A fight over ground-floor retail mandates could become one of the most consequential zoning debates of 2026, with Washington state lawmakers moving to curb mandatory storefronts in new residential buildings.
A bill in the Washington state Senate would flip the script on commercial zoning, requiring cities with more than 30,000 residents to allow housing by right on most commercially-zoned land.
That approach has become common for cities and states seeking to increase housing supply.
However, the bill would go further by sharply limiting how often local governments can force ground-floor retail into those projects. So far, Washington is the only state to consider limiting mandates at the state level, creating a model that other officials in other states are monitoring closely.
After decades of codifying these mandates, cities nationwide have now put eliminating them in the crosshairs to address housing affordability and supply, as well as vacant ground-floor retail. The shift has focused on converting existing vacant retail or commercial space into residential.
In Michigan, Grand Rapids changed its code in 2021 to allow ground-floor residential in conversions. New York City and San Francisco have changed rules to allow ground-floor residential.
Decades of mandates
With the rise of new urbanism, planners often sought to harken back to the bygone days of ground-floor retail within walkable neighborhoods. The ideal became residential above restaurants, grocery stores or other commercial uses.
From roughly the 1980s through the 2000s, many cities embedded requirements or bonuses for ground-floor retail and other active uses to create pedestrian-oriented streets in downtowns, station areas and redevelopment districts. These codes often tied extra height or floor area ratio to providing active ground-floor space and required transparent facades, multiple entrances and commercial or civic uses at street level, with housing above.
However, instead of requiring retail to stay in step with up-and-down-the-street market demand, cities made retail a blanket requirement for most urban-style multifamily developments, even in the suburbs.
Prior to the COVID-19 pandemic, retail real estate professionals made the case for ground-floor retail.
“You need the retail on the ground floor to attract and charge higher rents for the multifamily units above,” Melina Cordero, now former head of real estate firm CBRE’s retail research, сказал the International Council of Shopping Centers in 2018.
The pandemic, however, crushed office and in-person retail demand in urban cores, particularly in office-dense districts that had been the main customer base for restaurant and shop tenants in mixed-use buildings. The acceleration of e-commerce further reduced demand for small storefronts.
Storefronts in these buildings increasingly remain vacant for long periods, or the space turns over frequently.
Developers want flexibility
For years, real estate developers have argued that mandatory ground-floor retail looks better on paper than in practice. It costs money to hold a space or flip tenants. Retail also entails increased parking requirements, which raise costs.
Developers are particularly wary of mandated retail in suburban and slower-growth markets, where tenant demand often cannot support the space. They want to build ground-floor space that can flex between retail, office or amenity use, rather than freezing every new building into a traditional storefront template.
The mandates can be particularly cumbersome for Low-Income Housing Tax Credit developments. Ground-floor commercial uses in LIHTC deals can lead to higher construction costs, more complex fire separation and elevator requirements, and prolonged vacancies that undermine the economics of affordable projects, согласно to the National Housing & Rehabilitation Association.
Allowing residential in commercial areas
Modeled on a 2022 California law, the Washington счет targets stagnant strip malls and low-slung office parks. Supporters argue that such properties should be prime sites for mid-rise housing rather than reserved for marginal storefronts that struggle to lease.
A parcel-level анализ by HR&A Advisors for the Puget Sound Regional Council found that the real leverage in the bill comes not just from opening commercial zones to apartments but from loosening the retail mandates. The analysis, conducted in partnership with Challenge Seattle and Amazon, determined that the mandates often push mixed-use projects from barely feasible to dead on arrival.
Supporters, including Gov. Bob Ferguson and large employers such as Microsoft, frame the change as a housing affordability measure. They argue the state can cut construction costs, streamline financing and unlock thousands of new units on land already served by roads and utilities.
Critics, however, warn that dialing back storefronts risks hollowing out neighborhood business districts and undermining plans for lively, walkable corridors that many cities spent decades cultivating.
Salomon cited concerns that long-standing neighborhood business districts could be diluted if cities lose the ability to require retail in key locations.
Threading the needle with local governments
Washington’s SB 6026 effectively enters the middle of a growing national debate. The bill has already been narrowed to preserve cities’ ability to require retail in transit-oriented districts covered by last year’s statewide transit-oriented development law. The same holds for business improvement areas and state or national historic sites.
The bill allows limited retail mandates — capped at 20% of an area — elsewhere in exchange for modest height bonuses.
That compromise reflects Washington’s willingness to preempt local zoning that would block housing while still pursuing a balance between ground-floor economic realities and long-promised, vibrant, walkable streets.
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