Real estate developers are merely playing by the rules

You may demonize real estate developers and distrust their motives, yet few developers deserve distrust or demonization. In fact, developers by and large do what governments permit or demand, in accord with public policy, laws and regulations. Moreover, developers do only what they believe the real estate market wants, accepts and can pay for.

Sure, developers are profit-motivated. But taking risks and seeking a fair return on investment are not sins. Indeed, only profit-motivated developers are willing and able to create most residential and commercial real estate necessary to accommodate increasing population and demographic shifts within growing metropolitan areas such as Washington.

You probably know that constructing your home or apartment building, from initial site preparation to kitchen appliance installation and final painting, took less than two years. What you may not realize is that the pre-construction development process typically lasts much more than two years. For real estate developers, this process is always arduous, time-consuming, costly and risky.

Developers undertake projects only by complying with a daunting web of federal, state and local environmental regulations, zoning laws and building codes. These are operational expressions of public policy goals that we citizens and our elected political representatives, not developers, have set forth.

Regulatory hoops aren’t the only ones that developers must jump through during the lengthy pre-construction process. They must agree to the always tough demands of real estate investors and lending institutions that provide most of a project’s funding. For large-scale or complex projects involving multiple buildings, disparate tenancies or extensive infrastructure enhancements, finding and securing necessary debt and equity financing can take years, not just months. Moreover, financing often entails multiple funding sources.

Paralleling financing efforts are overall project planning and market research; architectural and engineering work; continual construction cost estimating during design and redesign; and construction contract bidding and negotiation. Sometimes developers choose to build something other than a matter-of-right project. This normally requires proposing and obtaining one or more unique entitlements, which can take years rather than months.

“Entitlements,” a term of art, refers to approvals for zoning amendments, variances, special exceptions, tax relief, infrastructure agreements or other project-specific benefits. These are all building permit prerequisites. The entitlement process entails submitting applications and study reports; meeting with civic groups, government agencies and elected officials; numerous public hearings; and quid pro quo negotiations. Legal fees alone can consume much of the developer’s pre-construction budget. And there is no guarantee of success.

Being aware of another reality can help promote understanding of and temper cynicism about real estate developers and the development process. Many people believe that preserving the status quo and outlawing physical change is or should be the primary goal of public policy, zoning laws, environmental and other regulations, including historic preservation guidelines and requirements. But this is a misconception.

A paramount goal of policies and regulations affecting what and how we build is ensuring public safety, the protection of life and property, and not impeding change. Another goal is ensuring that what’s newly built will not be a nuisance or be incompatible with what exists. But this does not mean that something new must replicate its surroundings, nor does it mean that it cannot be different in appearance or use from what is old.

Our policies and regulations affecting urban and suburban development actually anticipate change. They acknowledge that, over time, economic and social circumstances evolve, technologies advance, and human knowledge, needs, tastes and ideas change. State, county and municipal charters and statutes purposefully incorporate amendment procedures, as do master plans and zoning ordinances. This enables communities to periodically update and revise laws and regulations to reflect new modes of habitation, work, recreation and travel.

If wisely governed, communities willingly revisit long-standing policies, laws and regulations that have proved deficient or flawed, especially when they have produced seriously dysfunctional physical environments requiring costly makeovers. Look no further than Tysons Corner, the poster child for the result of ill-conceived planning and zoning that seemed like a good idea at the time.

A half-century ago, Fairfax County planned and zoned hyper-congested, unwalkable Tysons Corner into existence, predicated entirely on accommodating private automobile mobility. Today, having generated a new plan and new regulations, the county is committed to remediation entailing billions of dollars of new investment over several decades. Public officials and Tysons stakeholders aspire to transform Tysons into a walkable city. And private-sector developers will do much of the transformation’s financial “heavy lifting.”

Real estate developers didn’t create Tysons Corner, although they have produced a lot of mediocre architecture. Tysons Corner is what you get when physical development is shaped — or misshaped — by obsolete land-use plans and zoning regulations coupled with a road network designed by transportation agency traffic engineers.

So the next time you feel inclined to blame developers for traffic congestion or for greedily constructing buildings you believe are too tall, remember that they are only playing by our rules, not theirs.

Roger K. Lewis is a practicing architect and a professor emeritus of architecture at the University of Maryland.

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