Small builders in a large-scale bureaucracy

Posted on January 6, 2006 by Jim Duncan

From the Jessica Kitchen’s article in the DP Wednesday:

Supervisor Kenneth C. Boyd voted in favor of the development. (Wickham Pond) “I feel that we can’t legislatively squeeze out the small developers,” he said. Supervisor David C. Wyant said proffers from Wickham Pond could go toward infrastructure, such as the proposed eastern connector, and Supervisor Sally H. Thomas said such a development could limit growth in the rural areas.

Excellent point, and one on which I have been masticating for some time.

NYTimes:

In recent years, the difficulty of getting things built has made business harder for small, local builders and easier for big companies, with their greater resources, to gain control of the housing market. “The large builders have taken the position: we’re just going to fight,” Chris Mayer, a housing economist at Columbia University’s business school, says. ” ‘We have lawyers, we have experts, we have money, we’re going to buy these tracts of land and fight it out’ ” – that, according to Mayer, is their position. “That has proven very time-consuming. But the local builder who used to have the benefit of knowing the local people – that has become far less important than the ability of the big builders to fight the current regulatory environment.” As Mayer points out, virtually every state in the country now has policies to restrain developers. No matter the region, he says, the small developer is at a tremendous disadvantage. (bolding mine)

Ryan Homes are already here. Toll Brothers may be on the way. K. Hovnavian is building in Ruckersville (but they call it Charlottesville).

What will be the impact on the region if the local builders, who have done large developments (by Central VA standards) no longer have the ability or desire to fight the red tape in local governments? CharlAlbemarle is still a small town in many respects, where knowing someone is a valuable commodity – but for how long?

Economies of scale are one thing, but allowing a bureaucracy to develop and grow that may in effect strangle the smaller developer … not so good. In my perfect world, developers and landowners would have a clearly identified process to follow in order to gain approval. The market benefits from equitable competition (I debated using “fair” for “equitable” but fair has become such a relative term …

Efficiency and clarity benefit us all.

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About Jim Duncan

A Charlottesville Realtor who tries to stay on the bleeding/cutting/functional edge of technology and real estate trends. I have been selling real estate for the past 10 years, lived in C'Ville for twenty+ and am married to one of few Charlottesville natives left.
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  • Ray Hyde

    “In my perfect world, developers and landowners would have a clearly identified process to follow in order to gain approval. ”

    AMEN. If I had that, then I could make plans for what to do with my property and the rest of my life. I could predict what it would cost, how long it would take and what the profit might be. As it stands now, I’m in a permanent state of limbo, or what Ed Risse has called a strategic stalemate.

    I’m restricted only to farming, at which I can only expect to lose money. So the game is to lose as little as possible and hope I can hang on long enough for the rules to change, or else sell out to someone so wealthy he doesn’t have to care about losing money. If that happens, the new owner will get a bargain compared to the free market value of the property. I’ll be subsidising the very rich under orders from the county.

    At his income level, he’ll be able to place a conservtion easement on the land and take a handsome tax break: it may pay for as much as 75% of his purchase. In exchange, he’ll get permanently lower property tax assessment. As a result of removing a number of homes from the market permanently, everyone else will enjoy higher values and assessments for their homes.

    This is exactly what the county wants: to eliminate new homes that they claim cost them $2100 per year in tax losses. In other words, by preventing development, the county is borrowing money from the landowners at no cost to themselves. If on the other hand, they were willin to pay me the interest on what they claim I’m saving them, it would just about equal the losses the farm sustains every year, and I could stop worrying about being forced to sell.

    If the county had to partially offset the costs (even if they are only opportunity costs, they are still real) they cause to landowners, then they would be forced to consider their development applications in a more business like way.

    What was that you said about fair?

  • TrvlnMn

    Was the point of your post to suggest that small builders have a tough time of it locally?

    How are the local builders “suffering?” (and)

    What are these bureaucratic hurdles that these small builders currently face?

    In my opinion most of the Charlottesville area development since the 1990′s has been locally driven. The national developers you cite above are recent comers- as the real estate market begins to look like it’s a no bubble and therefore solid draw. I’m going to go so far as to say the old trail village (a big development) is made up of “Local builders.” Large local builders.. but local none-the-less.

    My big problem with local “small” builders is that the buildings they build are largely uninspired local builders putting up the same “socially acceptable” cookie cutter designs. Did I mention they were “uninspiring designs as well? (of course large builders can do the same thing as well- the uninspired designs too).

  • http://www.jduncanrealestate.com Jim

    My point is that while most, if not all of the development has been local, the possibility exists that the bureaucracy will become so cumbersome that only the larger builders will be able to exist and survive.

    Old Trail is made of almost entirely of local builders – Ryan is the only national builder that I am aware of. They have had some real issues conforming to the stringent ARB guidelines put in place, from what I understand.

    I see an awful lot of parallels between Loudoun County and CharlAlbemarle – none that I find particularly inspiring or comforting. I prefer to keep my business local as, for the most part, local builders tend to live here as well and (theoretically) have some investment in maintaining the local environment’s quality of life (I know, I know, it might work in theory but …)

    When the rep from K. Hovnavian says that they plan to be here for four years and then depart, that concerns me. It is sort of hit-and-run development; those builders seem to have no reason to be concerned about the long-term effects of their development. One of my personal goals in everything I do business-wise is to maintain the “and I live here too” mentality; that keeps me honest and accountable, to myself if no-one else.

  • Ray Hyde

    Last year the Fauquier Citizen had an interesting story about the demise of small builders. They are gone now but the building continues. It seems that only large builders have the cash flow to comply with all the rules and regulations and delays.

    It’s the same with the local pharmacy vs CVS and the local dime store vs Wal Mart.

  • http://www.housediary.com ty

    It’s unfortunate that small or local builders have to “suffer” or at least be compromised in their own territories. There are many cases like that, wherein big-time developers are getting aggressive not only because they have the resources in building houses and establishments but have connections as well. I guess it’s just a matter of competition between the small and large builders on who has more powerful and influential connections.

  • Ray Hyde

    Competition is one aspect, but why should a building permit be a matter of influence and connections? We complain about the cookie cutter developments that big builders provide, but at the same time, we created the restrictions that cause them.

    For the landowner the result can be that you own land with ten building rights. Because of the rules, and the economics involved with compliance, you can build ten houses, but you can’t build one. Even if that is all you have in mind, or all you can afford. The result is that you call in a subdividion specialist who has the staff on board to do traffic studies, detailed soil maps, drainage plans, environmenta surveys, archeologists, engineers, lawyers, financiers and lobbyists and bingo: ten homes.

    The upside is that you avoid the cumulative mistakes and hapahazardness that results from random building that doesn’t ake all those things into account.