People love houses. Neighbors and change are different matters entirely.
The simultaneous growth of two consumer wants—affordable private homes in conveniently sited, ever-denser communities—will give multifamily developers enormous headaches during this new decade. That’s because every proposed project is likely to launch a multisided confrontation between developers, citizens groups that either hate or are pleading for the project, standard-setting community associations, and beleaguered government officials.
“The big thing these days [in development work] is how you negotiate and deal with the public sector,” says Joshua Harris, clinical assistant professor at New York University’s Schack Institute of Real Estate. “It’s much more hands-on, time-consuming, and costly than it was 20 to 30 years ago. Today you have hypertechnical land-use designations; that’s just come in the 2000s. The planners want their seat at the table. You’ll see a lot more public-private sector involvement.”
Examples abound:
- It took an extended political fight before the city of Minneapolis decided to permit multiple apartments inside what had been single-family detached homes. The Oregon Legislature recently made the same change for the state’s bigger cities, again overcoming resistance from people who presented the usual objections: more traffic, fewer parking places, and plummeting property values.
- More than 1,100 residents of Montgomery County, Md., signed petitions protesting plans to loosen zoning regulations for accessory dwelling units. The county council ultimately approved the change, saying the county needs more affordable housing.
- A joint study by the National Association of Home Builders (NAHB) and the National Multifamily Housing Council (NMHC) reported that the cost of applying for zoning approval eats up 4.1% of developers’ total costs, affordability mandates account for another 5.7%, and “development requirements that go beyond the ordinary” take up 6.3%. “Parking definitely is something that people are concerned about, but I don’t think it’s ultimately one of the bigger issues,” says Caitlin Walter, vice president of research at NMHC. “I think it’s more about a change in the character of the neighborhood.”
- It’s not just the government that’s a hassle. In 2018, 62.5% of all homes constructed were built within a community that had a homeowners association, according to an NAHB review of Census Bureau data. That’s up from 47.6% in 2009, the NAHB noted.
The situation is so bad in some California communities that the state in 2017 enacted SB 35, a law that lets developers fast-track getting certain approvals from communities that have fallen show to state-mandate home building guidelines if the project can meet affordable housing requirements and other standards. “The goal of SB 35 is to get projects unstuck in communities that are not meeting their housing goals,” California state Sen. Scott Wiener, who sponsored SB35, told the San Francisco Chronicle.
As blog commentator Garrett Dash Nelson noted on citylab.com, NIMBY technically might stand for “Not in My Back Yard,” but lots of people have widened the backyard to include the neighborhood and beyond to pretty much anything that crosses their path.
What can developers do? One option is to focus on putting apartments in disadvantaged neighborhoods, where NIMBY protests might be muted and city leaders likely would welcome the investment (while some potential tenants will revel in the bohemian vibe). In a sense, these attempts to turn straw into gold are what makes developers special.
A second is to promote your local connections. WC Smith’s website touts its 50-year history in the District of Columbia. Sedgwick Development cites its 15-plus years in Chicago. The architecture firm KFA works only in Los Angeles. Such focus means these companies develop deep relations that are efficient (fewer governmental and neighborhood groups to deal with) and build trust.
Knight Kiplinger is an extreme example of how to do that. Martin County is one of Florida’s most anti-development counties, The Washington Post says, but Kiplinger has persuaded the local government to let him develop a new city for 10,000 people on 1,100 acres of what is now farmland. How? First, the Kiplinger family has owned the land—part of a 3,400-acre parcel—since 1952. It has been a vacation retreat for Kiplinger’s employees ever since. Second, the Kiplinger family has donated land for various causes in the county for five decades. Third, Kiplinger was open about his desires, starting with a full-page ad in a local newspaper and then going to more than 40 meetings to explain his vision. And finally, it didn’t hurt that 70% of the 3,400 acres will remain undeveloped.
Developers rarely have the decades of goodwill chips that Kiplinger has amassed, but the principles are the same: Dealing with protesting citizens and headstrong planning officials are more the rule than the exception in multifamily development today. It helps to get into their backyard as soon as possible.
