EQUITY IN AGRICULTURE: PRESERVING THE VALUE OF DELAWARE'S RURAL LANDS
Equity in Agriculture • Resources • Commentary • Myths and Misconceptions • Frequently Asked QuestionsMyths and Misconceptions about the Delaware Sprawl Prevention Act
The Delaware Sprawl Prevention Act has raised many questions regarding land use, property rights, economic impacts, equity, and takings. The following section details a range of important issues of interest to Delawareans, and how the Sprawl Prevention Act has been crafted to address them. We call these issues "Myths and Misconceptions" because our research has demonstrated that the Act will be a compliment to the equity inherent in rural lands.
- Myth: The four acre minimum lot size proposed by the Delaware Sprawl Prevention Act is a radical, untested idea.
Fact: The Delaware Sprawl Prevention Act is modeled after programs that have been successfully implemented in other areas of the country, including many nearby jurisdictions. The median, minimum lot size requirements for the 9 Maryland counties on the Delmarva Peninsula is 10 acres, and the Sprawl Prevention Act is actually less drastic than seven of the Maryland counties on Delmarva that have minimum lot size requirements between five and twenty acres. - Myth: The Delaware Sprawl Prevention Act is a "taking" of private property as described in the both the United States and the Delaware Constitutions.
Fact: The Delaware Sprawl Prevention Act is not a taking of private property because it won't bring about a physical taking, or confiscation of property, nor will it result in a regulatory taking, whereby land is left without any economically viable use. The Delaware Sprawl Prevention Act assures that equity inherent in rural areas is preserved and enhanced. - Myth: The Delaware Sprawl Prevention Act will devalue all rural lands.
fact: Recent studies have shown that protected agricultural and rural lands are not uniformly affected in a negative way as a result of their protected state. Furthermore, there is evidence showing that in many instances their values are actually increased because of their protected state. - Myth: the Delaware Sprawl Prevention Act becomes law, farmers will lose all of their options for how to use their land.
Fact: Rural land owners have far more land use options available to them than residential land owners d. The Delaware Sprawl Prevention Act will not change that. In addition to crop farming possibilities, rural land owners can become involved in the equine industry, the poultry industry, agricultural commercial, industrial and tourism uses, along with various residential development options. Furthermore, rural land owners can take advantage of federal, state, local and private equity transfer options. - Myth: Farmers' ability to get loans to operate their farms will be effected if the Delaware Sprawl Prevention Act becomes law.
Fact: Lenders' primary concern when issuing loans is the probability that the loan will be repaid on time. Lenders give the most weight to the potential debtor's reputation to repay a loan, and ability to repay a loan through annual farm income. The Delaware Sprawl Prevention Act will not affect either and thus is unlikely to affect most farmers' ability to get loans. - Myth: Farmers will not have any retirement options if the Delaware Sprawl Prevention Act passes.
Fact: Many farmers have relied upon their land as their retirement savings, and eagerly anticipate selling to developers for what appears to be the highest price. However, there are many innovative retirement options available to farmers that take advantage of well known equity transfer programs, estate planning practices, and the increased value and equity inherent in valuable, protected rural lands. - Myth: The Delaware Sprawl Prevention Act will negatively affect the real estate market because there will not be enough available land left for residential growth.
Fact: The Delaware Sprawl Prevention Act should not negatively affect the real estate market because there will be enough available land left for residential growth. - Myth: There will not be severe impacts and job losses in the construction trades if the Delaware Sprawl Prevention Act passes.
Fact: The success of the construction trades in Delaware depends on the number of people who want to purchase homes in Delaware. The Delaware Sprawl Prevention Act will not have a negative impact on the number of people who want to live in Delaware, and subsequently will not adversely affect the construction trades, resulting in job losses. - Myth: The provision of affordable housing will not be seriously impacted by the Delaware Sprawl Prevention Act.
Fact: Affordable housing is an issue throughout Delaware. Affordable housing isn't currently being built outside the growth zone and shouldn't be built there because of the disadvantage residents would have by living so far from community services. Affordable housing is a challenge that is being met by local, state, and federal agencies, as well as the private sector. - Myth: The Delaware Sprawl Prevention Act will not limit people's choices regarding where to live, and what lifestyle to lead.
Fact: The Sprawl Prevention Act does not prohibit residential uses in rural areas of the State. The act seeks to limit large scale suburban subdivisions, but will not affect traditional rural residential housing options. Those who choose to live in a rural setting will still have the option to do so. In fact, the Sprawl Prevention Act will ensure to those making that choice that the rural landscape will be preserved. - Myth: The minimum four acre lots proposed by the Delaware Sprawl Prevention Act should not encourage "large lot sprawl" throughout the rural areas.
Fact: Delaware is threatened by a new wave of population growth and housing demand. The current pattern of land development involves national builders constructing large subdivisions with hundreds or even thousands of homes on relatively small lots ranging from 10,000 square feet to 1 acre. Despite the fact that developers are currently permitted to build large lot developments under local ordinances, few if any choose to do so. Experience with similar regulations in New Castle County and many Counties on the Eastern Shore indicates that the Sprawl Prevention Act should not result in any significant increase in large lot subdivisions. - Myth: The State Government is only interested in regulating rural lands, and is doing nothing to help rural landowners maintain and enhance equity.
Fact: The State has long had a proactive approach to protecting our rural lands, and the Delaware Sprawl Prevention Act will not change that. The State has invested a significant amount of tax money into a nationally acclaimed farmland preservation program and an open space program. Both programs will continue. In addition, the State has worked through the Office of State Planning Coordination to develop innovative programs at both the State and County levels to ensure that rural landowners have many options to either enhance or transfer their equity depending on their needs.
Is this an untested idea?
While the proposed four-acre lot size minimum may seem like a drastic change to some Delawareans, The Delaware Sprawl Prevention Act is not a new concept or a radical idea. Versions of this approach have been successfully implemented in many other parts of the country, from New Jersey, Pennsylvania and Maryland to California, Oregon and Hawaii.
Zoning, land use, and environmental regulations that restrict large scale suburban development have been shown to preserve and enhance agricultural viability by preventing fragmentation of farmland and encroachment by incompatible land uses such as housing. Studies have indicated that protecting rural uses can actually increase the value of those areas by increasing the certainty that traditional rural land uses can continue.
In fact, many Maryland Counties on the Eastern Shore adjacent to Delaware have enacted stricter regulations than we are proposing under the Sprawl Prevention Act. Depending on individual zoning districts, these counties typically have minimum lot size requirements in agricultural areas well in excess of the four acres proposed by the Sprawl Prevention Act. Wicomico County requires a minimum of 15 acres. Dorchester, Talbot, and Caroline require a minimum of 20 acres. Kent County, Maryland requires as much as 30 acre minimums in some situations. Even New Castle County's land use regulations are more restrictive, requiring a minimum of five acres to construct a house in the rural area that is not currently planned for sewer service.
Sources:
Rogers, S.J.T. et al. (2003, December). Downzoning: Does it Protect Working Landscapes and Maintain Equity for the Landowner? Retrieved March 2005, from Maryland Center for Agro-Ecology, Inc.
Somerset County. Phone conversation with staff members. June-July, 2004.
Wicomico County. (2005). Zoning Code: County Regulations Wicomico County, Maryland. Retrieved June
2005, from www.wicomicocounty.org
Worcester County. (2005). Code of Public Local Laws Worcester County, Maryland, v11. Retrieved June
2005, from www.co.worcester.md.us
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Is this a "taking?"
A "taking" of private property occurs when a government entity seizes, without just compensation, the private property of a citizen. There are two general types of takings that have been defined through case law by the United States Supreme Court. The first type is a physical taking, where a government agency either takes possession of an owner's land, or gives another party permission to intrude on the property. The Delaware Sprawl Prevention Act will do neither, and thus cannot be considered a physical taking. (Cordes, M.W. (1999). Takings, Fairness, and Farmland Preservation. Ohio State Law Journal, 60, 1033. Retrieved June 2005, from the University of Delaware electronic journals.)
The second type of taking occurs "where the regulation denies all economically beneficial or productive use of the land." (Ibid.) This category is often referred to as a regulatory taking. (Schwartz, A.W. (2004). Reciprocity of advantage: the antidote to the antidemocratic trend in regulatory takings. UCLA Journal of Environmental Law & Policy, 22, 76. Retrieved June 2005, from the University of Delaware electronic journals.) Mark Cordes, professor of law at Northern Illinois University College of Law, explained that "the primary focus is not on what is lost in terms of potential profit, but what remains in terms of possible use. As long as there is a reasonable ability to generate a livelihood, there is economic viability." (Op.Cit., Cordes.) The Delaware Sprawl Prevention Act will not eliminate all productive use of the land affected by the Act (see Myth 4) and thus will not bring about a regulatory taking of land.
Penn Central Transportation Company v. City of New York (1978) is a landmark Supreme Court case that demonstrates this concept. In the Penn Central case, the owners of Grand Central Station in New York City sued when the City denied them permission to construct a 50 story tower at the site of the historic station. The City denied the permit due to the historic nature of Grand Central Station, and this decision was based on a comprehensive landmark preservation law. The owners argued that the City had "taken" the property without just compensation. At issue was the perceived "right" of the property owner to exploit the air space above the station for speculative profit. The court decided on behalf of the City, noting that the owners still had a reasonable economic return from their investment (a bustling transportation hub), and that being denied the ability to make speculative profits from a hypothetical office tower did not constitute a taking. (Penn Central Transp. Co. v. City of New York, 438 U.S. 104 (1978).)
Palazzolo v. Rhode Island (2001) is a more recent Supreme Court case that demonstrates the same concept. Mr. Palazzolo owned a waterfront parcel in Rhode Island consisting mostly of tidal wetlands, but including a small portion of uplands. He sued the State when he was denied permits to bulkhead and fill the wetlands in order to construct a 74 unit housing development. Palazzolo's appraiser estimated that the value of the 74 unit subdivision was $3.15 million. He argued that the State had "taken" his right to build the housing development, and demanded compensation based upon the appraiser's estimate of the subdivision's value. The Supreme Court found that there was no taking and Mr. Palazzolo was not due to receive "just compensation" for his speculative subdivision. Although the majority of the parcel consisted of undevelopable wetlands, the court found that the small upland portion retained "significant development value," demonstrating that Palazzolo had a viable economic use for the parcel. The parties all agreed that the value of the upland portion was about $200,000 if developed. (Palazzolo v. Rhode Island, 533 U. S. 606 (2001).)
While the Delaware Sprawl Prevention Act places limits on certain wastewater permits for residential development, the Act is not a physical taking or a regulatory taking and does not conflict with private property rights. There are a wide range of economically viable agricultural, ag-industrial, ag-commercial, residential, recreational, and open space land uses which are currently available to rural land owners, and the Sprawl Prevention Act will not alter those rights.
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Will the Act devalue all rural lands?
Perhaps the biggest myths about the Delaware Sprawl Prevention Act is that it will lead to an automatic reduction in the value of all farmland involved. While this has been a common concern by many people, two recent studies in Maryland have shown that there's no proof to this misconception.
In one study about the affect of farmland preservation on agricultural values, the authors Cynthia Nickerson and Lori Lynch were surprised by the results, stating, "Contrary to our expectations, we find little statistical evidence that voluntary, permanent preservation programs significantly decrease the price of farmland in Maryland." (Lynch, L. & Nickerson, C. (2001). The Effect of Farmland Preservation Programs on Farmland Prices. American Journal of Agricultural Economics, 83, 341+. Retrieved February 2005, from the University of Delaware electronic journals.) Another study by the Maryland Center for Agro-Ecology, Inc. concluded that there was no evidence that lowering potential development density had a uniformly negative impact on all farms affected by the action. (Op. cit., Rogers.)
An intriguing part of the Maryland Center for Agro-Ecology, Inc. study is that they found evidence that farmland preservation programs have actually increased agricultural land values. The report cites Ann Arundel County as an example, where development rights increased by approximately 66%, partly due to the demand for "farmettes." (Ibid.)
A study published by Richard Barrow and David Henneberry also concluded that reducing potential development density does increase farmland values in many instances. Their study shows that the end result of a zoning ordinance on land values depends on the specific characteristics of each land parcel. Of the land studied for their report, they found that 90% of farms larger than 35 acres and at least 10 miles from a large city showed increases in value due to agricultural zoning. (Barrows, R.L. & Henneberry, D.M. (1990). Capitalization of Exclusive Agricultural Zoning into Farmland Prices. Land Economics, 66, 249-257. Retrieved February 2005, from the University of Delaware electronic journals.)
The Sprawl Prevention Act would provide long-term protection to farmland from encroaching development, thus reducing a farmer's uncertainty about the future. A farm that is not only protected, but surrounded by other protected farms is desirable because it gives farmers the assurance that they will be able to farm indefinitely into the future without the threat of encroaching development that could eventually force them to relocate their farm. The Sprawl Prevention Act will not devalue all rural lands and there's evidence and reason to believe it will increase rural land values in many instances.
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Will farmers lose their options?
Rural land owners have many profitable uses available to them that will not be negatively affected by the Delaware Sprawl Prevention Act. Furthermore, the Act will actually help preserve profitable land use options for farmers by protecting them from being forced out by development.
One of the most valuable options available to rural land owners is farming. The total value of agricultural output for Delaware in 2003 was $859.1 million and the net farm income for the state was $155.7 million. The average gross income per farm over this same period was $373,521 and the average net income per farm was $67,695. (Op. cit., Delaware Agriculture Statistics.) Protecting rural land through the Delaware Sprawl Prevention Act will help Delaware's agriculture industry remain strong, supporting our overall economy and preserving farmland for the younger generation who seek to farm the land in the future.
There are many profitable agricultural options available to farmers aside from traditional crop farming. The News Journal recently published an article explaining how new technology is making chicken houses more profitable than in the past, enabling poultry farmers to earn a net income of $14,000 per chicken house. (Tadesse, L. (2005, June 19). Delmarva's poultry farms go high-tech. News Journal, p. E7.) With such a relatively high profit margin, more rural land owners are turning to poultry farming to diversify their farming operations, making Delaware the 8th highest poultry producing state in the country. (Ibid.) Last year alone, Delaware poultry farmers produced 270.7 million chickens that had a value of $686 million. (Editor. (2005, June 21). Corrections. News Journal. p. A2.)
Another rural land use that is becoming increasingly popular in Delaware is the Equine Industry. A report by the Delaware Department of Agriculture estimated there were about 27,415 acres of land in the State of Delaware devoted to equine-related activities. This report estimated that the average acre of land, including infrastructure, devoted to equine uses in Delaware was worth approximately $20,427. (Delaware Equine Industry. (2004). The State of Delaware.)
Agricultural industrial uses are an additional land use option available to rural land owners. The Perdue AgriRecycle plant near Laurel is one example. This facility converts poultry manure into commercially viable fertilizer pellets that are sold across the county. This plant takes a potentially harmful waste product from one of our largest industries, and transforms it into a profitable consumer product. The Pictsweet vegetable processing facility in Bridgeville is an example of an agricultural industrial facility that supports the agricultural industry by providing a venue to transform crops grown by Delaware farmers into commercially marketable consumer products. The Delaware Sprawl Prevention Act will guard the industries currently in Delaware from intruding growth that could eventually crowd them out of business, while creating protected land that will help attract future ag-industrial and ag-commercial businesses. (State of Delaware. (2005). Agritourism. Retrieved June 2005, from www.state.de.us/deptagri/agritour)
Agritourism businesses, which combine tourism and agriculture, provide a valuable option to rural land owners. The Delaware Department of Agriculture lists numerous different types of agritourism businesses that are currently found throughout the state. These businesses include petting zoos, "pick your own crop" farms, hay rides, farm tours, and more.
Under the Delaware Sprawl Prevention Act, land owners will still have residential development options for lots that are four acres or larger in size. In Anne Arundel County Maryland, land values were preserved and in many instances increased by large lot requirements, partly due to the demand for farmettes near urban areas. (Op. cit., Rogers.) It isn't unreasonable to speculate that in the future a similar demand will arise in Delaware.
In addition to the other land use options, rural land owners can participate in numerous equity transfer options available through federal, state, and private agencies. Delaware has invested over almost $90 million in preserving farmland since the Delaware Agricultural Lands Preservation Program was adopted in 1991. (Op. cit., Farmland Preservation in Delaware.) Kent and New Castle Counties offer Transfer of Development Rights programs which allow rural landowners to sell their development rights to homebuilders who want to build more densely in designated growth zones or towns. Private organizations, such as The Nature Conservancy and Delaware Wildlands, provide a variety of services and resources to rural land owners to aid them in preserving sensitive natural areas and wildlife habitat.
Rural land owners have far more land use options than residential land owners, and these options will not be taken by the Delaware Sprawl Prevention Act, but will be preserved and enhanced for the future.
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Will the Act affect a farmer's ability to get loans?
Farmers need to be able to get loans to finance farming operations and some people are concerned that the Sprawl Prevention Act will reduce a farmer's ability to obtain loans. While this is a legitimate concern, economic experts (Goldshore, L. & Wolf, M. (2002, October). Stopping the sprawl: desire for farmland
preservation leads to 10-acre zoning, claims of confiscation of affected farmers and landowners. New Jersey Law Journal, 170, pp. S-1. Retrieved March 2005, from the University of Delaware electronic journals.) and university research (Coughlin, R.E. (1984, May). The Effects of Agricultural Zoning on the Ability of Farmers to Borrow Money. (Research Report No. 8) Philadelphia, PA: University of Pennsylvania Department of City and Regional Planning.) have shown that there is no proof that reducing development potential has a negative effect on a farmer's ability to get loans.
A study conducted by the University of Pennsylvania explains that banks lend money based primarily on the individual's character and reputation to repay debts on time. The second most important factor is a farmer's ability to repay the borrowed money from farm cash flow. The last consideration for a bank is collateral. Banks may consider physical assets and established values for real estate (i.e. the value of a farm as a farm). The speculative value of the real estate (i.e. the value of the farm as some other use, such as housing) may also be considered but it is important to note that actual collateral will carry more weight than speculative collateral. Recent interviews with bankers from Georgia, Maryland, and Pennsylvania confirm that a borrower's reputation and cash flow are more important than collateral when lenders issue a loan. (Maryland Banker, phone interview, July 19, 2005. Pennsylvania Banker, phone interview, July 19, 2005. Southern Georgia Banker, phone interview, July 19, 2005.)
When a borrower cannot meet their financial obligations, the bank will foreclose and assume possession of the collateral. However, as the study explains, "Lenders want to be paid back, not be in the real estate business." (Op. cit, Coughlin.) Since banks want their money back, and not collateral, the study concludes that while collateral is always considered, "it is generally a secondary consideration in the context of the other two factors." (Ibid.)
The Delaware Sprawl Prevention Act will have no effect on a borrower's character and reputation for repaying loans. It won't negatively affect the viability and potential for a farmer to profit from farming his land. As we have described in Myth 4, the Act may actually make agricultural land more viable and more productive. Since the Act will not affect the two primary criteria lenders use to evaluate loans, the Delaware Sprawl Prevention Act will not restrict the majority of farmers' ability to get loans.
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Will the Act affect a farmer's retirement?
Farming is a very difficult occupation, especially for family farmers. Because most farmers are independent small business people they do not have the advantage of financial benefits such as employer-sponsored health insurance, retirement plans, pensions, and 401k plans. Many farmers are so busy with their work that they never have time to think much farther ahead than the next planting season, harvest, or loan payment. Their land, which provides them with their livelihood, is also considered to be their retirement savings account. And this land only grows more valuable with each passing year, assuring farmers a comfortable nest egg when and if they decide to sell at retirement.
That nest egg has potentially gotten much larger in recent years as the trend has shifted from selling farms as farms to selling farmland for its development potential. There seems to be no shortage of realtors and developers willing to pay very high per-acre prices for farmland based on the expectation that they will be able to make an even higher return by building residential subdivisions on the land. Some farmers eagerly anticipate the day when they too can sell to developers. Many in the farming community have gone so far as to contend that the Delaware Sprawl Prevention Act will ruin all possible retirement options for farmers by making their land "worthless" to developers.
There is tremendous equity inherent in rural lands, especially in high quality farmland with modern improvements. In fact, a recent report from the United States Department of Agriculture (USDA) identified Delaware farmland as the fifth most valuable, per acre, in the nation. Only Rhode Island, Massachusetts, Connecticut and New Jersey had average farmland values that exceed Delaware's. Since 2004, the USDA report shows that Delaware's agricultural lands increased in value 40 percent to an average of $8,400 per acre. This percentage increase was among the highest recorded in the nation. (Land Values and Cash Rents 2005 Summary. (2005, August). United States Department of Agriculture.) Far from being "worthless" without development value, the UDSA report underscores the point that farmland in Delaware is a valuable commodity that is likely to increase in value as time goes on. The Delaware Sprawl Prevention Act will only serve to enhance that value by protecting rural lands from encroaching suburban development (see Myth 3).
The value inherent in farmlands and other rural lands is sure to provide a valuable nest egg for farmers who plan on selling their land at retirement, regardless of whether it is sold as farmland or for residential development. Some would argue that since developers will pay a much higher price than other farmers, it will be better to sell to the developers. Although conventional wisdom suggests that more money is always better, there are many other estate planning considerations that should be evaluated when any individual is planning for retirement.
Lottery winners face a dilemma similar to the farmer: is it better to accept the full cash payout in one lump sum, or is it better to take the annuity? Although many lottery winners find it difficult to turn down a cash payout, smart money managers almost always recommend the annuity as the more sound financial choice. In choosing the annuity, the lottery winner avoids paying half of their winnings in taxes almost immediately, secures a reliable stream of income that will last for many years, and almost always retains a much higher percentage of the winnings over the life of the annuity.
Farmers may choose to sell at a higher price to developers at retirement. They are then responsible for taxes on the sale. Since they have sold their land and likely their primary residence, they must use a portion of the remainder to acquire another residence or retirement property. Then they must plan very wisely for their remaining years. Without their land, they have no potential source of income to pay for annual expenses and health care costs as they age. Spending too much of their windfall on a new residence, travel, or other items may leave them cash-strapped as heath care costs increase in their later years.
Innovative retirement options exist to help farmers make the most of the value inherent in their land as farmland, allowing them to retire in comfort and security. Rather than selling to a developer, the farmer could sell his development rights to the State via the Agricultural Lands Preservation Foundation, or to developers through a county level Transfer of Development Rights (TDR) program. They could also choose to sell development rights or portions of their property with sensitive natural resources to the State's open space program, or sell or transfer sensitive lands to private conservation organizations for tax benefits and preservation. This initial sale and / or land transfer would provide cash to serve as a nest egg and tax benefits allowing the farmer to begin retirement. Yet under this option, the farmer still owns his land and likely his primary residence. There would be no need to purchase another residence unless it was desired. After retiring from farming, the farmer could lease the land to another farmer, assuring him a consistent income throughout retirement. This income can help offset living expenses and healthcare costs. It is expected that the value of the farmland will keep increasing in value over time. If the recent USDA report is any indication, that increase could be substantial. This could lead to a higher inheritance to pass on to heirs, or it could be sold - as farmland - at any time. Depending on the initial program selected, the farmer may still retain a variety of rural residential options ranging from minor subdivisions to selling off larger acreage as small farms, farmettes and large lot estates.
There are many things to consider when planning for retirement. Each and every family will have many decisions to make depending on the age at retirement, financial situation, debt, number of children, personal goals and many other factors. Some may certainly consider a large lump sum to be in their best interest, but the Delaware Sprawl Prevention Act can not be said to eliminate all retirement options for farmers. There are a number of ways farmers can comfortably retire while taking advantage of the equity in their rural lands.
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Will the Act negatively affect the real estate market?
The State of Delaware recently conducted an analysis, in conjunction with the Strategies for State Policies and Spending, to evaluate the growth zones' capacity to accommodate population increases within the State of Delaware. This analysis evaluated the amount of remaining vacant land within the growth zones that is available for residential development, combined with the Delaware Population Consortium population projections for the State of Delaware through the year 2030.
More recent analysis by the Office of State Planning Coordination, in conjunction with county planning and mapping officials looks at existing and proposed residential building lots in Kent and Sussex Counties. In Kent County it was determined that there are approximately 9,000 vacant recorded building lots in the County as of July 2005. This figure includes some smaller municipalities, but excludes large municipalities such as Dover, Milford and Smyrna that issue their own permits. Of those lots, 66 percent of them were in municipalities and County growth zones. In addition, Kent County currently has 9,584 lots in some stage of the approval process. Due to recent land use planning initiatives, such as the new Kent County subdivision ordinance, 87 percent of these lots are in the County Growth Zone. Combined, this represents over 18,000 potential available building lots in Kent County, most located in the growth zone. Considering that there have been approximately 1,200 new homes built each year in the County over the last several years, there is an ample supply of land available to accommodate future growth in Kent County. A similar review of Sussex County parcel assessment data revealed that there are approximately 24,000 vacant recorded lots in that County. Detailed data about the lots in the Sussex approval process was not available at the time we conducted our analysis. (Analysis of available lots for Kent County completed by the Kent County Department of Planning Services in conjunction with the Office of State Planning Coordination, August 2005. Analysis of available lots in Sussex County completed by the Office of State Planning Coordination in consultation with the Sussex County mapping department, July 2005.)
Both the analysis conducted for the Strategies and the more detailed review of Kent and Sussex County data demonstrate that in all possible scenarios there is more than adequate land available in growth zones to accommodate the projected population growth for all three counties in Delaware through 2030. It is also worth noting that the growth areas are revaluated by state and local governments on a five year cycle, and can change in response to population growth, development pressures and other considerations. The Delaware Sprawl Prevention Act will not limit or restrict the real estate market because there is an ample supply of land to accommodate expected development inside the growth zones identified by the local governments and the State Strategies for many years to come.
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Will there be impacts and job losses in the construction trades?
Construction trades exist to serve the housing market and Delaware's housing market currently has a very high demand. The Delaware Sprawl Prevention Act will not affect the quantity of housing units constructed in Delaware, it will only ensure that more of it is built where the State, County and Municipal governments have planned for growth. We have already demonstrated that there is more than enough land available in those growth zones to accommodate all of the housing we expect for the next 30 years (see Myth 7).
Population growth and the demand for new housing are complex factors that are influenced by local, regional and national trends including the birth rate, economic development and job creation, and migration of people choosing to move from one state to another for a variety of reasons. The Sprawl Prevention Act is going to enhance and preserve the quality of life in Delaware. Furthermore, the Act will create more predictability for the construction trades and the development industry as residential development takes place in a manner that can be anticipated. This will be good for the industry, good for the economy, and ultimately good for future residents in the homes built during the coming decades.
| Back to list |Will the Act affect the provision of affordable housing?
Some in the development community have argued that the Sprawl Prevention Act will negatively impact the provision of affordable housing in Delaware. The development industry has not chosen to build affordable housing outside of designated growth zones, even though it is currently permitted by local codes and ordinances. This is just as well, because affordable housing does not belong in remote rural areas far from needed services and economic opportunities. Affordable housing options are necessary for those who need to reduce costs because of limited financial means. People in such a situation benefit from living in developed areas that are close to jobs, schools, stores, community services, and public transportation. Living in developed areas increases the amount of services that can be reached on foot and by public transportation, thus reducing the costs associated with automobile travel. The best location for affordable housing is within the growth zones, where residents will have access to the services they need.
There is more than adequate land available inside the designated growth zones to meet the anticipated housing demands required by population growth. Some of this housing must meet the needs of those with low to moderate incomes. While it is unlikely that the private sector alone will provide this housing, the challenge will be met by the federal, state, and local governments along with private industry. The Sprawl Prevention Act will not negatively affect affordable housing inside the growth zone because there still is sufficient land to meet future development needs long into the future.
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Will the Act limit people's choices?
There have always been, and always will be, Delawareans who choose to live in the rural areas of the State. Farm families have resided on farms for generations, and many others have been drawn to live in the midst of the working landscapes and natural features of our rural areas. Those who make this choice may do so because of a connection to the land through their work as farmers or in industries related to Delaware's large and vibrant agricultural economy. Others value the proximity to open space, woodlands, and wetlands because they enjoy outdoor activities and being close to nature. Still others make this choice because of their desire to live "in the country" away from the hustle and bustle of cities, towns, and more developed suburban areas.
These are all valid reasons to live in rural areas, and the Sprawl Prevention Act will not prevent current or future Delawareans from making this lifestyle and housing choice. There are literally thousands of recorded lots in existence in our rural areas that could be built upon. Some of these lots are in suburban style subdivisions, and others are simply carved out of farmland along rural roadways. The Sprawl Prevention Act does not affect these subdivisions or lots, although relevant County ordinances may eventually "sunset" some of these lots if not built upon in a certain amount of time. The Act does not become effective until a subdivision of more than 5 lots is proposed, so any particular parcel may still be subdivided into up to five lots, depending on the local land use regulations. Lands in the Agricultural Preservation Program are exempt from the Act, and there are a number of residential options within the easement agreements which farmers may take advantage of. Finally, individual on-site wastewater system permits are still available to any lot larger than four acres that can comply with the relevant DNREC regulations.
If this act passes those who choose to live in rural areas will continue to have many options ranging from purchasing land in an existing subdivision or a rural lot, to purchasing larger acreage. The Sprawl Prevention Act will serve to preserve our rural landscapes from encroaching suburban development. Not only will this protect the agricultural economy and our natural resources, but it will protect the lifestyles, investments and property values of those who choose to move to the country. Those living in rural areas should not have to worry about the threat of suburban subdivisions being built next door or near-by.
| Back to list |Will the act encourage "large lot sprawl" throughout the rural areas?
Delaware is facing a new wave of population growth and housing demand. Since the 2000 Census was completed, our best information from the local jurisdictions is that population growth through migration into Delaware has met or exceeded our projections. Anecdotally we have learned through a variety of sources that many of those moving to Delaware are coming here from surrounding States such as Pennsylvania, New Jersey, New York, and Maryland and are drawn by our high quality of life and low taxes. Some continue to commute to work in the major metropolitan areas, while others are moving to Delaware to retire. There are a significant number of second home purchases, mostly in Sussex County. Families may be continuing to work for awhile, then planning to retire to their Delaware home.
Home builders, including many national and regional builders, have noticed this trend and have increased their development activities in Delaware, particularly in Kent and Sussex Counties. The typical model of development utilized by these developers is to construct large subdivisions containing hundreds or even thousands of homes. There are many business advantages to this model. The developer can mobilize once and stay on site for many years constructing homes. The developer is assured of an inventory of lots to be constructed upon as the market demands. Marketing and sales can be centralized and coordinated. Perhaps most importantly, there are cost savings to be achieved by installing infrastructure such as roads and sewer lines in a coordinated fashion in a relatively dense development pattern. (Mix, T.D. (2003, August 29). Exploring the Benefits of Compact Development. Retrieved June 2005) The typical lot sizes for this type of development range from 10,000 square feet to about 1 acre for a single family home. Densities may be higher and lot sizes smaller when development occurs in municipalities or in certain areas of designated County growth zones.
This model of development is appropriate and very efficient when located in conjunction with a local government's certified plan and the Strategies for State Policies and Spending. Growth areas designated by these plans are where the infrastructure and services are available and planned to meet the demands of population growth for years to come. Unfortunately, the development community has begun to use this same model of development in our rural areas, which is the primary reason why the Sprawl Prevention Act is so important. Why have they done so? Current regulations in Kent and Sussex Counties allow relatively high density subdivisions to be built in the midst of traditionally agricultural and rural area where no services are planned. Zoning and subdivision ordinances in those two counties allow density bonuses for clustering and the use of community septic systems in rural areas, and ensure developers of minimum densities of 1 to 2 units per acre. Developers are attracted relatively low land costs in rural areas because they do not have to take into account the costs of providing needed public infrastructure and services to the future residents. Those costs (including road construction and maintenance, school transportation, police protection, and emergency medical services) are borne by taxpayers.
There are those who contend that if the Act is passed developers will be compelled to put the same number of houses in rural areas, but use up more land in doing so. For example, if the current regulations would allow 100 residential units on a 100 acre parcel, the concern is that if this Act passes the same developer would simply buy 400 acres to construct 100 residential units. This is unlikely to occur for two reasons. First, there is no shortage of available land inside the growth zones as depicted in the Strategies for State Policies and Spending and the certified local government plans. (See Myth 6) Developers of large scale residential subdivisions will be able to meet the needs of housing future population growth where the infrastructure and services are available while taking advantage of the cost savings inherent in their current business model.
Second, this approach would not be compatible with the typical business model used by the development industry in Delaware. Aside from the larger land purchases necessary, there would be notable increases in infrastructure costs in order to do a large scale residential subdivision of four or more acres per lot. Research done in conjunction with the 2004 update of the Strategies detailed the cost benefits to developers and governments alike in developing in a compact pattern.(Op. cit., Mix.) We expect to see some large lot subdivisions and "farmette" style residential developments if the Act passes, but nothing that approaches the scale and impact of the current style large scale subdivisions with hundreds or thousands of units. While there is no way to be sure that this will be the case, we have only to look to New Castle County to get a glimpse of the impact the Sprawl Prevention Act may have on residential development activity. Since the County adopted the UDC in 1997, with five acre minimum lot sizes in the southern part of the county, there have been no new large scale subdivisions proposed or approved in this low density area. Many of the Maryland counties surrounding Delaware have similar regulations in place, and their experiences have been consistent.
| Back to list |What is the state doing to help rural landowners maintain and enhance equity?
The State of Delaware has a long history of working proactively with landowners to protect the value inherent in our rural lands, and to enhance its equity and environmental values. Delaware has a nationally acclaimed farmland preservation program as well as an active open space program which acquires sensitive natural areas. These programs will continue and should be expanded. The Agricultural Preservation Program was recently upgraded with a permanent funding source and expanded with a new option for owners of working forest lands. These changes demonstrate the dedication of the State to the future viability and stability of these programs.
The State has also supported innovative equity transfer options developed by local governments, such as Kent County's new Transfer of Development Rights ordinance. The State will continue to provide grant funding and direct assistance to local governments that wish to develop plans and ordinances aimed at preserving the rural landscape. The State, through the Office of State Planning Coordination, is continuously working on research projects and developing best practices that will help our local governments manage land use change in Delaware. Model ordinances, such as agricultural zoning models that further protect rural landscapes and allow agricultural commercial and industrial uses, are an example.
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