Strategic Neighborhood Redevelopment: Part 3 – Building Blocks for an Effective Neighborhood Strategy

By Ian Colgan | Redevelopment & Revitalization | Aug 23rd

This article is Part 3 of a four part series titled “Strategic Neighborhood Redevelopment.” This series provides the considerations involved in formulating a meaningful neighborhood redevelopment strategy. From Development Concepts Inc.’s 19 years of redevelopment experience, we’ll explain what in involved in establishing redevelopment strategies that produce sustainable private investment.

You can read Part 1 here and Part 2 here.

There are no easy answers to address the issues of neighborhood distress. A carefully crafted strategy, established with community stakeholders and public and private sector leadership, can make a difference. What will work on a larger scale, providing sustainable results, is likely to involve several critical components. The following components are essential building blocks to an effective and comprehensive redevelopment strategy.

1. Community Buy-In

Given the scope and magnitude of most urban economic distress, and assuming significant change is required to reverse this distress, it is absolutely necessary for community buy-in to be a part of any solution. A methodical process putting a well balanced “community team” in place to assist crafting the solution scope, soliciting and informing the stakeholders from the impacted area, and playing a role in implementation is mandatory to maximize support and minimize resistance to necessary change. Getting meaningful stakeholder involvement in a well thought out manner is an absolute essential if a macro redevelopment strategy is going to survive the planning process, let alone reach the implementation phase.

2. Land

A key assumption in any redevelopment program is that there is a large amount of land that is underperforming or not performing at all. Put in other words, the market is not investing in the real estate in any meaningful or productive manner. Most often this land is characterized by dilapidated buildings, brownfields, improper zoning, and cloudy title (ownership). It is often platted in a manner that does not accommodate the needs of a modern user or new development. Any successful redevelopment program must assume assembling and configuring land in distressed areas is imperative if an area is to once again entertain significant levels of new investment. It is important to understand the dynamics involved in unraveling the many entanglements inherent in analyzing, negotiating, and assembling urban “redevelopment” property are extremely complex. The process is much more involved than purchasing greenfield sites. Land acquisition to be accomplished in a reasonably efficient manner must incorporate a variety of skill sets in order to overcome the many obstacles involved in this important early step in the redevelopment process.

The Public Sector must minimize, if not remove, the risk of development in these areas in order for successful neighborhood redevelopment.

3. Incentives

The cost of doing business in an area considered distressed is often higher and can involve significantly more risk. Increased costs include, but are not limited to: security, insurance, legal due diligence, taxes, cost of construction, unforeseen property conditions, and sometimes parking for employees. Risks include, but are not limited to: marketability of the invested asset, ability to attract employees, customer/ visitor perceptions, potential for environmental liability, and failed infrastructure. In distressed areas the private sector is looking for a public sector partner. The partner must minimize, if not remove, the risk of development in these areas.
Perhaps the most important incentive provided by the public sector partner in a distressed area is a predictable and positive environment in which to invest. A guarantee of functional, well maintained infrastructure and unremitting vigilance in dealing with property maintenance and public safety begins to remove many of the redevelopment impediments. Land availability and its condition represent the other major factors likely to require public involvement if new investment is to occur. The ability to assemble land and prepare it for redevelopment (environmental remediation, rezoning, replatting) is not likely to occur on a measurable scale without some participation from the public sector. If an organization or public entity is not charged and empowered to complete the acquisition process, it is unlikely the real estate will be organized in a manner that fully addresses the needs of the community. This factor alone will impede the private sector from organizing its investment potential to create positive change in our urban areas.

4.  Investment

There are two key objectives when implementing a redevelopment strategy. The first involves eliminating slums, blight, or to modernize the legal redevelopment language – effectively removing the factors leading to disinvestment. The second objective, somewhat implicit in the first, is to create an enhanced environment for new investment. There are large pockets of urban areas that have lost value and are in steady decline. The goal is to reclaim their investment and development potential. Most developers/investors will need three factors to be present if they are to assume development risk:

1. The real estate must offer enough critical mass to make a difference. This is especially the case when the real estate is located in a redevelopment setting.
2. As mentioned earlier, the surrounding area needs to be predictable as to its future. If the environment around the subject real estate is perceived as a potential liability with an uncertain future, investors will take note and shun the opportunity.
3. The opportunity must be financially attractive. If the opportunity cannot be sold to debt and equity sources, the opportunity does not exist.

These factors: the real estate, surrounding environment, and ability to finance, must be conspicuously present in a redevelopment area if the development community is to invest and assume risk. Any macro redevelopment strategy must assume the ultimate outcome is the enhanced ability to attract large-scale new investment. It is appropriate to assume the public sector’s role is not to heavily subsidize the development, but to make sure a healthy environment exists in which to make development risk worthwhile.

5. Regulatory Muscle and Follow-Through

If you talk to stakeholders in areas considered distressed, they will normally express two frustrations. First, the laws and ordinances on the books addressing household and property maintenance and activity are often written without any real ability to enforce them (animal control, vehicle storage, drug peddling and solicitation, prostitution, unsafe buildings, etc). Too often, violations are found and reported, but a murky and overwhelming process is the result. This process is often lengthy, wearing down the complainant and the system prior to an adequate remedy from the system. A second frustration is the lack of consistent attention to code and criminal violations within their areas. Those easily enforceable laws still require enough trained personnel to follow-up and assure compliance (illegal dumping, high grass and weeds, abandoned building orders). There are areas within that do not receive regular attention from the enforcement agencies even though the need for such activity is undeniable. The system now rewards the squeaky wheel and other areas suffer as a result. The need for regularly scheduled, persistent follow-up with the chronic offenders is clear if enforcement is to be taken seriously. If minimum standards of property maintenance and use are not upheld through sufficient authority and enforcement, the ability to market distressed areas for investment is likely fighting a losing battle.

Tags: Code Enforcement, Community Buy-In, Land Acquisition, Neighborhood Redevelopment, Private Investment