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Butting Heads over Housing Growth … Again?

Once again Frederick’s no-growthers and pro-growthers are at odds, but ultimately market forces will prevail.

Butting Heads Over Housing Growth...Again?They’re baaaaaaaaack….

The past few election cycles have resulted in Frederick’s county commissioner administrations see-sawing between vastly opposing viewpoints on comprehensive planning.  The Jan Gardner administration continued the two-decade long tradition of implementing policies to restrain housing development with their 2010 Comprehensive Plan; Blaine Young’s administrative effectively won office by promising to unravel it.

Both camps have fierce—one could even say zealous—defenders in the Frederick community.

(It would be an interesting exercise to calculate the percentage of Letters to the Editor in the Frederick News Post during the past decade devoted to hot debate of housing development and growth planning in Frederick County.)

The rumored housing recovery, combined with the Young administration green-lighting a number of long-standing residential projects that were stricken from the 2010 Comprehensive Plan, appear to have sparked tensions between the no-growthers and the pro-growthers once again.

No-growthers are sounding alarms that Frederick County will be as congested as Montgomery County before Blaine Young leaves office; pro-growthers appear to be dismissive of concerns raised by current residents such as potential school overcrowding and financing of road infrastructure.

The development and housing construction industries in this region are not enjoying this pendulum swing any more than Frederick County voters are.  The best and brightest developers and builders investing and operating within this region favor a far more predictable political climate.

Frederick County’s fractious land planning battles may be scaring away the very experts most qualified to creatively and effectively resolve the county’s impending housing shortage without harming the quality of life we treasure here.  Frederick’s next administration and new county executive will have their work cut out to gain back the confidence of, and mend fences between, county residents and the development community.

Wherever you fall between the extremes in this debate, it’s important to remember one thing:  the free market is driving the train.  Local government control of the pace of regional housing development—in one direction or another—is an illusion at best.

Frederick County Maryland Housing Permit Forecast Chart_2013-2030 MacRo Ltd.

Regardless of how many new residences are approved and stuffed in a development pipeline, they won’t be built and sold until there are people who want them and can afford to buy them.

Despite how tightly a comprehensive plan is locked down to constrain new housing supply, if the housing market continues to eek its way back from the pits of recession, real estate values will climb and pressure to grow will increase.

To that end, many who reside on the “Nay” side of the the growth debate often forget Frederick County is part of a vibrant metropolitan region that despite periodic economic downturns has always faced the pressures of growth.

Let us not forget, it was the O’Malley Administration (not necessarily known as a promoter of growth) that mandated a target of 36,000 new housing units to be achieved in Frederick County by 2030.  And it was the Gardner Board of County Commissioners that adopted a Comprehensive Plan they claimed would meet that goal.

The problem was that the very restrictive housing policies (i.e., the APFO test for schools to name one) nearly made that goal impossible.  This of course is one of the primary reasons that there was a flood of housing project annexations into the city back in those days, which continued into the Young Administration.

For the record, the nearly 17,000 units of housing currently in the Frederick City & County residential pipeline are less than half of what is needed to meet the State of Maryland’s projections for Frederick’s population growth during the next 20-odd years.

In a previous post about multi-family development in Frederick County, we took a stab at how the residential absorption rate may play out in Frederick County up to 2030.

Figure 1 (click to enlarge) makes several assumptions … or maybe better known as SWAG’s:

  1. The local economy will continue to trend in a positive direction but with a market correction in the early 2020′s.
  2. The process of gaining federal, state and local government development approvals will continue to slow the overall project start times.
  3. Housing development project financiers will remain cautious in lending practices, and while projects may receive government approvals, land development and housing construction starts will be much less speculative than in the first decade of the 21st century.
  4. High land and development costs of current and future projects will prevent builders from flooding the market with inexpensive housing—the margins just aren’t there.

The SWAG scenario shown in Figure 1 projects a total of 29,500 new home building permits to be issued between 2011 and 2030.  Even in this scenario, much of the growth is back-ended into 2027 through 2030, and yet the chart misses the 2010 Comprehensive Plan targets by about 18%, but considering the severity of the recession that’s not a surprise.

Put another way, that plan called for an average of 1,800 residential building permits to be issues each year.  Under the chart in Figure 1, between the years of 2011 and 2026 the permits average 1,300 units.  Over the full 30 years the average only reached 1,471.

With all that stated (and assumed) it is interesting to note in this projection that the current approved pipeline of nearly 17,000 homes will not be absorbed by the market before 2022 … but this is by no means a glimpse into a crystal ball.  There are many other factors that could impact these projections (for better or for worse, depending upon your perspective): deepening recession in Europe, effects of government spending cuts on this region, and continued labor shortages in the construction industry to name just a few.

Another critical element that many forget is that while market forces of supply and demand play a key role in the absorption of units, once approved, it can still take years before the necessary infrastructure is in place before the first house is sold to the end user.

No matter what lies ahead for our economy, and our community, one thing is for certain—market forces will not be contained.  The laws of supply and demand will ultimately dictate how quickly Frederick County grows.

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The authors: Rocky Mackintosh is President of MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He also writes for  Kathy Krach is a commercial sales and leasing agent with MacRo.

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