Chapter 2: Land Use Controls and Development

Externalities

*   Negative; Positive

*   The case for government intervention

Public Goods (Infrastructure)

Adverse Selection (Failure of 'Perfect Knowledge')

The Equity Criterion

*   Horizontal equity (equal treatment of equals); e.g. sex equity pay issues, disproportionate taxation of like properties (two different tax bills for very similar condominiums within the same project)

*   Vertical equity (proportional treatment of unequals); e.g.. flat fee income tax; disproportionate housing subsidies for the rich

Why Do We Have Government Intervention in Housing?

*   Decent housing of political and social significance

*   Use of housing to spur the economy

*   The structural impact of capitalism tends to discriminate against the poor (both for the lack of capital and the lack of education). By intervention in housing allocation, the government can redistribute wealth to some extent.

Why Do We Have Government Intervention in Housing? (Cont.)

*   The public is largely ignorant of real estate and due to the lack of knowledge might "adversely select" their housing product.

*   The affordability problem

*   The problem of the homeless

*   The distribution problem

Programs to Promote Efficiency

Mortgage Insurance and Guaranty Programs

*   FHA

*   203b (3%of first $50,000)

*   213 and 234 (cooperative and condominium)

*   233 experimental

*   VA (the lesser of 60% or $27,500)

Regulation of Interest Rates and Mortgage Credit

*   Usury

*   Monetary policy

*   open market

*   reserve ratio

*   discount window

*   Federal Reserve System (FDIC insurance)

*   Federal Housing Finance Board (FHB) and Office of Thrift Supervision

Secondary Market for Mortgages

*   FNMA

*   GNMA (Tandem Plan)

*   FHLMC

Licensing of Real Estate and Related Professions

*   Screening of licensees from unethical backgrounds

*   Promoting education to improve competence

*   Promoting continuing education for concurrent upgrading

Programs to Promote Equity

*   Filtering

*   Subsidized housing programs

*   FHA 235

*   FHA 221 d 3 (236)

*   FHA Title II (Section 8)

*   Community development and block grants

Policy Issues

*   Cost benefit of income redistribution in housing

*   Do FHA and VA programs increase efficiency?

Zoning

Why Zoning?

*   Reduce externalities

*   Reduce adverse selection

*   Protect and promote the public health, safety, and welfare

*   Problem of greed (selfishness)

*   Use of private sector land use controls in lieu of zoning

*   restrictive covenants, easements

*   Houston, Columbia, Reston, Palm Coast

Zoning Implementation

*   Development of a long range master plan (comprehensive plan)

*   Resource studies

*   Public hearings

*   Zoning Code used to work toward master plan

Master Plan Components

*   Land Use

*   Housing needs

*   Transportation of people and goods

*   Infrastructure (Community facilities and utilities)

*   Energy consevation

Zoning Categories

*   R-1: Single Family Residential

*   R-2: Usually 2-4 family

*   R-3: Above 5 families

*   O-1 and up: Office uses

*   C-1 and up: Commercial

*   I-1 and up: Industrial

Changing the Zoning

*   Alteration

*   no protest - majority vote

*   protest of 20% + of affected - 3/4 vote

*   Board of adjustment (plan board)

*   special exceptions (conditional use): churches, government buildings

*   variances allowed for "undo hardship" if not badly contrary to public interest (balancing)

*   Grandfathering

Zoning Innovations

*   Needed to increase efficiency of land uses constrained by traditional zoning

*   Difficult to find communities where legislative bodies are progressive enough

Floating Zones

*   Establish need

*   Establish standards which protect areas

*   Locate zone on map after application

Cluster Zones

*   Allows clustering of development which maintains the same average density or lot coverage

*   Greater economies of scale

*   Ordinance has to allow clustering

PUD's

*   Process begins with authorization of PUD's

*   Creates "floating zone"

*   Developer submits plans to plan board

*   Recommendation made to government body

*   Zoning ordinance and master plan amended to specify site as PUD zoning

TDR's

*   Most frequently used to preserve specific areas for open space. e.g.,

*   wetlands

*   flood plains

*   environmentally sensitive lands

*   Works best when there is desirable developable land in the area that is not environmentally sensitive

Steps in Adoption of TDR's

*   determine areas to be preserved

*   development potential of preservation areas to be determined

*   development rights (xxx of units/a) then distributed according to current value of land in preservation district

*   designate other areas in which new and higher densities will be allowed (because of higher density, greater economies of scale can be achieved; thereby give the development rights greater value than "normal")

INTRODUCTION TO DEVELOPMENT

Types of Development

*   Residential

*   Commercial

*   Office

*   Industrial

Analysis of Investment

*   Cost of development

*   Income

*   Reversion

*   Risk

*   Equity analysis

The Development Sequence:
Initial Steps

*   Concept--highest and best use study

*   Market analysis

The Development Sequence:
Feasibility Analysis (Site selection)

*   Location

*   Accessibility

*   Size and shape

*   Physical characteristics

*   Infrastructure

*   Land use control

*   Cost and value

The Development Sequence:
Final Steps

*   Negotiation and contracts

*   Development plan

*   Construction

*   Estimating

*   Control

*   Marketing

*   Property Management

Subdivision and Land Development Ordinances

*   Development plan submitted for approval

*   Impact studies required for larger projects

*   Developer may be required to provide some or all infrastructure

*   Developer may be required by DEP to have percolation tests if septic system is planned

*   Impact fees

*   Subdivision requires subdivision plat and may require dedication of land for streets, etc.

*   Building codes and building permits

Private Land Use Controls

*   Deed restrictions

*   Restrictive Covenants

*   Sunset provision

Interstate Land Sales Full Disclosure Act

*   25 or more lots

*   Must provide property report

*   7 days to rescind contract