Land Development Stakeholders

Land Development Stakeholders - over the past four decades the list of real estate development stakeholders has grown and the result ….. an unwieldy process adding time and cost to every project.

Owners have always retained technical consultants with the necessary expertise to design, permit and construct a project. The list of project professional stakeholders has grown not because of land constraints but more because of where the land is located within the developed community.

As an overview, can we agree that in a free society property rights are the basis for all other rights?

 
“In a country like the United States, where the right to property is placed above the law, where the sole function of the public police force is to safeguard this natural right, each person can in full confidence dedicate his capital and his labor to production. He does not have to fear that his plans and calculations will be upset from one instant to another by the legislature”. -Frederic Bastiat (1850)

I am including several statements from UN documentation to give you context before posting my next blog on regulations.

According to the UN:

“Private land ownership is also a principal instrument of accumulation and concentration of wealth and therefore contributes to social injustice; if unchecked, it may become a major obstacle in the planning and implementation of development schemes.”

“The provision of decent dwellings and healthy conditions for the people can only be achieved if land is used in the interest of society as a whole.”

Over the past four decades we have experienced the change in our industry from a company developing land working directly with the town to developing land by committee. The list of stakeholders has significantly expanded and the process has changed our industry. The control and use of land is shifting from the property owner to society as a whole! This shift has been gradual and seemingly reasonable until you take two steps back and reflect. If you have been required to use the charette process, you know that all of the stakeholders have a say in your project.

We, the industry, have not always used “stakeholders” to identify those involved in real estate development projects. However, it now seems using “stakeholders” is the only way to define those interested in a real estate development project.

Defining Stakeholder:   

 “Persons, groups or organizations that have direct or indirect stake in an organization because it can affect or be affected by the organization’s actions, objectives and policies” (Business Dictionary, 2007).

Local & State Governments

States                                                                                                 50

Counties                                                                                         3,034

Municipalities (city, town, village...)                                               19,429

Townships (in some states called Town)                                      16,504

School districts                                                                              13,506

Special purpose (utility, fire, police, library, etc.)                           35,052

And, most have separate ordinances, regulations, standards and criteria. And, most implement the real estate development process differently.


Stakeholders and their roles:

The great recession has altered the landscape of professional stakeholders. The design and development profession have been altered significantly not to ever return to a pre-bubble level.  

Builder/Developer – the owner of the real estate development project. The entities that must orchestrate the process, meet market demands and remain profitable after the lengthy approval/permitting/construction process have been completed. Many regional companies have gone out of business because the residential and non-residential markets disappeared. These markets may seem to be on a rebound but be careful about inflation and inevitable increase in interest rates. However, will the owner’s role return and match a strong market – I don’t think so. We will have the demand but the supply will lag and prices will jump significantly……if you know the history of other recessions.
 

Planning Board – many communities have planning board hearings for ALL real estate projects even if it is a development by right or consistent with all local regulations. This board is a political tool and is a forum in which solicits public input from “stakeholders”. In my experience, most planning board members do not have any experience in real estate development and are a political appointed watchdog. They love the power over entrepreneurs and will extract concessions from applicants to appease “stakeholder” objections.
 

Zoning Board – this board is more technically and legally oriented than the Planning Board. Essentially, zoning restricts or regulates the rights of property owners. Thus, applicants seeking a variance to the zoning code are asking the zoning board to allow them to use their property in a way restricted by the zoning ordinance.  The board votes to grant the deviation from the zoning ordinance. This process of course is based on the zoning map and ordinance being correct. In some locations, a land owner must complete a detailed and well defined zoning appeal process after preparing the final project design plans. This process may include stakeholder meetings, public advertisements, public meetings, staff reviews, changes and concessions. And, the applicant is not assured of being approved. The applicant must prove that undue hardship exists. In many jurisdictions, the following criteria must be met:

 

·         it is impossible for the applicant's land to yield a reasonable return without the variance,

·         the need for the variance is due to the unique circumstances of the property and not to the general conditions of the neighborhood

·         granting the variance will not alter the essential character of the locality

·         the hardship is not the result of action taken by the landowner or a prior owner

Zoning maps and ordinances govern how we use our land. What will government’s reaction be to the great recession? How will government include “sustainable” development practices in the zoning ordinance? Do you really think local government will impose regulations promoting real estate development?

Property Owners – in my opinion, land price determines the success of a project. Most land owners think their property is valued more than it is worth. Property owners also do not understand how regulations have in most cases devalued their property. The net buildable area is the key to a successful project NOT the gross acreage. In some locations, property owners are selling the development rights to their property.

 

Politicians – City Councils – real estate development is a fragmented local market and highly competitive industry directly affected by local political policies and actions. The competition for job producing industries will become the short term (next decade) priority of state and local governments. Government will change the playing field for these companies but not for others!

 

Surveying Firm – this professional stakeholder has the responsibility of preparing the property base map, platting and constructing staking.

 

Land Development Engineers – a civil engineer with real estate development expertise is the thread between all professional stakeholders. There are few if any real estate development projects that do not have a civil engineer on the design team. A great land development engineer is one that has excellent design capabilities complemented with suburb inter-personal and presentation skills. Many land development engineers have left their profession and have moved on to other civil engineering disciplines. Land development firms / departments have down sized over the past 4-yrs. Will they be ready when the builder/developers want to start?

 

Environmental Consultant – this professional is essential for every design team. Since most of the “good” land is gone and regulations have continued to restrict land, environmental issues will impact most every property. The environmental consultant with experience in defining wetlands will be best suited for the design team.

 

Soils Consulting Firm – earthwork and soil import/export remain as one of the most costly components of any land development project. Owners must balance the pre-development soil testing regiment with the need to budget contingencies for the unknown. Soil testing remains a necessary function prior to the design and during construction for earthwork analysis, foundation design, road construction, stormwater management facilities, etc.          

 

Attorney - as an obvious extension of any team, attorneys provide necessary political and legal advice. In some areas, attorneys must represent land development corporations before planning or zoning boards.    

 

Financial Partner – only time will tell on who will step to the plate

 

Marketing Specialists – from print to media to social networking, the industry will still have to elevate company brands and increase market exposure.

 

Public Relation Firms – as the land development process becomes even more complex, the importance of conveying the proper message about a project has and will to increase at all levels.

 

Land Planner – this discipline has many facets but most of these professionals are in the public sector developing regulations. However, there are many land planning firms that have survived over time due to their creativity and cutting edge cost effective concepts. A practical land planner balancing creativity with cost is a valuable asset to the design team. In my experience, a true land planner is best suited to layout large scale mixed use developments.             

 

Architect – real estate projects have architecturally evolved over the past 40 years with design elements becoming a much more important component of the overall project. High density housing projects and non-residential developments are governed by the product footprint and enhanced by the use of exterior material and design features.

 

Landscape Architect – in my opinion, this design discipline brings a lot to the table. They combine their technical understanding of real estate development with their softscape expertise. Their strengths are technical or aesthetic but rarely both!        

 

Economist - a numbers cruncher that provides an economic assessment of the benefits of a real estate projects. The need to show local government the economic impact of a project in taxes and government services will become much more important as we come out of this recession (s).     

 

Traffic Engineer – at what level of complexity or size of project requires a traffic study and thus a traffic engineering professional. Not every project in the past required an analysis of the existing infrastructure before a project was approved or denied. In my opinion, local government does not have the funds to maintain nor build infrastructure and will rely on the development community to pay as they go. A traffic engineer will assist in presenting and debating local government needs beyond the project scope.            

 

Water & Wastewater- without question, the need for public water and public sewer assessments during the due diligence period becomes paramount in moving forward with a project. Leading up to the market peak, water and sewer were not a significant issue in most locations. After all, most localities planned for expansion but are they ready now for increased development activity? In my opinion - no. The water and wastewater engineer is a specialty and a definite team member in areas of utility capacity problems.   

 

Realtors® - yes, required on both the buy and sell sides of a real estate transaction.

 

Regulatory Staff – many communities have scaled back their staff since 2008. In most cases, local governments retained the experienced staff. In many cases, staff that have little to no practical experience in land development. Government employees have and will continue to voice their opinions on projects beyond their regulatory responsibility. This will only become more increasingly blatant and difficult to address.

 

General Public – the internet, real estate sophistication, and migration from highly regulated states have changed the role of the citizenry with the assistance of government. The general public has been emboldened and will exercise their voice individually or as a special interest group member.  

 

Contractors – with competitive bidding of projects and unless owners have an excellent relationship with a contractor, most contractors are not included in the design phase of a project. Their experience and knowledge of land can be an asset.

 

Government Agencies – there is no need to explain the role of each agency. This list is intended to be comprehensive and not all communities will burden real estate development entrepreneurship with a bureaucratic maze. However, over the past forty years, I have seen many more regulations implemented or changed than repealed or rescinded! The agencies specific to where your real estate project is located will be part of the regulatory process and by local ordinance become a “stakeholder”.

 

When the industry recovers, will you be building in a growth or no-growth community?

 

Have your local government agencies passed new regulations impacting real estate development by expanding their internal review process?

 

Local political emphasis will be on expanding the tax base through commercial development rather than promoting residential projects. How will this government emphasis affect you in your market?

 

LOCAL AGENCIES

·            Environmental Commission

·            Shade Tree Commission

·            Town Engineering

·            Planning Department

·            Town Traffic Department

·            Town Building Department

·            Town Zoning Department

·            Municipal Utility Authority

·            Fire Department

·            Police Department

·            Water Company

·            Sewer Agency

·            Water Allocation Agencies

·            School District

·            Park District

·            Improvement District

·            Drainage District

·            Lighting District

·            Air Quality District

·            Flood Plain District

·            Historical Society

·            Architectural Committee

·            Landscape Committee

 

REGIONAL AGENCIES

·            Soil Conservation District

·            Watershed District

·            Coastal Agency

·            Transportation District

 

STATE GOVERNMENT

·            Department of Transportation

·            Department of Environmental Protection

 

FEDERAL GOVERNMENT

·            Corps of Engineers

·            Environmental Protection Agency

·            Housing and Urban Development

 

SPECIAL INTEREST GROUPS

·            Civic organizations

·            Religious organizations

·            Recreational organizations

·            Historical or cultural associations

·            Chamber of Commerce

·            Environmental organizations

·            Financial institutions

·            Homeowner associations

·            Political organizations

·            Parent-teacher associations

 

 

1970 – 1980

Only a limited number of design professionals were needed on the design team. Real estate industry stakeholders were not a factor in most locations. A period of stagflation when the average inflation was at 8 percent and unemployment hit a peak of 9 percent.

Any development was a good project even with mortgage interest rates as high as 18%.

 

1980 – 1990

During this period, the ownership of public versus private infrastructure dictated the infrastructure design criteria. Variances, rezoning, and design waivers were easy to obtain from local government with the proper presentation. Again, land development professionals were limited and industry stakeholders were a voice but not a strong voice. Regulations were not expanding and thus the need for specialized design professionals was not necessary.

 

 

1990 – 2000

“NIMBY” – not in my back yard

Neighborhood meetings

 

 

2000 – 2010

“CARE” – citizens against really everything

Charettes

 

 

2013 & Beyond

Costs increases

Shortage of materials

Lack of trained labor

Escalation of land prices

Regulatory pendulum not swinging back but further into the bureaucratic abyss

Financing hard to secure

Higher interest rates

Crushing of the entrepreneurial spirit

Lack of quality “land” in good locations

Escalation of adversarial stakeholders

 

Land development has always been a complex industry very much affected by local events. If you think the above paints a negative picture – it doesn’t!! With the right design team of stakeholders, the industry will thrive even against all odds. Why? Population and thus demand! This is a risk-reward business and only those with the entrepreneurial spirit and fortitude to succeed will succeed with one other component. Partnering.

 

My guess is that it will become more important for stakeholders to partner together and become part of the deal. It will become more important for the builder/developer to partner with the land owner and design professionals to strengthen those with a vested interest in the project. In my opinion, if owners (builder/developers) revert back to pre-bubble days the process will only be more difficult. We have to do what we do differently. Except regulations and policies will change the playing field for all and next week …..

 

NEXT WEEK: Government Regulations – this topic will take several posts to cover the change from 1970 to 2013 and beyond.