The real estate bubble spanning from 2000 to 2006 was driven by a basic economic system: when demand increases, production launches and sales commence. As development plans progress, one of the roles of a municipality is to maintain control as growth occurs and potentially climbs to unsustainable levels.
While municipalities that have too many restrictions tend to remain underdeveloped, the responsibility of a zoning department is to mitigate growth for the betterment of a city, and to anticipate necessary infrastructure enhancements in the pockets of an area most likely to be affected by new construction.
Municipalities can control housing oversupply, prevent city underdevelopment and provide healthy infrastructure by balancing regulations and engaging in open dialogue with development experts in an effort to create a comprehensive plan that determines the growth of a city in the years to come, and ensures its beautification.
ONE MUNICIPALITY vs. ANOTHER
During the inflation of the real estate bubble, when the thought of a burst was nowhere in sight, municipalities managed neighborhood development plans differently than one another, resulting in very diverse outcomes post-market collapse.
As a veteran developer of residential and commercial real estate, I have observed the varying philosophies governed by individual municipalities.
Some cities encouraged a rapid influx of new construction and were extremely lenient about zoning requirements and design review, which led to a massive housing oversupply, and in some cases, underwhelming community appeal. Others claimed to welcome new development plans, although enforced such a high level of restrictions it would have been more fair for the city to put a temporary stop on construction altogether. Imposing such strict and particular requests makes it nearly impossible for builders to cooperate with, as many of the demands cause major budget increases. Development gets halted in neighborhoods that need advancement, and city budgets are affected as well — new development means revenue.
MEETING IN THE MIDDLE
The goal is for municipalities to regulate and find a middle ground that enforces reasonable restrictions and encourages long-term vision for a city.
Examples of two South Florida municipalities that managed the real estate development balancing act with great success are Aventura and Fort Lauderdale.
The zoning department in the city of Aventura is less interested in imposing stringent regulations on the builder, and more interested in having a professional dialogue that clearly defines how plans support the development of a strong and beautiful city. As building progressed, the city passed a construction moratorium in select neighborhoods for a period of one year to allow time to review its master plan.
When a bank of units was scheduled to be delivered in Fort Lauderdale, the city decided that for a period of two years, only 400 units could be built of which were allocated to several builders. Once reached, development was on hold until the city released more units. This is another example of an excellent way to manage growth and important infrastructure such as schools, parks and traffic lights necessary for a flourishing community.
Regulations placed by municipalities are vital to maintaining the foundation, strength and character of an area. Still, in the case of underdeveloped cities, having greater flexibility is preferred so not to kill development efforts completely. On the other hand, in concentrated areas, receiving a more thorough development review and close guidance is recommended to prevent overbuilding and lack of supporting infrastructure.
There is no doubt that as a region and a country we are learning from our mistakes. For now, it is the responsibility of municipalities and builders to work together to decide what is best for our cities long-term and turn our knowledge into opportunity for a new real estate cycle.
— Fernando Levy-Hara is chief executive officer of mckafka Development Group. Led by CEO Fernando Levy-Hara and CFO/COO Stephan Gietl, Aventura-based mckafka Development Group is a real estate investment firm specializing in the acquisition of distressed properties by purchasing broken condominiums in default, loans in default and real estate owned bank properties in South Florida. They can be reached by phone at 305-917-7673 and found online at www.mckafka.com.