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What Texas SB 840 means for owners of commercial land in Austin

Since September 1, 2025, Austin must allow apartments and mixed-use housing in zoning that allows office, commercial, retail or warehouse use, without a rezoning and with defined exceptions. What the statute says, where it stops, and how to weigh it in a sale.

Hardgate Capital · October 7, 2026 · 6 min read

What the law requires

Senate Bill 840, passed by the 89th Texas Legislature, added Chapter 218 to the Texas Local Government Code and took effect September 1, 2025. Under §218.101, a covered city shall allow mixed-use residential or multifamily residential development in any zoning classification that allows office, commercial, retail, warehouse or mixed-use development, and may not first require a rezoning, variance, conditional use approval, special use permit, comprehensive plan amendment or other discretionary approval. If the city's permitting authority determines that a project meets the applicable development regulations, it must approve the permit administratively and may not require further action by the city council (§218.102(b)).

Multifamily means three or more dwelling units on a site; mixed-use residential means a development in which residential uses make up at least 65 percent of total square footage (§218.001). Section 218.102(a) then limits what a city may impose on these projects:

  • Density: no limit more restrictive than the greater of the highest residential density allowed in the city or 36 units per acre
  • Height: no limit more restrictive than the greater of the height that would apply to an office, commercial, retail or warehouse building on the site or 45 feet
  • Setbacks and buffers: no more than the lesser of the requirement for an office, commercial, retail or warehouse building on the site or 25 feet
  • Parking: no more than one space per dwelling unit, and no required multilevel parking structure
  • No floor area ratio limit, and no requirement that a multifamily project include nonresidential uses unless it is in an area zoned for mixed-use residential

Who it applies to, and from when

Chapter 218 applies only to a city of more than 150,000 people that lies wholly or partly in a county of more than 300,000 (§218.002). Austin meets both tests. A City of Austin briefing on the citywide density bonus in April 2026 summarizes SB 840 as allowing housing in areas that previously allowed only office or commercial uses, without requiring rezoning. The chapter governs municipal zoning, so it does not reach unincorporated Travis County, which a 2013 county staff memo describes as having no zoning regulations. Under Section 4 of the Act, the zoning provisions apply only to projects initiated on or after September 1, 2025, and the conversion provisions apply only where the building permit was submitted on or after that date.

How SB 840 interacts with Austin's zoning districts

Austin's use table (LDC §25-2-491) permits multifamily residential use in MF-1 to MF-6, CBD, DMU and CH, and conditionally in L. Office and commercial bases such as NO, LO, GO, LR, GR, CS and CS-1 do not permit it on their own; under the city code, housing on those bases has come from a combining district such as -MU, -V, DB90 or a density bonus tier, or from a rezoning. W/LO (Warehouse/Limited Office) does not take -MU and is not eligible for DB90 or the citywide density bonus. Under §218.101, most of these office, commercial and warehouse bases now carry a state-law right to residential development, subject to the exclusions below.

The effect is largest where base limits were tight. Under LDC §25-2-492, NO allows 35 feet or two stories and a 0.35 floor area ratio, LO 40 feet or three stories and 0.7, and W/LO 25 feet or one story and 0.25. On a qualifying residential project on those sites, the city may not hold height below 45 feet or density below 36 units per acre, and may not apply a floor area ratio limit. On GR and CS, where the base height is 60 feet, the height floor is the commercial height that applies to the site rather than 45 feet.

Austin's density bonus programs remain, since §218.003(3) preserves density bonus and other voluntary programs that allow less restrictive standards. The citywide density bonus combining districts (DBC, LDC §25-2-656), in effect since June 2026, come in tiers that add up to 60 feet over base height on CH, CS-1, CS, GR, LR, GO, LO and NO, and waive minimum site area, maximum density and floor area ratio, in exchange for income-restricted units. A DBC tier is a combining district added to a site's zoning, and only one tier applies per property. On some sites a bonus program supports more than the SB 840 floor.

What SB 840 does not do

The statute is broad, but it has defined edges.

  • Heavy industrial zoning is excluded (§218.101(c)). Section 218.001 defines heavy industrial use as a storage, processing or manufacturing use with processes using flammable or explosive materials, with hazardous conditions, or that is noxious or offensive from odors, smoke, noise, fumes or vibrations. Austin's use table permits Basic Industry only in LI and MI, so those districts are likely excluded and IP likely is not. That is a reading of the code, not a City determination.
  • Location exclusions apply regardless of zoning: land within 1,000 feet of an existing heavy industrial use or development site, within 3,000 feet of an airport or military base, or in an area the city has designated as a clear zone or accident potential zone (§218.101(c)).
  • Section 218.003 preserves the city's authority over short-term rental rules, water quality protection rules that implement state or federal requirements, generally applicable sewer and water access requirements and building codes, stormwater mitigation, and historic preservation. A site zoned -H or -HD still faces historic review.
  • The height floor is relative. Where the height that would apply to an office, commercial, retail or warehouse building on the site is above 45 feet, the city may hold a residential project to that height. Whether a tract-specific limit, such as a conditional overlay, counts toward that figure is a question for the City or land use counsel.
  • The limits in §218.102 do not mention floodplain, tree protection or impervious cover rules, so an owner should not assume those rules are waived.
  • Chapter 218 limits what a city may require. It does not address deed restrictions, recorded covenants or lease terms.

Older buildings: the conversion provisions

Subchapter C covers buildings in office, retail or warehouse use, built at least five years before the conversion starts, where at least 65 percent of the building, and of each floor fit for occupancy, is proposed to convert to mixed-use residential or multifamily residential occupancy (§218.202). For those conversions a city may not require a traffic impact analysis or traffic mitigation, parking beyond the spaces already on site, utility upgrades beyond the minimum capacity needed to serve the building, or design requirements more restrictive than the International Building Code as adopted by the city (§218.203). A new impact fee may not be imposed unless the land was already subject to one before the conversion permit was filed (§218.204).

Practical steps for an owner evaluating a sale

SB 840 shifts the question from what the zoning map says to what the site can support. Owners can test that before taking calls.

  • Pull the full zoning string from the City's Property Profile and read any conditional overlay ordinance on the tract. The City's open zoning dataset states that it should not be used to make zoning determinations and points to the Property Profile instead.
  • Check distances to heavy industrial uses, airports and military bases, and any clear zone or accident potential zone.
  • Identify historic designations, watershed and floodplain constraints, and water and wastewater service.
  • Compare existing zoning, the SB 840 floor and any density bonus available on the base district.
  • Measure contiguous acreage and note who owns adjoining parcels; combined sites can support larger projects.
  • Ask buyers how they priced the residential path and what contingencies they carry, and confirm the zoning position with the City or land use counsel.

How Hardgate Capital approaches these sites

Hardgate Capital acquires under-improved commercial land in Austin on 3.0 to 15.0 contiguous acres, from $10 million to $75 million, including assemblages. These criteria are indicative. On our representative timeline, diligence runs under the letter of intent, the deposit is non-refundable at signing of the purchase agreement, and we target a funded close 30 to 60 days from the letter of intent with no financing contingency. Owners and brokers can submit a site through our portal or to ashwanth@hardgatecapital.com, and a principal reviews every submission within 24 hours.

This article is general information about Texas SB 840 and Austin zoning as of October 2026, not legal advice.

Sources

This page is general information about the market, not legal, tax or investment advice. Zoning and statutes change; confirm current requirements with the city and your counsel.