Some people like to talk and write about “greedy developers.” Greed is an attribute of people; there are definitely greedy real estate developers in Seattle. But there are also greedy bus drivers, greedy kindergarten teachers, and the greedy guy who makes 10 trips to the all you can eat sushi bar. Why one profession attracts greedy people and one does not is a sociological question, not an economic one. Consideration of how a piece of land becomes a financially viable project should dispel the notion that real estate development is a greed driven enterprise, or an easy way to exploit zoning and “laugh all the way to the bank.”
The business of real estate development is often characterized with a simple story of rich fat cats buying up land, building things on it, and then reaping massive profits by selling off what they build. However, like any business or organizational venture, real estate development is no sure thing. Business is like love; it’s about taking risks. One does not find Mr. or Ms. Right by sitting a home watching television; such a venture requires engagement and vulnerability.
Real estate development is about transmuting risk into profit; it requires taking a chance. The certainty levels of profit in real estate development are very low, and if they were higher there would be many more cranes than are on the horizon now. Projects that are coming out of the ground now came a long way, and it may have taken years of work and lots of money to get it done. Here’s a quick sketch of the factors affecting development.
Land acquisition—obviously every project needs land. Finding land that will work and this priced right is the first step. Private developers don’t have condemnation powers, so they take their chances with the market and with landowners looking to maximize their return. If the price is too high, nothing is going to happen. Assembling multiple parcels, for example, can take years and costs lots of money with little immediate benefit.
The costs of property acquisition are usually carried over time as a debt or are big one-time cash expenditures. Either way it takes a long time to get that money back, and even though there might be something on the site that generates revenue, there are still operating costs associated with running that function (parking, housing, retail etc.)
Market study (supply and demand)—a developer might have a pretty good sense of what’s possible on their land, the important question is “Does any one want to buy it?” In the real world, real estate development is driven by supply and demand. I can own prime real estate, but if nobody wants to buy what I want to build there, nobody makes money. Market studies are important tools to figuring out what people want and what they’re willing to pay for it. If there is no demand, then there won’t be a project.
Price—as I’ve pointed out before, once it’s determined that there is demand for what a developer wants to build she has to figure out what she can charge for her product. Often, the product is changed based on demand. Price for space, whether it is rentals, condos, or retail space, are set very early and are based on what is going on in the broader real estate market. A market study will help a developer figure out what kind of case they can make to a bank for construction and other loans. A developer has to ask, “If I build it will they come?” This better be an honest answer, because it shapes everything else that happens.
The banks—banks, contrary to popular mythology, are not freewheeling, drunken sailors of finance; they hate risk. Banks are the people who will loan you an umbrella when it’s not raining. A developer has to make a strong argument that the project that she is proposing has very little risk and a high potential for return. Want to try a green roof, or a passive building? The bank will need persuading that the rents will cover the extra expense and potential downsides, including permitting headaches and technical trouble. Banks like sure bets, which often means that they fund stuff that looks like everything else built before it. Hate cookie cutter buildings?; don’t blame developers and architects, blame banks.
Environmental—that sweet lot you bought might seem perfect for a mixed use project, but what about that sloping hill right near it? That could present a serious erosion problem. And, oops, it turns out there was a tank under ground when the site was a gas station. That’s going to cost some extra time and money. Local and state government require lots of due diligence to be sure that a site doesn’t have any serious environmental issues. In a big city, with lots of previous activities going on at a site over time, there can be lots of issues that come up. Those cost money to analyze and fix, well before a new project is even approved.
Zoning—even if the property is available, configured just right it’s got to have the right zoning. Obviously, developers try to buy land in the right zone, but after analyzing the site and the issues associated with it, including the financial risks, sometimes, the zoning needs to be changed. For example, if a developer finds that there is great demand for their product but the costs for building the project are high, she might want more units. Creating more units, even a few, could tip the scale for the bank, ensuring that rents or sales will cover the debt service on their loans. Maybe that steep slope adds costs that could make the project work if there were more, higher priced units.
The building inspector—let’s say everything lines up, the market study shows demand, there are no environmental issues, and a rezone isn’t needed. What about the building inspector? Planners review zoning and use, but the nit-picky building inspector needs to be happy with the building too. That’s a good thing; someone needs to make sure that the building construction is sound and safe. Tragedies can happen when assumptions are wrong. But problems or tweaks cost time and money before, during, and after construction.
Other problems—what happens if a general contractor goes out of business half way through construction? What if a sub contractor doesn’t work out, requiring that part of the project re-bid part of the work? What if prices on some of the key materials being used for the project suddenly spike, pushing up costs? All of these things and more can happen, affecting costs and the timing of the project. Funds can be set aside to cover these things, but delays and additional costs can turn what looked like a sure thing turn into a losing bet.
The neighborhood and politics—enter the big variable in Seattle development: neighborhoods and how they affect politics. There is an unfortunate relationship between neighborhood expectations and the reality a developer has deal with. Usually the more complicated or innovative a project, the more challenges the project faces—and the more approvals, exemptions, and changes to existing rules will be needed. That means everyone gets to weigh in on a project through the public process. Suddenly new variables get introduced: design, affordability, noise, use, and even the color of the paint or the windows all get questioned. Each one of these things can add costs to the project in addition to the extra time for public process.
Lease up and sale—and then, people have to show up. If, during the years it takes to deal with all the things I’ve listed already, the market shifts the developer could have a real problem. If rentals or sales are what is expected, prices might have to drop and that cuts into profits and can even put a developer out of businesses.
As with any business, sometimes developers strike gold and find a piece of property for a song, that’s easy to build on, has no issues, and creates a product that sells like hot cakes for a price that exceeds expectations. What’s wrong with that?
Real estate developers hardly ever end up “laughing all the way to the bank,” unless they’ve crawled their first having already spent their own money, accepted risks, and done lots of work to build a feasible project. Weekly paychecks aren’t the same thing as profit, and profit isn’t the same thing as greed. People make choices about how they make their money. Real estate developers make their money by taking risks; if people couldn’t make money building housing, then why would anyone do it? Would you pay your boss to come to work every day? Would you work for free?
67 Replies to “A Fistful of Contingencies: Developers, Risk, and Profit”
Excellent post. Would also add that the dread “greedy developer” discourse is crucial in a certain kind of Seattle lefty’s toolkit. It allows her to argue for development restrictions that should offend her political sensibilities, as they are unjust (making it ever harder for the non-wealthy to live in the city) and ecologically unsound (sprawl), while directly serving her own financial self-interest. The “greedy developer” with malign intent is a fiction designed to prevent them from ever having to face the fact that they’ve become selfish reactionaries. It’s mostly projection.
But that’s the point, these developers are not spending their own money typically they are leveraging other people’s money with only the shoddiest chance of the supposed returns! As we’ve seen, these locusts have moved neighborhood to neighborhood around Seattle, claiming that “everyone” wants density and then leaving a swath of half empty concrete eyesores in their wake. And when questioned about why it doesn’t work in Belltown, they move to SLU, then then to Ballard, and then to…
Case in point, 20 years ago it was supposed to be Downtown Seattle that was an urban paradise. Billions and billions of years later, one can hardly say that. I did one of my monthly pilgrimages to Benaroya Hall, walking up 1st from King Street Station.
You know, 20 years ago when I lived in Seattle proper, I remember going down to Elliot Bay Books at any time, day or night. There was always that bright spot of light there, and loads of customers coming and going. Now, I’m surely not going to blame real estate development for changes in reading technology and the demise of the bookstore, but it seems like there has been little to replace it.
Here is this supremely “walkable urban square” and yet at 6pm it looks like a that video simulation of “Empty Seattle”. And it was the same all from King Station to my destination, the Italian Family Pizza place that SLOG recommended; however, let me tell you the good news. Once I left the dark, dreary and empty streets of Seattle for the pizza place, the whole atmosphere changed. The place was bright, warm and full of people! And this was a cheap pizza place that was based not on some “gourmet” pizza — the kind of high priced, esoteric, West Coast, quinoa and broccoli pizza, but a good old fashioned, 100% regular guy pizza.
See, that in a nutshell is the problem. Seattle was…used to be…the Last Middle Class City…that’s why people moved here. But it seems like just about every flim-flam man and his brother has been trying to destroy that and turn it into the Trump Tower. Yet, 20 years and billions wasted, and the one thing that people really want and need is a simple neighborhood pizza parlor from Queens…
“You know, 20 years ago when I lived in Seattle proper, I remember going down to Elliot Bay Books at any time, day or night. There was always that bright spot of light there, and loads of customers coming and going. Now, I’m surely not going to blame real estate development for changes in reading technology and the demise of the bookstore, but it seems like there has been little to replace it.”
John, Elliot Bay Books is still alive and kicking, with patrons coming and going well into the evening, located in a dense urban core neighborhood. They moved from Pioneer Square to Capitol Hill a few years ago, largely because they were unable to resolve a difficulty with the landlord regarding climate control in the building (which was damaging books).
As to the rest of your comment, it’s fundamentally dishonest to treat failed development projects (2008-2011) as a general failure of urbanism. The was the worst economic crisis in 70 years, and it hit real estate markets particularly hard. And yet, after a multiyear pause, those condos in Ballard are filling up and previously paused projects are resuming. There’s a strong desire for dense, walkable urban neighborhoods, as the rents and prices in these neighborhoods very clearly indicate. Your distaste for such lifestyles is duly noted, but not shouldn’t be confused with facts about the rest of the world.
Current Elliot Bay (like I said):
Sorry, I wanted the street view to show:
Ok well, click on link, then go to Street View (aside: can you make it more difficult Google?)
All I see is the typical (good) old Seattle with low rise buildings, a nice warehousey, residential feel and yes, parking spaces!
Elliott Bay said it was moving because customers in Pioneer Square were dwindling with the failure of the arts-renaissance neighborhood around it, and the 2008 recession had been the final straw that endangered the company’s existence. It moved to Capitol Hill, which it perceived as an emerging bookstore mecca.
“All I see is the typical (good) old Seattle with low rise buildings, a nice warehousey, residential feel”
You can’t pretend you don’t know that new six-story apartments are two blocks away, and that Pine Street around the corner is already in process for the same. Yes, some “old Seattle” one-story warehousey buildings may remain for a significant time, but that’s hardly the only thing in the vicinity.
Uh……..there is a strong demand for housing because there is a strong desire to live in Seattle due to its beauty and job growth. Out of expediency, new immigrants to Seattle like myself look for an apt in a typical midrise in Ballard or Capitol Hill or Lower Queen Anne first. Density is usually the least of our considerations. Later, we find housing we really like. Don’t impose your values on all people who move to Seattle.
And let me add, this blog is so enamored with density it would sell its soul to the devil…….I mean the developer. Oh wait………it already has.
Seattle was…used to be…the Last Middle Class City…that’s why people moved here.
John, at what point do you think Seattle lost its reputation as “the last Middle Class City?”
I ask because the time period I’d associate with something like that characterization–the 60’s, 70’s, maybe early 80’s–are associated with population decline. It is only when Seattle’s image started to change that the population began to (and continues to) grow.
If only all those durned PEOPLE hadn’t moved here…
Seattle’s population started declining in the 1960s with white flight, and reached its lowest in the 80s at 410,000 or so. Prostitutes were all along 1st Avenue, and 2 BR apartments in University Heights were $450. So Seattle was cheap and had plenty of space then, but it was not “the last middle class city”. It was just in typical urban decline that didn’t happen to be as bad as northeastern or California cities. It hadn’t been discovered as a yuppie/hipster “most liveable city” hotspot yet. Condos were just starting to appear, and were cheaper than houses.
In the late 80s, the city applied some low-income housing money to spruicing in the Pine Street retail district and creating Westlake Park, under threat from Nordstrom who said it would move its flagship store to Bellevue Square if the deal didn’t go through. The DSTT was also built at that time, and the prostitutes dispersed from 1st Avenue.
In the 90s Seattle was discovered, the population started rising, the central downtown renaissance was successful (Belltown and Pioneer Square less so), 4-story denser housing started getting built, and condo prices rose to SFH levels.
Mike: No fair. I had my tongue in cheek first. :)
Seattle near top of income disparity between lowest and highest:
Seattle population history 1890-1990.
It peaked during that period after the 1950s.
I don’t think it’s wrong to look at rapidly adding population as negative thing…more people means less resources for everyone else. It’s a “hidden tax” that is little discussed.
While it may be hard to face, in some sense, our rapid growth in population is somewhat of a traumatic event. More competition, high prices, less real stuff like land for everyone. I’m not a Malthusian or a NeoLiberal, but I think you have to take a realistic view at these things and weight costs and benefits!
While it may be hard to face, in some sense, our rapid growth in population is somewhat of a traumatic event. More competition, high prices, less real stuff like land for everyone.
First, of course, this ignores the benefits of growth–more jobs, more opportunities, more restaurants, bars, and other businesses to choose from.
Insofar as prices are rising, that’s as much a product of public policy deliberately keeping costs high by preventing developers from building enough units to meet demand, even though Seattle is a mid to low density city. (From what I can tell, you seem to support these policies, but please do correct me if I’m wrong). As far as “less space”, many people, including me, really don’t mind. Because you find the idea of sharing walls and not having a private yard distasteful does not mean everyone does. Happily, our urban area offers the ability to choose locations where large amounts of space are more affordable.
Your inability to contemplate the possibility that your preferences are not universally shared is quite remarkable.
You’re a very hysterical person. I think you spend more time answered what you think you think I said that what is actually being said.
Original Post. Opinion Presented.
My Response. Counter position presented.
Your Reply. Goes off handle about “me speaking for everyone”.
I mostly use the singular pronoun indicating these are my opinions.
Since they seem to be shared by no one (on this blog) other than me, I think only the greatest fool would think that I think that I speak for anyone of the “transit and density” ilk.
If you meant to say a healthy, growing city is a “traumatic event” for you and yourself only, that wasn’t clear.
I pointed out that the one thing that makes sense about that claim–the increase in costs–is actually a side effect of not just growth, but growth+anti-density policy, which you support. If I’m wrong about that, my apologies.
Eric H, I was responding to djw, not you. Your message was just in between. :)
Don’t you understand that there is a demographic of young people who want to live in urban density? “Yes”, they’re a minority of American citizens but they total tens of millions of people. And, “yes”, you may not want to do so, but they do.
Nobody is trying to make you move from East Hill to the CD. But there are plenty of people who want to live there, because they can get to work in downtown Seattle in fifteen minutes on the 12 and walk, bike or bus to most everything they need. They’ve decided that they’d rather spend the $5,000 to $10,000 per year (plus garaging….) it costs to have a decent car and use the money on something else.
No, they can’t go make some physically large purchase at BestBuy or Ikea on the bus, unless they want to pay for delivery. But some people do that, believe it or not. Others are members of Car2Go or Zipcar.
Each person who makes a decision to pursue that lifestyle removes congestion from your commute, consumes less energy with all the environmental positives that has plus makes it a teensy-weensy bit cheaper for you, and reduces the pressure to convert wildlands to human-centric uses, making the cost you will have to pay for your East Hill house lower whenever it is you decide to make the purchase.
Please, get off your soapbox and congratulate those people. Everyone of them is doing you a personal service.
“Half empty concrete eyesores?”
John, you’re just disconnected from reality. Vacancy rates are as low as they’ve ever been on rental property. Compared with historical standards, there is damn near no inventory for sale in any of the central city neighborhoods. I should know — I want to buy at some point in the near future, but also don’t want to participate in a market where everything remotely desirable has to be jumped on the morning it gets listed and paid for with cash, so I haven’t jumped yet.
You speak with forked tongue.
On one fork you say there is lots of inventory.
On the other fork you say it gets sold so fast you can’t buy it.
What’s the deal?
John, why would you say that someone who writes the following:
Compared with historical standards, there is damn near no inventory for sale in any of the central city neighborhoods.
is, in fact, saying there is lots of inventory?
It’s not what he said at all. What are are you talking about?
He criticized my quip about concrete eye sores, but then he talked about “central city” neighborhoods, which I assumed he meant the central district, which does have housing, but not concrete high rises. So are we talking apples, oranges or peanuts?
Few people consider the CD to be “central city”, especially the people who live here. But that’s just semantics in the end.
The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.
“Greed works.” A really moderate man would ask: “Would you say the same thing about gluttony and dysentery?”
Greed works for making people money. Gluttony works for making people fat. So yes, you could say the same thing.
‘m more partial to sloth ;).
Isn’t it time we retired the 1980s.
I mean maybe it worked for like 30 years, but clearly we’re ready for something new. I think Milton Friedman has been repudiated by current events a thousand times over.
We need to get back to managing our dominion (not our “domain” as you would have it).
Also, there is always the risk of a strike by the building trade unions or the Teamsters. Seattle had a cement truck driver strike a while back that caused a lot of disruption. I remember UW had to pave some of its campus roadways with asphalt instead of concrete as a result of the strike.
Good post, I’m filing this away for the next “but developers are evil vampire squids” conversation I end up in.
When I think of greedy developers, I think of the ones that leave us with god awful looking box condo buildings, with “mixed use commercial” that is suited only to dry cleaning, nail salons and phone stores. This is because the review process in Seattle seems like nothing more than a rubber stamp. Now that’s not only the fault of the developers, as Seattle is the one doing the rubber stamping, but I’m sure the “greedy” developers do what they can to keep it that way.
Now that’s not to say that all condos are or have to be bad. I have high hopes for the Market Street Landing. But it is a small drop in the sea of gaudy buildings, like Ballard Blocks, Leva, Hjärta and of course everyone’s favorite, Ava. But you go to places like Portland and Chicago and there are some downright gorgeous condo buildings. Why can’t we have buildings like those? I’m leaning on greed until there’s a better reason offered.
The thing is, we are stuck with developer greed forever, in the form of horribly designed and built buildings. The greedy guy at the sushi buffet, he’ll be out of our lives 10 minutes later (and our insides might actually thank him later).
You’re leaning on greed because… developers in Seattle are more greedy than developers in Chicago? Have you ever been to Chicago? Seriously, now.
People are people everywhere; one thing that differs city to city is code. A lot of Seattle zoning code bans attractive and useful building features while encouraging ugly ones.
“This is because the review process in Seattle seems like nothing more than a rubber stamp.”
As opposed to what? There is a common misconception that design review holds some sort of power over the developers. Design review is really just a look at the pieces of the design that stand outside of the law, and the reviewers have the power to deny these variations, approve them, or ask for other changes in return.
The issues you mention are the direct result of our building codes. Design review has nothing to do with this – if a developer designs shallow, wide storefronts that’s inappropriate for any businesses except nail salons or Subway, well this satisfies the code and the design reviewers don’t have the power to change it. Actually, in some ways it’s all but forced by our code, especially back when we required more parking – parking eats up much of the 1st floor, leaving only a sliver at the front for retail.
Why is it so much easier to revise the building code to allow less parking than to enforce “better looking” buildings? My guess is because less parking saves the developer money, whereas “better looking” buildings cost the developer more money. Seems like they should go hand in hand. If you want more transit users and better walk-ability, to compliment less parking, you need to create places that are enjoyable and useful to walk around in. Somewhere along the line, there was a disconnect, and I bet it had something to do with greed, be it the developer or the city.
Define better looking buildings. Seriously. Right now.
If you can’t do it, how are you going to write a code that requires it?
If you can’t write a code that requires it, how can you let someone spend all of the effort above, then come to some panel of non-experts that say “Hmmm. I don’t like green. And there are too many windows – take out half of the windows. That pointy roof is hideous – I like flat. And move the balconies to the back.”
If that’s what you’re talking about, you’re talking about killing development. Design review necessarily relies on asking for changes in exchange for allowances. The moment you make reviewers into kings, you’ve passed sociallism and gone straight into a Kafkaesque nightmare.
You’re right, it’s completely impossible. Let’s just give up and let the developers come in, build their buildings with cheap facades and leave. After all, we wouldn’t want to make their lives difficult. We should just accept their ugly, cheap buildings that will define our neighborhoods for the next 50 years. After all, it’s our duty to be stuck with buildings that look like this:
Rather than this (Pan around in Chicago to get building envy):
Or hell, even a little art:
But nope, we wouldn’t want to “kill development”, because clearly, by having developers put a little more effort into their facade, they all just give up and don’t build.
So hey, to make it easier for those poor developers, let’s just do away with any kind of aesthetic requirements, since it’s impossible to define them, let’s just have buildings that look like this:
Then maybe our neighborhoods could look like this, so we don’t hurt any poor developer’s feelings:
“because clearly, by having developers put a little more effort into their facade, they all just give up and don’t build.”
No. By making government unpredictable and arbritrary you dramatically raise the cost and drop the quality of everything.
“Let’s just give up and let the developers come in, build their buildings with cheap facades and leave.”
Is that the issue? Cheap facades? No problem – require brick, or even stone. That’s something we can codify. It’ll needlessly drive up the price of construction and therefore rents, but these are the choices we get to make as a society.
But note that your first link shows some bad choices Seattle’s made. We require large buildings to vary their fascade, which resulted in that ugly wave. I’d probably get rid of that.
Do you really think good buildings come from design reviews? Does Chicago really have design review kings and queens that tell developers how to build buildings? I doubt it. Good design comes from good architects, and is paid for by developers that are trying to attract clients that want beautiful housing. It does not come from government mandate, and it doesn’t come from a random group of citizens telling architects how to do their jobs.
The Aqua tower got built because the developer wanted to pay for something nice, not because Chicago has any kind of design review. There is almost none here. The neighborhood folks try to force pedestrian oriented changes now and then, but, mostly developers have free reign here in Chicago. They build beautiful skyscrapers, but even where you show your google maps link, its a very boring place to walk around because there’s nothing there. Also, there’s town homes right there, which is perhaps the worst land use I’ve ever seen in my life. (with the exception of the cantina laredo (brand new 2-story restaurant) above the grand ave subway station. shoulda been a tower…. that station is surrounded by towers, and they decided to build a tiny building on the last corner….
Seattle has gorgeous High Rise Condo buildings, brand new sparkling glass towers, Chicago has many pretty condo towers that meet the street so poorly its like living in the suburbs despite there being 40-50 story buildings everywhere (I’m looking at you, South Loop), and to some extent, my own neighborhood, Streeterville. What part of Chicago were you referring to with good condos?
You missed the entire design cycle in there! Back when the developer’s dreaming up the use of her new building she hires an architect. That architect works to come up with general concepts for the building, and create some mass models that generally show what shape the building might become. Once everyone’s happy with that, they create a schematic design set, which will be useful to show the bank as well as the design review groups. Around this point they hire strucutal, then electrical, mechanical, plumbing, and life safety engineers, sometimes followed with lighting and communications engineers. The team works together to build a set of detailed design drawings, and eventually construction drawings, which could take months. Again, these have to be reviewed by the city and the owner, and when everyone’s happy the developer can finally put these drawings out to bid by general contractors. The general contractor breaks up the drawings and gives them to their subcontractors, who then create their own shop drawings to finally use in construction. (note: this was a design-bid-build process – design-build is similar, but some of the order is changed)
Design is usually a significant cost of construction (~10-15%), can take a long amount of time, and is mostly done before the first shovel hits the ground.
Good synopsis, Matt–but you forgot the dreaded VE (Value Engineering, or “cut all the good stuff out to maximize return”). Generally occurs following request for bids. :)
(so very, very many ugly buildings are due to this…either developers trying to build something that doesn’t really pencil out, so they cut stuff; or underestimating the contractors’ numbers when budgeting for the project and having to respond to high bids. Often you get a box with appliqués that looks very little like the original design intent when this happens.)
Ah, yes. And you’re lucky if you only hit one round of VE. Sometimes you cut all of the good stuff and it’s still too expensive, so you go back and cut all of the not-completely-terrible stuff. At this point the entire design team feels like they might as well be replaced with uncreative robots.
Thanks for this, Roger.
I’d add, given above comments, that a good project can become bad through the compromise that is the current public input process. Public input can be helpful and improve a building, or can be obstructionist and we end up with the lowest common denominator (as long as we’re talking in broad generalities here). Seattle’s process seems to set us up, time and time again, for the latter.
Most of the development regs are targeted at the relatively small percentage of developers who are not looking to create quality projects. This is similar to the small percentage of restaurant owners who need the Health Department to ensure the food they serve is safe and other quality control measures that cover a range of other professions and industries. Most laws generally target the less than 5% who are either unscrupulous or lazy.
I think the best thing we can shoot for to make development easier is clarity of regulations/controls for everyone.
All I want to know is why Seattle’s buildings are so terrible compared to Portland’s.
Wait ten years.
No question about that. But related is how do they cover their losses. Usually by declaring bankruptcy and changing corporate names. If you want transit that can effectively serve density then you push for zoning that supports that. But speculators always want to buy low (the low density zoning) and sell high (i.e. get it rezoned higher density.).
You’ve just described every entrepreneur. How do new restaurants cover their risks? How about new tech companies? The banks know what they’re getting into, and although they like much less risk, they still are taking a risk for a gain. When they lose, there’s a bankruptcy. That’s the game. It takes a terrible bank not to realize this. What the developer is risking on top of this is the money up front before a bank gets involved.
A bankruptcy doesn’t necessarily harm the bank. The bank has lower risk; if the developer goes belly up, the bank gets the property. They may not get all their money back, but they’ll probably get more than the developer and his investors.
The difference is in the effect on zoning and the way the city gets built out. A restaurant will fail if it came in and set-up shop in the middle of a single family neighborhood. That’s not the case with an apartment. Of course said apartment is nowhere near where it can be served by effective transit. Everyone, except the developers, is better off if the building is concentrated in areas where it makes sense instead of just sprouting randomly like weeds.
That is simply not true Bernie. One of my favorite buildings in Seattle is a random retail/office building plopped down in the middle of SFHs.
And yes, there is a restaurant there:
That’s a neighborhood commercial district going back to the streetcar days. :)
“Everyone, except the developers, is better off if the building is concentrated in areas where it makes sense instead of just sprouting randomly like weeds.” How are the developers better off? Their risks are calculated too. Placing a housing where there’s little demand is bad business, and they’ll lose their shirts.
Mike, I realize the building has been there forever, likely from before our zoning regulations were installed, but it doesn’t change the fact that it is still one ‘huge’ ‘out of character’ commercial/retail building surrounded by SFHs.
The issue is how zoning gets done. The process has evolved because people want a degree of public control. Strip clubs aren’t appropriate across the street from a day care or school. Allowing the greed of developers to replace this public control will lead to host of problems not the least of which is a lack of density around publicly planned and financed infrastructure to support it.
Except in reaslity the opposite is the case. Zoning has KEPT density from going in around transit infrastructure (Roosevelt, Beacon Hill, Columbia City).
Roosevelt and Beacon Hill are examples of stupid over building and then whining because the gawd awful expensive underground station doesn’t have anything around it.
And why don’t they have anything around them?
Because the people that live there like it that way. It’s not like there aren’t areas of Seattle that already have the zoning to support a subway station and will never get one. ST’s “build it and they will come” is no way to run a railroad.
So you agree that, contrary to your earlier statement, in these situations and others zoning is keeping density away from our transit investments?
Where did I say that? Please use blockquote. Either you completely misunderstood my statement or you’re just making crap up again and trying to put words in someone else’s mouth.
“Allowing the greed of developers to replace this public control will lead to host of problems not the least of which is a lack of density around publicly planned and financed infrastructure to support it.”
It’s multiple modes of failure. Putting in uber expensive infrastructure where it’s not needed is the fault of transit planners; and politicians that play transit planner. Changing the zoning to “fix” the mistake reinforces bad behavior. Throwing out the zoning would make transit planning nearly impossible since development would be incentivized in the lowest cost lowest density areas.
So yes, you do agree that, contrary to your earlier statement, in these situations and others zoning is keeping density away from our transit investments?
Roger, [ad hom]. This is shameful misinformation. Please educate yourselves, citizens: http://realestate4ransom.com/
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