Spokane, Washington, grabbed national headlines for the remarkably steep growth of its housing prices. Now it's made a dramatic countermove: opening its single-family neighborhoods to multifamily development.

Under an ordinance approved by the City Council and headed to the mayor for signature, single-family properties throughout the city will soon be eligible for development of duplexes, triplexes and even fourplexes, or up to 10 townhouses per acre, including on big backyards of large lots.

“We’re absolutely in a housing crisis today,” Michael Cathcart, a city councilman and one of the ordinance’s prime sponsors, said in a phone interview. “It’s grim.”

Yet while there is broad agreement that more units are needed in the city, there are lingering concerns that higher development costs, rising interest rates and a run-up in land values may still make it harder for denser development to make economic sense. Until that's determined, homeowners can expect to be able to put up buildings with as many as four units when their lot is big enough.

While policies vary widely, Spokane’s move appears to be among the most aggressive such changes made recently across the country as state and local governments seek to address a growing housing shortage. California enacted a law last year allowing owners of single-family lots to build duplexes or add auxiliary dwelling units to their properties. A study by a Montana think tank earlier this year suggested the state make it easier to build denser housing on single-family lots, though it has not yet been taken up as legislation.

Cities from Minneapolis to Seattle are amending density limits in single-family zones or doing away with the designation altogether. And San Francisco Mayor London Breed last week vetoed legislation allowing fourplexes, saying in a letter that the ordinance as written would neither create new housing opportunities nor address the affordability crisis.

"I’m not familiar with any other cities that have gone to fourplexes," James Young, director of the Center for Real Estate Research at the University of Washington in Seattle, told CoStar News.

Minneapolis earlier this year eliminated "single family" as a zone designation, but a judge has since blocked implementation of the change. And while Seattle and neighboring Tacoma also increased density, both did so with geographic limitations, rather than changing the rules for all single-family-zoned land citywide in one fell swoop.

“I don’t know any that have opened it up to four," Young said. “It’s more than what I’ve heard so far.”

Once a hub for mining and logging, Spokane's housing market transformed in the first two years of the pandemic as urban expats fled locked-down cities. The activity sped an already-underway population boom in which Spokane County's population grew 9.8% in the past five years, and pushed it to the third-fastest job growth in the nation in 2021, according to CoStar data.

But the surging population amplified existing housing shortfalls and created an affordability crisis. Citing a 60% increase in home prices in the city, the New York Times in February dubbed the city a poster child for the dilemma created by the pandemic’s housing market heat-up.

While a recent city report put housing needs at around 7,000 new units over coming years, Cathcart said planners widely regard the figure as a major undercount, and instead see the current deficit alone as likely closer to 30,000 units.

While it hasn’t taken effect, the ordinance has already had an impact.

Nate Gant, an adviser with Spokane real estate firm SVN Cornerstone, has a listing on a property that at first glimpse seems like a prime target for development under the new rules. On a corner lot at 1232 N. Madison St. tucked between a residential neighborhood and a commercial strip, there is a duplex on one side of the 0.44-acre parcel, leaving much of the lot empty. 

In an interview the day after the ordinance passed, Gant said the measure had already changed his equation.

“We were at five units,” Gant said, referring to previous rules. “I’m hoping that [the new ordinance] will provide an opportunity for up to 10.”

The catch for Spokane is whether the market will bear it.

With prices in the city’s residential neighborhoods already having made a big jump during the pandemic, the denser projects the city envisions present much thinner margins than they would have in years past.

“Building costs are up, land costs are up and interest rates are up, and it’s a deadly situation,” Jim Frank, founder of Greenstone Homes, a single- and multifamily developer, told CoStar News. “This should have happened 10 years ago.”

Still, he said the ordinance was an important first step for the city, while emphasizing it would take time to attract investment.

“You have to get developers interested in it, then they have to find land, then they have to develop product,” Frank said. “This isn’t the kind of thing that the big national developers are going to have any interest in, it’s something that’s going to be of interest to smaller local developers.”

Cathcart was equally sober about the prospects of a building boom.

“It’s not feasible in the current market to tear down a home, essentially, to build a quad,” Cathcart said. “Our staff at city hall have run the numbers, and they don’t pencil.”

Rather, Cathcart said, the hope is that the new rules will make vacant lots and parcels with large empty sections a more appealing prospect for builders.

Young, of the University of Washington, said an unintended consequence of the ordinance could be to drive rents higher to entice developers to build rental housing. Likewise, the ability to add units to a single-family lot would probably drive up those prices as well. In the end, he said, the overall effect could be that single-family homes would remain scarce and become even less affordable.

“You may get those extra units, but it may come at a longer-term price.”

After the one-year pilot project expires, the city would have to vote again to make the rules permanent, though any projects that get started in the meantime will be grandfathered should the rules lapse.