How A Small Legal Error Derailed A City’s Ambitious Housing Reforms

• Zoning out: Eliminating single-family zoning has turned into a quagmire after a state judge voided Charlottesville’s new ordinance.

• ESG battlegrounds: A wave of reforms have proposed to ban ESG in investment portfolios but very few of them have actually made it into law.

• Post-modern service: A looming USPS scale back has put a postal focused REIT in a tough position.

• Upcoming webinar: How AI and data tools are transforming energy management in commercial real estate asset operations. Sign up

Editor’s Pick

How A Small Legal Error Derailed A City’s Ambitious Housing Reforms

Charlottesville, Virginia, made headlines in 2023 for eliminating single-family zoning and parking requirements in an ambitious bid to increase housing density. But today, the city is in an unusual position: it has no zoning code at all.

Last month, a state judge voided Charlottesville’s newly adopted zoning ordinance after a procedural misstep by the city’s legal counsel led to a default judgment. In response, the city placed all zoning-related applications on hold, halting approvals for new construction, additions, site modifications, and land use changes. The only exception: building permits unrelated to zoning, like fire and trade permits, are still moving forward.

It’s an unexpected setback for a city that had joined a growing list of U.S. municipalities, from Minneapolis to Cambridge, Massachusetts, that have embraced zoning reform to address the housing affordability crisis. Charlottesville’s ordinance, passed unanimously by the City Council in December 2023, aimed to modernize decades-old land-use rules by allowing duplexes citywide and eliminating mandatory parking minimums.

Like many college towns, Charlottesville faces high housing demand from both students and professionals. City officials hoped the new zoning code would enable denser development and reduce barriers to new housing construction, particularly by allowing multifamily housing in formerly single-family zones. But with the ordinance now legally nullified, the city’s efforts are on hold.

The legal challenge was brought by a group of local residents who claimed the city failed to follow proper procedures when adopting the ordinance. The case took a dramatic turn when the city’s outside legal counsel missed a key filing deadline, resulting in the court automatically siding with the plaintiffs. The ruling has temporarily left Charlottesville with no active zoning code, since the ordinance had already replaced the previous version.

Lawsuits over zoning reform are not new. Cities in Colorado, for example, have pushed back against statewide efforts to mandate denser housing, filing legal challenges of their own. Charlottesville’s case is notable not for the substance of the ordinance, but for a procedural lapse that has left the city scrambling.

Now, city officials are pursuing multiple paths to restore order. Negotiations are ongoing between the city and the plaintiffs. At the same time, the City Council has passed a resolution to refer the zoning code back to the Planning Commission. A new public review process has been triggered, and the commission is expected to submit recommendations within 100 days of its next meeting.

For now, development in Charlottesville remains in limbo. As more municipalities rewrite their land-use rules, Charlottesville’s zoning freeze is a reminder that even well-intentioned housing policy must be built on procedural solid ground.

Overheard

USPS Service Risk Shakes Up Postal Property Market

Mail delivery faces a growing threat of service cuts and general restructuring. Those cuts put commercial real estate investors who have been betting on postal properties increasingly at risk. Postal Realty Trust is a publicly traded REIT that generates nearly all of its revenue from leases to the USPS. The company is now grappling with existential questions while operational uncertainty is already weighing on its valuations.

One alarming turn of events is the appointment of David Steiner, a FedEx board member, to Postmaster General. The surprising new head of the Postal Service has heightened fears of privatization and aggressive reform. Postal unions warn that his corporate background could undermine service commitments, especially in underserved rural communities. Any broad restructuring could significantly impact the REIT’s portfolio by destabilizing lease agreements or prompting asset divestiture.

Postal Realty Trust's promise rests on stable USPS tenancy—but political and financial pressures are casting doubt over that continuity. Declining mail volume, union-led opposition, and mounting privatization proposals all introduce a dose of unpredictability into a historically steady property play. The struggles of the niche REIT highlight the danger of specializing in just one property type and focusing on only one tenant, even if that tenant is the U.S. federal government.

ESG Opponents Are Winning the Narrative, Not the Policy

It seems like a new focus for legislators around the country is to eliminate or discourage the use of "ESG" metrics in investing and financial reporting. In the first half of 2025, 106 bills targeting ESG were introduced across state legislatures, but only 11 were signed into law. That discrepancy tells a familiar story—one where political theater outpaces policy teeth. The numbers make headlines, but the laws that make it through remain sparse, scattered across about ten mostly Republican-controlled states.

The bills tend to look similar and mostly aim to prevent pension funds and state contractors from considering environmental or social factors in decision-making. One Texas law, supported by ExxonMobil, goes even further, targeting proxy advisory firms and triggering lawsuits over free speech and fiduciary duty.

For commercial real estate, the impact is more about signaling than substance—so far. Lenders and investors are watching the legal landscape, but the patchwork nature of the laws and their slow implementation mean ESG considerations remain embedded in many underwriting models. The political dynamics couldn’t be clearer: Republican‑led states drive this legislative wave, while Democratic states continue to advance pro‑ESG measures at a much slower rate. Despite the theatrics of high bill counts, only a handful qualify as law, revealing anti‑ESG as more bark than bite in most state capitols.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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