According to a study by George Mason University’s Center for Regional Analysis, “Demand for new housing in the Washington, D.C., region is outstripping supply and will continue to do so for 20 years, ratcheting up prices, and spurring development farther into the geographical fringe. In many communities, the land may be available, but the remaining infrastructure capacity may be deficient, or the land may lack the appropriate development entitlements. And many communities evidence insufficient political will to grant entitlements to allow more residential development.”

While land development is one of the nation’s most regulated activities, the common perception is that developers and builders are not regulated at all! Of course, developers and builders hold just the opposite view—that land and community development is over-regulated to the point where it is impossible to provide high-quality housing at an affordable or reasonable price. What is the answer? Is there a reasonable compromise?

Infrastructure Gap
Many regions of the country suffer from an infrastructure deficit caused by the rapid growth of the last several years. In suburban Atlanta, for example, traffic congestion is reaching epic proportions. According to the Bureau of the Census, Atlantans are driving more miles and spending more time on the road than they did a decade ago. Their average commute time is 31.2 minutes, and the average number of vehicle miles traveled per day is 35 miles per person.

Meanwhile, the U.S. Department of Labor’s Consumer Expenditure Survey reports that a significantly large share of the Atlantan family budget (and the U.S. family budget in general) is allocated to transportation, representing about the same share spent on shelter.

What does this mean? Rising housing costs driven largely by land costs continue to push residential development farther out from the central city, further straining our communities’ ability to provide adequate infrastructure. It is true that houses located some distance from downtown are somewhat more affordable (i.e., the “more house for your money” perception), but few people calculate the full range of associated costs such as infrastructure and commuting costs.

Growth Management—Smart Growth
Since the early 1990s, growth management and, more recently, smart growth have become planning buzz words. The American Planning Association (APA) and the Urban Land Institute (ULI) along with The National Association of Home Builders (NAHB) have all adopted smart growth policy statements. NAHB’s smart growth policy includes the following points: anticipate and plan for growth; adopt a comprehensive plan for each local jurisdiction; include higher densities and mixed uses; incorporate timely infrastructure; focus on environmental protection and include open spaces; and institute a reasonable, predictable, and fair review/approval process.

Numerous states have adopted smart growth legislation. According to the APA, as of 2000, 15 states had enacted state-wide growth management programs or comprehensive growth legislation. The APA’s recent update entitled “Planning for Smart Growth—2002 State of States” indicated that many of those 15 states are implementing moderate to substantial state-wide reforms. Another eight states are pursuing additional state-wide, regional, or local reforms while another 15 or so are actively pursuing their first major state-wide planning reforms for effective smart growth. Only 12 states, according to the APA, were not pursuing state-wide smart growth controls.

Urban Growth Boundaries
Urban district boundaries, planned service boundaries, or urban growth boundaries (UGBs) are major components of most smart growth management programs. Even as these lines “drawn in the sand” indicate the extent of higher-density development and the limits of urban water and sewer services, they have fueled significant debate as to their impacts on land costs and their effectiveness in managing growth. An article entitled “Ditching the Doctrine” reported that buildable land within the Portland, Oregon, urban boundary is selling for upwards of $300,000 an acre for residential property making it extremely difficult to build attractive housing at affordable prices. Some believe that the use of UGBs creates an artificial shortage of urban land and an artificial surplus of agricultural land.

In Howard County, Maryland, undeveloped land within the present planned service area boundary is in short supply, greatly inflating raw land costs. A recent bidding war for the Curtis Farm property, an undeveloped 75-acre tract in a strategic location of the county, is testimony to that fact. It is reported that the raw land costs for the 50-acre developable portion of the Curtis Farm exceeded $400,000 per net acre.

Downzoning
Where growth boundaries have not taken root, anti-growth pressures have sometimes led to downzoning of otherwise developable property. In Loudoun County, Virginia, one of the nation’s fastest-growing counties (located to the northwest of Washington, D.C.), the county supervisors amended the 1991 county comprehensive plan in 2001, reducing by 45 percent the number of allowable housing units. In early January 2003, the supervisors adopted new county-wide zoning to implement the comprehensive plan. The approved zoning bars standard suburban development from about two-thirds of the county and shrinks the number of potential new dwellings by about 60,000. Loudoun County’s zoning scheme is that the metropolitan Washington growth bubble has been pushed farther west. Northern Virginia developers have moved into West Virginia as the next frontier. “Attempts by individual localities to limit growth within their own boundaries normally cause the spread of growth beyond their boundaries and into other localities in the same region, thus generating more sprawl.” One result of

Where’s the Land?
In view of the various checks on growth, what are residential developers and builders to do? Where is the land for tomorrow’s development opportunities? Obviously, one option is to move farther out and look for development sites in areas where land is less costly. Such an approach, however, is hardly rational and in the long run will merely exacerbate suburban and exurban sprawl. Fortunately, opportunities abound for creatively developing closer-in residential neighborhoods and capitalizing on sites that often go overlooked:

• Housing infill in strategic locations on smaller, underused lots. Many local governments are recognizing that it is possible to redevelop certain areas of their communities by allowing higher-density residential development in strategic locations. Throughout the country, corridor revitalization strategies and small area plans offer developers and builders the opportunity to work with their local jurisdictions to achieve common redevelopment objectives.

• Public/private redevelopment sites. Many cities, townships or counties own strategically located property that is ripe for development or redevelopment. Their development goals often include: converting tax-exempt lands to revenue-producing lands, helping increase the value of residential properties throughout the jurisdiction, emphasizing housing designs and amenities targeted to adult markets, and/or creating unique recreational opportunities for their residents.

• Look to Downtown Redevelopment Agencies’ listings of developable sites within city centers. Many cities have created Empowerment Zones and Enterprise Zones in old city centers affording developers lower land prices and/or tax credits.

• Niche markets. As reported in “Active Adult Market Equals Economic Benefits for Communities” in the fall 2002 issue of Land Development magazine,6 new housing developments targeted to active adults generate substantial economic benefits for local communities, including income and jobs for residents and revenue for local governments. In Howard County, Maryland, for example, the zoning ordinance provides for a density bonus for active-adult, age-restricted communities that meet certain standards. Table 2 presents the density increases.

• At least 50 percent of gross sites in the RC, RR, R-ED, R-20, and R-12 districts and at least 35 percent in the R-SC, R-SA8, and R-A-15 districts must be in permanent open space and meet some other minor requirements. Among the many benefits of an age-restricted community are relatively minor traffic impacts as compared with a conventional residential community and marginal impacts on community services, particularly schools.

• Mixed-use adaptation of commercial/industrial sites. Many communities are finding that they have an excess of land zoned for commercial or industrial use that would be better suited to mixed-use development with a residential component. Mixed-use neighborhoods offer several benefits, such as providing housing closer to jobs, encouraging higher densities near centers of activity, encouraging non-automobile transportation alternatives, and decreasing off-site traffic trips, thus reducing area-wide traffic impacts.

• Underused/obsolete corporate or institutional properties. In today’s world of corporate economic woes, many large corporations and institutions are finding that downsizing and divestiture of corporate liabilities are essential for survival. As a result, companies are evaluating their corporate real estate portfolios and selling sites with excellent development potential. Many such properties, however, are surrounded by existing homes, making redevelopment of these sites a sensitive community issue.

• Privatization of military housing. Military housing represents an emerging opportunity for private developers and builders. The U.S. Department of Defense (DoD) owns approximately 300,000 family housing units on and around military bases across the country. More that 60 percent of the units (over 180,000) need to be replaced or renovated. Estimates indicate that replacement or renovation would cost over $16 billion in public funds and would require 20 years for completion. Needless to say, the required federal funds are not available, and DoD needs better housing now to aid in the retention of military personnel.

• In response to this need and to establish a military housing privatization initiative, the National Defense Authorization Act of 1996 specifies a wide range of initiatives to encourage private sector companies to build, renovate, and own housing units. The private sector would lease renovated and new housing to military families at rents equal to the military member’s housing allowance (based on rank). All service branches need new or renovated housing including: the Army, which requires the most on-base housing; the Navy and Marine Corps, which require the least on-base housing (enclaves off base); and the Air Force, which is somewhere in the middle.

• Most opportunities involve on-base housing whereby the government brings the land to the deal. For example, projects could be structured with a 50-year land lease and title to existing housing and call for retaining renovated/historic units; demolishing substandard units; constructing new units along with site improvements; and private sector financing, building, and management of the replacement housing. Moreover, the government would guarantee an income stream for 50 years.

• Progress on the privatization program has been slow thus far as both the private sector and DoD are learning the process. Given that the DoD secretary has directed all military housing to be adequate by 2007, the privatization program is expected to accelerate over the near term. Clearly, there are numerous opportunities for developers, national builders, and local builders to enter into partnerships for upcoming projects.

What Must You and Local Home Builder Associations Continue To Do?
This article has discussed some of the issues associated with land availability, land costs, and development, but is has also identified some merging opportunities. In addition to exploring new development and redevelopment opportunities, the developer/builder community needs to:

• Become an expert/hire experts.
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• Jointly sponsor seminars, housing symposiums, and summits.
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• Sponsor third-party studies and audits. Many jurisdictions greatly overestimate the amount of buildable residential land while significantly underestimating growth projections and housing demand. Incorrect assumptions are evident in land inventories (supply analysis), growth projections (jobs versus housing), and comprehensive plan and zoning audits.
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• Utilize the staff and resources of national professional organizations such as NAHB or ULI.
  
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• Developers and builders need to keep abreast of industry trends by reading and using articles and publications, referencing test-case scenarios, and utilizing model ordinances.
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• Develop media relations. Placing newspaper articles, writing letters to the editor, and regularly submitting newspaper columns can raise issues associated with land availability and cost.
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• Encourage regular evaluation of smart growth policies and urban growth boundaries.
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• Build reliable coalitions.
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• Recognize that advanced planning of acquisitions and approvals is essential.
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• Incorporate creative land planning techniques.
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• Keep your nose to the grindstone and your eyes on the horizon!

“Where’s the Land?” originally appeared in the Spring 2003 issue of Land Development magazine. Land Development magazine is a publication of the National Association of Home Builders (“NAHB”) and this article is reprinted with permission from NAHB. All rights reserved by NAHB. Land Development magazine is not affiliated with Land Development Today. SLDT