Flagstaff staff propose by-right single-use residential, adaptive reuse incentives tied to affordable units

City staff presented a work session on a proposed zoning text amendment on June 25, 2025, that would allow single-use residential and adaptive reuse projects in commercial zones without a conditional use permit if the projects meet specified affordability and building criteria. Zoning Code Manager Tiffany Antal introduced the proposal as “a work session for our text amendment called single use residential and adaptive reuse incentive.”

The amendment would let developments that contain only residential uses — described in the draft as “single use residential” — be permitted by right in commercial zones if they provide a minimum of 20% of units at an average of 80% of area median income (AMI) for rental units (income restriction for 30 years). For ownership projects the draft sets a 15% affordable-unit threshold at a higher AMI; staff described ownership units as likely condominium projects capped around 100% AMI.

The draft includes additional incentives for adaptive reuse projects (repurposing existing buildings rather than demolishing them). The draft requires an adaptive reuse building to be at least 15 years old and limits new additions so the existing structure remains primary. For housing-focused adaptive reuse, staff would waive some parking, landscaping, common-space, and architectural-design requirements so long as the site meets the affordability threshold.

Staff said the incentives were developed to align with bond funding the Housing Department plans to use for adaptive reuse projects. Housing staff said bond dollars would be applied on a per-affordable-unit basis and would not subsidize market-rate units; the housing presentation noted a per-unit cap “about $40,000 per unit.” Staff and commissioners discussed that pairing code changes with available bond funds is intended to increase the likelihood developers will take on conversions that can be costly and unpredictable.

Commissioners asked for examples and raised concerns. Commissioner questions included what building sizes and neighborhoods would qualify, whether projects would allow short-term rentals, and whether the 20% threshold would disincentivize private developers. Housing staff said qualifying projects with income-restricted units would be subject to periodic verification, and ownership units would be monitored to confirm primary-residence requirements where applicable; staff noted prohibiting short-term rentals outright is not within their authority but that deed restrictions or CCRs could be used in some ownership projects.

The Housing Commission had recommended a different approach at its review, favoring permitting adaptive reuse without mandatory affordable-unit thresholds; staff explained the recommended 20% trigger is intended as an initial, cautious step while the city refines a larger adaptive reuse strategy and complements bond funding. A public commenter, Charity Lee of Capstone Homes, said she supported allowing single-use residential and adaptive reuse by right but recommended removing the 20% affordable requirement and using limited bond funds on fully affordable projects instead.

Staff told the Planning and Zoning Commission it will return the item for a public hearing in August after incorporating feedback and providing additional analysis if requested. No ordinance vote was taken at the June 25 work session.