Building From the Ground Up: The Power of Small-Scale, Incremental Development
How modest, neighborhood-scale projects can support more equitable, authentic, and financially resilient communities
Starting Small
When we think of transformative development, our minds often jump to grand master plans, towering new apartment complexes, or sprawling mixed-use projects that promise to remake entire districts overnight. In some cases, these grand projects are exactly the catalyst a community or neighborhood needs and has been asking for. But these major projects don’t work everywhere. They can be difficult to finance, often face community pushback for changing too much too quickly, and they depend on the assembly of a lot of property all at once. In high demand areas this can be very difficult and expensive.
Many communities are beginning to realize that there is an equally powerful tool for building thriving neighborhoods, and it doesn’t require tens of millions (or hundreds of millions) of dollars.
Places where small-scale infill development is allowed at the next viable increment of density are showing their strength. The modest duplex, a few simple townhomes, the corner shop, and a handful of backyard cottages in every neighborhood can make a big difference when added up across an entire city or region.
Small-scale, incremental development is quietly revolutionizing how we think about building communities. Rather than waiting for big developers to swoop in with massive projects, this approach empowers local residents, small business owners, and community-minded investors to strengthen their neighborhoods one building at a time. And, in many cases, those small-scale and local developers begin to understand the value of one or two larger development projects, when done well.
Why Small-Scale Development Matters
Creating Authentic, Place-Based Communities
Incremental development results in places that are adaptable and financially more resilient than our modern approach. When development happens gradually, it allows communities to evolve organically in response to local needs and character rather than being imposed from the outside.
The kind of places we want to live in are built and maintained by people who really love them. Local and small-scale developers typically aren't just building for profit—they're building for their own community, their neighbors, and sometimes their own families.
Advancing Equity Through Accessible Development
One of the most compelling arguments for incremental development lies in its potential to address racial and economic inequality. Zoning for smaller scale buildings not only allows smaller projects, but the buildings themselves are less expensive to build and can be financed more easily through standard mortgages. The lower development costs in turn can support more affordable rents.
This accessibility matters immensely. While large-scale development typically requires millions in capital and complex financing arrangements, small-scale projects can be undertaken by local residents with modest resources. This democratizes the development process and creates pathways for wealth creation that are available to just about anyone who can get a mortgage.
What's Standing in the Way?
Despite its benefits, small-scale incremental development faces significant barriers. Understanding these obstacles is the first step toward removing them.
Zoning: The Biggest Roadblock
Modern zoning codes are perhaps the most significant barrier to incremental development. At present, the vast majority of residentially zoned land only allows for one single-family house per lot, and most communities require a lot to be excessively large. This both adds cost to a small-scale project and dramatically limits the number of viable opportunities. See our previous post about the perils of excessive minimum lot sizes.
This exclusionary zoning doesn't just limit housing options—it actively prevents the kind of gentle density that makes neighborhoods walkable and affordable. Many zoning codes effectively prohibit the very types of buildings that characterize our most beloved neighborhoods: duplexes, corner stores, live-work spaces, and accessory dwelling units.
This duplex plan could be permitted in any single family district on any lot that is at least 40’ wide and 80’ deep. It can be owner-occupied on one side or both sides if land divisions are permitted for townhomes. Source: Liberty House Plans.
Financing Challenges
Obtaining financing for a 1 - 4 unit development can be fairly straightforward, if the developer intends to live in one of the homes. Most FHA mortgage products are available for 1 - 4 units per loan and only require 3.5% down payment if the borrower has a credit score of 580 or above. The project must make financial sense - meaning that the total rent collected must equal or exceed the total mortgage, tax, and insurance costs. But, this can be a fairly low-barrier way for a first-time developer to get started in their own neighborhood.
If local construction costs are averaging $200 per square foot, and a small-scale developer is working to build a 4-unit building with two 900 square foot units and two 500 square foot units, the total construction cost will be around $560,000. Add in the cost of land ($70,000), and soft costs for design, permitting, and financing ($30,000), and you have a total project cost of $660,000.
The required down payment for this building will be $23,100 under FHA lending standards. While that’s not a simple amount for everyone to come up with, its a surprisingly low barrier for a first-time developer with a little bit of saved cash and maybe a couple of friends and family.
The simple rule of thumb to assess whether this project makes financial sense is the 100 Rule. If we divide the total project cost by 100, that will be the amount of rent the project must create to be financially stable.
$660,000 / 100 = $6,600 monthly rent needed
$6,600 / 4 units = avg rent of $1,650 / mo
(maybe $1,950 for the 900 sq ft units, and $1,350 for the 500 sq ft units)
At this cost, these new housing options are not capital “A” affordable. Meaning that they won’t serve low-income families without a subsidy. However, they will be lower-case “a” affordable for families earning $50,000 to $80,000 per year. In many places, this is the sweet spot for teachers, nurses, firefighters, and recent college graduates just getting started.
Knowledge and Capacity Gaps
Many potential small developers simply don't know where to start. Small-scale developers have limited financial and social capital, but incremental development allows them to transform neighborhoods through smaller sites in concentrated areas. However, without proper training and support systems, even motivated community members struggle to navigate the complex world of real estate development - especially when the local permitting process is not simple and streamlined.
What We Should Do Now
The good news is that communities across the country are already implementing solutions. Here's how we can support and accelerate small-scale, incremental development:
1. Reform Zoning to Enable Gentle Density
Cities should prioritize zoning reforms that allow incremental development. Zoning codes can be crafted to lower the barriers to neighborhood-scale development and infill housing by providing specific tools for more equitable and affordable development.
Key reforms include:
DO Allow accessory dwelling units (ADUs) by right in most/all residential districts
DONT impose an owner-occupancy requirement or burdensome limitations that effectively limit this option.
DO Allow duplexes and fourplexes in single-family zones
DONT require excessive lot size requirements. Make them possible on a standard single family lot. If you need a limiting element to get support from your planning commission, start with corner lots only, or only those properties fronting on primary collector streets.
DO Allow residential on the ground floor in neighborhood commercial areas
DONT require retail on the ground floor UNLESS it is your primary retail center AND there is clearly enough market demand to support the additional retail space
DO Make the approval process for small-scale projects simple and straightforward.
DONT impose requirements that send small scale developers on a wild goose chase. They should be able to get a permit in less than 2 weeks if they submit a complete application.
2. Build Local Development Capacity
Organizations like the Incremental Development Alliance are leading the way in training small developers. Their workshops focus on small scale real estate development and simple project formation. They take a big picture view of neighborhood-based development to help attendees analyze what makes a good project, how a building makes money, and how small developers interact with the broader ecosystem of professionals in the built environment.
Communities should invest in training programs that teach residents how to become small developers, providing both technical skills and ongoing mentorship.
If you’re in West Michigan, we recently helped the Urban League of West Michigan to create a new Equitable Development Initiative to provide exactly this type of training support. Enrollment is happening now and Cassandra Oracz is a fantastic instructor.
See also Nathan Biller’s new ADU Academy for a local opportunity to learn about building a backyard cottage. This inaugural event will undoubtedly create a ton of great connections in West Michigan.
3. Use Public Land Strategically
Cities can lead by example by making public land available for small-scale development. Identify vacant City-owned lots that could be offered for Incremental Development and create streamlined processes for community members to develop these sites. In some cases, this might be subdividing a city-owned parcel into several smaller lots. Or, if you have a land bank authority with vacant land in the inventory, make sure that the local zoning has been right-sized to the local needs.
4. Create Supportive Ecosystems
Successful incremental development requires a supporting ecosystem of professionals who understand small-scale projects. This includes architects, contractors, lenders, and city staff who are equipped to work with small developers rather than just focusing on large projects.
Taking the Next Steps
The shift toward incremental development isn't just about changing policies—it's about changing how we think about community building. We can't wait around for a big developer or a mega-project to fix our cities. The kind of development we need today happens from the bottom up.
Communities interested in fostering incremental development should:
Start with pilot projects: Identify one or two sites where small-scale development could demonstrate success and build momentum.
Engage residents: Host community workshops to educate residents about small-scale development and identify potential developers within the community.
Audit local regulations: Conduct a systematic review of zoning codes, building codes, and permitting processes to identify and remove barriers to small projects.
Build partnerships: Connect with organizations like Strong Towns, the Incremental Development Alliance, and local ULI chapters to access resources and expertise.
Measure and celebrate success: Track the impacts of small-scale projects and share success stories to build support for broader reforms.
Resources and Further Reading
Strong Towns:
Incremental Development Alliance:
Neighborhood Evolution:
Urban Land Institute:
Additional Learning:
Zoning for Incremental Development Course (Planetizen)
Incremental Code Reform Course (Congress for the New Urbanism)
Have a story about incremental development in your community? Want to learn more about becoming a small developer? Share your thoughts and questions in the comments below.