Chapter 10 Land Use Controls and Property Taxes

1. Chapter 10Land Use Controls and Property Taxes “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

2. Major Topics • Origin, purpose and types of local land use controls • Uses and process of determining property taxation • Impact of property taxes on property values • American Disabilities Act • Political and economic perspectives of land use controls • Rationale and impact of subsidies to private developers • Newer environmental regulations • Federal government involvement in environmental regulation • CERCLA and the superfund • Environmental impact statement • Sustainable development and Green Design “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

3. Introduction Role of Government in Influencing Real Estate Markets The inherent stewardship of public lands, to maintain and protect these lands for both current and future generations The provision of infrastructure and public goods that benefit all local residents and visitors The land use that affect, limit or influence private property owners or tenants “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

4. Balancing Land Use Controls vs. Market Freedom “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

5. Authority and Purposes of Regulating Real Estate Use • Three primary rationales for government interference in real estate markets: • Markets are imperfect and market participants may be ignorant of facts that significantly affect their welfare • Every land use has the potential to generate externalities that may positively or negatively influence adjacent property values • Real Estate values may be enhanced with good land use planning “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

6. Zoning • Zoning is the regulation of permitted land uses, as well as minimum or maximum structures, upon geographically define contiguous districts. • Zoning limits potential land uses and often use a cumulative type hierarchy system • By grouping similar land uses together through zoning codes, there is less negative impact on other types of land uses that may be less noxious “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

7. Building Codes • Building codes are a series of standards and specifications designed to establish minimum safeguards in the erection and construction of buildings, and to protect those who live and work in them • Building codes describe in great detail the materials, methods, and techniques to be used in the construction of buildings “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

8. Building Codes: Historic Structure Rehabilitation and Preservation • In 1987, tax credits became available to encourage rehabilitation and preservation of historic real estate structures • A tax credit is more valuable than a deduction from income for the calculation of taxable income, since tax credits are dollar for dollar tax savings • A two tiered system is still in place today “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

9. Building Codes: Design Review and Aesthetic Controls • “Highway Beautification Act” under President Johnson • Consistent environmental quality - EQD Building Codes: Design Review and Aesthetic Controls • ADA requires that facilities that are generally open to the public be accessible to all members of society “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

10. Impact of Property Taxes on Property Value • Property Taxes exert a negative influence on property values because they increase the cost of ownership • Fiscal Redistribution: the mismatch of service receipt and cost support – city vs. suburbs “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

11. Public Assistance to Private Development • Local/ state governments can encourage or directly support private development through: • Property tax abatement for many years • Land buy downs • Industrial revenue financing • Tax increment financing (TIF) • Infrastructure improvements “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

12. State/ Local Level Subsidies • Use of abating local and state income taxes on the earnings of a new local employer in order to encourage a location move to an area in a given state and/ or county or city • Competition for large employers has been so strong in some urban areas, especially in areas that border two states, that governments end up in a bidding war of economic incentive packages “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

13. Environmental Land Use Regulation • Environmental activism officially began at the Federal level in 1969 with the passage of the National Environmental Policy Act • Environmental Impact Statement: the first assessment of the impact of any proposed development • Clean Air Act • Federal Water Pollution Control Act • Endangered Species Act “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

14. CERCLA the Superfund • CERCLA: Comprehensive Environmental Response, Compensation, and Liability Act of 1980 • Also referred to as the “Superfund”, it sets forth a complex regulatory scheme to identify, investigate, analyze and remediate property contaminated with hazardous waste • Who is liable: Current/ past owners, generators/ possessors and transporters of hazardous substances • CERCLA liability is strictly retroactive “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

15. CERCLA, Potential Liabilities and Site Assessment: Managing Real Estate Risks • Phase 1: To determine whether there is evidence of past or current environmental problems on the subject site • Phase 2: To test and verify the extent of the actual contamination • Phase 3: Actual action plan that usually includes remedial cleanup efforts “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

16. Preserving Wetlands • For many years, wetlands were thought to be useless mosquito infested swamps • Today we are learning that they are wondrous sources of life and diversity, with species that are crucial for a healthy environment • Wetlands help control floods, which are important ecological processes Sustainable Development and Green Design • Green design involves a more environmentally oriented approach to building design, construction and maintenance • Sustainable development plans include a more holistic approach to the environmental impact of the entire development “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

17. END “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner