The Case For Incremental Development: Micro Strategies as Part of the Urban Development Toolkit
Real estate investors of smaller profiles who invest in micro projects are becoming neighborhood game-changers. New solutions in technology, financing, and development policy are providing an assist. OpportunitySpace, for example, is an online real estate marketplace that helps cities and towns across America transform distressed properties into vital assets by match-making public inventory with investors, civic organizations, and residents who have good ideas for how to mobilize difficult properties. Why the focus on these smaller players?
Despite the renewed interest in urban living, many cities and towns across America continue to wrangle with disinvested neighborhoods dotted with blighted property and neglected real estate assets. Even the marquis “gateway” cities contain challenged areas. The typical fix is to await a large employer or first-moving real estate developer to take on all the risk for these communities and be the driver for follow-on change.
Traditional sledgehammer approaches to economic development and reinvestment rely largely on tax subsidies and grants to lure a major employer or developer away from it’s existing home or target area, respectively – a zero-sum game. This takes years to arrange, involves precarious negotiations, and results in harm not only to the community the employer exits, but also potentially to the new destination locality as well.
It’s time for a change. Lighter, faster, less expensive.
What about smaller, incremental development that is associated with a single residential property, a small-balance commercial asset, or a handful of assembled sites? Unlike some typical approaches to economic development, this reinvestment strategy involves surgical injections at smaller scales, engaging numerous local, regional, and even national developers of varying backgrounds. It leverages their sweat equity, capital, networks, and creativity. In aggregate, this form of micro development can have very significant impacts. Look at the Wynwood Walls in Miami, undertaken by Primary Flight and Goldman Properties. A risky vision of a neighborhood built around a well-curated street art gallery (i.e., spray painted walls) spurred the rise of rents for comparable apartments from $650 in 2006 to $3,500 in 2013. The University of Chicago’s Place Lab and its activist developer-artist, Theaster Gates, are working to expand this theory of creative, adaptive community development to kick-start revitalization.
Until recently, there were few solutions that support this method of transformation and the entrepreneurial, frequently first-time developers who make it happen. However, emergent technologies, innovations in development financing, and even smarter land use and zoning policies offer support. OpportunitySpace, and CoUrbanize serve as tools for developers to better explore development/investment-grade properties and manage development risk in the entitlement and project approval process – leveling the playing field for them to engage in the market. RealtyShares provides unique crowd-financing for smaller value-added development and property revitalization. The flexibility of FHA 203-k loans make cash for tough rehabilitations more accessible, as demonstrated by Dekonti Mends-Cole, who led much of the revitalization support in Detroit. Land Banks and adaptive zoning enable fast-tracked projects – distressed land acquisitions take less time and the permitting allows for updated and highly distinct end uses that fit the needs of modern cities.
In urban redevelopment and reinvestment, it’s the hour of the smaller player.