Developer Bashing - A Florida Pastime

But let those who have not taken out a home equity loan, made possible by the handsome increase in the value of their home, cast the first stone.

Palm Coast, Flagler County, Florida - One of my readers posted the following comment to a recent article about Sawmill Creek, a gated, golfing community currently under development by Lowe Destination Development. He questioned the sanity of developers. Here are his comments and my reply.

Comment Title: "Why More Private Communities"

Comment: "In all of your conversations and research has anyone made any sense as to why the persistent focus on these ‘upscale' communities in this area?  From what I understand, none of them have filled.  And as you reported, the Conservatory seems to be a ‘bust'.  What is the thought process?  It appears that some people have in their heads that this will be a luxury area (which it is not, and does not ever seem that it will be) and no one can tell them differently.  It's amazing to me.  What world are these people living in?  And quite frankly, they appear to be much of what is holding your industry back by driving price up with ‘speculation' and destroying the price of golf (or the courses themselves . . . Palm Harbor).  What is going on?"

First, thank you for your comments. Your views that developers are responsible for many of our problems mirror those of many Palm Coast and Flagler County residents. But these views are founded less often on facts and knowledge than on opinion, emotion, and perhaps, a little wealth envy. Let me address the comments:

The comments on upscale communities are simply untrue. Nearly all Flagler's gated communities are doing well, Plantation Bay, Palm Coast Plantation, Grand Haven, Hammock Dunes, Island Estates, and Hammock Beach, to name a few. Sure, there are still some vacant lots in each, but there are also vacant lots in every section of Palm Coast, from A-Z.

"This place" will not be a luxury area any more than are most other Florida coastal areas. But it will have a luxury component, concentrated along the coast and the Intracoastal Waterway. This is just too great a place to live and retire to be ignored. Miles of beaches, water frontage, and a wonderful climate will continue to draw more affluent buyers. These are the buyers your "developers" have targeted with upscale communities. Upscale buyers like upscale communities. Affluent buyers like luxury communities. Even Flagler's most expensive communities are still very affordable when measured against other warm climate coastal alternatives.

I never reported that The Conservatory was a "bust." Some, perhaps many, of the original purchasers will suffer losses. But I believe it will ultimately be a successful community. It won't be as successful as Reunion, the Orlando area development on which it was modeled. The location, near the high school, away from the water, and far from Disney, will continue to work against it. Its lots will not demand the same price as lots nearer the beach or on the Intracoastal Waterway. People who eventually build in The Conservatory will likely erect more modest homes than originally envisioned for the community. They will also likely to purchase their lots at prices below the original offering prices. Eventually demand and supply (the market) will dictate this price. It will not be dictated by the developer.

Developers do not create speculators any more than casinos create gamblers. Casinos are built because gamblers already exist.Developers are not solely responsible for driving up prices. They are simply responding to demand, including demand from speculators. It's the excess of demand over supply that drove prices up (2001 - 2005), just as the excess of supply over demand caused prices to drop (2005 - 2007). The median price for single family residential homes in Flagler County dropped 17% over the past 18 months. Are you as willing to give developers credit for this as you are to blame them for the prior increases?

When a home buyer considers a purchase, they are looking not only at the price of the house. They are also looking at the total cost of housing, which is effected by interest rates, taxes, and insurance. Florida housing was the unlikely recipient of two-years of successive hurricanes. That's never happened before and probably won't again any time soon. But demand dampened and insurance rates skyrocketed. Developers had nothing to do with this.

Let's not overlook the roll played by local government in the cost of housing increase. Our elected officials were quite happy to enjoy the bounty of increasing property values and new construction. They've been able to engage in profligate spending while bragging that taxes have remained in check. Homesteaded properties (where the voters live) have even seen a slight decrease in property taxes. But the property tax on newly purchased homes, commercial, and rental property increased dramatically; again, not the builders' fault. Look at what has happened to Flagler County Government spending since year 2000, according to charts presented at a recent county budget workshop:

These increases happened in spite of the fact that the City of Palm Coast, where most of the population lives, was born and, as a result, has taken over some of the services previously provided by the county.

The city budget has likewise grown at a rate out of proportion to the increase in population. Did you know that $18,000 dollars of the cost of every new home built in Palm Coast is the result of impact fees (read taxes), for transportation, fire and rescue, parks, schools, water & sewer, storm water, and more. That makes every home in Palm Coast less affordable. And because the majority of the fees are fixed and do not vary with the value of the home, they are overly punitive to prospective buyers of affordable workforce housing. We're talking about our first responders, our teachers, our service providers, our building trades, our retail employees (but apparently not the average county employee). Also, if Palm Coast's proposed Land Development Code is adopted as presently drafted, it will not only diminish commercial and industrial development chances, but it will also increase the cost of housing.

Our local government should be using more of its resources to encourage commercial and industrial development. Flagler County currently draws less than 1% of its revenue from its nearly non-existent industrial tax base. 25% to 30% is considered ideal. Unless they fix this, the residential property tax will really take off. The save out homes amendment restricts increases in assessments but does not prohibit increases in the millage rate. Also, if Palm Coast's proposed Land Development Code is adopted as drafted, it will not only inhibit future commercial and industrial growth chances, it will also increase the cost of housing.

I'm not writing to defend developers. They are not all without blame. But to paint them all with the same brush, and to blame them, at the exclusion of all others, for the present situation is not only wrong. It's just not fair.

I didn't intend to ignore the comments about golf. While we have an inalienable right to life, liberty, and the pursuit of happiness, I cannot find a specific reference to an inalienable right to affordable golf.The condition in which Centex left the Palm Harbor Golf Course is unacceptable. But I'll bet the resulting municipal golf course will be more affordable than Centex's planned Jack Nicklaus makeover would have been. And there is another public course under construction north of Bunnell on US1 - by a developer who is responding to demand and trying to make a living.

Toby Tobin is Editor & Publisher of GoToby.com, the popular real estate news, information, and analysis website for the City of Palm Coast and Flagler and Volusia counties in Northeast Florida.