Land Development and the risks associated

Why do houses cost so much? Why can't we have a nice restaurant on that corner? Why do they want to put that kind of density on the land? These questions and more are often heard at community meetings or public hearings. These questions are legitimate and there are multiple answers to each, but this article attempts to let you see the development process through the eyes of the Developer.

First risk a Developer must forecast and mitigate is time. What makes sense now may not make sense 2 or 3 years from now when the development is ready. A project planned in 2006 may have crashed and burned during the housing crisis of 2007 and 2008. Many Developers went bankrupt due to the recession and housing crash as they were too land heavy. They had dirt that was going through the process or had been approved but not built on yet; many had to give the land back to the banks or get workouts to stay in business.

In many counties in the Virginia, a rezoning can take up to 18 months from the time the application is first submitted. You turn in the application and staff has 30 days to turn around your first set of comments. This back and forth with staff can easily go 3 or 4 rounds. During this time, you are doing community engagement, and depending on the locality this process may be formalized with forms describing the level of community engagement being turned into staff. Next is Planning Commision which will either recommend approval or denial of the project. Commissioners are supposed to look at projects through the lens of the Comprehensive Plan, but they are ultimately just people like the rest of us and will have bias and considerations that will go beyond land use. If you keep moving forward after the Planning Commission, them in about 60 days you will finally make it to Board of County Supervisors. This will also be a public hearing and sometimes depending on the level of interest could be held open for a second meeting. There are also some jurisdictions who do not vote on matters until the meeting following the public hearing. If all goes well and your project is approved, you probably have another 6 to 8 months for your site plan approval. Then you can finally get started on actual construction,

Next what is the financial risk involved? The risk is generally two-fold; the seller of the land is usually on hold until the project is approved by the Board of County Supervisors and the Developer has a significant investment at risk until the project is approved. Let's look at the costs that are paid out before a project is approved:

Deposit on land 2-5%

Land Use Attorney or Planner $60,000-$100,000

Civil Engineer $100,000-$200,000

Architect $25,000-$50,000

Environmental Engineer $10,000-$30,000

Depending on the size and scope of the Development, this number could grow exponentially. If the project is denied this is money lost. Now, if the project passes these costs are generally well worth it and the items delivered will be built upon to get to final site plan and architectural design. Also, remember the Developer is a business and needs to mitigate risk with profit, so thus the cost to business is ultimately passed on to the consumer.