Wednesday, September 30, 2009
Sorry to lead with the corny, overused NASA Apollo 13 reference, but everytime a national media outlet does a story on the City of Houston (or the energy industry, or Houston sports teams, or hurricances, or Whitney Houston), it seems de rigeur to paraphrase the "Houston/problem" line.
South Texas College of Law, where I teach, is located in downtown Houston, Texas. I'm not from Texas originally, but they tell me that's OK as long as I got down here "as quick as I could." (Plus Lyle Lovett says Texas wants you anyway.) I practiced law in Houston before leaving to take a VAP job, and I was very pleased to come back here to join the faculty at STCL. I like Houston-- it's America's fourth-largest city (look out, Chicago!), has great cultural amenities and a decent cost of living, and some believe it is an emerging global city due to its international presence and its important role in the world economy.
What Houston doesn't have, as many of you probably know, is zoning. Most property and land use casebooks and treatises mention that Houston is the nation's only major city without zoning. Houston has over 2 million people (4 million metro), yet it is one of only a tiny handful of cities over 100,000 without a zoning code (Pasadena, TX--a Houston suburb--may the the only other one). A lot of lawyers, planners, architects, and others remember that Houston is the only unzoned major city. The image that this fact leaves with people is that Houston is a development-friendly free-for-all, a sort of land-use Wild West.
I get my chops busted regularly by other property and land use profs when they find out that I actually teach land use law in Houston ("why bother? hahahaha!").
But is this image true? Is Houston really the quintessential unregulated land use city, in accordance with its reputation? Is it truly unregulated, or does it just lack a certain kind of zoning? Do private land use agreements take the place of public laws? And even if it is true that Houston is less regulated, is this a good thing, a bad thing, or something entirely unique? What effect does the land use regime have on development and on property values?
These are some of the questions I will be pursing on this blog and in my scholarly research. I consider Houston to be a great laboratory for examining assumptions and ideas about land use regulation. So I think that it's actually one of the best places to study land use!
- Matt Festa
Remember when evidence of a ridiculous decision was often followed by "and if you believe that, then I've got some oceanfront property in Arizona to sell you"?
Well, that quip is now so very 1900's. These days, the new motto of futility is apparently "and if you believe that, then I've got a strip mall in SoCal's Inland Empire to sell you."
This article from the interesting Retail Chatr blog explains why:
It should be noted that the property is being offered with an assumable loan with a current balance of approximately $8,665,000. As far as I can tell, this property is not worth the debt which encumbers it. The reality is really worse than the values depicted in the above table. True capitalization rates for this type of asset are likely approaching 9.00% (if not higher) and most investors would not be comfortable with a vacancy factor as low as 10% in this trade area. Additionally, my quick look at the property does not even take into account loss of rents for tenant turnover (which will undoubtedly happen in the not-to-distant future) or expenditures for tenant improvement allowances, leasing commissions and carried expenses.
The sale of this property in its current condition and anywhere near the asking price is a lawsuit waiting to happen (emphasis added)
Tuesday, September 29, 2009
Michael B. Kent (Stetson/John Marshall) has posted Theoretical Tension and Doctrinal Discord: Analyzing Development Impact Fees as Takings, forthcoming in the William & Mary Law Review. Here is the abstract:
One of the lingering questions about the law of regulatory takings concerns the proper scope and application of the Supreme Court’s exactions jurisprudence, known as the Nollan/Dolan test. A recurring issue in the case law, and of particular importance to this article, is the extent to which the Nollan/Dolan framework applies to takings challenges brought against development impact fees.
By and large, the decisions on the issue split over two primary issues. First, there is a debate about whether Nollan/Dolan is limited to physical exactions or whether the test might also apply to monetary exactions as well. Second, there is a difference of opinion over whether Nollan/Dolan applies only to exactions imposed in an ad hoc, adjudicative manner or also to those that are more broadly-applicable and established legislatively. These questions are important, but the primary emphasis on them has diminished other issues that also require attention. Particularly, there is a need to situate impact fees within the law of local government financing – i.e., determining whether they operate as fees or taxes – as that will have some bearing on the proper level of Takings Clause scrutiny to which they should be subjected. Only after wrestling with all of these issues can one move to the ultimate query of what analytical test is most appropriate.
This article attempts to answer these questions, fit impact fees into the Court’s current takings jurisprudence, propose a new rule of decision for impact fee cases, and demonstrate how that rule might apply to basic factual situations. In short, I demonstrate that impact fees are hybrid animals that occupy a space at the theoretical and doctrinal crossroads of takings jurisprudence, property law, and the rules applicable to municipal finance. Second, in light of this hybrid quality, I propose that takings challenges to impact fees be analyzed under a hybrid framework that combines elements of Nollan/Dolan with the more flexible factor-balancing reserved for the majority of takings cases. Finally, I suggest several larger questions implicated by the impact fee problem that continue to require judicial and scholarly attention.
- Matt Festa
Today at my law school the student Real Estate Law Society hosted a panel of property lawyers from the Real Property Division of the Harris County Attorney's Office (that's the county that Houston is in). The two panelists were attorneys that I had previously invited as guest speakers to my Land Use class: Chuck Brack, an eminent domain litigator, and Jimmy Jones, a real estate transactional lawyer. Some observations:
- There is a lot of student interest in property law careers. Even though transactions may be down because of the economy, I think that students sense that people will always be buying, selling, and using land. So students who are interested in real estate or land use practice should pursue it.
- A student asked about one attorney's transition from criminal law practice to real estate. Perhaps counterintuitively to the students, he responded that it wasn't as hard as you might suspect-- once you know how to think about and practice law effectively, learning a new substantive area has some start-up costs but it is doable.
- One theme that seemed to come out to me was how much the transactional and litigation sides of property practice have to cooperate. When I was an associate at a big firm doing general commercial litigation, it seemed that there was a big divide between the litigation and transactional practice groups (we were friendly, we just didn't seem to work together that often!). But the practice that our panelists described seemed to have a lot more interaction. When the County needs land, for example, it tries to purchase it before it goes to eminent domain condemnation, so the attorneys work together. I wonder if land use and real estate law are more likely to involve interaction between different practice areas than other substantive areas of law.
- Interdiscipliarity. As a couple of my co-bloggers have mentioned, land use is a very interdisciplinary field of legal practice. The attorneys on the panel spoke about their regular interaction with appraisers, planners, engineers, politicians, and a host of other types of professionals who are involved in decisions about land and property.
- Matt Festa
I am happy that Land Use Prof is back and I am pleased to be working with a great group of editors. I practiced and taught community development in Baltimore, Maryland for several years before moving to Las Vegas in 2000. As a converted westerner, I plan to focus on land use and community development issues that occur west of the Mississippi. I'll begin with the westward journey of the Brookings Institution.
Brookings, a public policy think tank based in Washington, DC, published "Mountain Megas: America's Newest Metropolitan Places and a Federal Partnership to Help Them Prosper" in 2008. A project of Brookings' Metropolitan Policy Program, Mountain Megas focused on the growth of the southern Intermountain West states (Arizona, Colorado, Nevada, New Mexico, and Utah) and the challenges metropolitan regions within these states face. In September 2009, Brookings continued its study of the Mountain West region with the announcement of a partnership with UNLV. This partnership, the Brookings Mountain West Initiative, will build on the Mountain Megas 2008 report and bring Brookings scholars to UNLV (and the greater Mountain West region) for further research and lectures. For a copy of the Mountain Megas report as well as more information on the Mountain West initiative, visit http://brookingsmtnwest.unlv.edu/.
While a variety of government officials and media outlets are suggesting (if not outright proclaiming) the Great Recession to officially be over, there is still a big hurdle facing land development (both residential and commercial): the shadow inventory.
The shadow inventory is the suspected large number of homes that banks have not foreclosed on but are delinquent in their payments. Now, one might wonder why would a bank not foreclose on a property when it has a right to do so.
Well, there are a variety of reasons but two main ones stick out:
1. Because so many banks packaged and sold home loans as securities (the now infamous MBS or Mortgage Backed Security), there are serious questions as to what entity actually maintains the legal right to foreclose. Indeed, several courts are now dismissing foreclosures actions for this very reason.
What ends up happening if these convoluted contracts cannot be sorted out to identify what party/parties actually "own" the right to foreclose? That will be a topic-in-waiting for continued analysis by law review authors well into the future...
2. When a bank begins foreclosure, the loan typically moves from being an asset to a liability. While this statement simplifies the situation a bit, the basic premise is that some banks are now trying to extend the delinquency period in order to avoid having to report bad loans on the liability side of their ledger. The suspicion among several industry observers is that, if all delinquent loans were foreclosed on, several banks would be underwater at Cheney-ian levels (as in "big time").
So, there appears to be a large inventory of home loans that are not being paid by the borrower but not being foreclosed by the lender. The likely expansion of this shadow inventory is suggested by recent news from Fannie Mae of a spike in loans that qualify as being seriously delinquent (read more on the report at the excellent Calculated Risk blog).
Even more concerning is that these loans are not the troubled subprime or OptionARM versions but typically conventional mortgages--you know, the ones that were supposed to be most reliable and safe from failure.
The result of all of this is that we are unlikely to see any significant or sustained increase in land development (especially residential homes) until this shadow inventory is disclosed and drawn down.
Many thanks to Joe Hodnicki for getting us started!
We're busy right now in Charleston, SC, at the Charleston School of Law working with one of the nation's oldest (and latest) preservation law, following adoption in 2008 of a new preservation ordinance. The City of Charleston has also announced the first steps in a public process to update its Comprehensive Plan. Apart from discussing the latest land use issues, one of my goals is to introduce our readers to noted land use groups in the area, one filled with unique cultural and ecological resources. Some of the most innovative include the Coastal Conservation League (www.coastalconservationleague.org), the Lowcountry Open Land Trust (www.lolt.org), and the Southern Environmental Law Center (www.southernenvironment.org). Preservation groups are increasingly active in helping shape land use law here, too: The National Trust for Historic Preservation (www.nationaltrust.org), the Preservation Society of Charleston (www.preservationsociety.org), and the Historic Charleston Foundation (www.historiccharleston.org), are all making significant contributions to the land use debate, including its content and how it's applied. And last, but not least, the Lowcountry Housing Trust (www.lowcountryhousingtrust.org) is a great resource on issues related to affordable housing. Please stay tuned for more to come. My able research assistant, William Goodman, and I are looking forward to working with all of you. Please contact me if you have questions or ideas to share.
Monday, September 28, 2009
Well, I suppose its fitting that my first Land Use Prof blog post will occur just minutes before the Land Planning and Development course that I teach here at Faulkner.
This semester, I've eliminated the textbooks and hornbooks and replaced them with a semester long simulated development project. For the project, I selected a real parcel of land in the Montgomery city limits and will have the students "develop" it from start to end (in a legal context).
I'm including a series of site visits to the parcel as well as visits to the register of deeds and planning department. I've also invited a series of non-lawyers (engineers, architects, developers, real estate agents, etc.) to participate in certain classes since land development is, by its very nature, quite interdisciplinary.
The students will, among other tasks, research deeds, draft letters of intent/real estate contracts, prepare federal, state, and local regulatory submissions, and engage in mock hearings before local land use agencies.
We're about a month or so into the course and things are going very smoothly (knock on YellaWood (TM)).
Has anyone else engaged in this type of simulated exercise while teaching a land use-type course?
If so, we'd love to hear about the good and the bad that you encountered. Any lessons learned?
I'm Jamie Baker Roskie and I'm one of the new co-editors of the Blog. As Matt Festa has already mentioned, I'm the managing attorney of the Land Use Clinic at the University of Georgia. The Clinic started in 2002, and its mission is to provide innovative legal tools and strategies to help conserve land, protect water quality, and promote the creation of communities that are responsive to human and environmental needs. Our clients are primarily local governments, community groups, and land trusts. We also work with state agencies, regional planning bodies, local government associations and affordable housing advocates.
I'll be posting about the Clinic's projects and other topics of interest. I also work with a great interdisciplinary team here at UGA, including faculty in Environmental Design, Geography, and Public Service. I hope to have some of my colleagues as guest bloggers in the future.
In the meantime, if you're interested in learning more about the Clinic, visit our website.
Sunday, September 27, 2009
The Land Use Prof Blog is Back!
We have a new team of editors on board. My co-editors can introduce themselves in more detail, and over on the left you can find links to our faculty bio pages and publications, but here are the basics on us:
Prof. Will Cook teaches at Charleston School of Law. He teaches courses in property, appellate practice, constitutional law, and historic preservation. His research focuses on historic preservation (a great topic in Charleston!).
Prof. Chad Emerson teaches at Faulkner University's Jones School of Law. He teaches and writes in the area of property, land use planning and development, and intellectual property. He has particular expertise and experience in the areas of sprawl and form-based codes such as the SmartCode.
I am at South Texas College of Law (Matthew Festa). I teach property, land use, state & local government, and wills, trusts, & estates. My research focuses on property rights, land use regulation, and legal history.
Prof. Ngai Pindell is on the faculty at UNLV's Boyd School of Law. He teaches property, land use, local government, and wills, trusts, & estates. He has academic expertise and a number of publications in the area of community economic development.
Prof. Jamie Baker Roskie is at the University of Georgia School of Law, where she is the Managing Attorney of the Land Use Clinic. Her research and projects involve a wide array of land use issues. The clinic does great work advising governments and on other real world projects.
I'm very excited about blogging with this team. We are from different parts of the country (geography is always important in land use issues!) and we have research interests over a wide spectrum of land use topics. We also thank Paul Boudreaux for starting this blog. We are mostly new to blogging, but we are committed to making this blog a daily resource for scholars, practitioners, students, and anyone who is interested in the law of land use.
Please let us know about your experiences and ideas in the exciting, interdisciplinary field that is land use law. We hope you enjoy the Land Use Prof Blog!
-- Matt Festa