Kundenbriefing: Gesetzentwurf 840 des Senats von Texas und Gesetzentwurf 2477 des Senats von Texas (89. Legislaturperiode, Sitzung 2025)

Texas S.B. 840 and S.B. 2477, effective September 1, 2025, significantly curtail how larger Texas cities regulate mixed-use and multifamily residential development and office-to-residential conversions. The laws apply to municipalities with populations over 150,000 that are wholly or partly in counties over 300,000. They require by-right allowance of housing on most commercial-zoned land, restrict many local development standards, mandate administrative approvals when projects meet the new state parameters, and sharply limit impact fees on conversion sites. If a city refuses to comply, the statutes authorize private lawsuits with mandatory fee-shifting—and, under S.B. 2477, exposure to economic damages—brought in local venue with exclusive intermediate appellate review in the Fifteenth Court of Appeals. Recent reporting indicates several Dallas–Fort Worth suburbs (including Irving, Arlington, Plano, and Frisco) have adopted measures aimed at constraining projects under these laws, which may prompt test-case litigation by housing advocates.

For prospective developers and investors, these laws should offer clearer, by-right entitlement pathways on commercial land and materially reduce discretionary risk, studies, and fees for qualifying projects—particularly office-to-residential conversions—while creating legal remedies if a municipality attempts to impose prohibited conditions. Cities should promptly align ordinances, permitting workflows, and project review criteria to the state framework to mitigate litigation risk. 

Applicability: Which Cities and Which Sites Are Covered

Both bills apply to any municipality with a population greater than 150,000 that is wholly or partly located in a county with a population greater than 300,000. The statutes carve out locations near heavy industrial uses and aviation/military facilities:

• Geographic exclusions: Areas that allow heavy industrial use, 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 areas a municipality designates as a clear zone or accident potential zone.
• Project age/extent thresholds for conversions: Conversions must involve buildings constructed at least five years before conversion commencement and convert at least 65 percent of the building and at least 65 percent of each occupiable floor to mixed-use or multifamily residential occupancy.
• Covered starting use: S.B. 840 covers conversions from office, retail, or warehouse; S.B. 2477 focuses on conversions from office use.

What Cities Must Allow By Right (S.B. 840)

For covered municipalities, mixed-use residential and multifamily residential uses are allowed by right in any zoning classification that already allows office, commercial, retail, warehouse, or mixed-use uses. Cities may not require a zoning change, variance, special exception, conditional use permit, comprehensive plan amendment, or similar discretionary approval for those residential uses in such zones, subject to the geographic exclusions above.

Local Standards Cities May Not Impose

S.B. 840 establishes baseline limits on local development controls for new mixed-use and multifamily projects in the covered zones, and both bills restrict additional requirements for conversion projects.

• For new mixed-use or multifamily developments (S.B. 840): Cities may not impose:
  • Density below the greater of 36 units per acre or the highest residential density allowed anywhere in the city.
  • Height below the greater of 45 feet or the highest height that would apply to an office, commercial, retail, or warehouse development on the site.
  • Setbacks or buffers more restrictive than the lesser of 25 feet or the requirement applicable to office/commercial/retail/warehouse on the site.
  • More than one parking space per dwelling unit or a requirement to build a multilevel parking structure.
  • A floor-area-ratio cap, or a requirement that the project include nonresidential uses.
• For conversion projects (S.B. 840 and S.B. 2477): Cities may not require:
  • A traffic impact analysis or other traffic study; traffic mitigation improvements; or payment of a traffic mitigation fee for the conversion.
  • Additional parking beyond existing site parking.
  • Utility extension, upgrade, replacement, or oversizing beyond the minimum capacity needed to serve the converted building (S.B. 840); or utility upgrades except as necessary to provide minimum capacity (S.B. 2477 is materially aligned).
  • Design requirements (including exterior, windows, internal environment, or apartment interior dimensions) more restrictive than the minimum standards of the International Building Code adopted as the municipal commercial building code.
  • A zoning change, variance, or other discretionary land use approval to allow the conversion.
  • Additional drainage, detention, or water quality requirements if the conversion does not increase impervious cover (explicit in legislative analyses of S.B. 2477).
• Preserved local authority: Both measures preserve municipal authority over historic districts/landmarks and short-term rental regulation, and allow enforcement of private deed restrictions by owners’ associations or other private agreements. S.B. 840 also expressly preserves application of generally applicable building, water quality, and similar health/safety codes, and allows voluntary density bonus and affordability incentive programs.

Administrative Approval Mandate

If a permitting authority determines that a covered project meets municipal regulations consistent with Chapter 218, the authority must administratively approve the permit or authorization and may not require governing body action for approval to take effect. This applies both to by-right mixed-use/multifamily projects (S.B. 840) and to covered conversion permits (both bills).

Impact Fees and Related Fee Limits

• Conversion sites: Cities may not impose new impact fees on land where a building is converted to mixed-use or multifamily residential use, unless the land was already subject to an impact fee before the conversion permit application. Under S.B. 2477, a water/wastewater impact fee may be imposed only if the conversion increases demand for those services.
• ETJ roadway fees: Both bills amend impact fee statutes to prohibit political subdivisions from imposing impact fees for roadway facilities in the extraterritorial jurisdiction. 

Implications for Prospective Developers and Investors 

For developers pursuing ground-up mixed-use/multifamily or conversion projects in covered cities, the statutes shift entitlement risk and streamline approvals:

• Site selection and eligibility: Confirm the site is not within the statutory exclusions (heavy industrial areas or buffers; airport/military buffers) and, for conversions, that the existing structure is at least five years old and that the plan will convert at least 65 percent of the building and each occupiable floor.
• By-right pathway on commercial land (S.B. 840): Treat commercial zoning that allows office/retail/warehouse as enabling by-right mixed-use or multifamily residential without rezoning, variances, or conditional approvals.
• Standards floor/ceiling: Under S.B. 840, cities cannot push density below 36 du/acre (or below the city’s highest residential density), height below 45 feet (or below the highest commercial height applicable on the site), or require more than one parking space per unit, multilevel parking, stricter setbacks than 25 feet (or commercial equivalents), FAR caps, or nonresidential components.
• Conversion-specific relief (S.B. 840/S.B. 2477): Cities cannot require traffic studies/mitigation, additional parking, utility oversizing beyond minimum capacity, or design standards beyond IBC minimums; they also cannot require a zoning change to approve a qualifying conversion.
• Administrative approvals and timelines: Once a submittal meets municipal regulations consistent with Chapter 218, the permit must be administratively approved—no governing body action is required. This reduces scheduling risk and political veto points.
• Fees and pro formas: No new impact fees on conversion sites (with narrow exceptions), and no ETJ roadway impact fees, improving underwriting for adaptive reuse.
• Enforcement leverage if a city resists: Developers and housing organizations can seek injunctive/declaratory relief under both bills, plus economic damages under S.B. 2477 for conversion-related violations, with mandatory fee-shifting.
• Preserved constraints to underwrite: Historic districts/landmarks and short-term rental rules remain applicable; generally applicable building, water quality, and other health/safety codes still apply.

Opposition risk considerations for developers and investors:

If a municipality opposes or narrowly interprets these laws, developers and investors should account for the following risks grounded in the enforcement and applicability provisions of S.B. 840 and S.B. 2477:

• Permitting delays and contested interpretations: Despite the administrative-approval mandate, cities may dispute whether a submittal “meets municipal regulations in accordance with” Chapter 218 or whether a building qualifies for conversion (e.g., the five‑year construction age or 65 percent conversion thresholds), which can delay issuance pending resolution.
• Local countermeasures that raise costs or limit feasibility: Recent actions reported in the Dallas–Fort Worth suburbs include minimum height mandates (e.g., Irving requiring eight floors for new apartments; Arlington requiring six floors along certain corridors; Plano requiring 45–75 feet depending on area), expanded amenity and design mandates (e.g., pools, gyms, dog parks, menus of additional amenities; stricter building performance standards; EV‑charging requirements such as 15 percent of spaces), and other standards that can shift pro formas or deter mid‑rise projects. Some cities are also exploring zoning tactics, such as Frisco’s move to allow heavy industrial uses in affected zones to fall within statutory exclusions. These measures can create underwriting uncertainty until tested in court.
• Litigation timelines and appeal posture: While the statutes provide strong remedies (injunctions, declaratory relief, fee‑shifting, and, for S.B. 2477, economic damages), pursuing relief introduces schedule uncertainty and potential multi‑month timelines, with venue tied to the project county and intermediate appeals funneled to the Fifteenth Court of Appeals.
• Scope of preserved local authority: Cities retain authority over historic districts/landmarks and short‑term rental regulation and may apply generally applicable building, water quality, and health/safety codes. Projects located within these regimes can face additional compliance steps that affect cost and timing.
• Fee disputes on conversions: Although impact fees are generally prohibited on conversion sites (with narrow exceptions, including increased water/wastewater demand under S.B. 2477), disagreements over baseline eligibility and demand calculations can arise and may require resolution before financing closes.
• Project carrying costs: Any delay tied to opposition (administrative or judicial) can increase interest carry, extend rate‑lock and lease‑up timelines, and affect return thresholds, even when the developer ultimately prevails.

Practical mitigations include modeling schedule contingencies, aligning designs to the statutory floors/ceilings, documenting compliance evidence contemporaneously, and embedding contractual protections (outside the municipal process) to bridge timing and financing risks. 

Enforcement and Penalties for Municipal Noncompliance

Both statutes create private enforcement mechanisms against cities for violations, with mandatory fee-shifting and specialized venue/appellate rules. The exposure differs between the bills:

• S.B. 840: A housing organization or other adversely affected person may sue for declaratory or injunctive relief. Courts must award reasonable attorney’s fees and court costs to a prevailing claimant. Venue lies in a county where the subject real property is located, with exclusive intermediate appellate jurisdiction in the Fifteenth Court of Appeals.
• S.B. 2477: A housing organization or other adversely affected or aggrieved person may sue for economic damages or for declaratory/injunctive relief. Courts must award reasonable attorney’s fees and court costs to a prevailing claimant. Venue and appellate provisions mirror S.B. 840.

For developers, these remedies provide entitlement backstops when a city delays or conditions approval contrary to Chapter 218.

Taken together, the practical “penalties” for cities that refuse to comply include:

• Mandatory injunctions/declaratory judgments compelling compliance.
• Mandatory fee-shifting, requiring the city to pay the prevailing plaintiff’s attorney’s fees and costs.
• Economic damages exposure under S.B. 2477 for violations relating to office-to-residential conversions, potentially increasing financial liability beyond fee awards.

Harmonization and Relationship Between the Bills

S.B. 2477 expressly makes its application contingent on the passage of S.B. 840 and states the Legislature’s intent that Chapter 218, as added by S.B. 2477, be harmonized with Chapter 218 as added by S.B. 840. Where irreconcilable conflict exists, S.B. 840 controls. In practice, treat S.B. 840 as the baseline framework for allowing mixed-use/multifamily development and conversions, with S.B. 2477 supplying additional conversion-specific rules and remedies (including economic damages).

Effective Date and Transition

Both measures took effect September 1, 2025, and apply prospectively. Cities should conduct code audits now to identify and amend or suspend inconsistent provisions, update administrative approval workflows, and publish applicant guidance aligned to Chapter 218. Because the laws set minimum standards and limit more restrictive local controls, cities should avoid enforcing preexisting ordinances that conflict with the new mandates.

Municipal Opposition and Current Posture

Recent reporting highlights active resistance among several Dallas–Fort Worth suburbs even as the laws take effect. Irving adopted an ordinance requiring new apartments to be at least eight stories and to include specified amenities (e.g., pools, dog parks, gyms, coworking) and to meet stricter building‑performance standards, raising project costs. Arlington increased amenity mandates and, on key corridors, set a six‑story minimum; it also requires at least 15 percent of parking spaces to include EV charging. Plano set minimum building heights in many commercial areas (generally 45 feet, and 75 feet in certain office areas) and paired the approach with allowing some denser single‑family typologies (e.g., townhomes) in places opened by the state law. Frisco pursued a zoning strategy to designate heavy industrial uses in areas otherwise opened to housing, apparently seeking to trigger the statute’s industrial‑use exclusion. Housing advocates, including Texans for Reasonable Solutions, have publicly discussed test‑case litigation to compel compliance, while state bill authors have criticized local resistance. By contrast, Dallas and Fort Worth appear to be implementing the state framework without comparable resistance. Stakeholders should monitor local council agendas and any filed actions seeking declaratory or injunctive relief.

Action Checklist for Developers

• Entitlement diligence: Verify eligibility under Chapter 218 (location outside excluded buffers; qualifying commercial zoning; conversion age/65 percent thresholds).
• Permitting strategy: Structure submittals to meet municipal regulations “in accordance with” Chapter 218 and insist on administrative approval timelines; avoid discretionary triggers.
• Design to statutory parameters: Program density/height/parking/setbacks to the statutory floors and prepare alternative layouts if a city attempts to impose stricter standards.
• Fee modeling: Reflect the impact fee prohibitions for conversions in underwriting and confirm no ETJ roadway impact fees apply.
• Contract protections: Include cooperation covenants with sellers and adjacent owners for any needed easements/utilities sized to “minimum capacity,” and conditions to address municipal noncompliance (e.g., tolling of due diligence, litigation options).
• Lender communications: Highlight reduced entitlement risk, administrative approval rights, and litigation backstops (including fee-shifting and, for conversions, economic damages) to support financing.
• Escalation plan: If prohibited conditions are imposed, evaluate prompt suit for injunctive relief (and damages for conversions) with venue in the project county and appeals to the Fifteenth Court of Appeals.

Schlussfolgerung

S.B. 840 and S.B. 2477 materially shift land-use authority for larger Texas cities by establishing by-right housing on commercial land, limiting restrictive local standards, streamlining approvals, and creating potent private enforcement with fee-shifting—and, for conversions under S.B. 2477, economic damages. 

For prospective developers and investors in affected cities, the new framework offers clearer entitlement pathways, reduced discretionary risk, and enforceable remedies that can improve deal timing, underwriting certainty, and financing outcomes. At the same time, where municipal opposition or narrow interpretations arise, developers should plan for potential permitting disputes and litigation timelines—even under a favorable statutory regime—and build in schedule, financing, and contractual contingencies to manage those risks.