The housing bust left many things in its wake, but some of the most troubling detritus are the “zombie” and obsolete subdivisions sprawled across peripheral areas – approved and platted, some partially built but most just lots, unimproved roads and the occasional lone lamppost – all over the country but particularly prevalent in the South and Intermountain West.
Many developers rushed for entitlements in the real estate run-up to 2007, said Jim Holway, executive director of Western Lands and Communities, a joint venture of the Sonoran Institute and the Lincoln Institute, speaking on the panel “Reshaping Development Patterns” at the New Partners for Smart Growth conference in Charlotte yesterday. The planned developments are typically in far-flung locations, make it difficult for others to get permitting in better locations, and lock in water allocations. Much of the land wouldn’t be developed for 5 or 10 years under the best of circumstances, let alone amid the plummeting demand.
The zombie subdivisions “are never going to move,” said Kathy Rinaldi, county commissioner for Teton County, Idaho, where nearly 5,000 homes and lots lie fallow in over 36 approved, unbuilt, and incomplete subdivisions across thousands of acres of environmentally valuable land. Some developers are changing their schemes to create more density and open space, but others, including a development around a golf course where the topsoil has been scraped for fairways, simply hope and wait for the market to come back. In the meantime, property tax collections are down over 80 percent, there are $250 million in foreclosures in the works, and the local paper is thick with legal notices reflecting extensive litigation. The county would like to figure out how to “incentivize replatting,” Rinaldi said. Public sentiment generally favors respect for property rights, though some want to see the subdivision developers’ entitlements revoked.
Aside from the contentious idea of replatting or rezoning already approved land, one option, given that prices are so low, is for local or state government and possibly non-profit partners to go in and purchase the land, especially if it has high wildlife or natural resource value, said Holway. Senior fellow Armando Carbonell, who moderated the panel, suggested there might be a way to seize the moment and rethink the location of these developments, or possibly redesign them. The incentive for developers for engaging in such a “reset” would be to recognize the changing market for housing that is steadily turning away from the purchase of single-family homes, said Arthur C. “Chris” Nelson, professor at the University of Utah.
The trends seem clear: households with children will drop from 45 percent in 1970 to 27 percent in 2030. Households without children will rise sharply, and the market will be dominated by aging baby boomers. Three million people turn 65 each year. “This will change our housing demand functions,” Nelson said.
Meanwhile, home ownership is declining, from 66 percent in 2000 to a predicted 62 percent by 2015, as part of a significant movement from owner-occupied to renters; the propensity to buy slows down as most people age. Add to that the “great senior sell-off” – the aging boomers looking to sell their homes in the years ahead -- and sellers are likely to far outnumber buyers, leading to ever-lower prices. Some seniors in Buffalo are abandoning their homes because they simply cannot sell them, no matter what the price.
Many household may actually increase in size in the “doubling up” phenomenon, including grandparents living with families, further reducing demand, Nelson said. A 6,000 square-foot McMansion could be repurposed into a three-family rental. The real demand will be for multi-family housing, versus single-family homes. “We’re overbuilt by about 28 million homes on large lots considering demand by 2020,” Nelson said.
The bottom line, said Holway: “It’s not just a crash. It’s going to be different when (the market) comes back.” The multi-year research project Holway has been engaged in seeks to redirect and reconfigure the obsolete subdivisions to reflect the coming changes in housing demand.