Mortgages & Creative Financing

Planned Unit Developments: A Primer for Real Estate Investors

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planned urban developments

My last two articles on land use regulations focused on zoning and subdivision regulations.  In this article I want to discuss something that is sort of a hybrid between the two and is becoming much more frequently used, the planned unit development or PUD.

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Zoning and subdivision regulations by their very nature are rigid and unbending.  You can either do something or you can’t.  There is no in between.  You can either have apartments on a parcel of land or you cannot.  You can mix land uses or you cannot.  You can build narrow streets and use alleys or you cannot.  Development under these types of standards tends to be very uniform and in my opinion, down right dull.  They stifle creativity and innovation.  Just look at most suburban developments over the past 50 years built utilizing these rules; sometimes you can’t even tell what city you are in as they all look the same.

Planned Unit Developments: Killing Uniformity and Bringing Creativity

Planned Unit Developments attempt to relieve some of this rigidity and allow some creativity and flexibility in the development process.  PUDs often allow one to bypass the traditional zoning and subdivision regulations and vary things such as land uses, lot sizes, street setbacks, building placement, street widths, almost anything that the zoning and subdivision regulations regulate.  All of this can be very good.

Getting Approval for a PUD

The process for getting a PUD approved is often very similar to the process for getting a rezoning or plat approved.  A plan is drawn up to required standards showing proposed lots, streets, utilities, setbacks, etc.  Conditions are outlined describing the uses that will be allowed in the PUD along with other details.  A public hearing is held before the local governing body and if approved the PUD is recorded much like a plat is recorded in the local register’s office.

Sounds great right? Yes, but there is a catch. Zoning and subdivision regulations, while rigid are at least straightforward. If you propose something that conforms to the zoning rules, a permit must be granted. It is not quite that way with PUDs. PUDs will allow you much flexibility, but they also open you up to negotiation with the jurisdiction and with local interest groups like neighborhood associations. Since PUDs often require legislative approval, it also opens you up to the political process. Because of these two factors more and more jurisdictions are funneling projects towards the PUD process rather than using the straight zoning and subdivision process.

The Downside of the Planned Unit Development Approval Process

The negotiation process with Planned Unit Developments can be easy, or it can sap any benefit of doing a PUD.  For example, say you want to allow a particular land use in your development. The local government could come back and say they will allow that use with some landscaping.  Say that you want to have smaller lot sizes.  The government may say ok as long as you include more dedicated park space and a walking trail or ball fields.  Say you want to include some apartments as a part of you plan.  The local government may allow it if you dedicate a site for a new school.  See what I mean.  The benefits of doing a PUD can be quickly lost if the local government requires too much in return.

Plus politics being what it is, politics can quickly stifle what is an otherwise reasonable development plan.  If the neighborhood is firmly opposed to what you are doing for example, and come out in force to the public hearing to oppose you, forget about your plans.

So while PUDs can offer many advantages, there can also be some serious downsides. How big those advantages and downsides are will depend on your local jurisdiction, the PUD rules and which way the political winds are currently blowing. I have seen a PUD rejected just to return some time later with slight tweaks after an election and get approved. Plus, if your plans do not quite work out as you think they might (What plan ever does?) and you need to change a couple of things you have to go back through the whole process again.

If you are contemplating any type of development or redevelopment and the jurisdiction suggests the PUD process as a way to make things happen, think carefully and seek very competent advice on the approval process and the political climate.  You may just want to skip it all together and go with the rigid rather than the flexible.

Till next time, happy investing.

Photo: STV Incorporated

Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in ...
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    Dale Osborn
    Replied almost 8 years ago
    Govt has its place, but when it gets in the way for silly little things, there needs to be another alternative to seek a way around the roadblock to approval. Dale
    Kevin Perk
    Replied almost 8 years ago
    Dale, Sometimes the roadblocks are by design. It all depends on the jurisdiction and the local politics. One can always go to the courts, but who has the time and money for that? Thanks for reading and commenting, Kevin