Zoning Issues
New Orleans’ new Comprehensive Zoning Ordinance could stand some adjustments.
In advance of the Sixth Annual Economic and Real Estate Forecast Symposium on October 11, Biz New Orleans spoke with two members of the board of directors of the Commercial Investment Division (CID) of the New Orleans Metropolitan Association of Realtors, President Paul Richard and Director Snappy Jacobs, about their opinions on New Orleans’ Comprehensive Zoning Ordinance.
The conflict between city planning and commerce is nothing new. In 1916, New York City adopted the first citywide zoning regulation as a direct reaction to the construction of the Equitable Building, one of the country’s first skyscrapers. When it was completed in 1915, it was the largest office building in the world in terms of floor space — boasting 1.2 million square feet on a plot of less than 1 acre. The building was created without setbacks.
While many lauded the building as a miraculous structure that was good for commerce and New York City’s future, not all were thrilled. Neighbors complained about blocked ventilation, increased traffic, strains on the local transit facilities, and potential difficulties for firemen. And worst of all for many in the neighborhood, it created a shadow that stretched almost a fifth of a mile, cutting off direct sunlight to many of Broadway’s buildings.
As a result, surrounding property owners, claiming a loss of rental income due to the new building, filed for a reduction in the assessed valuations of their properties. The result was the landmark 1916 Building Zone Resolution, a 12-page ordinance that established three districts — or zones — wherein certain uses were allowed and others prohibited. Today, all major cities, with the exception of Houston, have a comprehensive zoning ordinance or CZO.
The Long Road to New Orleans’ CZO
In the wake of Hurricane Katrina’s devastation, New Orleans began efforts to pass a new CZO — something that had not been done since 1970.
“The old ordinance was a product of the ’70s,” says Richard. “It had more of a suburban feel to it.”
According to a 2015 report by the Data Center, an independent resource for Southeast Louisiana, the CZO had been amended so many times that it was full of inconsistencies. It was also heavily influenced by political cronyism. The last effort at a comprehensive revision of the zoning ordinance resulted in a 2002 draft that was not adopted.
“The long-term CZO is a good thing for the city. It takes into account the texture of neighborhoods and the demographics and moves us towards sustainability, but it’s not without some problems.” – Paul Richard
After Katrina, with so many infrastructures, homes and businesses destroyed, many believed it was critical to start the process again. According to the city’s website, “The resulting ordinance will give clear direction and a higher level of predictability to all users of the ordinance — from neighborhood residents to developers.”
The New Orleans City Planning Commission, a nine-member citizen board appointed by the mayor and approved by the City Council to provide analysis and recommendations to the City Council on matters dealing with the present and future development of the city, was integral in creating the new CZO. In accordance with the goals and policies of the city’s Master Plan for the 21st Century following Hurricane Katrina, the commission and New Orleans’ citizens crafted the ordinance, guided along the way by community meetings, professional guidance, and the consulting services of Goody Clancy & Associates.
The process took 10 years, ending on May 14, 2015 in a 10-hour City Council meeting that included many last-minute amendments. The new CZO went into effect on Aug. 12, 2015.
“The first five years were spent primarily in the recovery planning phase, and the second five years were spent dealing with complexities and conflicts of the comprehensive zoning process,” states the 2015 Data Center report. “The challenges were made more daunting by the fact that before the storm, the city lacked a history of strong traditional urban planning practices. As a result, most processes had to be constructed from scratch.”
The city’s Plan for the 21st Century, commonly referred to as the master plan, is designed to take New Orleans through the year 2030 and is primarily focused on recovery from the effects of Hurricane Katrina and the subsequent failures of the levee systems, but the plan also addresses the city’s long-term future.
“…it’s costing too much and taking too long to create new projects.” – Paul Richard
Additionally, the master plan and the CZO endeavor to incorporate best practices from city plans from around the United States in terms of transparency, reliability and due process. The city states that the “new plan prepares the city for future disasters, adapts to a changing natural environment, creates flexible and reliable systems and invests in economic development.”
The current CZO has a wide reach and is very comprehensive — with recommendations on every major aspect of the city, including culture, tourism, transportation and economic development.
“The long-term CZO is a good thing for the city,” says Paul Richard, a member of NAI Latter & Blum’s Commercial and Investment Real Estate Division and president of the Commercial Investment Division (CID) of the New Orleans Metropolitan Association of Realtors. “It takes into account the texture of neighborhoods and the demographics and moves us towards sustainability, but it’s not without some problems.”
Zoning Challenges Impeding Growth
The master plan and CZO affect every citizen in some way but perhaps have their biggest impact on the commercial real estate community. The CZO includes lists of permitted land uses for each of the city’s zoning districts, in addition to height limits, setback requirements, urban design standards and operational rules.
“The biggest challenge is that to conform to the CZO becomes a time issue,” says Richard. “Because of all the regulations and the time it takes to go from acquisition to occupancy, it’s costing too much and taking too long to create new projects.”
Some feel that these impediments to development are causing other parishes to get all the new business.
LEFT: Following Hurricane Katrina, it was determined that a new comprehensive zoning ordinance would help “give clear direction and a higher level of predictability to all users of the ordinance — from neighborhood residents to developers.” RIGHT: New Orleans’ limited inventory is forcing prices up on all properties and projects, causing some to say the answer lies in building up, not out. Photo Thinkstock
“Right now much of the big commercial developments for retail are leaving or moving into Jefferson Parish,” says Snappy Jacobs, CCIM Real Estate Management. “It’s costing more and more to do business in New Orleans. And we want new businesses and developments here because they create jobs and generate sales taxes. We don’t want that business to go to other parishes.”
Both Jacobs and Richard believe that because of the current CZO, sellers are reluctant to provide the time and money required to complete the process. This is causing a trend where developers, brokers and investors are trying a different tactic.
“We are going about it backwards now because we are looking for the zoning rather than using the best location for new retail developments,” says Jacobs.
Both say that many in their field believe it is getting harder and harder to find good locations.
Base Floor Elevation
Issues with base floor elevation (BFE) — included in the CZO — are also impeding developers. FEMA defines BFE as “the computed elevation to which floodwater is anticipated to rise during the base flood.” The relationship between the BFE and a structure’s elevation determines the flood insurance premium.
“Right now much of the big commercial developments for retail are leaving or moving into Jefferson Parish.” – Snappy Jacobs
Richard says he knows there are certainly benefits to these standards, but says conforming to them adds huge hidden costs to many projects. He says to determine a BFE a state-licensed surveyor, architect or engineer completes and issues an elevation certificate. Depending on the location and the complexity of the job, the cost of a surveyor can vary from $500 to $2,000 or more.
“Because of all the extra steps with legal, engineering and such, Jacobs says that estimating BFE creates extra work, which signals to some a bad investment.
Limited Inventory
The other challenge, the men say, is that New Orleans’ limited inventory is forcing the prices up on all properties and projects. Many in CID believe the only way to create more density and more business is to build up, which Richard and Jacobs say many neighborhood associations oppose.
“This is a dense city,” says Jacobs. “There’s 4 miles between the river and the lake. That’s a very little space with a whole lot going on. But here’s the thing — that density is what developers are looking for because the more people in the area, the more the potential that they’ll shop at your retail outlets.”
So What’s the Answer?
“As a city we have to achieve some level of balance with the CZO and how it regulates development,” says Richard. “There must be a better balance to address the needs of the developers with the needs of the neighborhoods.
This isn’t just a New Orleans dilemma. According to the website Community Builders, developers and commercial real estate agents across the country are plagued by zoning rules that seem to be increasingly misaligned with what consumers and business owners want.
“This is a dense city. But here’s the thing — that density is what developers are looking for because the more people in the area, the more the potential that they’ll shop at your retail outlets.” – Snappy Jacobs
In a 2007 article published in the University of Pittsburgh Law Review, Eliza Hall makes a concise argument identifying the real-world impacts of conventional zoning:
“Conventional zoning adversely impacts the economy in several ways: by distorting the real estate market; imposing massive infrastructure costs and associated tax increases; increasing the cost of housing and transportation; and reducing the ability of lower-income people—which includes, of course, not only those we normally think of as ‘the poor’ but also many artists and budding entrepreneurs—to find work or create self-employment. Conventional zoning distorts the real estate market in so many ways that it manages to simultaneously conflict with conservative, libertarian, and liberal values.”
Jacobs believes that the strides New Orleans has made in our city plan post-Katrina are certainly going in the right direction, but he thinks the CZO still needs more clarity.
“I think we can agree that it’s hard to make a one-size-fits-all ordinance and keep a framework that isn’t completely Draconian,” says Richard. “The CZO needs to be a dynamic document. It would be good as we begin to phase in all these new changes if there could be a more transitional process that eases us into the change. We are hoping we can find a way to balance the CZO, one that exhilarates the process and decreases the friction that it takes to move projects forward and, most importantly, helps keep development in Orleans Parish.”
