In 2002 – 2007, the run-up years before the real estate recession, land developers were buying well-located acreage for the purpose of developing vacant lot subdivisions. This was a costly and time-consuming process that took between one and two years to complete and required planning, engineering, platting, all the while working closely with local municipalities to satisfy the many subdivision laws and requirements.
Only when all the studies were done and approvals were received could a developer then start construction of the physical improvements, e.g. the roads, curbs, utilities, gates, sidewalks, and amenities to be included. Rules and regulations pertaining to living in and building in the area were developed. These were known as the neighborhood Covenants, Conditions, and Restrictions, or CC&R’S.
In many cases, a further set of building-specific rules were developed called Design Guidelines. The property had to be submitted to the Arizona Department of Real Estate and what is known as a public report had to be issued. This is a consumer-oriented document which provides full disclosure of all the issues that a prudent buyer would need to make an informed decision about whether to buy a lot in the subdivision. It outlined information about the developer, available utilities, school districts, neighborhood amenities, projected real estate taxes, addressed soils and hydrology issues, and provided any known title issues as well.
By 2006, developers were starting to see the first signs of a market slowdown, and the cautious and most astute ones stopped the development process before starting construction of the subdivision’s roads and improvements.
However, in many cases, all the municipal requirements had been met, engineering had been done, lots had been designed, the subdivision had been named, and the plat had been fully approved and recorded.
All of this happened, but because of the impending recession, the lots never came to market. These properties are referred to as “paper plats,” referring to all the paperwork being finished, but existing on paper only and remaining unimproved. I’ve heard various estimates of how many of these custom, “paper lots” exist, and I would estimate the number to be in the 1000+ range.
As I’ve referred to in recent blog posts, the Tucson real estate market is making a robust and steady comeback, particularly in the new construction and single family home resale markets (which typically trend 1-2 years ahead of the land market). As I’ve noted, custom builders are beginning to buy again lots on which to build spec homes. As you can imagine, as the market continues to expand, we will need a supply of new custom lots to meet the needs of the expanding buyer pool. And that’s when these dormant projects will be resurrected, dusted off and finally built.
If the market continues to expand, as I expect it will, developers will soon take advantage of these existing “paper plats” and buy them up. In doing so, they will be able to bring new lots to market in a fraction of the time and at significantly reduced costs versus starting the development process from the beginning. Efficiencies will be reached.
In so many aspects of our society, we’ve seen how items or trends of the past, over time, become the latest and most desirable aspects of our current lives. What’s old becomes new. The same can be said for vacant land.
