Arrested Developments

8/12/2019 Arrested Developments

1/64Policy Focus Report Lincoln Institute of Land Policy

Arrested DevelopmentsCombating Zombie Subdivisions and

Other Excess EntitlementsJ I M H O L WAY

with Don Elliott and Anna Trentadue


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Arrested Developments:Combating Zombie Subdivisionsand Other Excess EntitlementsJim Holway with Don Elliott and Anna Trentadue

Policy Focus Report Series

The Policy Focus Report series is published by the Lincoln Institute of Land Policy to addresstimely public policy issues relating to land use, land markets, and property taxation. Each reportis designed to bridge the gap between theory and practice by combining research ndings,case studies, and contributions from scholars in a variety of academic disciplines, and fromprofessional practitioners, local ofcials, and citizens in diverse communities.

About This Report

Western Lands and Communities (WLC), a joint venture of the Lincoln Institute of Land Policy andthe Sonoran Institute, began this research in 2009 in order to help cities and counties strugglingwith distressed subdivisions and other excess development entitlements throughout the Inter-mountain West. The real estate boom and bust of the 2000s had left millions of residential devel-opment projects incomplete throughout the region, from paper plats to partially built subdivisionsrequiring road maintenance and other infrastructure without contributing to the local tax base asplanned. Data on the extent of the problem was scarce, but the authors early research conrmedthat millions of vacant lots were entitled for development throughout the region, and the rates ofvacant subdivision parcels across a large number of counties varied from around 15 percent upto two-thirds of all lots. This report draws on case studies; lessons shared by experts during several workshops;results from a survey of planners, developers, and landowners in the region; and data analysis.The authors examine the nature of development entitlements and subdivisions, the extent of

excess entitlement in the Intermountain West, the legal and planning frameworks for local action,and the challenges communities typically face when they attempt to address excess developmententitlements. Finally, the report recommends measures to treat existing problems and to preventthem during future boom and bust cycles. A number of more in-depth working papers, presenta-tions, additional information, and links on best practices and other supplemental materialsare available through the companion website www.ReshapingDevelopment.org and through theWestern Lands and Communities best practices database www.SCOTie.org .

Copyright 2014 by Lincoln Institute of Land PolicyAll rights reserved.

113 Brattle StreetCambridge, MA 02138-3400 USAPhone: 617-661-3016 or 800-526-3873Fax: 617-661-7235 or 800-526-3944Email: [email protected]: www.lincolninst.edu

ISBN 978-1-55844-286-3Policy Focus Report/Code PF037

O N T H E C O V E R :

Top: SONORAN INSTITUTE(LEFT), SONORAN INSTITUTE(CENTER), MARICOPA COUNTYPLANNING AND DEVELOPMENTDEPARTMENT (RIGHT)

Bottom: Vacant, plattedlots under development inPinal County, Arizona. ANNE ELLIS


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H O L W A Y A R R E S T E D D E V E L O P M E N T S 1

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Contents

2 Executive Summary

4 Chapter 1: Excess Development Entitlements

6 Why Are Excess Development Entitlements a Problem? 8 The Economic Context that Fostered Excess Entitlements in the Intermountain West 10 The Number and Location of Excess Entitlements in the Intermountain West 16 Summary

17 Chapter 2: Legal and Planning Frameworks

17 Legal Frameworks for Subdividing Land and Addressing Entitlements 24 Planning Frameworks

26 Summary26 Case Study 1: Mesa County, Colorado

28 Chapter 3: Stakeholder Perspectives

28 Developer and Landowner Perspectives 31 Government Perspectives 32 Community Perspectives 35 Nine Key Challenges 36 Summary 37 Case Study 2: Maricopa, Arizona

38 Chapter 4: Best Practices

38 Preventive Measures 40 Treatment Measures 45 Summary

46 Case Study 3: Teton County, Idaho

48 Chapter 5: Policy Recommendations

53 Appendix A: Glossary

56 Appendix B: Suitability of Planning Tools and Policy Approaches

58 References

58 Acknowledgments

60 About the Authors

61 About the Lincoln Institute of Land Policy, The Sonoran Institute,and Western Lands and Communities


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2 P O L I C Y F O C U S R E P O R T L I N C O L N I N S T I T U T E O F L A N D P O L I C Y

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Executive Summary

These zombie subdivisions are theliving dead of the real estate market. Eachhas its own background story about a once-promising project that ground to a haltbecause of nancial or legal challenges.

In the Intermountain West, where landis abundant, and rapid growth is common,its not unusual for local governments togrant development rights well in advance ofmarket demand for housing. Boom and bustcycles arent rare in the region either. Themagnitude of the Great Recession, however,amplied the frequency of excess entitlementsand exacerbated their harmfulness to sur-rounding communities. In the IntermountainWest alone, millions of vacant lots are

Excess development entitlementsand distressed subdivisions arecompromising the quality of life,distorting development patternsand real estate markets, and diminishingscal health in communities throughout theIntermountain West region of the UnitedStates. Since the post-2007 real estate bust,which hit many parts of the region severely,eroding subdivision roads now slice throughfarmland and open space, and spec hous-es stand alone amid many rural and subur-ban landscapes. Some are empty, but othersare partially inhabited, requiring the deliveryof public services to remote neighborhoodsthat generate very little tax revenue.

In Teton County, Idaho

where three of four

entitled lots are vacant

arrested developments

such as this one consume

scal and natural resources

for required road main-

tenance, emergency

services, and otherinfrastructure, without

contributing to the local

tax base as planned

when development

rights were granted.

ANNA T


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entitled. Across a large number of the regionscounties, the rate of vacant subdivision parcelsranges from around 15 percent to two-thirds

of all lots. Although many areas throughout the Inter-

mountain West are rebounding robustly, manysubdivisions remain distressed, with expireddevelopment assurances, few if any residents,fragmented ownership, partially completed ordeteriorating infrastructure improvements, andweak or nonexistent mechanisms to maintainnew services. Without correction, they will con-tinue to weaken scal health, property values,and quality of life in affected communities.

Economic forces shape the regional marketsfor land development and drive the boom andbust cycles. But local planning and developmentcontrols greatly inuence how these marketforces will play out in any particular community.It is state and local law that sets the contextwithin which local governments manage andregulate land development. Examining thiscontext is important to understanding thechallenges and potential solutions to excessdevelopment entitlement.

The Lincoln Institute of Land Policy andthe Sonoran Institute initiated this project toprovide information and tools to help cities andcounties struggling with distressed subdivisions.Drawing on case studies, lessons shared by ex-perts during several workshops, survey results,and data analysis, this report identies the chal-lenges communities typically face when theyattempt to address excess development entitle-ments. It also recommends measures to treatexisting problems and prevent them in futureboom and bust cyclesincluding gure 4.1(p. 41), a model process to help communitiesaddress issues in their jurisdictions.

In order to avoid development entitlementproblems in the future, local governmentsshould build a solid foundation of policies, laws,and programs. They should also ensure theyhave mechanisms in place to adapt and adjustto evolving market conditions. Communities

likely to face signicant growth pressures wouldbe well served by growth management policiesthat help to align new development entitlements

and infrastructure investments with evolvingmarket demands. For communities alreadyfacing problems stemming from distressedsubdivisions, a willingness to reconsider pastapprovals and projects and to acknowledgeproblems is an essential ingredient to success.

This report concludes with a comprehensiveset of policy recommendations that address thechallenges most commonly faced by communi-ties attempting to address their excess develop-ment entitlements.

Adopt new state enabling authority to ensure local governments have the tools andguidance they need.

Prepare and revise communitycomprehensive plans and entitlement strategies as a foundation for local action.

Adopt enhanced procedures for development approvals and ensure policies areup to date and consistently applied.

Adapt and adjust policy approachesto market conditions.

Rationalize development assurances to ensure they are practical, affordable, andenforceable.

Establish mechanisms to ensuredevelopment pays its share of costs.

Serve as a facilitator and pursue public- private partnerships to forgecreative and sustainable solutions.

Establish systems for monitoring,tracking, and analyzing development data to enable effective and targeted solutionsto specic subdivisions.

Build community capacity and maintainthe necessary political will to take andsustain policy action.


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. . . . . . . . . . . . . . . . . .C H A P T E R 1

Excess Development Entitlements

Excess development entitlementsand distressed subdivisions are im-pairing the quality of life, skewingdevelopment patterns and realestate markets, damaging ecosystems, anddiminishing scal health in communitiesthroughout the U.S. Intermountain West.Since the post-2007 real estate bust, whichhit many parts of the region severely, erodingsubdivision roads now carve up agriculturallands, and lonely spec houses continue todot many rural and suburban landscapes.Some are vacant, but others are partiallyoccupied and require the delivery of publicservices to remote neighborhoods that gen-erate very little tax revenue. In jurisdictionswhere lots could be sold before infrastructure

was completed, many people now ndthemselves owning a parcel in what wassupposed to be a high-amenity developmentbut is in fact little more than a paper plat.

These arrested developmentsknowncolloquially as zombie subdivisionsarethe living dead of the real estate market.Each has its own background story abouta once-promising project that stalled orground to a halt in the face of nancialor legal challenges.

F R A N K

C A

S S I D Y ,T

O WN

O F MA R A N A

Broken windows

and weeds are

common sights

among the empty

homes in zombie

subdivisions such

as this one in

southern Arizona.


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BOX 1.1

What Are Excess Development Entitlements andDistressed Subdivisions?

Excess development entitlementsgrantedwell in advance of market demand for hous-ingare nothing new in the Intermountain

West, where land is abundant, and rapidgrowth is common. Neither are the boomand bust cycles that periodically occur through-out the region. The magnitude of the GreatRecession, however, amplied the frequencyof excess entitlements and exacerbated theirharmfulness to surrounding communities.

This report focuses on one of the most visible forms of excess development entitle-ments: residential subdivisions that areempty, nearly empty, or failing to developas plannedat least in part because lotsupplies exceed market demand. In the In-termountain West alone, millions of vacantresidential lots are entitled. Across a largenumber of the regions counties, the rateof vacant subdivision parcels ranges fromaround 15 percent to two-thirds of all lots.

Speculative buyers helped to fuel thisproliferation during the boom-bust cycleof the 2000s by investing in subdivisions notto build a home and reside there but to ipthe property as a short- or long-term invest-ment. The lifespan of these speculative pur-chases varies greatly. Some buyers dependedon a short timeline with a quick resale whilethe market was still active but lost their in-

vestments to foreclosure as market demandcrashed and sales dried up. Buyers withgreater nancial longevity bought propertyin order to sell it in the next boom. As the economy continues to recover,will the market correct excess entitlements,incentivizing developers to build out dis-tressed subdivisions or to redesign those thatdo not reect current market demand? Insome locations, yes; in others, it is unlikely.Subdivisions by denition are designedto be near-permanent divisions of land.

Although many areas throughout the Inter-mountain West are rebounding robustly,many subdivisions remain distressed, with

Development entitlements are generally the rights, granted by localgovernment, to develop land. For subtler distinctions among different

uses of this term, see Appendix A.

Excess development entitlements far exceed the current and

near-future demand for housing.

Distressed subdivisions are projects whose developer is facing bank-

ruptcy, foreclosure, unclear ownership, or some other legal or nancial

challenge to completing improvements or selling lots. Excess develop-

ment entitlements may or may not have contributed to the distress.

These projects may return to health as the market recovers or as

the developer overcomes the obstacles impeding progress.Premature subdivisions are development entitlements created in

advance of market demand for housing. Often landowners do not

intend to build on the subdivided lots but to ip them to a developer

or to individual lot buyers. Premature subdivisions may not be dis-

tressed at all; the lots and infrastructure may have been created

exactly as planned, but it will take a very long time to absorb

all the lots.

Obsolete subdivisions are premature subdivisions that no longer

meet current safety or market standards, making them undesirable

or unsafe for development in their current state.

Zombie subdivisions or arrested developments are distressed sub-

divisions that were begun but left unnished. The stasis could be

temporary, in the case of high-quality developments caught in an eco-

nomic downturn, or long-term, in the case of premature subdivisions

that remain dormant long enough to become obsolete over time.

Paper plats are subdivisions without any improvements

or development activityhence they exist purely on paper.

expired development assurances, few if anyresidents, fragmented ownership, partiallycompleted or deteriorating infrastructure

improvements, and weak or nonexistentmechanisms to maintain new services.Without correction, these arrested develop-ments will continue to debilitate the scalhealth, ecosystem stability, property values,and quality of life in affected communities.


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This report will provide information andtools to help cities and counties struggling toaddress their distressed subdivisions in order

to facilitate recovery, create more sustainablegrowth scenarios, improve property values,and pursue land and habitat conservationwhere those land uses are more appropriate.The best practices identied here will helpcommunities minimize excess entitlementsand distressed subdivisions in future boomand bust cycles as well. Although the researchfocuses on the eight U.S. Intermountain

West statesArizona, Colorado, Idaho,Montana, Nevada, New Mexico, Utah,and Wyoming (gure 1.1)the policyrecommendations and best practices areapplicable nationwide.

W H Y A R E E X C E S SD E V E L O P M E N T E N T I T L E M E N T SA P R O B L E M ?Local jurisdictions shape the future oftheir communities through the entitlementof land, the approval of subdivisions, andthe award of subsequent development rights.These actions result in land use commitmentsthat prove difficult to change in the future,establish development standards, and oftencommit the community to signicant, long-term service costs. When land is entitledand subdivided prematurely, before themarket demands new housing, the follow-ing problems can result:

1. Threats to health and safetyLots that sit undeveloped for many yearscan foster wildres, ooding, erosion, watercontamination, poor emergency access, andother health and safety hazards for residentsof neighboring lots and surrounding land-owners. Some of these lots may be obsoletebecause they were created without properreview of steep slopes or they lack thecapacity for current utilities, which couldcreate additional health and safety risks.

2. BlightWeeds, pests, and collapsing infrastructureare common sights among vacant buildingsand lots as they deteriorate in plain sightof the surrounding community, becausethe entities that were supposed to performmaintenance dont exist or lack the nancesto fulll this responsibility.

3. Impacts on existing lot ownersLot owners within or near a distressed

FIGURE 1.1Location of Intermountain West States & Communities(With Case Study Communities Highlighted)

Utah

Montana

Arizona

Idaho

NevadaColorado

New Mexico

Pima

Park

Fremont

Carbon

Pinal

Maricopa

Sweetwater

Teton

Natrona

Albany

Park

Mesa

Sublette

Flathead

Lincoln

Lincoln

Johnson

Crook

Glacier

Teton

Gareld

Lake

Laramie

Cascade

Eagle

Sheridan

Campbell

Beaverhead

Converse

Blaine

Madison

Ravalli

Powell

Gallatin

Sanders

Missoula

Carbon

Meagher

Ada

Montrose

Granite

Yellowstone

Clarkand

Lewis

Stillwater

Pondera

Jefferson

Bonneville

Mineral

Kootenai

Sweet Grass

Jefferson

Broadwater

Douglas

Teton

Silver BowDeer Lodge

Reno

Cheyenne

Billings

Helena

Denver

Tucson

Phoenix

City of Maricopa

Las Vegas

Boise

Albuquerque

Salt Lake City

Colorado Springs

Wyoming

Target Counties

IntermountainWest States

Major Cities

Case Study Communities

Source: Sonoran Institute


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subdivision may suffer a lack of services,unfullled subdivision amenities, or decreasedproperty values when amenities reected intheir lot purchase price are delayed or denied.

4. Fiscal threatsEven if a developer commits to buildingand maintaining internal roads and utilities,local government or community service

districts usually commit to providing roadmaintenance, snow removal, public safetyservices, or offsite road, water, and sewerinfrastructure to support the subdivision.In partially built developments, the localgovernment may have to bear these costswithout the benet of property taxes ex-pected from houses that were planned butremain unconstructed. If development is

A N N A T R E N T A D

U E

MA R I C

O P A

C O U

N T Y P L A N N I N

G A N D D E V E L

O P ME N T D E P A R T ME N T

Arrested developments

succumb to blight in

Teton County, Idaho (top),

and Maricopa County,Arizona (bottom).


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widely scattered, these costs could rise fur-ther. In Teton County, Idaho, for example,far-ung development ratchets up the cost

of road maintenance, because every housebuilt in unincorporated areas of the countyincreases the impact on roads. Every vehicletrip generated per day will, over the courseof a year (i.e., 365 such trips), cost the coun-ty $8.30 per mile for gravel upkeep. Becausethe countys general fund doesnt cover roadmaintenance, Teton County pays for it with

impact fees and supplemental road levies but those, too, provide less revenue whenthe economy is slow.

5. Fragmented development patternsRemote or otherwise poorly located devel-opments diminish the feasibility, heightenthe cost, and worsen the environmentalimpacts of roads and other public services.Such developments also disrupt wildlifehabitat and migration corridors. They alsoconstrain a communitys ability to modifydevelopment patterns as local needs andpreferences evolve over time.

6. Overcommitted natural resourcesDistressed and stagnant subdivisions tie upenergy and water commitments, diminish-ing the availability of these natural resourcesfor new developments driven by currentmarket demand. Premature entitlementsmay also needlessly or prematurely disruptagricultural and ranching operations andotherwise healthy ecosystems. In central

Arizona, where developers must secure a100-year assured water supply before sub-dividing land, more than 150,000 entitledbut undeveloped lots have been assuredwaterprematurely allocating this resourceand potentially delaying new subdivisionsthat are ripe for development in the futurebut may be unable to obtain this essentialelement (gure 1.2).

7. Market ooding and distortionsDevelopment entitlements, empty lots, and

vacant houses can distort and signicantlyimpair the functioning of real estate markets,hinder adjustments to meet changing mar-ket demand, and depress land and housingprices. The oversupply of vacant lots de-presses the value of even well-designed andwell-located lots that could and should beserving the regional demand for housing(Sonoran Institute 2013).

FIGURE 1.2

Status of Lots in Subdivisions with Certicates ofAssured Water Supply in the Central Arizona GroundwaterReplenishment District

| 2

, 5 0 0

u n

i t s

|

Not Constructed

Constructed

Constructed

NotConstructed

Incorporated City

Active Management Area

Note: This graphic illustrates assured water supply commitments for member lands since 1995,when the Central Arizona Groundwater Replenishment District was established.

Source: Central Arizona Project


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T H E E C O N O M I C C O N T E X TT H AT F O S T E R E D E X C E S SE N T I T L E M E N T S I N T H E R E G I O NThe Intermountain West has experienced anumber of real estate boom and bust cycles

that resulted in the over-entitlement of landand distressed subdivisions. None hit theregion as forcefully, however, as the growthand contraction that triggered the GreatRecession, from December 2007 until

June 2009.Prior to the bust, from the late 1990s

until approximately mid-2006, the Inter-mountain West was prospering. Unemploy-ment was low (between 3 and 6 percent),despite higher rates nationwide, and gross

domestic product (GDP) was generallyrobust (notwithstanding the dotcom collapsefrom 2000 to 2002). The economic boom,however, was driven largely by the nation-wide real estate bubble and accompanyingsurge in construction, fed by low interestrates and risky lending practices. At the na-tional level, between 2000 and 2010, nearly16 million housing units were built, though

only 11 million new households formed.That is to say, 14 units were constructedfor every 10 new households; one of thoseexcess units was purchased for seasonaland recreational use, while the other three

remained vacant. This housing overhangcontributed to the Great Recession, and theprocess of absorbing this excess continuesto slow the recovery in many areas of theIntermountain West. Housing prices in Western metropolitanmarkets peaked from 2006 to 2007 (gure1.3), before the subprime home loan crisisspread to wider nancial markets and led

FIGURE 1.3

Case-Shiller Home Price Indices

Los Angeles20-CityCompositeSeattleDenverPhoenixLas Vegas

0

50

100

150

200

250

300

J a n .

2 0 0 0

J u

l y

2 0 0 0

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2 0 0 1

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l y

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l y

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2 0 0 3

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l y

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2 0 0 4

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2 0 0 5

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l y

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2 0 0 6

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l y

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2 0 0 7

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l y

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2 0 0 8

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l y

2 0 0 8

J a n .

2 0 0 9

J u

l y

2 0 0 9

J a n .

2 0 1 0

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l y

2 0 1 0

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2 0 1 1

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2 0 1 1

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2 0 1 2

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2 0 1 2

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2 0 1 3

S O N

O R A N I N

S T I T

U T E

Note: The 20-City Composite includes Atlanta, Boston, Charlotte, Chicago, Cleveland, Dal las, Denver, Detroit, Las Vegas, Los Angeles,Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa, Washington, D.C.

Source: Sonoran Institute from Standard & Poors Case-Schiller Home Price Indices


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to an acute and widespread liquidity crisis,stock market declines and volatility, and aspike in job losses. Unemployment ranged

across the Intermountain West from 6.9percent in Montana to 13.9 percent inNevada (gure 1.4).

The real estate boom and bust played outdifferently in local western markets. Denverfared the best, with neither a large increasenor decrease in housing prices, while theLas Vegas and Phoenix markets were whip-sawed with large and rapid price surges,crashing in late 2007. The period of rapidhousing price declines ended in most West-ern and national markets in 2009, with aslight recovery and then a second bottom-ing in early to mid-2012. Since then, Inter-mountain West markets have been steadilyimproving. By 2014, several years intothe recovery, robust housing markets havereturned throughout large sections of themajor metropolitan regions, such as Phoenix

and Las Vegas. However, distressed sub-divisions remain scattered across these met-ropolitan regions and, in particular, some

edge communities. And many rural areasof the Intermountain West that were hardhit by the Great Recession have yet to seeany signicant recovery.

T H E N U M B E R A N D L O C AT I O NO F E X C E S S E N T I T L E M E N T S I NT H E I N T E R M O U N TA I N W E S TReliable data on the extent of entitlementsand vacant subdivision lots in the Inter-mountain West is scarce. In 2009, the issuewas troubling many communities in theregion, but the local and regional govern-ments, land brokers, and developers thathad compiled data were almost universallyunwilling to share it due to concerns aboutnegative publicity. Seeking to dene the nature and extentof entitlement problems throughout the

FIGURE 1.4

Unemployment Rates in the Intermountain West

Source: Sonoran Institute from Bureau of Labor Statistics

NV

AZ

CO

ID

NM

UT

MTWY

0

2

4

6

8

10

12

14

16

J a n .

2 0 0 0

M a y

2 0 0 0

S e p

2 0 0 0

J a n .

2 0 0 1

M a y

2 0 0 1

S e p

2 0 0 1

J a n .

2 0 0 2

M a y

2 0 0 2

S e p

2 0 0 2

J a n .

2 0 0 3

M a y

2 0 0 3

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J a n .

2 0 0 4

M a y

2 0 0 4

S e p

2 0 0 4

J a n .

2 0 0 5

M a y

2 0 0 5

S e p

2 0 0 5

J a n .

2 0 0 6

M a y

2 0 0 6

S e p

2 0 0 6

J a n .

2 0 0 7

M a y

2 0 0 7

S e p

2 0 0 7

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2 0 0 8

M a y

2 0 0 8

S e p

2 0 0 8

J a n .

2 0 0 9

M a y

2 0 0 9

S e p

2 0 0 9

J a n .

2 0 1 0

M a y

2 0 1 0

S e p

2 0 1 0

J a n .

2 0 1 1

M a y

2 0 1 1

S e p

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2 0 1 2

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2 0 1 2

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2 0 1 3

Date

S e a s o n a

l l y A d j u s

t e d U n e m p l o y m e n

t R a t e ,

%


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region, the Sonoran Institute conductedbackground research in individual commu-nities and assembled experts, primarily fromthe Intermountain Westfrom academia,consulting rms, nonprot organizations,and local governmentfor a workshop inSalt Lake City in October 2009. This earlyresearch conrmed that millions of vacantlots were entitled for development through-out the region, and the rates of vacant sub-division parcels across a large number of

counties vary from around 15 percent upto two-thirds of all lots (tables 1.1 and 1.2,

Colorado and Northern Rockies counties).The research demonstrated that excessentitlements are generally more prevalent inareas experiencing rapid growth and severeboom and bust development cycles. Theyare also more likely just beyond the growingedge of urbanizing areas (e.g. Pinal County,

Arizona) and in communities with ruralamenities (e.g. Teton County, Idaho).

Although larger urban areas experiencesignicant subdivision activity, their overall

vacant lot rates tend to be lower due to morestable markets, larger populations, and

TABLE 1.1

Selected Colorado CountiesVacant Subdivision Lots in 2012(includes incorporated and unincorporated areas)

CountyNumber ofSubdivisions

Parcels inSubdivisions

DevelopedParcels inSubdivisions

UndevelopedParcels inSubdivisions

PercentUndeveloped

Douglas 548 59,904 51,258 8,646 14%

Eagle 1,434 19,363 13,296 6,067 31%

Gareld 822 17,271 14,388 2,883 17%

Mesa 2,900 52,871 46,478 6,393 12%

Montrose 2,570 15,945 11,713 4,232 27%


TABLE 1.2

Selected Northern Intermountain West CountiesVacant Subdivision Lots in 2012

County, State2000-2010Growth

2010Population

Number ofSubdivisions

Parcels inSubdivisions

DevelopedParcels inSubdivisions

UndevelopedParcels inSubdivisions

PercentUndeveloped

Ada County, ID 30.40 392,365 5,460 151,319 127,451 23,868 16%

Jefferson County, ID 36.50 26,140 321 6,331 2,939 3,392 54%

Teton County, ID 69.50 10,170 403 10,225 3,300 6,925 68%

Lake County, MT 8.45 28,746 540 12,583 4,356 8,227 65%

Missoula County, MT 14.09 109,299 1,876 32,470 27,028 5,442 17%

Yellowstone County, MT 14.39 147,972 1,946 82,173 46,396 35,777 44%

Laramie County, WY 12.4 91,738 1,378 36,134 28,681 7,453 21%

Lincoln County, WY 24.2 18,106 367 5,663 2,356 3,307 58%

Sheridan County, WY 9.6 29,116 314 3,912 2,601 1,311 34%



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FIGURE 1.5

Vacant Subdivision Lots Douglas County, Colorado(Individual Subdivisions Categorized by Percentage of Vacant Lots)

0 6 123 Miles

County Line

Subdivision % Vacant

0%20%

20%40%

40%60%

60%80%

80%100%

Towns

5/7/12 Data: Douglas County, ESRI, State of Colorado GCS_North_American_1983

more stringent development requirements.County assessors records were examined

for subdivision lot vacancy conditions in

selected growing counties throughout Mon-tana and Wyoming and in a few selectedcounties in Idaho, Western Colorado, andDouglas County in the Denver metro-politan area.

ColoradoIn Colorado (table 1.1), the percentageof vacant subdivision parcels ranged from12 percent in Mesa County to 31 percent inEagle County. Across all Colorado countiesanalyzed, subdivisions close to populationand job centers demonstrated lower parcel

vacancy rates than outlying developments.With one of the lowest percentages of

vacant subdivision lots among the areas

analyzed, Douglas County, just south of theDenver metropolitan area, is home to manyemployed in Denver or Colorado Springs tothe south. Subdivision activity is extensive(gure 1.5). Although a number of devel-opments farther from urban centers havesignicant vacancy levels, the vast majorityof subdivisions are fully or nearly builtoutparticularly those closer to Denver.Douglas County presumably struggled withparcel vacancy less than other counties be-cause of its high growth rate (62.4 percentover the past decade) and location, directly



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. . . . . . . . . . . . . . . .

between Denver and Colorado Springs;in that metropolitan region, new home con-struction was a response not to speculation

but to population and job growth. At the opposite end of the spectrum,

Eagle County had the highest parcel vacan-cy rate among Colorado counties analyzed.Home to the town of Vail, Eagle Countyhistorically has demonstrated a strong secondhome market, which the Great Recessionhit particularly hard, halting most construc-tion. Eagle County has a much smallerpopulation and growth rate than DouglasCounty, so it absorbs vacancies muchmore slowly.

Idaho, Montana & Wyoming The data for these three northern RockyMountain states show a pronounced patternin which less populous counties have amuch higher rate of vacant parcels thanlarger counties (table 1.2, p. 11). Amongcounties with a vacancy rate over 30 per-cent, 88 percent have a population under30,000. Among counties with a vacancyrate under 30 percent, only 40 percent areunder 30,000. However, these counties didnot show a relationship between rate ofgrowth and the number of vacant subdivi-sion parcels. (See the companion websitefor the full set of counties examined:www.ReshapingDevelopment.org .) This pattern may be explained by arelatively low cost of entry into the devel-opment business in rural areas, where rawland and development costssuch as legaland technical services or land improvement

are typically cheaper, attracting inexperi-enced landowners or developers hoping tocash in on a purely speculative market. Inaddition, local land use regulations tend tobe less restrictive in rural areas, and localofficials tend to be more permissive; boththese tendencies increase the likelihood thatlocal government will grant entitlements.

In Montana, the research examinedcounties with growth rates exceeding 10percent from 2000 to 2010. The prevalenceof unbuilt entitlements far from urban areasand the potential for fragmented developmentthreatens prime agricultural land as well aswildlife habitat and migration corridors.

In Idaho, where reliable data was par-ticularly scarce, the research examinedseveral of the faster growing counties. RuralTeton County, on the Wyoming border, wasstudied in detail and is discussed throughoutthis report.

A N N E E L L I S

In central Arizona,

subdivisions such as this

partially built development

in Apache Junction must

secure a hundred-yearwater supply before nal

plat approvaldiminishing

the availability of a

scarce resource.


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. . . . . . . . . . . . . . . . . .BOX 1.2

Tale of Two Counties: Pinal County, Arizona, and Teton County, Idaho

R ural, unincorporated Teton County, Idahowith anestimated year-round population of 10,170has atotal of 9,031 platted lots, and 6,778 are vacant. Even

if the countys annual growth rate returned to 6 percent,

where it hovered between 2000 and 2008, this inventory

of lots reects a stockpile adequate to accommodate

growth for approximately the next 70 years (gure 1.6).

The data show that approximately 72 percent of the vacant

parcels have all improvements in place, and some sales

have occurred in 90 percent of the approved subdivisions.

Only 5 percent are paper plats, with no lot sales and no

infrastructure installed, making them less complex to

undo (table 1.3). In addition to these vacant lots in

unincorporated Teton County, there are also three small

incorporated towns with 3,856 residents and approxi-

mately another 1,674 vacant platted lots.

In the urbanizing area of central Arizonas Sun Corridor

a three-county megaregion encompassing Phoenix, Tucson,

and communities in betweenPinal County grew from

approximately 180,000 to 325,000 residents between

2000 and 2007, according to data from the Central Arizona

Association of Governments. Even at this 11 percent rate

of annual growth, Pinal Countys approximately 600,000

entitled but unbuilt lots could have accommodated futuregrowth for the next 18 years (gure 1.7 and table 1.4).

Entitled lots decreased 25 percent from 2009 to 2012,

because jurisdictions recognized that some projects were

not moving forward and recategorized them as anticipated,

rather than dropping them from the regional association

of governments list of subdivisions in the county. In a few

cases, entitled projects underway by 2012 progressed to

under construction or active status. At market peak,

approximately 1.3 million lots had been entitled for devel-

opment in the megaregion, though a signicant portion

(perhaps the majority) had occurred through development

agreements rather than the platting and recording of lots.

(Arizona seems unusual, at least among the Intermoun-

tain West states examined, in that lots are often entitled

through contractual development agreements between

the local jurisdiction and large master planned develop-

ments in advance of the more rigorous nal plat

approval process.)

FIGURE 1.6

Teton County, Idaho, Subdivision Activity, 19802013

Source: Teton County 2013

Copyright 2009 ESRI, Source: Esri, DIgitalGlobe, GeoEYe, i-cubed, USDA, USGS,AEX, Getmappi ng, Aerogrid , IGN, IGP, swisstopo, and the GIS User Community.

Year Recorded

19701999

20002004

2005

2006

2007

2008

2009

20102013


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. . . . . . . . . . . . . . . .

TABLE 1.3

Extent of Entitlements in Teton County, Idaho (Unincorporated County Only)

Subdivision Status # Subs # Total Lots

# Sold orTransferredLots

# ImprovedLots

# Partially/Fully BuiltHomes

# OccupiedHomes

TotalAcres

Development Agreement Only 0 N/A N/A N/A N/A N/A N/A

Preliminary Plat Submitted N/A N/A N/A N/A N/A N/A N/A

Preliminary Plat Approved 1 20 0 N/A 0 N/A 48

Final Plat Approved (Total) 327 9,031 5,054 N/A 2,253 N/A 29,891

No SalesNo Improvements 8 463 0 N/A 0 N/A 2,177

No SalesSome/All Improv. 22 434 0 N/A 8 N/A 1,055

SalesNo Improvements 0 0 0 N/A 0 N/A 0

SalesSome Improvements 12 1,105 486 N/A 66 N/A 6,468

SalesAll Improvements 285 7,029 4,568 N/A 2,179 N/A 20,191

Source: Valley Advocates for Responsible Development

Note: The number of subdivisions, lots, acreage, and level of infrastructure are current as of February 2013. The numbers of lots sold and homes partially or fully builthave not been updated since late 2010but very little development activity has occurred since then, so these gures are approximately accurate (Stacey Fi sk email4/2/13).

FIGURE 1.7

Pinal County, Arizona Subdivisions

Development Status

ActiveEntitledTentative Plat

State/Federal Land

Indian Reservation

State Trust Land



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S U M M A RYExcess development entitlements anddistressed subdivisions are diminishingthe quality of life, distorting developmentpatterns and real estate markets, harmingecosystems, and debilitating scal healthin communities throughout the U.S. Inter-mountain West. The magnitude of the 2000to 2007 housing boom and the subsequentGreat Recession yielded millions of vacantlots entitled for development throughout

Arizona, Colorado, Idaho, Montana, Nevada,New Mexico, Utah, and Wyoming; as aresult, rates of vacant subdivision parcelsacross a large number of counties nowrange from 15 percent to two-thirds of

The large, fast-growing central Arizona market is absorbing the excess lots as the economy recovers. But, this process

which, by the end of 2013, was almost completed in the core urban areasis not yet gathering momentum in some more

outlying places. In Teton County, where the total number of vacant lots is far lower, but the proportion of vacant to devel-

oped lots is higher, its unlikely the rural market will ever absorb all the excess entitlementscreating severe long-term

problems for the housing market, the local economy, and quality of life in the area.

Neither Teton County, Idaho, nor central Arizona are being highlighted because their practices were particularly good or bad.

They simply illustrate the extent of problems owing to excess development entitlements in a wide variety of local governments

across the Intermountain West. Both counties deserve credit for their efforts to identify and address these challenges.

BOX 1.2

Tale of Two Counties: Pinal County, Arizona, and Teton County, Idaho (continued)

TABLE 1.4

Pinal County, Arizona Entitlements (Both Incorporated and Unincorporated Areas)

Status

2009 2012

# of Lots Acres # of Lots Acres

Active 140,828 39,848 152,213 48,032

Under Construction 8,195 2,380 6,058 1,770

Entitled 623,010 184,763 469,256 148,703

Anticipated/Tentative Plat 28,667 8,396 156,116 46,344

Source: Central Arizona Association of Governments

Explanation of Categories: 1

Active: Homes are actually being built Under Construction: Dirt has been moved, infrastructure (water, sewer, etc.) being started Entitled: Projects platted and approved by city or county

Anticipated (tentative plat): Conceptual projects that have not yet been approved1 This categorization does not distinguish between multiple phases of larger projects. Therefore, although a multiple-phase, 10,000-

lot planned unit development (PUD) may have early phases just undergoing site development (under construction), later phasesplatted and approved without any work begun (entitled), and future phases not yet platted (anticipated), the entire 10,000 lotswould be listed as under construction. Then once houses are being builteven if its just a rst phase of 100 lotsthe entire10,000 lots would be l isted as active.

all lots. Although much of the Intermoun-tain West is rebounding robustly as theeconomy recovers, many subdivisions remaindistressed, with expired development assur-ances, few if any residents, fragmented owner-ship, and partially completed or deterioratinginfrastructure improvements. Without cor-rection, these zombie subdivisions mayresult in health and safety hazards, blight,negative impacts on existing lot owners,scal threats, fragmented developmentpatterns, overcommitted natural resources,and market ooding and distortions. Com-munities that seek to address and preventthese problems will nd helpful information,tools, and best practices in this report.


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. . . . . . . . . . . . . . . .C H A P T E R 2

Legal and Planning Frameworks

Economic forces shape the regionalmarkets for land development anddrive the boom and bust cycles,but local planning and develop-ment controls greatly inuence how thesemarket forces will play out in any particularcommunity. Effective resolution of excessdevelopment entitlements and distressedsubdivisions depends upon a sound under-standing of the framework for develop-

ment approvals, local government authority,the role of state enabling statutes and caselaw, typical legal challenges, and, nally,the types of planning tools available to

local government. Towns and cities willneed this knowledge in order to reshapedevelopment patterns and create projectsthat enhance the communitys quality oflife and scal stability.

L E G A L F R A M E W O R K S F O RS U B D I V I D I N G L A N D A N DA D D R E S S I N G E N T I T L E M E N T SState and local law sets the context within

which local governments manage and regu-late land development. Key aspects of thisframework include the subdivision approvalprocess as well as zoning, development

S O N

O R A N I N

S T I T

U T E

Signs of trouble:

deteriorating billboards

advertise a forsaken

development project.


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agreements, and other unique land use au-thorities that particular states may grant tolocal governments.

The Subdivision Approval ProcessFigure 2.1 demonstrates that excess entitle-ments are easiest to address when theyrepurely paper subdivisionswith no improve-ments, no lots sold, and no houses built.The revision or revocation of a paper platrequires the agreement of only a singleproperty owner, allowing for the simplestresolutions even in the worst case scenario if that developer sues the local jurisdiction.

Furthermore, the owner hasnt made anymajor investments that might constrain theability to alter design plans. As the status of

a subdivision progresses from a paper platto a partially built development with manyowners, the challenges grow more complex,and the options for resolving them moreconstrained.

The Standard Procedure

A typical subdivision process formally be-gins when a developer les a preliminaryplat, providing the local government basicinformation about the land in question;

FIGURE 2.1

Land Subdivision Process

Type of Entitlement

OwnershipStatus

ImprovementStatus

BuildingStatus

DevelopmentAgreement Only

(no plat led)

No LotSales

Preliminary PlatApproved

Final PlatApproved

DevelopmentAgreement

NoImprovements

(TruePaper Plats)

No HomesBuilt

Some/AllImprovements

NoImprovements

SomeImprovements

AllImprovements

Some or ManyOwners

No HomesBuilt

A Few HomesBuilt

Many HomesBuilt (>25%)

PURE PAPER PLATS ARE SIMPLER TO ADDRESS

MULTIPLE OWNERS AND CONSTRUCTION GREATLY INCREASE COMPLEXITY

Source: Sonoran Institute, adaptedfrom Don Ell iott 2010 working paper,Premature Subdivisions and What toDo About Them


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a map (a.k.a. the plat) that outlines thedevelopment, with proposed lots, infrastruc-ture, and other improvements; and additional

details about the proposed project. Typical-ly, the local government will rst grant thedeveloper preliminary plat approval con-tingent upon recommended revisions. Aftermaking the requested revisions and naliz-ing the development layout and plans, thedeveloper resubmits the proposal for nalapproval. Once the nal plat is approved,the land is considered subdivided, and theindividual land parcels created for eachlot are legally recorded.

Depending on the rules in individual ju-risdictions, developers typically must installinfrastructure improvementssuch as grad-ing, roads, and lines for water and sewage before selling any lots. Some jurisdictionswill not grant nal plat approval before thiswork is nished, and some communities evenrequire developers to construct communityamenities, such as recreation facilities orcommunity centers, before selling lots.

Lot Sales, Improvements, and Construction

Once more than a few landowners areinvolved, or the subdivider has begun toinstall improvements, or more than a fewowners have built homes, the difficultiesquickly mount in terms of the law and thenumber of parties that have to agree ona solution.

The sale of even one lot to an individuallandowner makes entitlement issues in thesubdivision harder to resolve for three majorlegal reasons: (1) the need to protect the prop-erty rights of lot owners, (2) the need to pre-serve access to sold lots, and (3) pressure forequal treatment between current and poten-tial future homeowners. Some of these issuescan give rise to lawsuits, creating potentialliability for the town or county. The revisionor revocation of a plat with sold lots willrequire the agreement of multiple owners

each of whom may decide to le a lawsuiton one or more of these grounds.

Once the developer makes signicant

investments for infrastructure and otherimprovements, complications escalate.

Although the purchase of land does not initself create a vested right to complete thedevelopment, once an owner invests in im-provements to serve anticipated houses, it isdifficult to stop construction of those homeswithout reimbursing the developer for thecost of infrastructure. The law of vestedrights is complex and varies by state. In gen-eral, however, you vest as you invest; thecompletion of improvements creates a gen-eral right to either complete the project orreceive compensation for the lost investmentin that infrastructure if the project stalls. Completed homesparticularly if anumber of those homes are already occu-piedfurther compound the complexityof resolving distressed subdivisions. Accessroads will need to be retained and main-tained, even if the homes are widely scat-tered in inefficient patterns. If the developercommitted to building a golf course, park,or other community facilities, individuallot owners could claim a right to thoseamenitieswhether or not they have beenbuilt, and whether or not the homeownersassociations slated to upkeep them existor have enough members to perform themaintenance. Even if the developer wasclearly responsible for constructing theamenities, the local government couldbecome liable for them if it has preventedthe developer from building the amenitiesby vacating the parts of the plat wherethose amenities were to be built. Larger subdivisions split into severalphases at various stages of completion posethe most intricate and extensive challenges.The rst phases of construction may bemostly sold lots with most infrastructure inplace, but later phases may be mere paper


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platsunbuilt, with no lots sold and no im-provements in place. Thus, a single distressedsubdivision may pose several types of legal

entitlement issues, with varying levels of riskand potential liability, in different portionsof the development.

Basic Legal Powers Governing Development ApprovalsZoning and land subdivision are two ofthe most fundamental authorities utilizedby local governments to shape the future oftheir communities. Although specic details

vary by jurisdiction and by state, the basicpowers outlined below are utilized by nearlyall local governments.

Subdivision Powers

State enabling acts authorize local govern-ments to control the subdivision of landwithin their jurisdiction subject to denedstandards. Unfortunately, most subdivisionenabling acts in the western United States areold, and many have been amended repeat-edly over time in ways that create internalinconsistencies between different sectionsof the subdivision act and between that actand the local governments zoning powers.

Zoning Powers

While subdivision law controls how landcan be divided, zoning addresses how itcan be developed. In theory, the two shouldwork hand-in-hand: zoning would describewhat could be done on the land, and thenthe owner would divide the land appropri-ately. In several Intermountain West states,however, there is no legal requirement thatzoning and subdivision policies correspondwith one another.

Planned Unit Development (PUD) Authority

Planned unit developments are a form oflegalized contract zoning that may includeelements of zoning, subdivision, and

contract. In essence, state PUD enablingacts authorize local governments to nego-tiate with landowners and draft individual-

ized land use regulations that will then beapplied to only that landowners property.Some states, such as Idaho, expressly autho-rize PUDs by statute, but each jurisdictiondetermines the requirements and criteria.Other states, such as Colorado, establishsome of the requirements and criteria forPUDs in the state code. In other jurisdictions,the state code is silent on PUDs, but theyhave been established by ad hoc combina-tions of the local governments powers toregulate land use and to enter into contracts.

Development Agreement Authority

Regardless of whether a PUD is used, manysubdivisions are approved in conjunctionwith a contract specifying how the propertywill be developed. Development agree-ments generally address issues that cannotbe addressed in a zoning or subdivision ap-provalsuch as the timing of developmentand whether nancial security must beposted until the applicant builds requiredimprovements. The simplest form of devel-opment agreement is a subdivision im-provement agreement, in which propertyowners agree to build certain roads, pipes,wires, or drainage structures to supporttheir project.

Other Sources of Land Use Authority

Some states have additional statutes grantinglocal government powers to regulate landuse or environmental matters. For example,Colorados Local Government Land UseEnabling Act (LGLUEA) gives local juris-dictions broad authority to regulate activityrelated to land use, development, and theenvironmentprovided that the state hasnot adopted legislation that limits localauthority in those areas.


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Additional Legal Dutiesand ConsiderationsIn addition to those state-specic powersoutlined above, some planning and regula-tory duties remain constant across the states.For example, all states have the generalized

duty to plan for public infrastructure andservices, to process applications and plats inan orderly fashion, and to record subdivi-sion plats in county records. Each state hasits own approach, however, to the allocationof planning, zoning, and subdivision respon-sibilities among state, county, and municipalgovernments.

Each states enabling legislation is struc-tured differently (table 2.1). For example, inHome Rule states, some local governmentscan adopt their own charters allowing addi-tional legislative authority in local matters.In Dillons Rule states, local governmentshave only the authorities expressly grantedby the state. Some nonHome Rule legis-latures have granted broader authority tolocal governments than other nonHomeRule states. Wyoming and New Mexico,for example, grant municipalities extra-

territorial jurisdiction (i.e. they can regulatelands outside their city limits), while Nevadaand Idaho specically limit each citys au-thority to its jurisdictional boundaries. Eachstates legislature dictates, with varying de-grees of specicity, how local governments

may exercise police powers regarding landdevelopment.

State enabling legislation also variesregarding whether local governments can

vacate or amend approved plats; whethersubdivision approvals must conform to cur-rent zoning; whether specic investmentsare necessary to create vested rights tocomplete a development; and whether localgovernment regulations might result in thetaking of private property rights, warrant-ing compensation for owners (Trentadueand Lundberg 2011). Even the most fundamental land use ter-minology varies according to state enablinglegislation. A subdivision, for example,is any division of land in some states. Inothers, tracts must have more than 25 lotsor fewer than 35 acres. In states with loosethresholds for what constitutes a subdivision,

TABLE 2.1

Existence of Specic Statutory Authority across the Intermountain West States

StateHomeRule

City Extra-

TerritorialJurisdiction

Prohibit Lot

Sale beforeRecordation

Vacating /

AmendingPlats

Subdivision

Conformancew/ Zoning

Vested

RightsProvisions

Enhanced

TakingsProtections

Arizona Y Y N N N Y Y

Colorado Y Y N Y N* Y Y

Idaho N* Y N Y N N Y

Montana Y Y/N N* Y Y N N

Nevada N N Y Y N N N

New Mexico Y Y/N Y/N Y Y N N

Utah Y N N Y N N Y

Wyoming N Y/N Y/N Y Y/N N N Notes: See the Appendix to Trentadue and Lundberg 2011 for detailed explanations of the state-by-state enabling statutes relevantto addressing excess entitlements and distressed subdivisions.

Y/N indicates that the answer depends on the situation; * indicates that there are limited exceptions to this standard answer.

Source: Sonoran Institute, adapted from Anna Trentadue and Chris Lundberg 2011 working paper, Subdivision in theIntermountain West


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local governments typically adopt morestringent standards, resulting in diverse

regional denitions of a subdivision as well.

Averting Lawsuits from Property Owners

Although local governments in the Inter-mountain West possess a bewildering arrayof land use powers (depending on the statewhere they are located), they also face acomplex range of limitations on the usesof those powers. As a result, some citiesand counties that have exercised the rightto address distressed subdivisions have faced

lawsuits from landowners and developersclaiming improper employment of localland use powers. In such cases, plaintiffsgenerally claim these laws are illegal forone of the following four reasons:1. The local government had no authority

to take the action that it took;2. The way in which the regulation was

adopted violated procedural due process;

3. The owners had a vested right to developtheir property under the prior rules; or

4. The regulation was a taking of their prop-erty without just compensation (box 2.1).

Despite these challenges, local governmentefforts to address distressed subdivisions canbe made defensible, especially if the adopt-ed solutions are closely tailored to the prob-lems created by each specic development.This is an area where broad brush solutionsdont work. Only through understandingthe historical context of a disputed subdivi-

sion can local governments craft a programthat will protect legitimate property rightsand withstand challenges based on enablingauthority, vested rights, takings, and proce-dural due process. To achieve this end, thelocal government should carefully reviewthe history of the subdivision, lot sales,lot ownership patterns, infrastructure invest-ment patterns, market conditions, and growth

S O N

O R A N I N

S T I T

U T E

An aerial view of Lakota

Canyon Ranch, a zombie

golf community in New

Castle, Colorado.


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patterns before designing or implement-ing any remedial program. Different legalapproaches and tools will be appropriate

and defensibledepending on how com-plex the platting, property ownership, infra-structure investments, and home constructionpatterns have become in different phasesof the subdivision.

Reducing Liability

As a general rule, these ve simple principleswill help local governments reduce legalliability while addressing the complexproblems of arrested developments:1. Cite as many sources of land use authority

as possible and avoid actions where courtsor statutes have denied local governmentauthority. In Home Rule states, makesure there is no state statute prohibitingthe proposed action; in Dillons Rulestates, nd the state statute that explicitlyauthorizes the proposed action or impliesit falls within local government powers.

2. Avoid actions prohibited by state vestedrights statutes. Likewise, avoid cases in-

volving individual lot owners who haveinvested money in their homes or in lotimprovements following government ap-proval of a subdivision, and whose rightsto develop their property may be vestedunder common law. If signicant infra-structure has been installed, the develop-er may well have a right to complete thedevelopment as shown on the adoptedplateven if full buildout seems unlikelyat the time or in the near future.

3. Recognize the legitimate rightsasopposed to subjective expectationsofindividual lot owners, and try to treatthem as fairly as possible.

4. Leave each property owner with areasonable economic use of his or herproperty taken as a whole, unless statelaw requires that each lot be consideredindividually.

5. Scrupulously follow and document eachstep required by state law and the localgovernments own regulations. Err on the

side of providing additional notice andopportunities for participation, in casea judge later determines that an actionintended to be legislative in nature wasin fact quasi-judicial, requiring higherlevels of due process.

As noted earlier, a few state statutes explic-itly address city and county powers to dealwith distressed subdivisions, and an equallysmall number of reported legal decisionssupport or invalidate local government effortsto solve these problems. It is important thatlocal governments see this lack of statutoryand case law as an opportunity rather thanas a barrier to action. Even in the relativelyconservative judicial climate of the Inter-mountain West, courts have been fairly will-ing to interpret local governmental powersbroadly when it is clear that the government

BOX 2.1

Regulatory Takings

The eld of regulatory takings of private property is complex

but generally prohibits denying the owner all reasonable economic

uses of the property (taken as a whole) and requires that any indi-

vidualized requirement to dedicate land or pay money be rationally

related or directly related to the impacts of the proposed devel-

opment and in an amount roughly proportional to the impact

of the owners proposed development. The recent U.S. Supreme

Court decision in Koontz v. St. Johns River Water Management

District, 133 S.Ct. 2586 (2013) appears to conrm that the roughproportionality standard applies to individualized exactions of

money in an attempt to mitigate project impacts, but its further

implications are not yet known. Because most platting and replat-

ting approvals involve obligations to dedicate land (rather than

pay money) to mit igate project impacts, Koontzs holdings regard-

ing monetary exactions may not have a signicant effect on

current subdivision practice.


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. . . . . . . . . . . . . . . . . .

is addressing a signicant problem in a waythat is both procedurally and substantivelyfair. That is what it is going to take to man-age the impacts of distressed subdivisionsover time (see Elliott 2010 and Trentadueand Lundberg 2011 for related case lawand more guidance on legal issues).

P L A N N I N G F R A M E W O R K SLocal governments seeking to remedythe potential negative impacts of excessdevelopment entitlements and distressedsubdivisions have many different land useand zoning tools at their disposal. Theseinstruments generally fall into four catego-ries: economic incentives, purchase of landor development rights, development regu-lations, and growth management programs.Note that the existence of appropriatestate enabling authority is a prerequisitefor local adoption of most of these tools.

P H O T O S :

S

O N O R A N I N S T I T U T E

The housing market

bust postponed the

promise of a Life

Elevated on Trail

Ridge Estates in

Toquerville, Utah.


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S U M M A RYIn order to remedy problems causedby excess development entitlements anddistressed subdivisions, communities needto understand the basic legal framework fordevelopment approvals, their legal powers,and how those rights are shaped by the en-abling statutes and case law in their state.Local governments should also develop andadopt ordinances and policies to withstandtypical legal challenges. Prior to adoptingnew policies, communities should rst clarifyspecic goals for distressed subdivisions andchoose appropriate tools to reach thosegoals. The most effective strategies will in-

volve collaboration and mutually benecialagreements between landowners, local gov-ernment, and the development community.Successfully addressing excess entitlementsis critical to creating timely and successfuldevelopments that pay for themselves andmeld with the existing built and naturalenvironment.

CASE STUDY 1

Mesa County, Colorado

Problem: 1980s Development Boom and Bust

Solutions: Revised development approvalprocesses and abandonment of pure paper plats

D uring the oil shale boom and bust of the1980s, Mesa County, Colorado, was one ofthe regions hit hardest. When Exxon-Mobil ceased

operations in the area, the population of Grand

Junction, the county seat, plummeted by 15,000

people overnight. All development halted. In the

busts wake, more than 400 subdivisions, encom-

passing about 4,000 lots throughout the county,

were abandoned. Nearly 20 percent of Mesa

Countys subdivisions were left with unfullleddevelopment improvement agreements.

When its bond rating was threatened in 1988, the

county put several measures in place to clean up

the excess entitlements. It negotiated with local

banks and the development community to estab-

lish a development improvements agreement form

and procedure. The county also established a new

nancial guarantee called the Subdivision Dis-

bursement Agreement between construction

lenders and the county. The agreement puts thecounty in a direct partnership with the nancial

institution to ensure 1) an agreed-upon construc-

tion budget; 2) an established timeline for con-

struction of the improvements; 3) an agreed-upon

process, involving eld inspections during con-

struction, for releasing loan funds to developers;

and 4) the countys acceptance of a developers

improvements, provided certain conditions have

been met, and the developers subsequent

release from the nancial security.

It took Mesa County 15 years to fully address theexcess entitlements stemming from the 1980s

bust, but the work paid off: During the Great

Recession, the county had the lowest percentage

of vacant subdivision parcels to total subdivision

lots among the approximately 50 counties exam-

ined. Not a single developer backed out of a devel-

opment agreement when only partial improvements

S O N

O R A N I N S T I T

U T E

The way was paved,

but residents never

made it to this arrested

development.


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were made. While some subdivisions

remain vacant, all improvements have

been completed to the point that the

parcels are ready for construction

once they are sold.

River Canyon (gure 2.2), for example,

was planned as a 38-lot subdivision on

192 acres. When the real estate bubble

burst in 2008, the entire site had been

lightly graded with roads cut, but no

other improvements were complete,

and no parcels had been sold. Realiz-

ing the lots would not be viable in thenear-term, the developer worked with

the county to re-plat the subdivision

into one parent lot until the owner is

ready to apply for subdivision review

again. The resolution is a win-win:

The county escapes a contract with

a developer in default and avoids the

sale of lots to multiple owners with

whom it would be difcult to coordinate

construction of subdivision improve-

ments. The developer avoids the costof installing services and paying taxes

on vacant property that is zoned for

residential development.

Now, lenders in Mesa County often

encourage the con solidation of platted

lots, because many banks will not lend

money or extend the time on construc-

tion loans without a certain percentage

of presales validating the asset as a

solid investment. The landowner gener-

ally complies as well, to avoid paying

taxes on vacant residential property,

which carries the second highest tax

rate in Colorado. If market demand

picks up, property owners may submit

the same subdivision plans to the coun-

ty for review, to ensure compliance with

current regulations. If the plans still

FIGURE 2.2

River Canyon Original Filing & Vacating Replat

comply, the developer can proceed from that point in the sub-

division process. Mesa County consolidated parcels this way a

total of seven times from 2008 to 2012, to eliminate lots where

no residential construction was anticipated in the near future.

Source: Mesa County, Colorado


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. . . . . . . . . . . . . . . . . .C H A P T E R 3

Stakeholder Perspectives

Government policies and plan-ning tools can greatly facilitate orhamper remedies for individualarrested developments, but ulti-

mately market conditions and the actions oflandowners and developers will determinethe fate of approved entitlements. A myriadof stakeholders will need to identify and im-plement solutions, subdivision by subdivision.Landowners, developers, and local planningofficials are the primary actors. Other keyparties include lenders, realtors, state andlocal elected officials, and current residents.Understanding the owners perspectives ineach development will help determine how toapproach them and how to choose or createpolicies tailored to inuence their decisions.

D E V E L O P E R A N D L A N D O W N E RP E R S P E C T I V E SDevelopers generally will be most inuencedby the economic market for constructionand the subdivision processincluding

the interplay of approval, ownership, im-provement, and building status for eachindividual development.

The marketability of a project is based rston its specic location within a communityand second on its design and price. Prot-ability depends on the price and timingof lot sales or home purchases within thesubdivision and on the length of time thedeveloper or landowner can afford to holdonto it as an investment. Is the project viabletoday, will it be feasible in a few years, ormay it be unmarketable in the foreseeablefuture because of its location or design?Developers answers to these questions willhave a major inuence on their perspectiveand ability to complete their projects. The market for vacant, entitled land isdifferent than the market for homes. Ownersof vacant, entitled land may include a master-planned-community developer with a multi-

year project, a builder looking to quicklybuild and sell houses, a speculator holding

MARICOPA COUNTY PLANNING AND DEVELOPMENT D

Distressed

subdivisions

are hardest

to treat onceconstruction

begins.


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. . . . . . . . . . . . . . . .

vacant lots until they are ripe for develop-ment, or a bank with a foreclosed project.Each type of owner is likely to prefer a dif-

ferent approach to excess entitlements. Asdiscussed in chapter 2, issues concerningentitled lands with some infrastructure al-ready in place are even more complicated,as the services could prove an asset or aliability depending on their condition andstate of completion.

Developers Response to the Boomand Bust in the Intermountain West In response to market conditions broughton by the Great Recession, two-thirds ofdevelopers and landowners who respondedto the Sonoran Institutes Distressed Subdi-

vision Survey (box 3.2, p. 30) changed thetype of housing product they would nor-mally build. Many focused on constructingsmaller, more affordable homes. Othersmade homes more efficient, incorporated re-newable energy features, built mixed-usecommunities or mixed-use buildings, and re-duced amenities or made them optional rath-er than standard. Several developers com-mented that the market was still unstableand they were waiting to see how it stabi-lized before deciding how to proceed withtheir proposed developments.

Developers Perspectiveson Local Officials and LendersThe Distressed Subdivisions Survey alsoasked developers and landowners abouttheir experiences working with local officialsand the lending industry to correct problemsimpeding their projects. Developers wereslightly more likely to say local officialswere somewhat helpful (43 percent) thansomewhat non-helpful (35 percent). Theirexperiences with the lending industry weredistinctly more negative: No one identiedlenders as being very helpful; 70 percentindicated they were unhelpful, and the

majority of those respondents said lenderswere very unhelpful. These attitudes cor-roborated what our experts and participat-

ing communities said about the difficultyof nding lenders who were even availableto discuss potential solutions. Lenders par-ticipating in the experts workshops pointedout that lenders themselves are not in thedevelopment business, and many are unableor unwilling to invest time or money in adistressed assetlet alone roll up theirsleeves to grapple with restructuring orredesigning a distressed development.

Common Subdivision-SpecicObstacles for DevelopersIn addition to general market conditionsand evolving home buyer preferences, anumber of subdivision-specic problemscan also obstruct the successful completionand marketing of lots and homes.

Legal Issues

Distressed subdivisions frequently sufferfrom ownership that is unclear or divided

BOX 3.1

The Growing Market for Compact, Walkable Developmentin the Intermountain West

The Sonoran Institute recently conducted an analysis and accom-

panying survey of the real estate markets in the northern and central

Rocky Mountain states, and presented the ndings in a publication

entitled RESET (Sonoran Institute, 2013). Interviews were conducted

with brokers and developers to understand their perspective on com-

pact, walkable development. Generally, the development community

in the northern Rockies indicated that about 15 to 20 percent of

the market demand is for such compact, walkable developments.

Constructed projects bear out this range in Bozeman, Montana, and

the Teton Valley of Idaho and Wyoming. In Colorado, local developers

estimate that demand for such housing makes up about 25 percent

of the market. In several Colorado cities, however, a much higher

percentage of recently constructed projects are oriented toward

compact and walkable developmentas high as 40 percent in

Eagle and 50 percent in Carbondale.


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. . . . . . . . . . . . . . . . . .BOX 3.2

Distressed Subdivisions Survey

In February and March 2013, the Sonoran Institute sur-

veyed planners and developers in the Intermountain West

regarding excess development entitlements and distressed

subdivisions in their areas. Designed to supplement the

2009 and 2012 experts workshops (p. 58), community

case studies, and otherwise sparse data on the number of

excess development entitlements, the survey was based

not on a representative sample but on feedback from 302

individuals who answered an open invitation. Respondents

were from Arizona (31 percent), Colorado (19 percent),

other Intermountain West states (25 percent), and the

Southeast (5 percent). Responses came primarily from

public agencies but also included attorneys and consul-

tants in private practice, nongovernmental organizations,developers, builders, and lenders. Key ndings suggest:

The majority of respondents (67 percent) experienced

a boom and bust cycle in their communities; 28 per-

cent indicated it was ver y severe, 42 percent severe,

and 28 percent moderate.

The respondents who reported very severe boom and

bust cycles in their communities were much more likely to

report a larger number of vacant, platted subdivision lots.

47 percent reported that home construction was driven

equally by current housing demand and speculative

FIGURE 3.1

Distressed Subdivisions SurveyWhat Issues Are a Problem in Your Jurisdiction?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Number of Vacant Platted Lots

Large Unnished Subdivisions

Owner Not Adjusting for Lost Property Value

Potential Lots Allowed by Current Zoning

Fiscal Impact to Serve Entitlements

Unnished Subdivisions too Costly for Market

Location of Entitlements vs.Services & Demand

Obtain & Maintain Development Assurances

Excess Entitlements Limit Adapting to Market

Impacts on Surrounding Homeowners

Disrupting Agriculture or EnvironmentUnnecessary Infrastructurefor Premature Entitlements

Unplatted Lots Entitled by Develop. AgreementsNumber of Vacant Lots

from Multiple SubdivisionsEncumbering Water & Other Services

Blight from Unnished SubdivisionsHealth & Safety Concerns

from Unnished Subdivisions

Major ProblemModerate ProblemMinor Problem

S o ur c e:

S on

or anI n

s t i t u t e

building; 27 percent attributed the boom to demand

alone, and 26 percent blamed speculative building

alone. The respondents who said that speculative build-

ing drove the bubble were more than twice as likely to

have reported a severe boom and bust cycle, compared

to respondents who said current housing demand drove

home construction (40 percent versus 15 percent).

Issues most often cited as moderate or major problems

included the number of vacant, platted lots; unnished

large subdivisions; property owners and lenders

unwillingness to accept decreased property values;

and the number of potential future lots allowed by

current zoning (gure 3.1).

Market demand and speculative building were thefactors considered most likely to foster excess entitle-

ments (gure 3.2), though respondents also blamed

local planning and zoning practices.

When asked to quantify the number of vacant, platted

subdivision parcels in their jurisdictions, 32 percent of

respondents reported many, 42 percent reported a

moderate number, and 25 percent reported very

few; only 2 percent reported none.

For a more extensive discussion of the survey results, see

the companion website ( www.ReshapingDevelopment.org ).


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. . . . . . . . . . . . . . . .

among multiple stakeholders. There maybe unresolved litigation among owners,lenders, and developers.

Financial Problems

Signicant changes to an approved subdivi-

sion generally require the lenders consent,which makes it harder to redesign develop-ments to make them more marketable particularly if the subdivision became dis-tressed because the developer, lender, or in-frastructure nancing district went bankrupt.

Infrastructure Deciencies

In some cases, decient offsite infrastruc-ture, such as inadequate road capacity orwater and sewer services, may be hindering

the development or value of a subdivision.In other cases, a subdivision may sufferfrom defective or decient onsite infrastruc-ture. Incomplete, inadequate, or even non-existent development improvement agree-ments and assurances may complicate theresolution of these problems. A subsequentowner, which could be the lender, may bepushing the local government to rely on the

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Market Demand &Speculative Investments

Easy & Low-Cost Mortgage Financing

Local Regulatory Atmospherefor Development Approvals

Planning & Zoning Practices

Local Lending Practices

National Housing FinancePolicies & Procedures

Federal & State Tax Structure

FIGURE 3.2

Distressed Subdivisions SurveyFactors that Led to Excessive Entitlements

S o ur c e:

S on or anI n

s t i t u t e

development assurance (surety bond or letterof credit) to fund completion of the infra-structure. On the contrary, the subsequentowner may be trying to prevent reliance onthe development assurance if said owneris the bank that issued the assurance.

Standards and Requirements

Changes to the codes that govern subdivision,zoning, or building could raise the cost andlower the feasibility of a development; creategeneral uncertainty; or render some of thelots nonconforming, which could delayor prevent the issuance of building permits.

General Uncertainty

Uncertainty about any of the factors above

will hinder nancial investments and thewillingness of various stakeholders to investtime in problem solving.

G O V E R N M E N T P E R S P E C T I V E SThe Distressed Subdivisions Survey askedgovernment officials about their experienceworking with landowners, developers, andlenders. Sixty-two percent of government


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. . . . . . . . . . . . . . . . . .

officials indicated they worked with land-owners and developers concerning distressedreal estate holdings, but only 31 percent had

worked with lenders on these issues. Amongthose respondents, 54 percent indicatedlandowners and developers had been some-what or very helpful, while only 38 percentsaid they had found lenders to be some-what helpful or very helpful.

C O M M U N I T Y P E R S P E C T I V E SThe community-wide view of distressedsubdivisions and excess development entitle-ments is shaped by the cumulative impactsthey have on the surrounding community,as well as the developers, landowners, andlenders local reputations for quality andcredibility. An individual community assess-ment evaluating the seven types of commu-nity impacts and the three causes of thoseimpacts (table 3.1)both for individual dis-tressed subdivisions and then for the com-munity as a wholecan help to clarify theseverity of entitlement problems and deter-mine the most important policies to remedythem (see Appendix B). The community assessments componentof the Distressed Subdivision Survey indi-cated that the majority of communities hadmoderate problems in three areas:

1. the number of lots,2. the impact of these lots on an over-

extension of scal commitments by

local government, and3. the impacts of excess entitlements

on the functionality of housing markets.

Two of the three illustrative communitieshighlighted in this reportTeton County,Idaho, and the city of Maricopa, Arizona evidenced much higher levels of negativeimpacts.

Documents

Arrested Developments