The Shifting Landscape of Real Property: Increasing Density and Neighborhood Dynamics

By Dan Harkey

While these newly mandated state-level building standards are comprehensive in their application to all types of properties and zoning classifications, they also present significant opportunities for transformation. Consider a commercially zoned property currently used as a church. Under a highest-and-best-use analysis, it could be redeveloped into high-density residential apartments, thereby increasing its value and contributing to the evolution of the neighborhood.

Consider a hypothetical scenario where a 24,000-square-foot property valued at 1.2 million is subject to the new state-mandated standards. The property’s highest and best use could be to tear it down and build 29 residential units. This transformation could significantly increase the property's value, with an allowable land value of $74,000 per unit for a future residential rental unit development, or a total of $2,200,000. The potential for increased property values is a ray of hope amidst the changes, offering promising financial rewards for property owners.

The neighborhood may gain 29 units, an average of 2.5 occupants, or 72 tenants moving into the quiet, tree-lined community—minimal setbacks and parking required.? The building could see 50 or more cars to find parking around the neighborhood.? Tree-lined, quiet areas can now expect transient tenancy void of traditional values.? But, heck, this is what we voted for?

Using the above example, California has witnessed a massive flurry of new developments that may downgrade the quality of life for many who prefer a peaceful, quiet neighborhood lifestyle. Quiet neighborhoods may become high-density transient-occupant tenants that bring noise, neighbor conflicts, traffic congestion, crime, and increased neighborhood hustle-bustle.

The fact that the state government has taken over development oversight and allowed municipal cities only to be approved as an administrative action needs to be revised.?? State mandates decision-making do not mean that the property owner will not get bogged down in a nightmare of regulations at a local municipal level.? The nightmare will be between state regulators and hostile local municipalities about sharing their power, approvals, and oversight.? All parasitic bureaucracies, whether state or local, feed and grow on the available crop of property owners.? Multiple bureaucracies can separately feed on the same property owner.

A positive note is that all the above has created new opportunities for the private money lending industry for investors purchasing tear-downs, financing entitlements, vertical construction, refinancing construction loans, and bridge loans for mid-rise residential apartment complexes.

Thank you

Dan Harkey

Educator and Private Money Lending Consultant

949 533 8315? [email protected], Visit www.danharkey.com

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