It’s 2019 in Nashville and properties are changing hands faster than you can say “hot chicken.” According to a report from the Urban Land Institute and PricewaterhouseCoopers, Nashville ranked fifth in the nation for real estate prospects in 2019, the city’s highest ranking in the report’s 40-year history. On top of that, the U.S. economy is booming and unemployment is at a 40-year low, meaning Nashville isn’t the only hot development market in America. Cities like Charlotte, San Antonio and Seattle are seeing a mad dash in development too.
Size and existing conditions of a property are common factors in determining how a given piece of land may be used. However, there is another critical factor that’s not always given its due, at least in the initial stages of assessing a site—entitlements. Broadly defined as permissions granted to you, the property owner, to use or develop your land, these legal rights come in a variety of forms from multiple regulatory bodies and jurisdictions.
Collecting entitlements often begins at the policy stage through community General Plans or Comprehensive Plans then progresses through the maze of zoning, land development regulations and permits. There are multiple pitfalls and potential side paths to negotiate throughout your journey toward vested property rights that can derail you. At a minimum, the entitlement process will impact your bottom line; often times, 20-25% of a property’s total value is tied up in entitlement costs.
However, the impacts of entitlements don’t stop there. As design consultants, entitlements also influence what we can design and how we can design it. From more widely understood codes and regulations to less obvious overlays and character manuals, there are often multiple layers of entitlements that are introduced at different stages in the design process.
The entitlement process can be complicated, time-consuming and costly—especially in cities where land is scarce and land values are high. However, we’re here to help make the process a smooth and profitable one. With years of experience dealing with entitlements from both the private development and public sides, we’re outlining the process and offering tips for navigating land entitlements in a hot real estate market.
As part of your financial viability analysis, you will typically analyze market conditions, site conditions, the desired project design and construction management costs. However, the costs associated with entitlements aren’t as easy to analyze. We’re dealing with a process where approvals can be subjective and rules subject to interpretation, which often times leads to time costs. All of this can affect project return and even viability, which is why it’s imperative to paint as full picture as possible regarding entitlement costs.
Read the Road Map
Once you’ve decided to move forward with your development project, it’s time to start working your way through the entitlement system. The first step is investigating the comprehensive plan for the community you want to develop in.
Known by various names depending on your jurisdiction, the comprehensive plan is essentially the road map that’s used by the government to assess whether proposed land uses are in accordance with the vision set out by community leaders. The plan often has goals and objectives related to a variety of elements, such as transportation, housing, parks and trails and economic development, and is the measuring stick your project is judged against.
Get in the Zone
A lot like the classic board game “Monopoly,” the more entitlements you obtain, the greater the potential to increase your property value. Understanding what zoning district your project requires, what zoning district you’re currently in and how well that corresponds to the comprehensive plan is only a part of the zoning process.
It’s equally as important to determine what type of zoning is being used. Whether it’s Euclidean zoning, performance zoning, incentive zoning, form-based zoning, or some hybrid, each has its own unique characteristics that will affect the development regulations you’ll face , such as height restrictions, lot dimension regulations and setbacks, and who the decision-makers might be, such as a legislative body, planning board or commission, or architectural review committee.
This phase of the entitlement process also involves extensive public engagement, which means your plan will also likely be reviewed by a variety of stakeholders and interest groups. While often daunting, the issues or concerns brought forward by these groups can usually be mitigated or eliminated before you ever appear before the decision-making body. We strongly believe in the value of stakeholder outreach and work closely with our clients and their land use attorneys to develop a strategic community engagement plan. In some cases, especially with complex projects, it may even be wise to involve public relations firms and real estate attorneys in the public engagement process.
Proceed, With Caution
Approvals can come in many forms and understanding your options will help you select the path forward that works best for your project. Options may include conditional use or special exception permits, which would allow you to build if certain conditions are met. You may also be able to obtain a variance or waiver, allowing you to deviate from a land use of land development regulation. Knowing which options may be available within your jurisdiction will help you make informed decisions about what makes the most sense for your project.
Green Means Go
Once your zoning and development plan is approved you’ll be cleared to produce construction documents for the project. The final approvals for developing your site could require permits from a litany of federal, regional or state agencies. Permitting often involves a multitude of fees, including some to help cover the “impacts” of new development, and can easily cost thousands of dollars. However, with a understanding of the range and types of fees associated with the permitting process, you can avoid steep and unnecessary penalties.
Once you have your permits in hand it’s all hands on deck and all boots on the ground. While the entitlement process is complex, especially in a hot real estate market, it’s a necessary evil when it comes to development. However, by involving your design team early in the entitlement process we can help you every step of the way, all while safeguarding your investment.