Infill Development Is Legal in More Places Than Ever. Most Sites Still Don't Pencil Out.

Over the past two years, cities and states have passed roughly 250 zoning rule changes and nearly 180 state-level housing laws aimed at loosening the restrictions that once made it illegal to build more than one home on a lot. The stated goal is to chip away at the “missing middle,” the housing stock between single-family homes and large apartment buildings, by unlocking small, irregular, or previously off-limits parcels for denser construction.

Legal permission, though, has not translated cleanly into built housing. Construction costs rose roughly 44.5 percent between 2019 and 2024, driven by commodity prices and labor shortages, and that increase has landed hardest on exactly the kind of small-scale, site-by-site development infill zoning was meant to encourage. Researchers who study infill development have long noted that higher land values, environmental and site-assembly costs, and lengthy permitting processes can push an otherwise-legal project outside the range where it’s financially viable, and that this gap tends to be widest outside of the most active, highest-demand markets.

That gap, between what zoning now allows and what the numbers actually support, is where a lot of the current losses in small-scale development are concentrated, according to Steven Weber, founder of Rekara, a residential construction analysis software company based in the Seattle area. Weber, who also works as a broker and investor, describes the disconnect bluntly: infill development “is the classic you could, but should you?”

The Broker Knowledge Gap

One under-discussed risk in small-scale development is how often the initial feasibility read comes from a broker who isn’t deeply versed in land use code.

Weber recounts a recent conversation with two investors at an industry event, both of whom had already closed on properties on the east side of the Seattle metro area. Their selling brokers had told them that new legislation would allow additional units on the sites. In both cases, the properties carried CC&Rs, covenants, conditions, and restrictions tied to their subdivisions, that likely blocked the intended development regardless of what the underlying zoning allowed.

“The broker that sold me the place told me I’ll be able to do it,” Weber recalls one buyer saying. “New legislation, blah blah. And I was like, yeah, no, you have CC&Rs.”

Weber says the pattern is common: a broker may correctly identify that a parcel’s zoning technically permits several units while missing the subdivision classification or covenant restrictions that make that number irrelevant. For buyers relying on that guidance to make acquisition decisions, the cost of the knowledge gap is the entire deal.

The Exit Pricing Disconnect

Beyond site-level feasibility, there’s a persistent mismatch between what sellers expect a property to be worth and what current cost structures support. Weber sees this on both sides of a deal: sellers anchored to peak values from the low-rate 2020–2021 environment, and builders or investors who assume prices will simply be higher by the time a project delivers. Development, in his framing, is fundamentally mathematical, the cost of land, labor, and materials weighed against achievable sale prices, and when either side of that equation reflects wishful thinking, the project doesn’t pencil.

“My property was worth a million dollars in 2020 when rates were 3%,” he says, paraphrasing a common seller position. “Great, well now it’s worth 700. ‘Well, no it’s not.’ Well, development’s just math, basically.”

Weber notes that this kind of hesitation to adjust expectations shows up at every experience level, though seasoned professionals tend to adapt more quickly. Newer investors may face the greatest challenge, particularly when they rely on broker guidance that isn’t always grounded in current market conditions.

Where Infill Actually Applies

The national conversation around infill sometimes treats it as a universal fix. Weber draws a sharper boundary: infill makes sense in major metros and their surrounding suburbs, where land is scarce, and demand is high enough that buyers will accept smaller lots without private yards. In rural areas, where land is abundant, infill is largely unnecessary.

Demand matters as much as supply. Infill works where local incomes support the prices that smaller, denser housing commands. Weber points to Austin as one of the few municipalities that has meaningfully opened its zoning in recent years, a shift that has coincided with declining condo and rent prices, good news for buyers, but a source of frustration for existing owners who’d expected continued appreciation.

In Seattle, the pattern is playing out geographically. “We’re seeing a lot more people push out to Marysville, Everett, Lake Stevens,” Weber says. “What used to be a half-hour commute, people are now accepting an hour commute to live in the type of areas that they want to.” Buyers priced out of the urban core are trading proximity for affordability, reshaping where infill demand actually concentrates.

Screening for Feasibility

The response to this gap has been a small but growing set of tools aimed at underwriting infill sites before money changes hands, running zoning, utilities, environmental constraints, and site-specific costs against achievable sale prices to flag which parcels are worth pursuing and which only look viable on paper.

Rekara, Weber’s company, is one version of this approach. Its tool takes an address, verifies variables like utilities, environmental critical areas, and zoning, and produces a feasibility report with site plans and underwriting; a batch feature can screen large numbers of addresses at once. It flags subdivision classifications that tend to correlate with CC&Rs; though it doesn’t pull title reports directly, the flag is meant to prompt a title check before closing, not replace one. The underlying need this kind of screening addresses, though, extends well beyond any single company’s product: as long as feasibility assessments continue to rely on brokers without land-use expertise, there’s a market for tools that catch what that process misses.

A Cautious Read on the Broader Market

Weber is candid about the current environment. “The market sucks,” he says. “We’re on the burst of a bubble. The stock market goes up, but Main Street is suffering.” Discretionary spending is soft across demographics, which makes it harder to justify any new tool or service that adds cost to a business.

His concern extends to capital concentration in AI. “I think it looks a lot like ’98, ’99,” he says, “and when the bubble pops, it’s gonna hurt.” He draws a direct line between tech-sector health and home prices in cities like Seattle and San Francisco, where tech growth has driven appreciation over the past seven years. “If your industry that is basically supplying the money supply for your city starts to dwindle or has a hiccup, you should think about that in terms of real estate prices too,” he says.