A new Texas law is changing how investors can plan multifamily and mixed-use projects on land that was never zoned for housing. Senate Bill 840, effective September 1, 2025, allows multifamily and mixed-use residential development by right on most commercial, office, retail, and warehouse-zoned land in the state's largest cities. For investors evaluating acquisition, conversion, or ground-up projects in Texas, this changes the entitlement picture and may change how a deal gets underwritten.
What SB 840 Actually Allows
SB 840 applies to cities with more than 150,000 residents located wholly or partly in a county with more than 300,000 residents. That reach covers major metro areas including Dallas-Fort Worth, Austin, Houston, and San Antonio.
In those cities, multifamily and mixed-use residential projects are now allowed by right on land already zoned for office, commercial, retail, warehouse, or mixed-use. That means no rezoning, no variance, no special exception, no conditional use permit, and no comprehensive plan amendment is required for qualifying residential use on that land.
The law also sets limits on what cities can require for new projects. Cities cannot push density below 36 units per acre (or below the highest residential density the city allows anywhere), cannot require height limits below 45 feet, cannot mandate more than one parking space per unit or a multilevel parking structure, and cannot impose a floor-area-ratio cap or require nonresidential uses to be included.
Conversions Get Their Own Set of Rules
Office-to-residential and other building conversions get additional relief under SB 840 and a related law, SB 2477. To qualify, the existing building generally must have been constructed at least five years before conversion begins, and the project must convert at least 65 percent of the building and at least 65 percent of each occupiable floor to mixed-use or multifamily residential use.
For qualifying conversions, cities cannot require a traffic impact study or traffic mitigation fee, cannot require additional parking beyond what already exists on site, cannot require utility upgrades beyond the minimum capacity needed to serve the converted building, and cannot impose design standards stricter than the International Building Code minimums.
Cities also generally cannot charge new impact fees on a conversion site unless that land was already subject to an impact fee before the application, and roadway impact fees in a city's extraterritorial jurisdiction are off the table under both laws.
Where the Law Does Not Apply
SB 840 carves out several categories of land. It does not apply to sites that allow heavy industrial use, land within 1,000 feet of an existing heavy industrial use, land within 3,000 feet of an airport or military base, or areas a city designates as a clear zone or accident potential zone.
Cities also retain authority over historic districts and landmarks, short-term rental regulation, and generally applicable building and water quality codes. Private deed restrictions enforced by owners' associations remain in effect as well. Investors evaluating a site should confirm it falls outside these exclusions before assuming by-right status applies.
Local Pushback Is Part of the Picture
Not every city has implemented SB 840 the same way. Some Dallas-Fort Worth suburbs have adopted ordinances that set minimum building heights, add amenity requirements, or expand design standards for new apartment projects. One city has reportedly explored designating areas as heavy industrial in an apparent effort to trigger the statute's industrial-use exclusion.
The law gives developers and housing organizations the ability to sue a noncompliant city for declaratory or injunctive relief, and courts must award attorney's fees and costs to a prevailing claimant. A related law allows economic damages claims tied to office-to-residential conversions specifically. That said, pursuing any of these remedies takes time, and investors should expect that disputed interpretations or local resistance can affect permitting timelines even where the statute is clearly on the investor's side.
By contrast, some major cities such as Dallas and Fort Worth appear to be implementing the framework without comparable resistance, so the practical effect of SB 840 can vary significantly by jurisdiction.
What This Means for Financing a Deal
For investors arranging acquisition or bridge financing on a commercial-to-residential conversion or a ground-up multifamily project on commercial land, a clearer by-right entitlement pathway can reduce one source of uncertainty in a deal: whether the project can be approved at all without a lengthy rezoning process.
That said, local ordinances, geographic exclusions, and the specific age and conversion-percentage thresholds for existing buildings still need to be confirmed city by city and site by site before assuming a project qualifies. Illustrative example: an investor considering a 1980s-era office building in a mid-sized Texas city zoned commercial would want to confirm the city's population threshold applies, the building meets the five-year age requirement, and the conversion plan meets the 65 percent threshold for both the building and each floor, before building financing assumptions around a streamlined approval.
Lenders evaluating these deals will still look at the underlying site plan, permitting status, and any local conditions or disputes, regardless of what the state statute allows in theory. Business-purpose investors working on these projects should keep documentation of how a project meets the statutory criteria, since that evidence can matter both for permitting and for underwriting.
Common questions
Does SB 840 apply everywhere in Texas?
No. It applies only to cities with more than 150,000 residents that are wholly or partly located in a county with more than 300,000 residents. That generally covers the state's larger metro areas, not every Texas municipality.
Do I still need city approval for a qualifying project?
Permits are still required, but the law requires administrative approval once a submittal meets the applicable regulations, rather than requiring a vote or discretionary action by the city council for projects that qualify by right.
What if my site is near an airport or industrial use?
SB 840 excludes certain areas, including land within 3,000 feet of an airport or military base and land within 1,000 feet of an existing heavy industrial use, as well as areas that allow heavy industrial use themselves. Those sites would not get by-right treatment under the law.
Can a city still block my conversion project?
Cities retain authority over historic districts, short-term rental rules, and general building and health and safety codes. Some cities have also adopted local ordinances that add requirements such as minimum building heights or amenities, and disputes over whether a project qualifies under the statute can still arise and affect timing.