BEYOND ZONING: How Mixed-Use Development Strengthens A Community
Over the past two decades there has been a rise in mixed-use developments. So much so, almost every economic development conversation is centered around the topic. From that, certain questions arise. What is mixed-use development and why is it in such high demand? What makes it successful? What is the appropriate mix and density of uses? What is the economic benefit to the community? Could tax revenue from mixed-use development have funded projects such as the pool? This article will attempt to answer those questions and more.
What is mixed-use development?
At its simplest form, mixed-use refers to any development that contains more than one type of land use, typically combining residential and commercial uses within a single project, building or neighborhood. The goal is to create an integrated “live-work-play” environment that is walkable and bike-friendly. Historically, before the advent of automobiles, all human settlements around the world were centered around mixed-use developments. Recently, there has been a renewed interest across the United States in returning traditional urbanism into suburban neighborhoods. It is why historic downtowns thrive and why many residents want to see them replicated.
Why is it in high demand?
Mixed-use developments are in high demand because they meet the needs of all the various stakeholders. First, they are extremely convenient for neighborhood residents because they reduce commute times and promote social connection. It also supports sustainability measures by promoting efficient land use thus lowering carbon footprints. They help meet housing demand by providing a mix of entry-level homes for younger residents and downsizing options for empty nesters, keeping people connected to the community at every stage of life. For commercial users it creates a symbiotic relationship between office employees that desire nearby amenities and the retail establishments that need daytime foot traffic. For investors, mixed-use projects offer stable revenue streams that make them financeable. For the community it increases economic development both in terms of real estate and income taxes.
What makes it successful?
Mixed-use developments are an extremely efficient use of land in areas that otherwise don’t have unlimited land to work with. If planned right, they create vibrant, sustainable communities that increase housing diversity and quality of life while also boosting
economic vitality. It does this through meeting the market demands of today while also planning for adaptability in the future. Mixed-use developments often have something for everybody thus diversifying risk and increasing chance of success.
What is appropriate mix of uses?
The appropriate mix of uses will vary from project to project, but the key is to create a development that fits within its natural environment, meets the demands of the local market and is financially feasible. Looking at other suburban mixed-use developments, the average size of a project is typically 25 acres and consists of various uses. These uses will vary from site to site, but this provides a general illustration along with associated sizes and market values:
It is reasonable to modify these percentages as necessary, keeping in mind the market demands and financial feasibility of the site. Changing one category impacts the viability of the rest. Financing a mixed-use project depends on factors like market rents, absorption rates, and demand. With stronger demand for housing than commercial space, projects now rely more heavily on residential components and often require municipal support for public and green spaces. This is why it is important for planners to take into account all of the variables when determining each use.
What is the economic benefit to the community?
Using the general breakdown of uses in the previous illustration, one can project the following annual tax benefit to the community:
Real Estate Tax @ 3% millage equals $8,000,000 with $2,000,000 (25%) to the city
Income Tax @ 2.5% equals $2,400,000 based on 1,200 jobs @ $80,000/job
Cost to serve is roughly $1,200,000 based on additional residents and employees
Overall Annual Net Gain of $3,200,000 to the city and $4,800,000 to the schools
Over a 20-year period this equals over $64,000,000 to the city and $96,000,000 to the schools. This additional revenue provides a city with the ability to update aging infrastructure without having to rely predominantly on passing additional bonds or levies to be repaid by residents. The cost to serve estimate would need to be studied further, but even as costs rise, there are economies of scale that can also be realized. Furthermore, even if total revenue has grown over the past decade in the absence of mixed-use, service costs have grown faster — and mixed-use projects can create recurring revenue streams that keep pace with inflation.
What does all of this mean?
Any community that welcomes mixed-use development stands to gain tremendously both in terms of quality of life and economic benefit. Alternatively, being resistant to mixed-use development or suppressing the market demands for mix of uses could negatively impact the financial health of the city, placing more of the burden on the residents.
In the past 20 years, the average homeowner’s tax bill has nearly tripled, rising from about $3,600 to $9,900 a year for a $450,000 house, even though home values have only doubled. Inflation hasn’t come close to keeping pace, increasing just 166% over the same period. During that time, the effective tax burden has shifted dramatically; where businesses once carried the larger share, homeowners now shoulder most of it. This stems not only from rising residential property values and stagnant commercial ones, but also from changes in state tax policy that have gradually reduced the portion paid by commercial properties.
Mixed-use development offers one way to rebalance that equation—broadening the city’s tax base and easing pressure on residents. While it’s difficult to calculate the exact savings per household, even one or two well-planned mixed-use projects could have offset these increases, funded a new city pool, and reduced the school levy for the high school rebuild.
In summary, there are many factors to consider when contemplating a mixed-use development. As we prepare for a new council to be elected and eventually adopt a new comprehensive master plan, it is important to separate those who recognize the benefit of a market-driven mixed-use development, from those who make ambiguous statements with no true practical intentions. There is no reason to fear inadequate quality of construction or greedy developers. We have measures in place to ensure strict design standards and it’s time to view developers as community partners who strive to achieve mutually beneficial outcomes. Mixed-use isn’t about changing a city’s character — it’s about ensuring its character remains sustainable for generations to come.
