves into the concept of Missing Middle Housing—a pivotal real estate investment strategy poised to address global housing shortages. Hosts A and B explore how duplexes, triplexes, townhomes, and low-rise apartments can bridge the gap between high-rise skyscrapers and single-family homes, offering scalable and accessible investment opportunities for both novice and seasoned investors.

Notable Quote:
A: “Because the cool part about missing middle is it's not like massive high rise developments that you have to be a billionaire to do. It's small stuff that you and I and the listeners of the show are capable of executing.”
[00:13]

Understanding Missing Middle Housing

The Missing Middle Housing refers to residential building types that are denser than single-family homes but less tall than high-rise buildings. This includes duplexes, triplexes, fourplexes, townhouses, and courtyard houses. These housing types increase density without overwhelming urban landscapes, making them an ideal solution for areas facing housing shortages.

Definition:
B: “It’s not high rises, it’s not a detached home.”
[05:16]

Examples of Missing Middle Housing:
A provides a comprehensive list:

• Duplexes and Triplexes: Two or three units respectively on a single lot.
• Townhouses and Stacked Townhouses: Multi-level units that share walls.
• Courtyard Houses: U-shaped buildings with shared communal areas.

Notable Quote:
A: “Once you get above four stories you’re kind of getting into that mid-rise territory and that’s where it’s no longer in the missing middle.”
[07:06]

Global Case Studies

The hosts examine various cities globally where Missing Middle Housing has been successfully implemented or is gaining traction:

1. Portland, Oregon:

   • Historical presence since the 1920s.
   • Experiencing a resurgence from 2022 to 2024.

2. Minneapolis, Minnesota:

   • First major US city to eliminate single-family zoning citywide [07:42].
   • Encourages duplexes, triplexes, and fourplexes across all residential zones.

3. Vancouver, British Columbia:

   • 6-Unit Housing Developments: Promoted through the Missing Middle Housing initiative [08:48].
   • Implementation of laneway houses and secondary suites.

4. Chattanooga, Tennessee:

   • 10-Plex Development by Kronberg Urbanists: Combines affordability with aesthetic appeal [08:48].

5. Victoria, BC:

   • 2023 Missing Middle Housing Initiative: Streamlines approvals for townhomes and low-rise apartments with reduced parking requirements.

6. Lisbon, Portugal:

   • 2024 Housing Recovery Program: Incentivizes urban rehabilitation and conversion of older buildings.

7. Auckland, New Zealand & Berlin, Germany:

   • Both cities have seen significant population growth and introduced policies supporting Missing Middle Housing [22:12].

Notable Quote:
B: “Minneapolis became the first major US city to eliminate single family zoning citywide allowing duplexes, triplexes and fourplexes in all residential zones. Do you know that?”
[07:34]

Zoning Reforms and Regulatory Changes

A critical component for the success of Missing Middle Housing is the reform of zoning laws that have historically favored single-family homes. The hosts discuss how restrictive Euclidean Zoning—which segregates residential, commercial, and industrial areas—has hindered the development of medium-density housing.

Key Points:

• Euclidean Zoning: Limits diversity in housing density, promoting uniformity over adaptability.
  B: “Euclidean zoning approach separated residential, commercial and industrial uses, discouraging mixed density neighborhoods where missing middle houses thrived.”
  [12:48]

• Post-WWII Suburbanization: Emphasized car-centric planning, further entrenching single-family zoning and urban sprawl.
  [11:21]

• Current Reforms:

  • Streamlined Approvals: Cities like Victoria and Melbourne have reduced bureaucratic hurdles for Missing Middle projects.
  • Pre-approved Designs: Municipalities offer standardized, approved architectural plans to expedite construction [25:46].

Notable Quote:
A: “A big one is zoning and also I think expediting construction. So like making it easy to get permits for this, any type of entitlement.”
[24:41]

Investment Strategies and Financial Considerations

Missing Middle Housing presents a lucrative investment avenue due to lower construction costs and higher rental yields compared to high-rise condos.

Investment Advantages:

• Lower Construction Costs:
  A: “High rise builders... are going to building their high rises... costing them $1,000 a square foot… Whereas... you can typically create that for a lot cheaper.”
  [04:52]

• Higher Rental Yields:
  Missing Middle units often command premium rents over comparable high-rise units due to better manageability and lower density.

• Scalability:
  Accessible to mid-sized investors who cannot afford large-scale developments, making it ideal for diversifying investment portfolios internationally.

Financing Challenges:

• Classification Issues:
  Multi-unit properties may fall under commercial rather than residential loans, posing hurdles for conventional mortgage financing.
  A: “In Canada, typically over four units... it'd be a different debt program.”
  [27:22]

• Capital Market Gaps:
  The existing financing landscape often overlooks mid-sized projects, requiring private sector innovation to bridge the funding gap.
  A: “There’s a missing middle in capital markets as well.”
  [29:07]

Notable Quote:
A: “If you're super rich, where you can afford... you could Uber everywhere... it's an extra hour and a half that I don't have that I know I longer have to worry about.”
[32:24]

Challenges to Implementation

Despite its potential, Missing Middle Housing faces several obstacles:

1. NIMBYism (Not In My Backyard):

   • Resistance from existing homeowners who fear property devaluation or changes in neighborhood character.
     A: “Most people... think about it in terms of like, oh, I don't want that thing being built behind me because it's going to devalue my property.”
     [17:53]

2. Restrictive Zoning Laws:

   • Historical zoning prioritizations inhibit the proliferation of medium-density housing.

3. Parking Requirements:

   • Traditional mandates for parking spaces can discourage the development of smaller housing units.
     A: “[Parking] being a problem… it’s a very short term problem.”
     [30:35]

4. Capital Market Limitations:

   • Lack of tailored financial products for mid-sized real estate projects hinders investment.

Notable Quote:
B: “You can’t get a CBRE guy to come and do that... it's just a bit more of like a mathematical equation than an emotional transaction that we're used to.”
[29:38]

Future Outlook and Recommendations

The conversation concludes with a forward-looking perspective on Missing Middle Housing as a sustainable and profitable investment:

• Urbanization Trends:
  With projections indicating that up to 80% of humanity will reside in urban areas within the next 50 years, the demand for Missing Middle Housing is set to rise.

• Policy Advocacy:
  Encouraging further zoning reforms and supportive municipal policies to facilitate medium-density housing developments.

• Innovative Financing:
  Developing financial instruments and attracting private investment to fill the capital gap.

• Embracing Technological Advances:
  Anticipating shifts in transportation, such as autonomous vehicles, which may reduce the emphasis on parking and further support urban density.

Notable Quote:
A: “These smaller projects are like super accessible... this is quite literally the only type of housing that's going to make money until something changes in the economy.”
[39:16]

Conclusion

Real Estate Without Borders successfully highlights the significance of Missing Middle Housing as a viable solution to the global housing crisis. By dissecting zoning reforms, showcasing global case studies, and addressing investment strategies, the episode provides listeners with a comprehensive understanding of how medium-density housing can be both a socially responsible and financially rewarding investment. The discussion underscores the importance of adaptability in urban planning and the role of investors in shaping sustainable communities worldwide.

Episode Highlights:

• Defining Missing Middle Housing: Duplexes to fourplexes as scalable solutions.
• Global Success Stories: Portland, Minneapolis, Vancouver, and more.
• Zoning Reforms: Overcoming Euclidean zoning and car-centric planning.
• Investment Insights: Lower costs and higher yields vs. financing challenges.
• Future Prospects: Urbanization trends and policy recommendations.

Key Takeaway:
Missing Middle Housing offers a balanced approach to urban density, presenting accessible investment opportunities that can significantly mitigate housing shortages while fostering vibrant, diverse communities.