Speculative Zoning

By Dan Reuter, AICP

The global mortgage and finance industry is suffering a meltdown not seen since the Great Depression. Thousands of homes have been foreclosed upon and new homes sit vacant in far-flung subdivisions.

According to the housing data firm Metrostudy, approximately140,000 lots are currently available in subdivisions in metro Atlanta with roads and utilities already installed. This is compared to around 40,000 in 2001.

Lending is tight. According to most experts, we are returning to a more normal period of mortgage lending that existed in the 1990s. The number of persons with sufficient credit and income to buy homes is likely to be smaller.

But apparently none of these factors will stop a property owner or developer from master planning thousands of acres and seeking rezoning from local governments. Nor does it seem to make planners or elected officials reluctant to support zoning changes in rural areas for thousands of additional lots and multiple subdivisions.

Some planners might call the rezoning of land when there is no obvious market nor community need, “speculative rezoning”.

The use of market data and demographic analysis to determine the need for new development does not occur enough by local governments in Georgia. Many planners or elected officials may not see a problem with zoning more land for development than is truly needed based on a prudent understanding of forecasts.

But there are consequences from “over zoning”. Too many homes and lots in an area can put downward pressure on existing home values or undermine the need to reinvest in homes in existing communities or subdivisions.

Over zoning for development at the fringe of a county can undermine the value of already vacant land zoned in areas that are well served with infrastructure. Homebuyers may purchase homes in a new 500-unit subdivision served by two lane roads in a rural area.

The better choice for the community would probably be to develop on land already zoned closer to jobs, schools or services. It is more likely that a developer can purchase cheaper land and assure more profit than for citizens to “choose” to live in subdivisions on land at the fringe.

A permissive atmosphere for rezoning rural land on the fringe of communities undermines real goals for managing growth and fiscal policy. It also undervalues the possible agricultural use of land.

It’s amazing that planners will sit attentively and listen to the tales many developers will spin to rezone property. Most often a true market study to determine the need for the rezoning has not occurred. If such rezoning is not supported by the local comprehensive plan or by knowledge of market conditions, than on what basis should it be approved?

Holding land for an extended period of time does not assure a legal right that a local government has a responsibility to rezone it to a greater use. Should we expect the federal government to assure our future value or stock held in GM or Apple?

Conversely holding property as an agricultural use means the owner has paid taxes on the most basic value. Why would holding land and paying taxes as an agricultural use require that after 10 years a high density residential zoning should be granted?

Local governments should support private development and accommodate new growth. But there are times when reality requires us to actually look at the data and facts. For most of our state’s history, planners and elected officials have relied too much on the speculative feelings of developers, property owners or bankers to rezone land. Too much land zoned or subdivided for housing or retail in a community was not seen as a problem. We too often assume that the private market and developers know the need for growth better than local governments. The private market is not in the business of understanding and coordinating the needs of entire communities.

The day has come in Georgia when more zoning and development can mean a real threat to community stability. Declining residential markets and high foreclosures are leaving many homes vacant. Foreclosures and vacancies can erode the values and stability of neighborhoods.

Rather than worry that planners will oppose zoning land in rural areas, developers should pay more attention to the possibility of an over-abundance of zoned land, over-building and foreclosures.

Understanding the supply of existing lots and zoned land in a community should receive more scrutiny from planners or elected officials. Local governments in Georgia have almost complete control through zoning to direct the future of our cities and counties.

We often undermine the strong powers and laws associated with zoning in Georgia by ignoring local governments’ planning responsibility. This problem can be helped by following the three rules below.

  1. First, know your existing housing stock and how many lots are already platted but vacant. Know how much development could occur on existing zoned land.
  2. Second, develop a market-based view of the needs of the community and the demographic changes that require more growth within the community.
  3. Finally, understand what types of new housing and development your codes and zoning laws are likely to produce. Once you are grounded in the current entitlements of property and the need for new amounts or types of housing and development, then you will be in a better position to evaluate the need for rezoning land.

Don’t make permanent decisions about zoning land in your community based on fuzzy feelings of growth, rights and laws that don’t exist.

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