Return of Downtown Local Ownership?

After the September 8th 2025 Bloomington City Council meeting, residents of the urban core can now construct the beloved shophouse typology. (I know, it took some time to push this blogpost out the door).

Agenda Item number 8.B. standardized the accessory dwelling unit application process (which we will talk about in a separate post), allows for small shops in high density residential areas, and allows single-family units on the upper floors of shops in the D-2 district. While Agenda Item number 8.C. simplifies confusing and conflicting zoning rules to make it easier for people to buy and OWN duplexes and townhomes.

Putting these changes all together, along with existing code provisions, developers now have the toolkit to build a truly connected and inspired transitional district between the downtown and the inner neighborhoods. Importantly, these building types can be built for homeowners and shopkeepers who want to live above their workplaces. People and institutions that can deepen their connection to a place is key to the future success of the neighborhood. 

The Shophouse Typology & Why It Matters

Whatever people call them: shophouses, shophomes, traditional downtown buildings, or live/work units, these are the bread and butter of a great and beautiful urban environment.¹ Compared to massive five-over-one podium apartment buildings² that many large scale developers are putting near downtowns, the humble shophouse is much smaller and simpler to construct. A shophouse also takes up much less space, meaning that numerous owners can own smaller parcels of shophouses rather than one podium building taking up much of one block.

Diversified ownership of small parcels has multiple benefits: varied owners create an interesting and unique environment friendly to pedestrians to activate street life, the smaller spaces are more manageable for local entrepreneurs, and multiple owners are better for resiliency. If one building forecloses or is vacant, it only ruins a small part of the block instead of an entire wall of emptiness seen by vacancies in larger buildings, it lowers the barrier to economic participation as these spaces are smaller and controlled locally, and the ownership structure creates “eyes on the street” to reduce crime. These differences in urban layout are analogous to monocultures versus polycultures in agriculture. The biodiversity allows for a higher effective crop yield; in cities, small parcels with multiple owners see a higher tax value per acre compared to big developments.

What exactly can we build & where?

According to this modified zoning map from McGIS, any lot highlighted in blue is allowed to build the shophouse typology by right,³ as long as all other applicable codes are also complied with. What will this look like? We’ll be creating some infographics in the future detailing which specific building forms can be placed in the various downtown zoning districts.

Financing

Shophouses can be financed with simple 30 year residential mortgages instead of the more complicated commercial financing products. That means anyone who can purchase a single-family home can also purchase a shophouse; that also includes the commercial space on the ground level. Imagine covering your commercial lease costs because it is also your mortgage payment. If you decide to close the business, or you’d like to have someone else operate a business on the ground floor of your home, you can take that rental income to supplement your mortgage payments. In fact, these payments can be factored into your qualifying income when applying for a home loan.⁴

Fiscal Impact

Shophouses don’t take up much land, so you can fit many of them on a single block. One block-sized building is putting all your eggs in one basket. Many small buildings put these proverbial eggs in many baskets. This allows for a more stable city budget. Over time, with other good fiscal management, this allows the city to proactively upgrade infrastructure, such as water and sewage.

Why is this Good for a Strong Town?

Strong towns are healthy communities. The newly-allowed building types are for people who have community at heart. From grown up children who build a backyard cottage for their aging parents, to the small business owners who become neighbors with their customers. These people now have more ways to contribute to our city. Not only that, but these building types will set us up for economic resiliency for generations down the line through higher tax values per acre and natural resistance to large-scale blight. It allows folks to incrementally grow their businesses and their building footprints over time through adding ADUs. These small shophouse units can also act as a jumping off place for larger brick and mortar establishments for businesses that prove themselves and build a clientele. Lastly, they bring a deeply needed residential density to Downtown that is prerequisite for certain types of quality of life amenities like drugstores and grocers.

Other Barriers

Now that the zoning barriers have been removed, what else stands in the way of a shophouse city? In order to have cheaper infill housing, officials must also peer into the building and fire codes for possible amendments and tradeoffs to help get these missing middle structures to get off of the drawing board. The Center for Building in North America recently published a white paper detailing all of the specific hurdles to more affordably constructed missing middle housing like shophouses. That study can be found here in its entirety. Lenders need to be more amenable to these products, as their novelty for this specific community might scare them away from approving loans for these projects. Education for lending institutions as well as city officials about the benefits of this building type will also be well worth it.

To put it simply, here are several changes that can make it even easier to build shophouses:

• Fire code changes to allow for two-hour fire-rated separation walls instead of the expensive NFPA 13 fire sprinklers, this has been done in several jurisdictions across the country.
• Flexibility for micro mixed use. Currently, if multiple uses stack on top of each other, like commercial ground floor and residential upper stories, it triggers a requirement for a full NFPA 13 fire sprinkler system, not the cheaper alternative NFPA 13R or 13D. Some cities have created a carve-out in the building code to exempt Group B (business) occupancies on the first floor to be exempt from the stricter sprinkler requirements. Group B is made up of lower hazard uses like offices, studios, and small retail.⁵ In order to make these buildings with commercial spaces viable in Bloomington, this has to happen.
• Adding flexibility to water detention requirements for infill development, such as collective offsite retention ponds, bioswales, or paying a fee to BNWRD in lieu of meeting the requirement.
• Educate planning staff on these missing middle typologies and run them through a faux (or real) pilot permitting process to determine bottlenecks and remove them.

Next Steps

There is a difference between allowing building types on paper and actually getting them built. When our organization lobbied to loosen the ADU ordinances in our community in 2022, the city did not see a single building permit for several years. This is due to larger problems at play: 

• Contradicting text within the zoning code that effectively made it impossible to build ADUs on most lots even if on paper they were allowed.
• Lack of awareness by homeowners and developers that ADUs were even an option.
• A dearth of financial products to get these built (still not fully solved).
• Institutional developers’ business models are not focused on this type of housing.
• Larger macro-economic issues like tariffs, construction prices, and interest rates.

In order to get these shophomes built, our community is going to have to find a “guinea pig” developer and homebuyer to be the first. Once people can visibly see what is possible, they’ll flock to it. Architect Sam Day designed and built these Spoke Street Shophomes in a new development near Oklahoma City, and every unit was pre-sold before they even broke ground, so many inquiries came in that the master developer had to adjust the plan to add more of these units in future phases. There is an appetite for this, people just need to know it is a possibility.

For those interested, Strong Towns Blono will be conducting a design charrette in 2026 that will highlight the possibilities of this building typology. We’ll also be creating a one-pager to inform the public about this! Stay tuned! 

If you’re interested in living or working in one of these units, share this post, get in contact with us, and let’s work together.

Footnotes:

1. Technically speaking live/work and housing above shops are separate definitions under the Bloomington zoning code, all of which are allowed in the Downtown. Live/work units “use[d] for both dwelling purposes and nonresidential use provided that no more than two persons who do not reside in the unit are employed on the premises,” while the other residential uses are allowed either above commercial uses in certain downtown districts or on the ground floor when built as attached housing (rowhouses). Read more about these distinctions in the zoning code. ↩︎
2. Type-V wood frame construction over Type-I concrete and reinforced steel construction for the first floor. This is a common way to increase building heights for developers. ↩︎
3. That means no lengthy public hearing process where the discretion of the Zoning Board of Appeals can accept or reject proposals. ↩︎
4. Mortgage underwriters will only allow 75% of the potential rental income to be included in addition to your salary to increase your borrowing power. ↩︎
5. John Zeanah, “Beyond Zoning: Hidden Code Barriers to Middle-Scale Housing,” ed. Stephen Smith, https://www.centerforbuilding.org/, September 2025, 21. ↩︎