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HomeMy WebLinkAbout2026-046 Multifamily Development MoratoriumJuly 31, 2026 Report No. 2026-046 INFORMAL STAFF REPORT TO MAYOR AND CITY COUNCIL SUBJECT: Temporary moratorium on new permit applications for multifamily development EXECUTIVE SUMMARY: On July 2, Mayor Watts submitted a two-minute pitch to have a work session to discuss a temporary moratorium on new permit applications for multifamily development. On July 14, 2026, the City Council gave direction to proceed with the two-minute pitch proposal as outlined in Ordinance 24-1725. Denton’s current apartment pipeline is projected to total 32,407 units, from 5,907 units in pre- development and under construction, in addition to the existing 26,500 units, exceeding the 2040 Comprehensive Plan’s original demand target of 28,839 units. Recent market data and development activity indicate a natural slowdown in the multifamily market, reflected in reduced developer inquiries and regional vacancy and rent trends. Under Chapter 212 of the Texas Local Government Code (TLGC), the City may enact a temporary moratorium on accepting new permit applications if justified by evidence of shortage of public facilities. This report outlines those legal requirements, provides alternate tools for Council consideration, including potential amendments to the Denton Development Code (DDC) that would expand Specific Use Permit (SUP) requirements for multifamily development. BACKGROUND: Current state of Multifamily (MF) in Denton The Denton 2040 Comprehensive Plan projected a 3.19% annual population growth rate, targeting a total population of 229,192 by 2040. To accommodate this expansion, the plan called for 37,094 new housing units, consisting of 19,908 single-family detached homes, 6,046 townhome/fourplex units, and 11,239 multifamily units. An estimated 2020 baseline of 17,600 units in existing apartments, the plan projected to reach 28,839 units by 2040. These estimates relied on the 2020 housing mix percentages and did not anticipate potential shifts in housing preferences, market demand, or affordability considerations. Today, Denton’s apartment inventory has outpaced these projections. According to data from CoStar, Denton currently has approximately 26,500 existing apartment units. Staff has identified an additional 1,621 units in pre-development and 4,286 units actively under construction. Upon July 31, 2026 Report No. 2026-046 completion of the current development pipeline, Denton’s total apartment stock will be 32,407 units, exceeding the Comprehensive Plan’s anticipated 2040 target by 3,568 units. Development by Right Multifamily uses are permitted by right within the Mixed-Use Neighborhood (MN), Mixed-Use Downtown Core (MD), and Mixed-Use Regional (MR) zoning districts. In these districts, developers must submit a Zoning Compliance Plan, standard civil engineering plans, plats, and building permits to be reviewed and approved by the City. Conversely, in the Residential 7 (R7), Suburban Corridor (SC), Highway Corridor (HC), and General Office (GO) districts multifamily projects require a Specific Use Permit (SUP). The SUP process entails initial staff review of the development plan, followed by a public hearing and recommendation from the Planning and Zoning Commission, and a final decision by the City Council, which may approve, deny, or conditionally approve the request prior to engineering and permit submittals. There are currently no active rezoning, Planned Development (PD), or SUP applications for new multifamily projects. The Comprehensive Plan supports a diverse housing inventory (Goal HN-1) and encourages higher-density housing within mixed-use developments across Downtown, University Compatibility Areas, and designated regional centers (Action 7.1). The Design Downtown Denton Plan also targets an additional 1,500 residential units in the downtown core over ten years. What Is a Moratorium? A moratorium is a temporary suspension on accepting or processing new development applications—such as zoning changes, plats, site plans, or building permits—in a defined geographic area. Under TLGC Chapter 212, a municipality may impose a moratorium only when justified by specific findings related to: 1. A shortage of essential public facilities or infrastructure, 2. A lack of adequate public services needed to protect public health, safety, or welfare, or 3. A need to update land development ordinances to protect the community from identifiable harms, but this is limited to only commercial development. Each of the above justifications requires a different set of written findings and evidence to support the need for the moratorium. A multifamily moratorium in Denton would apply only to new applications. If an application is filed — whether zoning, plat, site plan, or building permit— it must proceed under vested rights established in TLGC Chapter 245. A moratorium cannot retroactively halt or invalidate already filed applications. What Is the Process for a Moratorium? July 31, 2026 Report No. 2026-046 TLGC 212.134 was recently amended through HB 2559 (effective September 1, 2025), and the following outlines the process for municipalities considering a moratorium. 1. Required Notice First, Council must pass an ordinance or resolution setting the date of the first public hearing. Then, at least 30 days before the first public hearing, the City must: • Publish notice of the hearing in a newspaper of general circulation, and • Send certified mail notice to any individual who, within the preceding two years of the Council action setting the public hearing, submitted a written request to the City Secretary to receive moratorium-related notices. Staff is not aware of any such requests. 2. Public Hearings The City Council must hold two public hearings on the proposed moratorium. • The second hearing may not occur earlier than 30 days after the first hearing. • The municipality must issue written findings that include but are not limited to evidence of the following: the need for the moratorium, that the moratorium is limited to areas of the city where there is a shortage of public facilities and where development has not been approved to occur, that the City has explored and found alternative methods unsatisfactory, and the approved working plan for achieving the objective of the moratorium. 3. Ordinance Adoption Requirements Not later than 12 day after the second public hearing, the City Council must begin its final determination on the moratorium, which may require a special called meeting of the City Council. Adoption requires: • Two readings of the ordinance, • Readings spaced at least 28 days apart, and • A three-fourths supermajority vote at final reading (at least six Council Members). If Council does not comply with these timing requirements, the moratorium cannot be adopted. 4. Duration and Extensions (TLGC 212.1362) Under the updated law: • A moratorium automatically expires after 90 days unless extended. Extensions require an additional public hearing and written findings showing: o the problem necessitating the extension, o progress made toward resolving it, o a specific extension duration, and o evidence showing the issue will be resolved within that extension period. • A moratorium may not exceed 180 days total, and July 31, 2026 Report No. 2026-046 • The City may not impose a similar moratorium in the same geographic area addressing the same harm within two years of its expiration. DISCUSSION: Recent Multifamily Trends in Denton Recent reports indicate the broader Dallas-Fort Worth multifamily market is stabilizing following a high-level of new units constructed recently. Across the DFW metro area, the number of units under construction is approximately 30,200–32,800 units, which represents a 24.5% year-over- year reduction as new construction starts have slowed sharply. Regionally, vacancy currently sits between 10.1% and 12.2%, and regional effective rents experienced a modest year-over-year decline of 2.1% - 2.9% (averaging $1,508 per month). Various sources show Denton’s vacancy rate between 12.8% and 19.9% and an average rent of approximately $1,420, which is a 6.1% decrease in rent cost over last year. Despite high vacancy, Denton led the metroplex in absorption in Q1 2026, with 522 more units occupied than vacated. City wide, approximately 3,400 units remain vacant12. Reflecting regional trends, local developer interest in submitting new multifamily proposals in Denton has slowed significantly. The number of Multifamily Pre-Application Conferences (PAC) over the past year shows a drop in interest in new multifamily projects. PAC inquiries to the City average fewer than two per month, indicating that market conditions have naturally slowed the influx of new multifamily proposals. Impacts of a Moratorium If City Council wished to pursue a moratorium on multifamily, the earliest a moratorium could take effect would be December 2026, potentially extending through May 2027 if renewed. This timeline would require public hearings to begin in September 2026. As noted above, there are 3 different means of justifying the need for a moratorium; however, a residential moratorium can only be enacted based on a shortage of public facilities defined as “water, sewer, or storm drainage facilities or street improvements provided by a municipality or private utility” or other public facilities (i.e., police or fire). The City would need to provide written findings demonstrating either: 1 Cushman & Wakefield, MarketBeat: Dallas/Fort Worth Multifamily, Q1 2026. 2 Matthews Real Estate Investment Services, Market Report: Dallas–Fort Worth, TX Multifamily, Q1 2026. July 31, 2026 Report No. 2026-046 1) the extent of need beyond the estimated capacity of existing essential public facilities that is expected to result from new property development and that the area where there is a lack of public facilities; or 2) a significant need for public facilities other than water, sewer, drainage, or roadways (“other public facilities”) and that failure to provide those other public facilities would result in an overcapacity or would be detrimental to the health, safety, and welfare of residents. Alternative Options As an alternative to a moratorium, Council could direct staff to evaluate amendments to the Denton Development Code to expand SUP requirements for multifamily in additional zoning districts. Currently the DDC requires a SUP for the development of multifamily within the Residential 7 (R7), Suburban Corridor (SC), Highway Corridor (HC), and General Office (GO) Districts. Multifamily development is permitted by right within the three Mixed-Use Districts: Mixed-Use Neighborhood (MN), Mixed-Use Downtown (MD), and Mixed-Use Regional (MR). If City Council preferred, a method of ensuring new multifamily developments are analyzed more critically for potential negative impacts would be for staff to bring forward code amendments for discussion regarding additional standards, requirements, and limitations for a SUP for multifamily development in other zoning districts. If the Council wishes to pursue this option, additional consideration will need to be given regarding how to address existing multifamily developments and those in currently in the development process that do not have a SUP. However, as discussed in the recent trends, there has been a decrease in the number of new submittals related to MF developments in the City. CONCLUSION: Denton’s recent multifamily development has outpaced early 2040 Comprehensive Plan projections; however, market conditions, including rising construction costs, lower rents, and an abundant supply, have naturally slowed the market for new multifamily development even though Denton maintains a high rate of new leases. Pursuing a formal development moratorium under updated Texas Local Government Code would require written findings for the need for the moratorium regarding public facility shortages and would be a temporary measure with a maximum duration of 180 days. Should City Council seek more targeted oversight over the location and design of future projects, there is an option for evaluating targeted amendments to the Denton Development Code, like adding new standards and expanding Specific Use Permit (SUP) requirements across additional zoning districts, which would allow City Council a thorough review of new multifamily developments being proposed for construction. STAFF CONTACT: Charlie Rosendahl Director of Development Services July 31, 2026 Report No. 2026-046 Charlie.Rosendahl@cityofdenton.com (940) 349-8452 REQUESTOR: Mayor Watts STAFF TIME TO COMPLETE REPORT: 4 PARTICIPATING DEPARTMENTS: Development Services