Brownfields offer developers hope
as housing options dissipate

Commentary by Daniel Johnson
and Joseph Kesling

Is it possible for developers to provide affordable housing, clean up the environment and still make money?
    With an open mind, some risk and a lot of cooperation between the public and private sectors, brownfields redevelopment might be the missing link to solving these seemingly disparate endeavors.
    Brownfields are abandoned or underused commercial or industrial properties that usually have some environmental contamination. Redeveloping these neglected sites is becoming one of the most feasible ways to provide more housing, create a better environment and generate good profits for those who make it happen.
    The private and public sectors share an increasingly crucial problem: the shortage of developable land and continuing urban sprawl. Adaptive reuse of inner-city brownfields offers opportunities to reverse this trend.
    For developers, land must be accessible, conveniently located and properly zoned — or have a reasonable probability of being rezoned — and supplied with necessary public services, such as utilities and transportation. For the public sector, a new development should generate public revenue in excess of public costs, improve the surrounding environment and provide an appropriate mix of commercial real estate and housing for all income levels. Infill areas often fit all these criteria, becoming perfect candidates for redevelopment projects.
   Public-private partnerships are key to successful transformations. The private sector brings development expertise and equity capital to the table and expects an above-average, risk-adjusted rate of return for undertaking these projects. The public sector brings zoning and density variances or other concessions, and often can waive certain regulatory and compliance costs.
    In San Diego, the private and public sectors have teamed up to remediate a full city block of brownfields in the University Heights area. The property, formerly occupied by a McDonald’s restaurant, a gasoline station, a car dealership and, most recently, a state Department of Transportation right-of-way, has been transformed into an office building and affordable housing.
    The redevelopment could not have been possible without the partnership between San Diego’s Redevelopment Agency and a number of community stakeholders, including the San Diego Revitalization Corp., private environmental consulting companies and the San Diego County Department of Environmental Health.
    The challenge in these types of projects is that they require highly specialized expertise to determine a property’s value both before and after the remediation so its owners are aware of how much they need to invest in the project to make a profit.
    At the same time, developers must determine how to mitigate environmental concerns and risk and calculate their costs. Many times, addressing environmental concerns as part of the construction, versus a stand-alone remediation project, can accomplish this.
    Many developers find that the rewards outweigh the additional efforts of dealing with the environmental concerns in these projects. Municipal governments need to work with these riskadapted developers while the demand for residential developments continues to grow. Otherwise they must face the continued loss of developable land from brownfields abandonment.