Opposition to density grows as developers rush to meet demand
A wave of opposition to dense development is blocking approvals for new multi-family projects in DFW, with some companies choosing to avoid areas altogether amid growing backlash.
“It’s a big deal for us,” said Kip Sowden, president and CEO of RREAF Holdings, a multifamily developer with projects across Texas. “When we choose a site to develop, we have to believe and know that we will get through the eligibility process and get the density that makes sense to grow.”
Rental demand has skyrocketed at DFW as the job market expands and home prices soar. According to CBRE, the Metroplex added more than 200,000 new jobs year over year in November. Multifamily occupancy peaked in the fourth quarter of 2021 at an all-time high of 97.1%, signaling strong demand. Still, the number of new units added to the market was down from the prior quarter and the prior year.
There are many reasons why the market is struggling to keep pace – the cost of building materials and supply chain cramps still pose significant hurdles – but members of the development community say the sentiment anti-apartment by some residents and elected officials is partly to blame.
“This is one of the toughest challenges we face as developers,” said Tim Harris, vice president of multifamily development for Rosewood Development Co.
DFW isn’t the only major metro area struggling with this problem. Projects that include thousands of multi-family units in Washington, DC, have been riddled with appeals by small groups of local activists and federally appointed judges, in some cases delaying projects for several years. A new member of the New York City Planning Commission announced that she would not support the rezoning of two dense projects on one of Brooklyn’s busiest thoroughfares – a promise she kept during her first term week, according to The Real Deal.
Harris said he’s no stranger to the difficulties that sometimes come with getting buy-in for a new multi-family development. His company is responsible for Heritage Creekside, a 156-acre mixed-use project in Plano licensed for 1,300 multi-family units. Harris said Rosewood made several concessions to appease nearby residents, including building retail businesses before there were enough residents to justify the investment.
“It was really important for the neighborhood that we had restaurants,” he said. “[We decided we would] do it first, even though it may not have been the wisest decision in business. »
The Harris team worked hand-in-hand with neighbors and city officials to make Heritage Creekside a success. Getting community support early in the process is key to getting development past the finish line of the eligibility process, said Christina Day, Plano’s city planning director.
“You can’t put the genie back in the bottle,” she said. “You only get one chance to make a good first impression on your project, so it’s extremely important that people hear about your project from you. If they hear about it from someone else, you’ve lost control of the narrative.
Opposition to a mixed-use project on Plano’s largest undeveloped tract late last year illustrates some of what developers are facing. The project, approved in December, includes up to 700 multi-family units, 427 retirement units and 90 townhouses, and received 534 letters, including 391 in opposition, 142 in favor and one neutral.
“I want to ask them to look at a different legacy…the legacy of giving houses backyards and tree-covered lanes…to bring back the suburban nature of this area, to bring back the family nature of it where you have the pride of ownership, where you have neighbors and children playing in the garden and parents know they are safe,” resident Lydia Ortega said at the time.I don’t think it’s necessary to add more [apartments] right now. We are now almost 50% apartments. We need to restore our single-family homes.
This sentiment was widespread, but not universal, with residents like Dana Walters expressing that they were offended by the idea of multi-family tenants harming the community.
“I suggest that with all the immigration and businesses moving here and all the people coming here and the shortage of homes, maybe we should provide more options, not less,” Walters said. “Not everyone wants or is ready to buy a home now, but maybe they should be able to afford and deserve a nice place to live.”
Courtesy of the City of Plano
At a Plano City Council meeting in December, a man spoke out against a new mixed-use development that could include up to 700 multi-family units.
A major overhaul of Plano’s overall plan was approved in November. The document is essentially a roadmap dictating the future of development in Plano, including what types of housing he would like to see built and where. Day said staff have pledged to strictly adhere to the future land use map, which prevents new multi-family buildings from being built near neighborhoods.
“People want to understand what they’re getting and have some idea of their destiny,” she said. “It shouldn’t be so open that people don’t know what’s going to happen in the future because it’s frankly scary.”
Less than 5% of the land remains undeveloped in Plano, and Day herself admits the extraordinary price of land makes density a much more profitable option for developers. Given these realities, Plano’s overall plan calls for the share of single-family homes in the city to decline over the next 30 years – from 64% today to 58% on the low end or 60% on the high end. range.
Day said it’s too early to tell if the plan makes it harder for developers to get a zoning change in the city. So far, Plano, like the rest of DFW, remains a popular destination for multifamily investments.
“There’s still a lot of money to be made,” she said.
One thing that could dampen the momentum is rising building material costs, which RREAF’s Sowden says have risen by 150-200% in some cases. The headboards needed to cover these costs have increased in parallel.
“Therefore, density matters,” he said. “It’s important to choose places where you know city officials want the product you’re building.”
In an effort to make their projects more palatable, some developers are opting for mixed use rather than traditional multifamily, said Mark Allen, senior vice president of Multifamily Services Group at Colliers. Some areas are more conducive to projects that generate sales tax revenue, he said.
“Cities as a whole need to be more malleable in terms of rethinking their zoning,” he said. “We get a person to move to DFW once every three to five minutes, so [multifamily development] is somehow inevitable. If one particular municipality doesn’t go, then the next one will.
Angela Hunt, land use and zoning attorney at Munsch Hardt Kopf & Harr and a former member of the Dallas City Council, said campaign platforms focused on opposing dense development have become increasingly more effective, especially in some northern suburbs of Dallas, where populations have increased. rapidly in recent years.
“It’s a balance, because on the one hand elected officials want to effectively represent their constituencies, and their constituencies may be opposed to multifamily development,” she said. “We’re seeing that more and more, and I think that’s a direct result of tremendous growth in North Texas.”
Dallas suburbs that have grown rapidly in recent years are seeing a rise in anti-apartment sentiment.
Because of these hurdles, some multi-family developers are sticking to permitted areas for dense development to avoid the rezoning process altogether, Hunt said.
“[The debate over multifamily] definitely has a chilling effect on site selection,” she said.
Harris said anti-density sentiments didn’t deter Rosewood from proposing a project in any particular city. However, if a compromise can’t be reached, Harris said Rosewood isn’t afraid to cut its losses and move on.
“If we feel like everyone’s been heard and there’s no win-win, that’s kind of when we fold our cards,” he said.
For cities completely opposed to density, Allen said there are other ways to offer rentals to residents. Build-to-let communities, made up of homes built specifically for long-term leases, are becoming increasingly popular in Texas. Other innovations in the rental space include concepts such as The Guild, a technology platform that partners with properties to offer a combination of rental arrangements, including short-term stays and short-term rentals. long term.
“The number of business moves to the DFW area is staggering, and these people are going to need options to live there, so I think we’re filling a real need,” said Brian Carrico, CEO and co-founder of The Guild.
In January, The Guild announced its acquisition of CREA Management, the property management division of Cypress Real Estate Advisors. This move added thousands of units to The Guild’s portfolio; many of them are in DFW. Building owners who partner with the company have more options for how to use their space, which Carrico says makes the underwriting process easier and helps make a deal work.
“There are fewer and fewer places to rent,” he said. “You’ve got that combined with a market like DFW where more and more people are moving, and that’s not changing. So we try to be part of the solution.
Providing a healthy mix of housing options is key to fighting affordability, Harris said. The lack of multifamily supply is driving up rents, with CBRE reporting a 4% increase between the third and fourth quarters of 2021.
“We are in the midst of a housing crisis, exemplified by huge increases in apartment rents and house sale prices,” Harris said. “It is very important that DFW does not lose its competitive edge in housing affordability and that we continue to expand and improve our housing stock.”
Anti-density sentiment has not deterred investors from pouring money into DFW. The Metroplex led the nation in multifamily investment last year, with nearly $28 billion in total sales, according to CBRE. Allen said he doesn’t see it slowing down anytime soon.
“We have a lot of job drivers, population migration and capital migration because people love our [lack of] state income tax and that we are pro-business,” he said. “They’re not going to stop coming, and it’s just going to keep compressing cap rates.”