by Michael Dey | Jan 18, 2018 | Uncategorized
The Honorable Butch Kirven, Chairman
Greenville County Council
301 University Ridge
Greenville, SC 29601
Dear Chairman Kirven,
On behalf of the 600 members of the Home Builders Association of Greenville, I am providing you with a detailed analysis and list of proposed changes to the draft Land Development Regulations ordinance which you will consider for third reading on January 23.
I wish to emphasize that the Home Builders Association is not in opposition to this ordinance. In fact, we find many changes that we believe are needed and will improve the current ordinance. However, there are several changes that will significantly impair the economic development of residential building lots and lead to increased housing costs in Greenville County.
This analysis was prepared by several of our members who are active in land development in Greenville County. Most of them also were actively involved in the drafting of the Land Development Regulation ordinance that was adopted by Greenville County Council in 2016. In fact, each of them, as well as myself, spent more than 200 hours over the course of three years working with county staff to develop the ordinance that is in place now. Unfortunately, not of us were consulted on the current draft, but these comments have been received by county staff in a meeting that took place on January 10, 2018, at County Square.
Article 1
1.6.1:
In the draft ordinance, an additional pre-submittal meeting has been added by county staff. With this change to the ordinance, county staff will make the meeting mandatory and the meeting must occur before an application to subdivide real estate will be “accepted” for consideration. It is our opinion that this new meeting will add at least one month to the process of reviewing and approving a subdivision. It also is completely unnecessary in most cases.
Until recently, county staff made themselves available to developers and engineers, on an informal basis, to discuss a proposed development before the application to subdivide was submitted. This is no longer the case and when combined with a constantly-changing process imposed by county staff, some applications for subdivision have been submitted with errors. Staff has concluded that the developer and their engineer are at fault. However, it is our opinion that what is really needed is accessibility, and in some cases an improved customer service culture, among the staff that handles these applications.
One other point: you should know that county staff has already implemented this new meeting, and has declared it mandatory, ahead of action by County Council. In the first month some developers have been turned away because the meeting schedule was full. It should be apparent that our 30-day estimate may be conservative.
Recommendation: The change in 1.6.1.A. should be rejected.
Article 2
Definition of Authorized Representative:
If adopted, the definition of Authorized Representative will limit to one person a representative who is available to appear on behalf of the application in meetings with county staff as well as the Planning Commission and County Council. The problem with this definition is that it does not acknowledge the reality of people’s lives. Should the authorized representative be unavailable for a meeting, the application will be delayed until the authorized representative is available.
Recommendation: Provide for Alternate Authorized Representatives when the Authorized Representative is unavailable to represent the project.
Article 3
3.1:
Ordinances that are drafted with subjective language are especially problematic. Subjective ordinances do the following:
· Empower staff to make policy decisions that are rightfully the purview of County Council
· Allow policy makers to inject political considerations into a decision that should be objective
· Removes clarity in how land use is expected to occur in Greenville County
· Diminishes the role of the Comprehensive Plan in land use decisions, which the language in 3.1 will do
Greenville County Council already has allowed itself to be overly influenced by Not In My Backyard (NIMBY) interests, and in some cases council members are fanning those flames uncessarily. The people who oppose real estate development are not interested in sound planning decisions, they are interested in stopping any activity that might impact their personal property, even when their property is impacted positively, not impacted in any way, or is miles away. Some don’t have a property interest in the area at all.
The language in 3.1 will only provide further ammunition for opposition to development that is otherwise consistent with county plans and ordinances. In addition, because of its lack of clarity, it could be used to support litigation on both sides of a dispute, further clouding land use policy in Greenville County.
Recommendation: The new language in 3.1 should be rejected.
3.3.2:
As has already been pointed out in the Definition of Authorized Representative, the pre-submittal meeting and lengthening of the review schedule is unnecessary.
Recommendation: The Pre-Submittal meeting should be made optional.
3.4.7:
Sidewalks have been a touchy subject between developers and Greenville County. In most cases, developers want to include them in their projects, but the bonding requirement is something they would like to avoid. Bonding is expensive at 125 percent of construction cost. In addition, bonding is not actually a bond, but cash placed on deposit with the county. This money generally can not be borrowed, therefore it impacts the developer’s capital position for current and future projects. Therefore, it is not just an issue of interest expense, but restricts the developer’s ability to take on other projects or to do more with their current project. It therefore adds expense to the development that is beyond the cost of the financial security.
In the case of this change, which removes one word, “required,” it creates a disincentive for the developer to do more than the sidewalks required in the ordinance and on the site plan, because the developer will be required to bond any sidewalk that may otherwise be added by the developer, but is not required.
Recommendation: The removal of “required” in 2.4.7 should be rejected.
3.5.1.:
In our meeting with county staff on January 10, 2018, we questioned this new paragraph because of its vagueness and subjectivity. In that discussion, county staff stated that their intention is to redirect a Minor Subdivision to the Preliminary Plan process if a road, whether public or private, is required. They stated that it is not their plan to redirect Minor Subdivisions if a detention pond, sewer line, drainage swale, or other improvement, which could be defined as a public improvement, is involved.
Recommendation: In the last sentence of this paragraph, replace “improvement” with “road,” so that it reads, “If the County determines that a public or private road isnecessary for any reason, …”
Article 8
8.17.2.B.:
Requirements to place buffers in common areas will result in forcing a Homeowners Association to be created when no other common areas are necessary. In addition, it will have a major impact on meeting lot area requirements for non-cluster subdivisions, particularly in R-S, R-R1 and R-R3 developments. In addition, if buffers are expanded in the future, this will result in an even greater impact to the development.
Recommendation: Change the language to: “Riparian buffers are preferred to be located in common areas, but not required.”
8.17.3.A.:
Requiring stormwater conveyance systems to be in common areas rather than in an easement will result in division of lots where stormwater has to flow through the lot. This will particularly impact larger lots. In addition, the county has stated that they want easements on all channels that carry water from two or more lots. This could be interpreted to make these easements common area, which creates new property lines, building setbacks, and other issues that will reduce the yield of lots in a subdivision, raising the cost of the remaining lots.
Recommendation: Remove “through the common area.”
8.18.A.:
During the 2016 revision to the Land Development Regulations, the study committee agreed that ADA standards would apply only to the ramp portion where the sidewalk transitions to the street. We arrived at this conclusion because Greenville County is a very topographically challenging county, with many steep slopes even in the Southern part of the county. In many cases, it will be nearly impossible to meet the slope requirements of the ADA (5 percent) without substantial grading of the site, requiring the removal of trees and dramatic leveling of the site. This not only adds great expense, but it is also contrary to the very concern that has brought rise to this revised ordinance.
In addition, we feel it is important to point out to County Council that the language, as written in the current ordinance, which includes the ADA requirement to which we object, was not what was adopted by County Council in 2016. We brought this fact to the attention of county staff in Spring 2017, and we were informed that the ordinance would be corrected. To date it has not been corrected, and the current draft implies no change to the language when in fact there has been a change made to an ordinance that was properly adopted by County Council. This is a transparency issue that gives constituents reason to be suspicious of the integrity of the governing process and the motives of those who made the change after County Council approved the ordinance.
Recommendation: ADA standards should apply only to ramps and transitions from sidewalks to streets and the language should be restored to the language which was adopted by County Council in 2016.
8.21:
We object to the proposed screening requirement for the following reasons:
- It is unnecessary to screen similar, or identical, residential uses from one another. This adds unnecessary expense.
- The act of installing screening may result in the removal of existing vegetation that would otherwise be left undisturbed.
Recommendation: The current screening requirement should be retained. However, the Home Builders Association will support screening of residential uses from incompatible, non-residential uses.
Article 12
12.5.1.:
Requiring Private Roads will prevent certain types of development, like townhomes, which are generally regarded as more affordable than traditional single-family homes. County staff has told us that this was not their intent. But this issue in particular highlights the need for this ordinance to be returned to Planning Commission for further work.
Recommendation: The next to last sentence in this article should be be revised to read, “Private Roads or Private Drives are required…”
We do not oppose the entire ordinance
There are changes in this ordinance that we do support, and others on which we do not have a position either way, which is why we are not recommending that you reject the entire ordinance, just make the changes that we have outlined in this letter. For example, we support changes in Article 5 which provide for greater right-of-way when needed, and more consistency when designing streets.
We also should note that county staff has agreed to certain changes to the ordinance:
- 6.4.5.D.: Remove “whichever is greater”, to allow paving of the final surface coat of asphalt after 90 days of installation of the initial surface coat.
- 6.5.2.B.5.a.: Consider 60 or 90 days instead of the proposed 30 days for compaction test reports.
- 6.5.2.B.5.b.: Consider 180 days for grade depth expiration.
We also support certain changes in Article 8 that improve the engineering of catch basins under sidewalks, improving performance while reducing cost.
The regulated and regulators should work together to improve the process
I would like to note that this association has always been in support of, and has facilitated, training for engineers and developers to help improve the development process. We have hosted these meetings in the past, and collaborated with others to facilitate them.
We would, however, like to make the point that regulations and processes for compliance are continually changing at Greenville County. Instead of developing processes and rules on a periodic basis, whether annually or semi-annually, we have found in recent years that a new rule is implemented frequently, as often as every month. Some of the changes are minor, others major, but all contribute to the problem of applications that are not complete.
As a final recommendation, we urge Greenville County Council to initiate an independent review of land-use regulation, particularly development regulation, to search for ways to improve processes, communications, and customer service. The alternative is that development will continue to move to neighboring counties, which have the same regulations but also a culture of the desire for growth.
Conclusion
There should be no doubt that increased regulation raises the cost of everything, not the least of which is the cost of housing. And few activities are more highly regulated than home building.
And those regulations do add to the cost of housing. Since 2000, according to the U.S. Census Bureau, the percentage of homes in the South priced at less than $200,000 went from 90 percent to 10 percent. Let that sink in. Fewer than 10 percent of all homes in the South today are priced below $200,000.
The problem is, restricting growth is more popular than promoting housing affordability, particularly for citizens who have an incentive to see their home prices rise. But even if you are a homeowner, and have concluded that your home investment is more important than someone else’s dream of homeownership, or just an affordable rent, ask yourself this question: where are my children going to live?
Land use regulations do restrict where housing development occurs. It’s a basic business principle: locate where you are welcome.
In the first nine months of 2017, compared to 2016, the rate of growth in home building in the counties surrounding Greenville, was as follows:
- Spartanburg County, up 21 percent
- Laurens County, up 33 percent
- Anderson County, up 17 percent
- Pickens County, up 76 percent
Meanwhile, Greenville County was down 5 percent.
Where are our children going to live? Spartanburg, Laurens, Anderson, and Pickens counties.
Our Recommendation
We wish to reinforce that we are not opposed to amending and refining the Land Development Regulations. However, as you should have concluded from this letter, this ordinance is not ready for implementation.
We recommend that Greenville County Council return this ordinance to Planning Commission with instructions to engage with the members of the Home Builders Association who have invested a great deal of their personal time in developing the current ordinance. These professionals—engineers, developers, and other real estate development professionals—have the expertise and experience that the county needs to develop the amendments that will truly improve the Land Development Regulations in a manner that accomplishes our county’s goals for land development.
If you have any questions regarding any of these issues, please do not hesitate to contact me.
Home Builders Association of Greenville
Sincerely,
Michael E. Dey, Executive Vice President
and Chief Executive Officer
Copy:
The Honorable Willis Meadows, Vice Chairman
The Honorable Xanthene Norris, Chairman Pro Tem
The Honorable Joe Dill, Councilman
The Honorable Michael Barnes, Councilman
The Honorable Sid Cates, Councilman
The Honorable Rick Roberts, Councilman
The Honorable Bob Taylor, Councilman
The Honorable Liz Seman, Councilman
The Honorable Ennis Fant, Couniclman
The Honorable Lynn Ballard, Councilman
The Honorable Fred Payne, Councilman
Mr. Joseph Kernell, County Administrator
Ms. Paula Gucker, Assistant County Administrator for Community Planning, Development & Public Works
Mr. Mark Tollison, County Attorney
by Michael Dey | Apr 21, 2017 | Uncategorized
This week the South Carolina Senate held a public hearing before a Judiciary subcommittee to consider legislation to allow South Carolina cities and counties to impose Inclusionary Zoning on home builders and developers. Inclusionary Zoning is a regulation where government mandates that private home builders and developers sell or rent some homes at below-market prices without any financial participation from government.
Your Home Builders Association opposes Inclusionary Zoning because it does not work. In fact, it makes the affordable housing problem worse. We described the problem in a letter to Greenville Mayor Knox White. The Greenville City Council adopted a resolution in support of the Inclusionary Zoning legislation and actively lobbied for its passage. We also shared the letter with the rest of City Council, Greenville County Council, and the legislative delegations from Greenville, Pickens, and Laurens counties. You can read the letter below. Click here to read our policy paper on Inclusionary Zoning. April 17, 2017
The Honorable Knox White, Mayor
City of Greenville
206 South Main Street
Greenville, SC 29601
Via Email: kwhite@greenvillesc.gov
Dear Mayor White,
I would like to provide you with some additional research and information on inclusionary zoning and why, in almost all cases, this regulation worsens the affordable housing problem in the communities where it has been implemented.
Attached is our policy paper on the subject. In addition, I have outlined below why an inclusionary zoning regulation would contribute to the affordable housing problem in Greenville, rather than improve it.
Scenario 1
Assume that an inclusionary zoning ordinance in the City of Greenville will require 10 percent of all housing units constructed to be below market prices. Assume also that 400 housing units are constructed in a year in the city (consistent with current activity and about 8 percent of the total new homes constructed in Greenville County). The result would be 40 new below-market housing units constructed in the city as a result of an inclusionary zoning ordinance.
However, we must assume that the developer will pass the lost profit on in the form of an increase in the prices of the remaining 90 percent of their development that is being sold at market-rate prices.
The average price of a newly-constructed single-family home in the Greater Greenville area is approximately $270,000. The average home builders’ net margin is about 5 percent. That is their profit. Some are more profitable. Others are not. That is an average.
Therefore, the home builder will need to increase the prices of the remaining 90 percent of market-rate housing units by $15,000 each.
- $270,000 x 5% = $13,500 (average price times 5% net margin is the home builder’s profit per housing unit priced at $270,000)
- $13,500 x 400 / 360 = $15,000 (average profit times total housing units produced, divided by market-rate housing units produced is the price increase on each market-rate housing unit)
According to the National Association of Home Builders’ Priced Out Effect study (nahb.org/pricedout), a $1,000 increase in the cost of a new home in Greenville, South Carolina, prices out 520 households from purchasing a new home. Therefore, that $15,000 increase in the price of a new home, the result of an Inclusionary Zoning Ordinance mandating that 10 percent of the project be sold at below-market prices, will price out 7,800 families from purchasing a new home as a result of the ordinance—PER YEAR.
The hypothetical ordinance would produce 40 below market housing units, but will cause an increase in the demand for below-market housing units by 7,800 households. And this only assumes that the net profit from the 10 percent of housing units that are below market is $0. If the city demands that the price be less than break even, which is likely, the priced-out effect is even worse.
Granted, I am applying the Priced Out data, which is a regional statistic, to the City of Greenville. However, I believe it fairly describes the cause and effect of an Inclusionary Zoning ordinance.
Scenario 2
The above example assumes that the ordinance regulates the end price of the house. However, some ordinances have regulated the end price of the lot. That method is even worse for affordability.
The lot cost is a combination of raw land cost plus development and infrastructure costs, as well as marketing, commissions, and carrying costs (debt), plus profit. Below is how the final lot price is often determined:
- Land cost of $15,000 per lot ($60,000 per acre divided by 4 units per acre)
- Infrastructure and development costs have risen dramatically and are now typically $25,000 per lot
- The result is a $40,000 lot in hard acquisition and development costs
- Therefore, a 30-lot subdivision would cost $1.2 million
- Add risk, carrying cost, overhead, desire for a profit, and the $1.2 million in hard costs is typically grossed up using a 1.5 multiplier. Therefore, the retail price of the lot will be $60,000 lot.
- The gross margin is $20,000 per lot from which comes business overhead (city license fees, office cost, employee salaries, insurance, utilities, transportation, etc.). That overhead number is about 10% of revenue, or $6,000.
- Then there are the additional costs like sales commissions, marketing expenses, and interest expense.
- The absolute best outcome for the developer is 10% net profit on the lot, but usually it is less.
If 3 of the lots in the 30-lot subdivision must be sold for $20,000 each in order to produce a house affordable to a buyer earning between 80 percent and 120 percent of median income, the lost $20,000 in cost (the lot cost is $40,000) and the lost mark up of 20,000 per lot, will be added back to the remaining 27 lots.
- Therefore, the developer’s lot cost for the market-rate homes is $44,444 ($1,200,000 / 27 lots)
- The retail price of the lot will be $66,666 ($44,444 x 1.5 = $66,666)
- A difference in cost of $6,666 per lot that will be paid by the market-rate buyers in the subdivision
Therefore, the developer will sell the remaining lots to builders at $66,666 rather than $60,000.
In any final product, the lot is typically 17 percent to 20 percent of the cost of the home. To keep it simple, assume the builder uses a 20 percent value for the lot. Therefore, the builder will build a house that is five times the price of the lot.
When the lot cost increases by $6,666, that means the $6,666 increase in the lot will magnify into a $33,330 increase in the final price of the house. This is how it looks on paper:
- $60,000 lot x 5 = $300,000 house price
- $66,666 lot x 5 = $333,330 house price
With this lot-price control method, the city will have priced out of homeownership 19,314 families in the Greenville area.
You will understand from this analysis why the Home Builders Association has concluded that inclusionary zoning does not work. It, like many other government regulations on the housing industry, such as zoning and rent control, often make us feel like we are doing something constructive when we are, in fact, making the problem worse.
The study by the National Association of Home Builders that we reference in our policy paper has been applied to the Greenville area in the attached graphic. It demonstrates that housing in our community is nearly $70,000 more expensive as a result of regulation. As a result, less than 10 percent of all housing units built today are sold for less than $200,000. Just 17 years ago, 90 percent of all housing units were sold for less than $200,000. Inflation alone does not explain that increase in housing prices.
Our recommendation is that the City of Greenville and Greenville County work with the industry that produces housing to develop a meaningful housing policy for our community that will actually meet housing demand for all of our community’s citizens.
Home Builders Association of Greenville, SC, Inc.
Sincerely,
Michael E. Dey
Executive Vice President and Chief Executive Officer
Copy:
Greenville City Council
Greenville County Council
Legislative Delegations of Greenville, Pickens, and Laurens counties
