Real estate development is a profession that has an undeniable allure. Aside from the fact that some of the richest people in the country, including figures like Donald Bren, the Pritzker family and, yes, even Donald Trump have been primarily real estate developers, there is a certain built-in status enhancement that comes with being even a small-time real estate developer that simply isn’t seen in other fields.
Real estate developers are able to point to their completed works as tangible and highly visible additions to the community. Additionally, in the best real estate development projects, everyone walks away a big winner. Few things can be more exciting than buying or renting a highly desirable new home or an upscale office building or storefront. And the developers themselves can have six-figure paydays even on the smallest projects while the banks and investors that were brought in also make handsome returns. When everything goes off without a hitch, there are few careers that are more rewarding and inspiring than being involved in the completion of communally important real estate development projects.
But there’s an untold side.
Still, there is an untold side to real estate development that many people may not consider when thinking about getting involved in the industry. The biggest threats to any real estate development involve the risk of not being able to complete the project for one reason or another. And the most prominent threat to a project getting flat-out scrapped tends to be impediments thrown up by the government, local, state and federal.
In the blog linked above, a real estate developer managed to get all the way to the verge of sending in construction crews to start digging on the site, only to be stymied by an “entitlement issue”. This is a shockingly common issue for real estate developers. And although the blogger is careful not to mention exactly what the nature of the issue was, there is little doubt that it had to do with mandatory low-cost housing units being placed in the new development. It is likely that the local zoning commission had a quota to fill for low-cost housing units, usually tied to their city’s ability to get federal funding, and the developer-in-question’s project came up as the unlucky loser that would be required to shoehorn these units in. Unfortunately, for residential projects above a certain caliber, including Section 8 housing, zoning is a deal killer.
As a matter of practicality, this is a problem that is far likelier to occur in decades-long Democrat-ruled cities, such as Detroit, Chicago, Newark or St. Louis.