New Communities

Hello,

Welcome back to the one and only blog dedicated to the new home construction industry in Houston, Texas!

Today, we are going to talk about one of the four different types of communities that are built and developed in today's environment: (These are my definitions.  Don't like them? Then come up with your own!)

1. Master Planned Communities (MPC)
2. Mini-Master Planned Communities (mini-MPC)
3. Builder Community
4. Fourth Tier Communities

The point of this specific blog post is that I plan to spend a great deal of time discussing the different Areas, Submarkets, Communities, Builders, and Developers.  While discussing these items, we're going to talk about the types of Communities that are prevalent in each of the Areas and Submarkets.  By defining up-front the types of Communities, it will enable us to have a more in-depth discussion on what makes these Areas and Submarkets unique, rather than reciting the rote definition of what we are discussing.

After reading today's blog post, when I say The Woodlands and Cinco Ranch are Master Planned Communities, you will know exactly what is meant (OK, most of you already have a fairly good idea, but that's an easy one!  How about when I say mini-MPC???  We'll cover that one next time.).

Master Planned Communities
Houston, moreso than any other MSA, is dominated by its Master Planned Communities (MPCs).  MPCs are large acreage developments that include a wide array of residential uses, as well as pre-planned commercial (grocery stores, gas stations, strip malls, etc) and public uses (schools, fire stations, libraries, etc).

It takes a Developer with very deep pockets and a patient, long-term approach to pull off a successful MPC.  To purchase, develop and hold the amount of land necessary to develop an MPC is staggering.  While some developers are able to structure their original land purchase so that they can buy the land over a period of time, that is not always the case.  Imagine buying several hundred acres of land up front, with no guarantee of success.

Because Houston literally has little-to-no zoning requirements in place, MPCs enjoy fairly sizable price premiums over their competitors.  However, it takes years for a Developer to reap the benefit of this premium.  Why, you ask?  First of all, there is the overall investment in the property.  What investment?

• Land Planning - paying an expert to draw up the street grids that strike the proper balance between maximizing the number of houses while providing a street scape that buyers will be willing to pay a premium for.
• Soils Testing - paying a geotechnical engineer to analyze the soils to not only help determine how to develop the property (strength of the street pavement, depth of the undergrounds, etc.), but also to analyze the tract for the myriad of environmentally harmful substances (old underground fuel tanks, farmers burn pits, leaking underground oil/gas lines, you name it...), etc.
• Engineering - paying engineering firms to develop the plans for the underground utilities and paving.
• Attorneys - paying attorneys to create the litany of documents that are needed to successfully operate a large MPC like creating the HOA documents (have you seen the Deed Restrictions in your community?).
• Form a Municipal Utility District (MUD) - more attorneys and engineers to form the legal entity that will re-pay the developer for the facilities needed to treat both the sanitary (the stuff from your toilet, tub, and kitchen sink) and storm sewer (the stuff off your roof and gutters).  How does this get paid back?  The quick answer is property taxes, but we'll have to cover this one in more detail at another time.

All of this has to be paid for before the Developer actually starts developing!!!  Once you've spent this money (which is considerable), you still have to spend the funds to actually put the pipes in the ground, build the facilities to handle the sanitary and storm sewers, pave the roads, etc.  Not only does it cost money, but more often than not, the bulk of the money is borrowed from the bank.  Interest accrues on the money from day one.  The developer won't see a dime of money until the first homebuilder purchases their first lot!  The total time to take a property from "raw land" to developed lots can be as little as 6 months (MUD already in place) to several years!

We can (and will) spend entire blog posts talking about each MPC in Houston.  For now, here is a list of what is considered an MPC in Houston:

• The Woodlands
• Cinco Ranch
• Sienna Plantation
• First Colony
• Kingwood
• Champions
• Bridgelands
• Fairfield
• South Shore Harbor.

There are others, but I think you get the general idea.  Now that we have defined an MPC, next time we'll talk about mini-MPCs.

Is there a specific MPC that you would like to discuss (or just know more about)?  Drop me a line at houstonhomeboy@yahoo.com. 

Until next time,
Houston Home Boy
11/30/2011