One of the cornerstones of zoning is property value protection. Given how often zoning related issues come up and the ordinance gets changed, it is difficult to keep up on the situation. When proposed zoning is in play, there are some formal notices including posting a sign at the property and sending out a notice to those within a certain few hundred feet.
1. Understand why the rezoning was needed.
2. Gauge how the proposed plan (which is assumed is in the picture if rezoning is on the table) will fit into the neighborhood. Details such as the property type, unit mix, height and size all help describe the developer’s vision.
3. How often will meetings be held to discuss the project. There are some mid and larger scale projects that require a series of meetings to get feedback from the neighbors.
4. When is the project slated for construction is another useful bit of information to know in case you had planned to do something of substance at your property including selling it.
You may hear up-zoning or down-zoning. Up-zoning give the property more or something maybe more height, a higher ratio to calculate a bigger building or add more permitted uses. A down-zoning is a reduction, something meant to curb the building’s potential size or the number of allowed uses.
During my career I saw rezoning from both perspectives. In Sausalito, the city was trying to curb the number of two-unit buildings that got purchase to convert to a single-family home. So they proposed changing the zoning which would limit the size of a dwelling in some neighborhoods.
At the extreme is a major up-zoning of a property I was valuing. The 20 year-old fast-food restaurant on a busy road, just off a freeway, had experience the “lottery” moment gifted during a rezoning of an area to up-zone to a high-density mixed-use building. The zoning change meant a 15-story mixed-use building could be there rather than this 1,800 square foot restaurant with drive-through window.
So how do you play it? In the case of the up-zoning, I recommended marketing the property for sale and structuring the deal to allow for the continued use of the fast-food restaurant as an interim use.
The market for mixed-use was very hot and financing was readily available. The city clearly wanted to encourage development at this location making it attractive to a developer to pay top dollar. Sadly, the franchisor wanted to ride the wave of future richness and didn’t sell. Values fell by nearly 50% in that area and while the rezoning of the property had increased it valuation, the demand for building was gone. In times of financial distress and down cycles in real estate, selling potential is never easy.
In the case of the down-zoning, people got wind of the proposed change and took the offensive, making it clear to the city that their quiet handling of the rezoning was not appreciated. Needless to say, the zoning change was not made.
It is important to stay abreast of what’s happening in your neighborhood. Open up those letters addressed from your local planning department as you never know if you’re about to open a “lottery” ticket or something quite different.