Beyond the Backyard Cottage: The "Missing Middle" Gold Rush

If you are following the local real estate conversation, you have likely noticed a shift. The buzz isn't just about DADUs anymore.

With the implementation of Home in Tacoma Phase 2 (effective February 1, 2025), the conversation has moved rapidly to "larger projects": townhomes, cottage clusters, and 4-to-6-unit infill developments.

Investors are scrambling to understand these opportunities because the potential returns on a 6-unit townhome project dwarf those of a single rental cottage. But scaling up from a DADU to a "Unit Lot Subdivision" is not just a difference in size—it is a difference in species.

Here is what you need to know before you hunt for your first multi-unit site.

The New Menu: What Can You Actually Build?

Under the new Urban Residential (UR) zones, we have moved beyond the simple "House + ADU" model. We now have specific typologies designed for separate ownership:

* Rowhouses (Townhomes): Attached homes, each with its own front door and fee-simple land. These are allowed in UR-1, UR-2, and UR-3, but are most potent in UR-2 (Low Scale) and UR-3 (Mid-Scale) where density bonuses kick in.

* Courtyard Housing (Cottage Clusters): Small, detached or attached homes arranged around a shared common green. This is the "sweet spot" for difficult lots that don’t have alley access for traditional townhomes.

* Houseplexes: A single building that looks like a large house but contains 3–6 units. Warning: Unlike townhomes, these usually must be sold as condos because the units are often stacked or share a roof in a way that prevents subdividing the land.

The Secret Weapon: Unit Lot Subdivision (ULS)

Most novice developers assume that to sell four townhomes, they have to form a condo association. In Tacoma, that is rarely the best move.

The superior legal mechanism is the Unit Lot Subdivision (ULS).

* How it works: We treat the entire development site as a "Parent Lot" to satisfy zoning rules (density, setbacks, lot coverage). Then, we slice that parent lot into "Unit Lots" (Child Lots) that map perfectly to the footprint of each townhome or cottage.

* Why investors love it: You are selling "fee simple" dirt, not just air rights. Buyers get a standard deed and standard financing. Resale values are typically higher than condos, and you avoid the strict liability warranties associated with condo construction in Washington.

The Trap: It’s Not Construction, It’s Civil Engineering

This is where I see people get burned.

Building a DADU is largely an architectural project. Building a 6-unit townhome cluster is a civil engineering project.

When you cross the threshold from 2 units to 3+ units, you trigger a different tier of infrastructure requirements:

* Stormwater: You likely cannot just splash-block your rain gutters. You may need large underground vaults or complicated dispersion systems that eat up buildable land.

* Power: Tacoma Power may require a new transformer on your site if the pole on the street can't handle the load. That is a substantial cost and takes up valuable square footage.

* Fire Flow: Can the hydrant down the street deliver enough pressure for 6 units? If not, you are upgrading the city main at your expense.

The "Streamlined" Reality

Tacoma has launched a Middle Housing Streamlined Permitting program to help fast-track these exact projects. They offer dedicated review teams and reduced timelines for eligible townhome and ULS projects.

But "streamlined" does not mean "easy." It means the city will review your plans faster—but only if those plans are technically perfect from day one.

Summary: Clarity Before You Buy

The market for middle housing is heating up because the math works. But the math only works if you catch the site constraints before you close on the land.

If you are looking at a teardown or a large lot for a townhome project, do not start by asking "What will it look like?" Start by asking, "Can we subdivide the dirt?"

Disclaimer: Zoning laws in Tacoma are evolving. Always consult with a land use attorney and local design professionals before purchasing property.