Development Ready Webinar Series (Part 1): Small-Scale Incremental Development Recap

What does it mean to be a “Development Ready” community? The first webinar of our three-part series helped localities begin to answer that thought-provoking question. Guest speakers Elizabeth Williams and Neil Heller, both of whom are faculty members at the Incremental Development Alliance (IDA), walked participants through the what, why and where of incremental development, as well as discussed common barriers and strategies to overcome those barriers to guide local governments, community development organizations and others through the steps that they need to take to ensure their community’s vision can become a reality. Here are five (5) major takeaways from our first webinar, which was recorded:

1. What’s incremental development?

Generally, incremental development deals with 0-3 story buildings and/or buildings with less than 20 units. It cultivates a neighborhood over a long period of time, involves projects that are income-producing and fills market gaps and physical gaps within the community.

2. Who’s a small developer?

These are folks that are locally driven, and they’re working primarily in their own neighborhood and/or place. Small developers are purposeful and doing this work because they care and, ultimately, because they can spark something bigger than themselves in the process. They focus on return on investment (ROI) but also on return on community (ROC). You can’t find these people. You have to grow them by fostering an environment where they can succeed.

3. Work in STEPs | Small-scale, Time-enhanced, Entrepreneurial and Purposeful

STEPs is an acronym but, more importantly, a process or a way of thinking about development. During the webinar, the IDA faculty members unpacked each of the components listed above.

What does it mean to be small-scale?

Physically, we’re talking about something that’s between 0-3 stories and less than 20 units. Conceptually, small-scale is something that’s pedestrian oriented and human-scale in nature, as well as small enough for local people to develop and own themselves. But, just because something is small doesn’t mean it can’t pack a punch. Whether you’re setting up a pop-up tent on someone else’s property or tackling a mixed-use project, small-scale is a spectrum, and you’re increasing your experience in development, building relationships and/or growing your financing through the process to take that next step.

STEP buildings evolve over time and, like a fine wine, they improve with age.

There are many life stages a home or a business can take, and they should, ideally, grow to meet changing needs. For example, you may start with a duplex or a small quadplex and, over time, expand the back to add more units. The primary point here is that these buildings gain value, over time, through better cash flow and contribution to their neighborhood or place. It’s not just about passive appreciation.

Creative hustle lifts up locals, working buildings earn their keep.

Cashflow is what makes STEP buildings resilient over time, i.e. they can pay for their own maintenance and adaptation. It’s not just about the buildings being Entrepreneurial. It’s Entrepreneurial people who are developing these building, finding creative ways to fill the gaps in their market and/or neighborhood.

With purpose, STEP buildings give more than they take.

STEP buildings are designed to be profitable, but they don’t exist solely on income. They’re brought to life by local people who are asking themselves, what does my neighborhood need, and what is the next small step that I can take to provide whatever that is? It’s about bringing out the life and soul of one’s place.

4. Right-Size Regulations

In the best case scenario, our places will right-size regulations to allow for more small-scale development.

Legalize small-scale development.

Start small. Don’t attempt to re-write your entire zoning code all at once. Ask yourself, what’s the smallest step we can take? For example, are accessory dwelling units (ADUs) allowed in our community? If not, is something like that manageable?

Streamline processes to create a clear and predictable path.

You don’t have to be an expert to know how to navigate this work / system.

Allow flexibility in development standards.

While there are tradeoffs and conflicts that might come into play with many regulations, allow some flexibility for small-scale infill, such as parking minimums, lot sizes, stormwater requirements, trees, etc.

5. How to Right-Size Your Project

Do something legal.

Start with something within your locality’s zoning rules, and make use of legal, non-conforming uses. An existing building is the best way for a small-scale developer to get started because it requires financing, some level of construction, property management and other factors that contribute to enhancing your overall experience. You’re also exposing yourself to less risk. If everything goes south, it’s still a sellable asset.

Do what you’re good at.

Don’t try to learn and do everything all at once. Be will to share, start with minimum viable projects and be honest when you need help. Have an open dialogue with folks that you can learn from, while starting to build your network and knowledge of resources.

Give your community what it needs.

Don’t build something just because it’s your preference. Explore different uses and unit types that respond to unmet needs, income levels and family arrangements. Research that and find your niche!

Insist revenue matches costs.

Complexity will add cost to your project, and that cost demands higher rent. The market that a small developer is working in will often dictate the level of amenity and/or the complexity of a building in order to be able to meet the market for their achievable rents.

“If you can’t get the rent, don’t build the building.” – Neil Heller, Incremental Development Alliance

Take advantage of code thresholds.

Complexity responds to code thresholds. There are thresholds in building codes, finance, accessibility and the Fair Housing Act. Existing builds may have more flexibility, an each jurisdiction applies / interprets code differently so speak to a local code professional.

Use the most simple financing that works.

For small or “un-bankable” projects, such as light renovations or fix and flips, small developers might take these on with cash, personal debt or even take out a line of credit. Projects that consist of 1-4 units or live/work spaces, for example, involve residential mortgages, and things get a bit more complicated when commercial mortgages, tax credits or other federal-based sources come into play. Tax credits and the latter often require the use of a consultant so keep it simple to keep it doable!

To learn more and hear Elizabeth and Neil expand on all these great things, click here to check out the webinar recording!

Click here to register for Part 2 of the Development Ready Webinar Series!