The Real Cost of Delays
Just yesterday I had the following discussion with my civil engineer regarding a proposed $35mm workforce housing development to be financed with tax-exempt bonds – a typical day in the life of a developer:
Engineer: “The city wants us to obtain an easement for this 6-square foot piece of private ground to install these offsite stormwater improvements.”
Me: “Ok. But it’s a public improvement, why should I be the one to obtain the easement? That neighbor will likely ignore me. After all, I’m a for-profit developer intending to build apartments near his single family home.”
Engineer: “The city will step in only after you have made an attempt to obtain the easement, but failed.”
Me: “Ok. What will it cost and how much time will it take? Will it hold up my permits? I cannot close on my bond financing without them.”
Engineer: “The easement will probably cost about $2,000. Really not much at all. The city will issue your permits prior to obtaining the easement, but won’t let you begin construction until the easement is obtained. It’ll probably take 6 months to obtain the easement.”
Me: “What you described isn’t a $2,000 problem, it’s a $1,052,000 problem.”
Engineer: “How’s that?”
Me: “At closing, $35 million will get funded into a Trustee account earning 6% (or more) annual interest. Our construction start will get pushed back 6 months which will cost us $1,050,000 in interest, plus the $2,000 to acquire the easement. Does the city not understand the time value of money?”
Engineer: “Wow. I had no idea.”
From the piece:
“First and foremost, local officials should take a hard look at their internal regulatory and permitting requirements. In real-estate development, time is money. Regulatory and permitting processes often unnecessarily add to this burden.”
A link to the piece is found here
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About the Author
Jeff Carroll is a trusted leader in workforce and affordable housing who has spent his career building communities that balance efficiency, affordability, and long term stability. He leads Allen & Associates Consulting and helped launch the Workforce Housing Development Corporation, guiding projects that use innovative construction methods and mission aligned financing. With thousands of consulting assignments completed nationwide and degrees from Clemson and Harvard, Jeff brings deep technical insight and steady strategic vision to every project he supports.
This post highlights the grand opening of Buchanan’s Crossing, a fully accessible mixed income community serving veterans and seniors in Kansas City, Kansas. Project sponsors, city leaders, lenders, investors, future residents, and the construction team gathered to celebrate the completion of the first phase. The development will ultimately include forty two and three bedroom duplex units and required a major off site sanitary sewer improvement, including a one hundred forty four foot bridge that supports utilities for the project and future growth in the area. Jeff Carroll and Bob Hughes addressed attendees before the ribbon cutting and walk through, marking an important milestone for the community.