The Basics of Land Zoning
It’s essential to understand the basics of land zoning before investing, as zoning challenges are among the most time-consuming and frustrating regulatory hurdles a developer or owner might face. Land zoning types and land-use restrictions significantly impact what you can do with your own land and how you can develop it.
In this detailed guide, we focus on everything to know about land zoning and understanding how this crucial concept directly influences how owners might use a land parcel.
What is Land Zoning?
Land zoning refers to the dividing of land into different zones or districts. Each zone has specific regulations and restrictions on how the land can be used. Local government authorities typically determine a plot’s potential zoning to ensure that the land is used compatibly with its surrounding environment and neighboring properties.
By dividing land into sections, local authorities can shape the layouts of cities and towns to determine what landowners can build and where. The specific zoning can vary from one jurisdiction to another, but common examples include residential, commercial, industrial, agricultural, and mixed-use zoning.
How zoning laws are created
City planners consult the municipality’s master plan to determine current and future development needs and goals. These departments consider local infrastructure and stakeholder needs for transportation, economic growth,, and the residents and businesses making up the community.
One of the main factors city planners consider is the local government’s land use policies and regulations. Each jurisdiction has its own set of rules and guidelines that dictate how land can be used and developed. These policies are typically outlined in zoning ordinances or codes. They may include restrictions on building height, setbacks, lot sizes, and permitted uses for different zones. Understanding these policies is crucial for investors and brokers to navigate the zoning process effectively.
Land zoning decisions consider surrounding land uses and the community’s overall vision. For instance, residential areas are often distanced from industrial or commercial zones to prevent conflicts and promote residents’ quality of life. Existing uses of land also influence zoning decisions for new developments.
Environmental considerations significantly impact zoning processes. Some zoning designations may protect areas with sensitive ecosystems, natural resources, or those prone to flooding. Regulations may dictate setbacks from wetlands, restrict development on steep slopes, or mandate environmental assessments for specific projects.
Public input is another crucial factor in zoning resolution. Local governments often seek residents’ opinions on prospective zoning projects through public hearings, community meetings, and comment periods. This feedback shapes zoning decisions and future development. Investors and brokers must align their projects with the community’s vision and goals, considering their preferences and concerns.
After the land is analyzed, lawmakers enact zoning ordinances to put the master plan into action, specifying the land use of specific blocks and individual lots.
Understanding land zoning codes
Governments use alphanumeric codes to identify allowed land uses in a specific geographic area. A typical land zoning code list might contain:
- R for residential
- C for commercial
- I for industrial
- A for agricultural
These letters are typically combined with other letters or numbers to specify the level of density, such as required acreage or allowable square footage for a particular property:
- Residential zoning:
- Single-family residential (SFR)
- Suburban homesteads (SH)
- Home-based businesses
- Duplexes and triplexes
- Small and large apartment buildings
- Mobile home parks
- Commercial zoning:
- Large multifamily communities
- Retail storefronts and shopping centers
- Office buildings and office parks
- Restaurants and nightclubs
- Industrial zoning:
- Storage facilities
- Distribution centers
- Data centers
- Agricultural zoning:
- Farm and ranch land
- Suburban farms with a minimum lot size
- Type of agricultural operation
- Restrictions on non-farm use
It’s important to understand that zoning code classifications aren’t universal from one city to the next. For example, the type of commercial property developed with C-1 zoning in Miami could significantly differ from what is allowed under Phoenix’s C-1 zoning.
Different Types of Land Use
Land zoning and land use are two different things. Zoning is the tool governments use to regulate land, while land use is how the residents and businesses adapt the land to suit their specific needs.How land is used can vary from one submarket to the next, and often within a given submarket. A multi-story building may be classified predominantly for office use while allowing service retail on the lower floors and residential condominiums or apartments on the upper floors.
Some common types of land use:
- Recreational includes parks, and open spaces such as athletic fields and swimming pools. Cities use this land to improve the quality of life and attract permanent residents and visitors.
- Transportation includes roads, airports, train and subway stations, and mixed-use transportation-oriented developments (TOD) that combine transport with commercial and residential uses.
- Agriculture, such as ranches and farms, is used for the growing and harvesting of food sources.
- Residential includes all housing types, with restrictions on building and lot size, overall density, and location of amenities and schools.
- Commercial use land is designed for businesses and infrastructures critical to the local community’s economy.
The Importance of Land Zoning in Commercial Real Estate
Understanding land zoning is crucial for anyone investing in or brokering commercial real estate. At the most basic level, it determines what structures and businesses can be established on a piece of land. However, the implications of land zoning extend far beyond that.
One’s profit potential is directly tied to land zoning. For instance, a parcel zoned for commercial use could yield higher returns than the same parcel zoned for residential use. Evaluating the zoning of a land parcel is a critical first step in assessing its investment potential.
Future urban development also hinges on land zoning, as codes can manipulate how a city or town evolves. They influence where commerce can thrive, which areas will remain residential, what city sections can accommodate recreational activities, and so on. Zzoning adds a layer of predictability that can give investors a sense of the area’s prospects for future growth and development.
A piece of land’s current zoning designation doesn’t always have to be its future. In many instances, the owners of property can petition their local government to change the zoning classification of their property. This process, known as rezoning, can unlock previously unrecognized potential and significantly boost the land’s value.
Creative usage of land zoning
The strategic and creative use of land zoning offers owners a pathway to increase the property’s usage potential and, thus, improve its value. It could involve mixed-use zoning, adaptive reuse of historic structures, or even transforming a residential property into a commercial one.
|Mixed-use Zoning||Areas where commercial and residential properties can coexist||Living spaces above retail shops, combination of home and office, etc.|
|Adaptive Reuse||Modernizing an older building for a completely different purpose than for what it was initially built||Transforming an old factory into a tech hub, a historic home into a restaurant, etc.|
|Rezoning||Changing the classification of a piece of land to allow for different usage||Turning a residential house into a bed and breakfast, rezoning farmland for a supermarket, etc.|
Local land-use laws
As a real estate investor, your plans must conform with the local land zoning laws and regulations to maximize the return on your investment.
- Restrictive covenants add additional restrictions or prohibit specific uses, such as changing the exterior appearance of a property or restricting a liquor store within a certain distance of a school.
- Easements designate a portion of private property for public use, such as utilities or wildlife preservation.
- Environmental regulations may require certain industrial building types and land uses to have additional inspections, permits, and hearings from local, state, and federal agencies.
Commercial zoning reports
A commercial zoning report provides a snapshot of the zoning conditions of a property and is an integral part of the due diligence process when buying commercial real estate:
- Current zoning classification
- Basic property information such as parcel number and current and prior uses
- Setback and parking requirements
- Height and floor measurements
- Notice of variances related to special permits and conditions
- Notice of outstanding code violations such as zoning, fire, and building
Common zoning disputes
Zoning disputes can occur between private parties (like two investors owning adjacent properties) or between the property owner or tenant and the local government. The most common zoning disputes in commercial real estate include:
- Building height potentially creating safety or aesthetic issues
- Parking lot issues and traffic flow patterns disrupting nearby businesses and residents
- Setback requirements mandating the minimum distance a building can be located from a property line
- Signs too large or placed too close to the road, which can create a messy appearance and potential safety hazard to automobiles and pedestrians
A zoning variance or special use permit are two ways land investors can permanently or temporarily change land zoning.
While there’s no guarantee of success, investors can increase their chances of getting the zoning changed by demonstrating that the change or variance is in the public interest. For example, a developer seeking to repurpose an old retail shopping center into a mixed-use project with a residential component may help the community meet a demand for affordable housing.
There are plenty of opportunities in buying and developing land, provided you understand how to navigate the rules of land zoning and land use laws. Although it may require a little more work, understanding the basics of land zoning can maximize the value of your investment by creating the highest and best use.
The Bottom Line
Understanding land zoning and its potential creative applications is key to unlocking the opportunities lying hidden in plain view in the world of commercial real estate. Grasping the nuances of different zoning codes and how to use or transform them to one’s advantage can create lucrative ROI for those willing to get creative.