You
must have a high level of expertise, perseverance, financial stamina and
political perception to obtain all of the Land
Development Permits & Approvals required to build any real estate project.
The
regulatory processes no matter what country you live have expanded in
complexity, increased in time, elevated the risk and empowered adversarial
stakeholders. Before the mid-90’s, anyone could be a real estate developer as
long as you were willing to take a risk and you had an entrepenurial spirit. I
don’t think that opportunity exists today.
True or
Untrue?
The
last true entrupenuirial arena of using land the way you want has slowly
changed over the past four decades. Now, you just think you own the land!
There will be over 30,000,000
more people in the United States over the next decade! As generations move on,
do we ever ask the following questions?
WHERE WILL THEY LIVE?
WHERE & HOW WILL
THEY WORK?
WHERE WILL THEY SHOP?
WHERE WILL THEY PLAY?
HOW WILL THEY THINK?
How
will we answer the above questions?
But
before we can develop our answers to the above questions, I think we are in for
round two of the real estate bubble.
Think
about it. Over the past 6-years, new home construction has been severely
depressed and way below the acceptable number of new homes even to keep pace with
the population increase – new family formations, new workers, etc. Thus, the lack of new
home inventory and pent-up demand has caused home prices to escalate. Please read my October 6, 2010 blog post.
The
Fed has always manipulated the rate to control inflation. Interest rates are on
the rise. As soon as the Fed stops their credit card buying, interest rates and
inflation will increase rapidly. However, the Fed will strive to find a way to
ease in the pain but never the less we will all feel the pain. However, we have
yet to see the other shoe fall!
The
real estate industry has been poised (those left standing) to move forward but
only to be faced with a changed regulatory climate. My guess is that most
“finished” lots have been purchased and builder/developers must now buy raw
land for development purposes.
How would you
answer the following questions?
Do
you really think regulatory oversight has changed to benefit real estate
developers?
Do
you really think that lenders will make it easy to borrow to build?
Do
you really think interest rates will remain historically low?
Do
you really think that home prices won’t skyrocket and shut out homebuyers?
Do
you really think that inflation will stay properly managed?
Do
you really think that material and labor prices will stay low?
Do
you really think that we won’t have material shortages as production increases?
Do
you really think that it will be easy to find subcontractors?
Do
you now have to enter into a contract with a local municipality so you can build
on your property?
In
the United States, we have:
Federal
Government 1
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 Agencies (utility, fire, police, library, etc.) 35,052
These
government entities have their own ordinances, regulations, standards, criteria,
political agendas, and departments..
We used to obtain permits and approvals but
now it is called “entitlements” - meaning
“ to give somebody
the right to have or to do something”. Government is giving you the right to do
something on your own property! Please add to the
following list of agencies which have control over the real estate industry:
County
Planning Board
County
Zoning Board
Local
Planning Board
Local
Zoning Board
City
Council
Environmental
Commission
Shade
Tree Commission
Town
Engineering/Planning Department Staff
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
Homeowners
Association
Architectural
Committee
Landscape
Committee
Soil
Conservation District
Watershed
District
Coastal
Agency
Transportation
District
Department
of Transportation
Department
of Environmental Protection
Department
of Community Affairs – HOA’s
Corps
of Engineers
Environmental
Protection Agency
Housing
and Urban Development
As
you develop your business plan for developing and building real estate
projects, it is more important than ever to know the political climate of your
community.
Is your community a no growth
community? OR
Is your community open to growth and new
growth trends?
With each local approval/permit requirement, the more influence politicians will have over your ability to use your property for your intended use.
Become familiar with:
The local politicians
that would support your project
The staff that processes
projects and their influences
Learn the regulatory
permitting process
The surrounding
neighborhood and if they will oppose to the project
The community “hot
buttons” for inclusion in the project design
An experienced land
use/zoning attorney
Master plan and growth
management plans
Subdivision approval
process and the time required “to be in the ground”
In your community, what has been the progression of government’s control over development patterns? For the moment, think about how the following issues have been addressed or not addressed in your marketplace:
1. Rezoning of property
2. Affordable housing – workforce
housing
3. Higher density is the answer but
public perception?
4. Changing development criteria to
reduce yield & increase costs
5. Prolonging the permitting process
by multiple reviews and public meetings
6. Allowing the general public veto power
Coming
out of this recession, whenever that may be, it WILL NOT be business as usual. We
have to assess the benefits of each project in each location to determine if it
is worth the risk, time, effort, and expense to proceed? Yes this business will
not be for the beginner but for those that can change the playing field.
The
market segmentation in our industry fragments our ability to universally
counteract government trends. In fact, there is no one trade association having
the voice of the land development industry as its primary focus. I established
the Real Estate Development eAssociation group on LinkedIn as an organization representing
the land development industry – please join us.
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