Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR Romero
/Parajón
LAST UPDATED
ORIGINAL DATE 2/25/25
SHORT TITLE Residential Home Building Authorization
BILL
NUMBER House Bill 554
ANALYST Hilla
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
No fiscal
impact
No fiscal
impact
No fiscal
impact
No fiscal
impact
Recurring
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Sources of Information
LFC Files
National Conference of State Legislatures (NCSL)
Agency Analysis Received From
Office of Housing Agency Analysis was Solicited but Not Received From
New Mexico Municipal League (NMML) New Mexico Mortgage Finance Authority (MFA)
SUMMARY
Synopsis of House Bill 554
House Bill 554 (HB554) amends Section 3-21-1 NMSA 1978 to require that zoning authorities,
including home rule municipalities, accommodate accessory dwelling units in residential zoning
districts as a permitted use and multifamily residential housing in commercial zoning districts
and areas near transit as a permitted use.
HB554 defines accessory dwelling units as single habitable living units, which provide separate
ingress and egress, with provisions for sleeping, cooking, and sanitation. The bill requires that a
zoning authority, including of a home rule municipality, accommodate as a permitted use the
construction of at least one accessory dwelling unit for each lot within zoning districts that allow
residential use, regardless of the size of the lot. The bill also prevents zoning authorities from
imposing certain restrictions on accessory dwelling units.
HB554 defines multifamily housing as a residential property that contains more than one
household and includes duplexes and townhouses. The bill requires that zoning authorities,
including a home rule municipality, permit use of the construction of multifamily housing in all House Bill 554 – Page 2
residential and commercial zoning districts and areas within ¼ of a mile of a major public transit
location.
This bill does not contain an effective date and, as a result, would go into effect 90 days after the
Legislature adjourns if enacted, or June 20, 2025.
FISCAL IMPLICATIONS
This bill does not have a direct fiscal impact on the state.
SIGNIFICANT ISSUES
The Governor’s Office of Housing notes that the state’s median rent has increased 60 percent
since 2017, with the average cost of homes outpacing wage growth. The office adds that
accessory dwelling units can boost affordable housing due to their smaller sizes and utilization of
existing infrastructure, which can lower development costs. The office states there was a decline
in multifamily rental permits in the third quarter of FY24, which dopped 24 percent due to high
commercial construction costs and high interest rates. The office states that HB554’s provisions
of adding the multifamily units in commercial areas can utilize existing infrastructure and
parking and allow access to jobs, services, and transit options.
Additionally, the office notes:
One obstacle to the creation of new accessory dwelling units is that their construction
forces a current and correct property tax valuation. Residential properties in New Mexico
are subject to a 3% annual cap in property tax increase, so if an owner with significant
tenure builds an accessory dwelling unit, they can see a shock increase in property tax
often doubling or tripling their current property tax rate. One way to help make sure that
regulatory changes lead to actual new home construction would be to provide a
temporary abatement, or have taxes ramp up over a set period of time to current and
correct value. Allowing taxes to increase 20 percent towards current and correct per year
for five years would give time for existing owners to adjust to increased property taxes.
According to the National Conference of Sate Legislatures (NCSL), 15 states have introduced
legislation pertaining to dwelling units in the states’ appropriate legislative sessions in 2025.
TECHNICAL ISSUES
A discrepancy in the bill is Section 1. (F) (3) adds “multifamily residential housing” in
commercial zoning districts, but Section 3. (A) (2) defines “multifamily housing” and not
“multifamily residential housing.” This could create ambiguity in interpretation and application.
EH/hj/SL2/rl