Development Entitlement Speculation

Moises Gonzales, Professor of Community and Regional Planning
School of Architecture and Planning, University of New Mexico

The term real estate entitlement is used to define a development right on a property. The entitlement is acquired when a developer or land owner obtains legal approval through a municipal or county government. The process for acquiring real estate entitlements usually involves a lengthy development review process which defines the zoning, land uses, infrastructure, and the intensity of a development. If a developer acquires development rights through a development agreement, that allows for more intense development that the existing zoning, and then the property value usually immediately increases. The authors of the proposed Santolina Master Plan (2014) state, “Approval of this Level A Master Plan is the first step in transforming ranchland zoned A-1 to a new planned community to serve Bernalillo County residents and the surrounding MSA.” The intent of the developers is to acquire development rights for a suburban type of development on 13,700 acres of land which is largely agriculture and acquire development rights to support roughly 38,000 housing units. In the world of real estate development, often times developers generate value solely from acquiring entitlements and then sell off development rights to real estate investors. I refer to this process as land development entitlement speculation.

In the case of the Santolina Master Plan, it is hard to believe that in the next 10 years there will be any demand for new housing in the Albuquerque area given the status of the current economy and real estate market. New Mexico economy is dead last in terms of economic growth in the entire southwestern United States in addition to lagging in job creation since recession of 2008. Therefore, it is hard to believe that developers have any real chance of developing Santolina into a suburban community in the near future. I believe that the Santolina Master Plan process is being driven by hopes of receiving development entitlements to raise the property value for the purpose of selling off sections of the 13,700 acre parcel to investors. Given the current economic conditions facing the Albuquerque Metro Area, I believe it would be bad public policy to approve the Santolina Master Plan for the purpose of land entitlement speculation.