Can Zoning Affect Your Property Value?

I got a letter from the County Assessor’s office stating that my zoning was changing to C-3; will this affect my loan? This actually occurs quite often as counties and municipalities develop growth plans and try to reduce “spot” zoning requests. This should not affect your current home loan; but could affect you in the future.

As an area becomes more commercial, a planning office will usually recommend a change of zoning in an area to reflect anticipated future development. Let’s assume that 20 years ago you bought a house outside the city limit, but on a major thoroughfare. As the city expands, more and more parcels around you sell and request a change of zoning from agricultural or residential to commercial. Rather than continue to deal with individual requests, the governmental body will usually change the zoning of many properties to reflect the trend.

Exceptions to this would be neighborhoods that back up to the major road, but do not have access to individual lots from the main road. Many neighborhoods now enforce restrictive covenants that would prevent properties within the neighborhood from being used for anything but residential use. The county would usually accept this and not change the zoning of lots located within the neighborhood.

The one thing that you want make sure of is that you can “build back” your home in the event of a total loss. Some zoning changes will not allow you to get a building permit that is not compatible with the zoning. Obviously, commercial construction has much more rigid standards than residential requirements.

The second thing to consider is what occurs if you try to sell the property. Although your loan was in place before the zoning changed, a new lender will be looking at how the property is zoned. The appraiser for the lender is going to look at legal requirements (building back the property) and also at the current use of other properties around the subject property. If residential usage is still common with most parcels, you may be okay. When your property becomes an island in the midst of development; you will find it much harder to sell as a residence.

Commercial property usually carries a higher value and may actually increase the value of your property. The question arises: can your home be used by a business, or will it need to be removed and a new structure built in place. If you have to rebuild then the economics of removing the old structure will determine the ultimate value.


This blog is for informational purposes and is the opinion of the writer. In financial matters always solicit professional advice and legal counsel if necessary.