Negotiation or Schedule-Based?

Abstract

Problem, research strategy, and findings: Local governments can secure valuable public benefits from private real estate development through negotiations or schedule-based exaction programs. Nevertheless, few studies have empirically examined their relative strengths and weaknesses. In this study I compare the experiences of two major U.S. cities, Boston (MA)—where exactions are heavily negotiated—and Seattle (WA)—where public benefits are secured through statutory exaction programs with pre-established schedules. I analyze the entitlement processes of large-scale projects approved in 2016 in each city and show that both approaches have their own strengths and weaknesses. Boston was able to extract substantial public benefit packages, but uncertainty was high, and projects were subject to inconsistent decision making at times. By contrast, Seattle’s schedule-based approach was found to be fair and certain while yielding moderate public benefit packages. Despite the commonly held belief that negotiating land uses on a project-by-project basis is associated with significant process delays and a lack of transparency, the case of Boston offers a different perspective. Boston’s projects were approved in a shorter time frame and were subjected to more public meetings per project than Seattle’s.

Takeaway for practice: U.S. local governments are likely to rely on both negotiations and schedules to extract public benefits from real estate developments. Though schedule-based exaction programs ensure overall fairness and certainty of the entitlement process, project-by-project negotiation could potentially yield significant public benefits. However, uncertainty can be high in a negotiation-heavy system, which may disadvantage small-scale developers. Moreover, negotiations may open up room for poor and inconsistent decision making, which must be mitigated by establishing clear policies and standards to guide the negotiation process. Both negotiation and schedule-based processes can be designed to ensure a transparent process with multiple public participation opportunities.

Keywords:

• community benefits
• land use exactions
• large-scale developments
• negotiated zoning
• public benefits

Supplemental Material

Supplemental data for this article can be accessed on the publisher’s website.

NOTES

Notes

1 Fifty thousand square feet is the cutoff Boston uses to distinguish large and small projects.

2 Cap rate is a measure used to evaluate real estate investment opportunities. Cap rates can be computed in two different ways, but as used here it is the ratio between the net operating income of income-generating properties divided by their market transaction prices.

3 I conducted 13 interviews (nine city officials and four developers) in Boston and 10 interviews (six city officials and four developers) in Seattle. I attended four community meetings, three IAG meetings, and three public hearings in Boston and one early design guidance meeting and one design recommendation meeting in Seattle.

4 Affordable units created with direct monetary public subsidy, in part or full, are not included in the tabulation. Seattle also has a program called the Multifamily Tax Exemption, which exempts property taxes in exchange for affordable housing. These units are not included because the affordability restriction applies only during the lifetime of the tax exemption and developers only participate when the tax benefits outweigh the costs.

5 Affordable housing set-aside percentages and the dollar amount for monetary contribution differ greatly by zones. Projects that are 65 ft tall or shorter are required to provide onsite affordable housing.

6 If the project was located in downtown Boston, the developer would need to contribute $380,000 per unit for 18% of 177 units (32 units).

7 Additional floor area can be gained by purchasing development rights from properties located in King, Pierce, or Snohomish counties (City of Seattle, 2015).

Additional information

Notes on contributors

Minjee Kim

MINJEE KIM ([email protected]) is an assistant professor of land use planning and real estate development in the Florida State University’s Department of Urban and Regional Planning.