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Making Real Estate Great Again – Compromise or Combat?

1/30/2018 | Articles & Alerts, Zoning & Development, Real Estate Transactional

Yes, I added a question mark to the title to emphasize that any forecast comes with uncertainty. Of course, much of this uncertainty emanates from the President’s influence on the federal government. Sweeping changes to the tax code have arrived as have the rollback of a great many regulations. Other changes, such as the travel ban, are mired in litigation without any possibility for a compromise solution. It seems as though Republicans and Democrats have become the political equivalent of Eagles and Cowboys fans and the courts seem willing to jump into the swamp.

Uncertainty is never good for the economy or real estate. Worse yet is conflict among federal, state and local government. While the rollback of overly restrictive federal regulation is good for development, more lenient federal oversight will often conflict with state and local regulatory schemes. For example, while the federal definition of a “wetland” may allow for more acreage to be developed, state and local regulations may still provide for contrary definitions and expansive restrictions. These conflicts may result in more litigation, with accompanying years of uncertainty.

In any event, from a land use perspective, 2018 will require new development to adapt to the changing needs of our population. For example:

  • Millennials are technologically savvy, mobile and environmentally aware. They are keen on building careers and postponing families. They prefer a walkable, transit-oriented urban setting, but educational debt and limited job opportunities severely restrict their cash flow. They seek small affordable city living spaces to rent that are internet-connected to allow a home workspace, or are close to employment centers or collaborative open workspaces. There is no time for traditional “brick and mortar” shopping. Social media marketing and online shopping experiences will do just fine.
  • With millennials’ growing need for more affordable housing, multifamily demand will continue to grow.
  • Senior housing demand will continue to grow, with a present inventory that does not meet the needs of a group projected to grow significantly in the next decade. More affluent empty-nesters and seniors have opted to move to urban areas where shopping is walkable and public transit is good, leaving behind large single-family suburban homes.

Local zoning codes and state regulations will often lag behind these trends. The outdated definition of a “family household” as consisting of only individuals related by blood or marriage, must be revised to recognize a declining portion of family households and an increasing portion of non-family households. A more modern definition will allow builders to create smaller and more densely designed developments. “Right-sizing” is a term used by the Urban Land Institute to describe how the real estate market is adapting to changing demographics, technological advancements and economic realities.

It seems certain that many local government units will not voluntarily allow their own regulatory schemes to give way to state and federal preemption. We have entered a new age of populism, dominated by social media, in which one person’s crusade can become a coalition behind a cause, electing local candidates to office and proceeding forthwith to enact new and more stringent regulations. Absent a clear indication of federal or state preemption in any given area, it would appear the 2018 battle lines have been drawn. Let the games begin!

If you would like additional information, please feel free to contact Neil A. Stein, Esquire (610) 941-2469 or nstein@kaplaw.com.


Related Practices: Land Use, Zoning, and Development