By Rose Law Group Attorney Samantha DeMoss
HB2297, also known as the “Adaptive Reuse Law” is the culmination of an ongoing bipartisan effort from the Arizona legislature to mitigate the housing shortage in Arizona. Going into effect on January 1 of 2025, the bill allows for the redevelopment of up to 10% of existing built commercial development for multi-family residential or mixed-use developments without the need for rezoning or any public hearing. This law applies to municipalities with populations over 150,000. Qualifying buildings are those that are “economically or functionally obsolete,” defined as a “commercial office or mixed-use building [being] in a state of disrepair or [having] 50% vacancy in the total leasable square footage.” In addition, permitting requirements by the City ordinance can be no more than the following for qualifying buildings:
- A site plan review;
- Proof of water and sewer;
- Compliance with building and fire codes;
- Location on a parcel between 1-20 acres in size;
- A 10% maximum set aside for moderate-income or low-income units in the permitted projects.
Other features of the bill include a limit that parking requirements may not be more that a multi-family use in the current zoning ordinance. The height and density allowed must be the highest of both categories allowed in the municipality’s current zoning ordinance. However, the maximum is height 5 stories across the board and 2 stories on sites within a mile of single-family residential zones. Setback and height requirements are the same as the proposed use, unless the existing building has a lesser setback or higher height, then the site will be grandfathered into that standard as a legal nonconforming use. Municipalities are permitted to exclude not more than 10% of their existing commercial stock from the law, redesignating exclusions no more than once ever ten years. Exceptions to the bill’s applicability include tribal land, military land, airport, and airport vicinities.
The adaptive reuse bill follows the recent trends of the legislature beginning to view housing availability as a state-wide issue rather than one of individual municipalities. The bill creatively funnels needed multi-family development into those commercial areas that have already been unsuccessful rather than sites that may still be viable for new-build commercial development.
The goal of the bill is to allow developers to overcome aversions to multi-family development in the political arenas of resistant suburban cities in Arizona. There has already been tensions between intents of the legislature and City government implementation of the bill. The bill allows “up to 10%” of the commercial in a City to be converted, and some cities have interpreted this liberally, passing ordinances permitting as little as 1% of their commercial stock to be converted. In recognition that conversion of an existing commercial building to a residential use is not always optimal due to differences in layout of utility and foundational structure, the bill also prohibits a municipality from withholding demolition permits from a project that meets the requirements of the bill. The bill signifies an effort of the Arizona State Legislature to address housing shortages for a growing state by utilizing development areas that have struggled. As a result of the struggle of local governments to address the housing shortage while accommodating the opinions of their constituency, the state government has decided to address housing as a statewide issue.
