Question

Discuss the challenges South Florida will face as the urban infill trend becomes a reality focusing on two of the major planning opportunities - economic development and affordable housing.

Answer 1

1. Environmental Contamination

In case of Brownfields, sites with real or perceived environmental contamination, can present another barrier to infill development. Many types of uses, including gas stations, dry cleaners, and industrial facilities, can

leave behind environmental contaminants after operations end. Environmental contamination might

require mitigation before it would be safe for new occupants. Even the perception or possibility of

contamination can discourage some developers from acquiring these properties because of unknown

costs and additional time that could be required for cleanup.

However, the risks of contamination are often factored into sale prices, so developers willing to work on

Florida can find opportunities to acquire bargain properties. Studies have shown that potential

contamination and associated liability for cleanup lowers property values.However, the property value discount can be much greater than the costs of remediation.

2. Capital Costs
Infill development can require a higher upfront capital investment that can be a barrier for developers.
Potentially higher costs are associated with:
• Demolition. Many infill projects require demolition of existing structures before new
construction can occur.
• Design. Infill development is built to be seen from the sidewalk, at a closer range and slower
pace, so buyers and tenants often expect more expensive design, façades, and finishes than are
used in projects set back from the road in areas with little pedestrian activity.
• Construction. Infill development, frequently consisting of multistory buildings on smaller lots, is
more expensive to construct than the one- or two-story wood-frame construction more typical
of development in outlying areas. Buildings over four stories tall require steel or reinforced
concrete construction systems, which are significantly more expensive than wood framing.

These higher upfront costs mean that infill projects often have lower internal rates of return than
other types of development in the first years after construction. However, infill housing that is
integrated into the existing urban fabric can command a price premium over development that involves
creating a large number of units on contiguous parcels with newly designed roads, parking, and open
space. In addition, infill projects typically achieve higher returns over longer investment periods
compared to projects in previously undeveloped areas because of higher rent and sale prices.

3. Financing

Financing challenges are tied to the level of risk associated with infill projects. Investors can perceive

mixed-use projects to be inherently risky primarily because of their complexity. This complexity means

each project is unique, developers must be more skilled, and predicting demand is more challenging.

In addition, phasing and financing need to match market cycles, but the markets for residential,

commercial, and retail do not necessarily move together. Investors frequently finance one use at a time,

and mixed-use projects therefore often require multiple financing sources.Another challenge of financing infill development is that financial models used by banks can act as a barrier to securing capital investment. Most models assume that higher-income communities can better support new development. Infill development in cities and older suburbs that have experienced neglect

and disinvestment can thus be more difficult to finance. Such areas are often more likely to have brownfield sites, which can face additional financing challenges. For brownfield sites, lenders can have higher underwriting costs associated with evaluating site conditions, require higher rates of return, require developers to contribute more equity,and be reluctant to accept the underlying real estate as collateral.

4. Regulatory Approval Process
Infill development can be challenging in cities with regulations that separate land uses and have
requirements for parking and street width that were developed for spread-out suburban areas rather than city and town neighborhoods. Developers must get approval to deviate from zoning codes, a
process that can be lengthy and add uncertainty and cost to the development process.

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