Small Projects, Big Cities
A guide to incremental real-estate development raises important questions about our land-use regime.
Building Small: A Toolkit for Real Estate Entrepreneurs, Civic Leaders, and Great Communities, by Jim Heid (Urban Land Institute, 264 pp., $50)
Small projects play a role in defining the fabric of towns and cities. Yet discussions about planning and architecture often focus on singular, sweeping visions, like elegant patterns articulated through prescriptive codes, or eye-catching projects envisioned by a celebrated design team. Ambitious plans provide a sense of accomplishment for a well-placed few, and occasionally benefit the public with graceful results. But such unified concepts also tend to have limited benefits, because they neglect the gradual process by which most of the traditional cityscape was actually built.
Jim Heid’s recent book offers a refreshingly sensible contrast. In Building Small: A Toolkit for Real Estate Entrepreneurs, Civic Leaders, and Great Communities, the author—a longtime developer of small projects, based in Marin County, California—provides a panoramic overview of the development process, drawn from his experience and a variety of well-chosen case studies. Published last spring by the Urban Land Institute (ULI), of which I am a member, Building Small focuses on the granular components of today’s urbanism. Written for a specialist audience, the book is a close reading of vernacular forms, and a guide to the promises and perils that await those who would join, in 2020s America, the ancient tradition of building small.
Heid sees small development sites less as grains of sand than as potential gems. His approach, outlined early in the book, recalls the visions of builders from an earlier era, when a designer’s empathy focused on what pedestrians would see as they passed by on sidewalks, moving slowly enough to process minute details. Have you ever wondered, while walking in an older city neighborhood, why aging edifices are often adorned with so many small, artistic flourishes? It is because even the most functional of city buildings—including lofts, warehouses, and tenements—were once designed to be studied from the sidewalk.
Through street-level eyes, Heid iterates a contemporary business model for extending age-old urban patterns incrementally in the twenty-first century. In doing so, he shows that small projects are still feasible. Indeed, the range of project types that might be classified as small in today’s real-estate environment is extensive, including everything from one- and two-family rowhouses to mixed-use buildings that comprise workshops, apartments, and restaurants. But Heid also shows how the logistics of completing such projects—especially the challenges posed by financing and regulatory moats—have become too complex. This last point helps illustrate a major cause of the disconnect between the popularity of small, thoughtful building projects and the relative few that actually get built.
Heid aims to encourage developers to pursue small projects with greater confidence. Building Small distributes bits of wisdom, distilled from experience. Heid is serious about the “toolkit” aspect of his book’s title, and he identifies, in today’s inhospitable landscape, the nuts and bolts of what is needed to get a small project done profitably, and with a satisfying end result.
In the middle part of Building Small, Heid departs from general arguments for the merits of small projects and begins to address the logistics of development. Toolkit topics include obtaining site control (whether through purchase, partnership, or an option to buy), performing market analysis (by optimizing available tools for small projects), navigating codes, being prepared for the red tape that small builders will invariably encounter, and attracting the necessary capital to proceed. Heid’s summaries here are readable and concise. Perhaps most intriguingly, he wrestles with the question of how to sequence the tangle of early steps in a small development project. Which step comes first? How should a developer anticipate surprises? Is it possible, or even desirable, to obtain financing or site control before approvals?
These questions require answers from experience, not pure logic. Small-scale project managers must weigh different factors than their large corporate counterparts. Many answers, in Heid’s view, are uncertain—and require tolerance for uncertainty and midstream change. Knowing that an experienced developer continues to tackle these questions on a case-by-case basis is both daunting and encouraging. The reader can share in the thought processes of Heid and other developers whose examples he offers, learning to appreciate how certain challenges are intrinsic to the real-estate business while others are unique to local conditions. Moreover, more than one solution may exist, and, in the end, none may eliminate every risk.
For newcomers to the real-estate development process who have not yet been scared off, one of the most valuable parts of the Building Small toolkit is its coverage of basic legal considerations. Heid reviews parameters of how real-estate projects should be structured, including the custom of establishing a special-purpose entity to help limit liabilities for the duration of a project; how money is customarily held and handled; and the role of a well-drafted operating agreement to ensure that each player’s expectations about the deal have been accurately memorialized (and met). Heid also briefly discusses contracts with the design and construction teams, and due diligence requirements at various development milestones.
Elsewhere in the toolkit, Heid delves into topics as diverse as the role of construction codes, pitch strategies for approaching potential investors, coordination of various teams within an overall schedule and budget, and project close-out. Heid also provides, directly and indirectly, a broad-based explanation of how new value is created through a variety of business models, how project debt is paid down, and how gains are ultimately distributed to the developer and any investors. His treatment of the small-scale real-estate development process is consistently thorough and concise.
Though his prime audience is potential developers, the author has a second audience in mind: officials with regulatory power, whom he nudges toward developing more building-friendly frameworks for small projects. The most sobering part of the toolkit—Heid’s discussion of what he calls “entitlements” (often known in New York-area real-estate parlance as “approvals”)—may be seen in this light. These milestones represent an official green light from a planning commission, zoning board, or another public regulatory body, signaling that a developer may proceed with its proposed action on a particular site. With the exception of proposals whose specifications hew closely to what is allowed “as-of-right,” such permission will usually entail negotiation with officials and stakeholders. In this area, Heid’s advice is undoubtedly sage: take voiced concerns seriously, be candid about what is feasible (and what is not), show a commitment to the future of the community, and—if possible—find a well-placed ally in local politics.
That said, the need for small developers to repeatedly run this type of gauntlet raises serious questions about the conventional American land-use process and how it interacts with traditional, incremental forms of urban growth. This dynamic is particularly vexing given the greater role that small projects could play in a more favorable regulatory environment, in a market-based response to chronic, unmet demands for affordable housing and entrepreneurial workspaces.
Late in the book, Heid zeroes in on six firms or public agencies that have spearheaded or facilitated the progress of small building projects, as well as five small projects that serve as case studies. These make for valuable examples of small building in action. Phoenix is lauded for its efforts to create a simpler and more user-friendly process for adaptive reuse and other small, resourceful projects by relaxing onerous code requirements and establishing an office that expressly advocates for permit-seekers. These are the kinds of initiatives that, taken more widely by local boards, could lead to a fairer playing field for small projects.
Notably, Building Small includes no examples or case studies from the New York City region. However, a recent project in Philadelphia’s Spring Garden neighborhood is nearly local. Taking readers through the conversion of an old industrial campus to a mix of housing, retail, and workspaces, Heid’s description of the A. F. Bornot Dye Works project highlights the continuing potential to repurpose former heavy industrial sites to align with the evolving demands of today’s urban real-estate markets. A similar profile of a new co-living property in Washington, D.C.’s Shaw neighborhood illustrates the reimagining of boundaries between private and shared spaces, as well as the growing variety of small residential projects. Both cases, located in core northeastern cities, signal the market viability of small projects that promote incremental change in ways that closely mirror a traditional urban growth process.
Given the important role that small projects like these have always played in the growth and reinvention of cities, local officials must be reminded to focus on how their policies affect this key but neglected part of the urban land market. Building Small serves this purpose, in addition to providing a process map for the potential developers (and other proponents) of small, high-quality developments. Heid has articulated both the policy and business cases for a modern iteration of the type of incremental growth that has shaped urban forms for millennia. Instead of chasing a singular, gleaming vision, communities that wish to experience both sustainable and attractive growth should encourage a variety of developers to produce abundant small gems.
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