While many people think zoning is just for commercial properties it may be surprising to learn the overwhelming majority of people visiting, calling and emailing city planners are homeowners and homebuyers. People learn quickly they’ll need to get their zoning approved in order to get a building permit. The experience is not the same for everyone. Why? Zoning – like properties – is highly unique.
Zoning originally started to separate factories from homes and apartments. It expanded to include how big a building can be when mid-rise buildings in New York City started to “overwhelm” and block sunlight. Today, each municipality has its own specially designed set of rules to guide the community.
Here are ways zoning can influence your buyer or seller’s bottom line and how you can help them find the best deal to meet their needs.
1. Potential square footage and height can mean future profits
Knowing the zoning means being able to identify potential add-on opportunities. This can be square footage added on by building out or by building up. Add your know-how about construction costs and you have great information to help your buyer see the value beyond a tough negotiation. For many buyers, just knowing there is potential for adding square footage suggests inherent value in the property and is a great selling point.
2. Is the existing use the best?
The use of a property may or may not be optimal for the location. An example might be a 100-year old home that is zoned for either a single-family home or two-family (duplex). The market may prefer a duplex because there is more demand relative to a house. Converting single family to a duplex will require some work (such as adding a second kitchen and entry), but maximizing the type of use can be a way that zoning knowledge can lead to financial rewards.
3. Neighboring properties
Look for consistency when reviewing the zoning map. This is why people ask about the zoning next door. They don’t want to find out too late that the zoning allows for the vacant lot to become a use they don’t want to have next door. Regarding property values, people buying a single-family home want privacy. A four-story office building next door might be less attractive to a prospective a homebuyer, but could really appeal to an investor buyer.
4. Special designations
Local zoning rules can add special designations to the regular zoning to retain something from the past, promote a future vision, or create solutions to thwart disaster issues like wild fire and floods. When a property has a special designation, it sends a property value signal. Dig deeper to find out what is the driving principle behind it and then assess the property through that new piece of information. For example, a designation for “historic” exists to prevent changes to a property. Getting involved with a property with zoning restrictions that don’t match expectations is something to avoid.
Let’s bring this all together by looking at the zoning rules for a fictitious single-family property. Its marketing language suggests from the start that the historic zoning designation is something to investigate further. It is described as “A cottage with large lot and potential for expansion in the town’s coveted historic district. Bring your imagination and maybe your contractor as this property needs work!”
What can we tell from this?
- The home size likely has expansion potential, but how much? Use the zoning rules to estimate how much square footage is allowed.
- The description includes “historic district” which means – from a zoning perspective – more scrutiny to get approvals but a likely solid investment since these areas are appreciated for their dedication to preservation and limiting change.
- Look to see what uses are allowed at that location. A single-family cottage may be perfect or adding a second structure may be the way to go. This could be have income potential or allow for a detached office for the cottage to use.
Property rights are a key component of intrinsic property value. Savvy real estate agents who dig into local zoning rules will have a competitive edge because they will have a deeper understanding of what defines a property’s potential. This helps them to solve problems and negotiate from a position of strength.