D.C. Developers Looking To Break Ground Face New Delays As Localities Move Functions Online

The coronavirus and its economic fallout have already led developers to begin halting projects, but those still looking to move forward face new delays as government agencies adjust to working remotely.

From holding zoning approval hearings to conducting permitting inspections to recording sale and loan documents, a host of government functions are being disrupted by the social distancing policies put in place to slow the spread of the pandemic. 

Some jurisdictions have found new solutions, such as holding public meetings through videoconference, while others have postponed zoning meetings by more than a month, creating new delays for projects that were close to breaking ground, and stakeholders fear the delays could extend beyond April. 

"There are so many different variables that can delay a project, I think we're going to see those problems mount up," Maryland Building Industry Association CEO Lori Graf said. "We’re talking months, not just a couple weeks, because there is going to be such a backlog of projects that aren’t able to come online."

Graf said the issue that concerns her most is inspections. Because they are one of the last steps before a development delivers, inspection delays can prevent people from moving into a new residential building that is otherwise ready for occupancy.

A senior housing development on Kent Island, which sits about 45 miles east of D.C., needs only an elevator inspection before it can achieve its certificate of occupancy and welcome residents, Graf said. She said that elevator inspection has been delayed by at least 30 days, with "at least" being the phrase that worries her most.

"They are basically at a standstill and will not be able to deliver the project," Graf said. "There are going to be a lot of delays."

The two government bodies that approve rezoning applications in D.C., the Zoning Commission and the Board of Zoning Adjustments, canceled all public meetings from March 18 to April 25.

When the bodies resume proceedings, they plan to hold weekly hearings in the order in which they had been scheduled, starting with cases from March 18, meaning any developments that had upcoming hearings will likely be delayed by at least one month.

The planned D.C. developments that had zoning hearings scheduled during the next month include MidCity's 363-unit project in Mount Vernon Triangle, a 51-unit townhouse development in Fort Lincoln, a 54-unit Georgetown condo project, a 40-unit mixed-use project in Adams Morgan and a 16-unit apartment building in Brentwood. 

Goulston & Storrs Director Jeff Utz, a land-use attorney whose firm is representing multiple D.C. developers with upcoming hearings, said development teams understand the need for the delays, but he said they will have an impact. 

“These project timelines were typically formulated before applications went in, and having a delay in the middle of entitlements is certainly stressing that,” Utz said.

In addition to the zoning hearing delays, Cozen O'Connor land-use attorney Meridith Moldenhauer said another step in the approval process is also experiencing cancellations: Advisory Neighborhood Commission meetings. 

"There will definitely be delays," Moldenhauer said. "ANCs are not having meetings, people are not getting together. The question will be with that delay, how creative can our agencies be to resolve any backlog?'"

For D.C. developers that already have rezoning approvals or are building within a site's existing zoning, the process of receiving building permits could also be complicated.

The Department of Consumer and Regulatory Affairs announced yesterday it is closing its building and moving operations online. DCRA says it will still be able to perform all necessary functions, but Utz said he has concerns that complications could arise that could delay projects from receiving building permits and certificates of occupancy.

While some are beginning to rethink moving forward with projects in an unstable economic climate, Utz said many residential developers are still looking to begin construction.

“The need for housing will remain, and it is still a critical need,” Utz said. “The supply-demand misalignment we were experiencing before still exists, and it could be made worse by this.” 

D.C. Building Industry Association CEO Lisa Maria Mallory said her group is working with the District government to find workarounds to delays in the zoning and permitting processes. She said she hopes the postponing of zoning hearings does not extend beyond April. 

"We could probably withstand a 30-day delay, but if were talking about more significant time, that would be a problem," she said. "New development could certainly slow down, and that would be problematic."

Several jurisdictions in Northern Virginia have also postponed zoning hearings. The Fairfax County Planning Commission's meeting calendar indicates its meetings have been canceled from March 18 through April 1. The Loudoun County Planning Commission rescheduled a hearing from yesterday to April 9. The Arlington County Board held a meeting Saturday and approved at least one major development, but the Arlington Site Plan Review Committee canceled its March 16 and March 19 hearings.

In suburban Maryland, the counties have found a solution to hold hearings on new development plans. The Montgomery County Planning Board and Prince George's County Planning Board will both hold virtual hearings Thursday using videoconferencing technology.

Montgomery County Planning Board Chair Casey Anderson said the board went through a practice run yesterday with the Microsoft Teams platform they will use for Thursday's hearing. Each board member will call in from homes, the applicants will be given a specific time to call in and present their plans, and members of the public can sign up in advance to call in and testify.

"We think it’s important not to stop working on planning and regulatory issues, because we know that this outbreak is going to have a dramatic impact on our economy, and we want to do everything possible to try to continue business functions and get development applications moving through [the] system," Anderson said. 

The Department of Permitting, Inspections and Enforcement in Prince George's County closed its in-person services but is continuing functions online. Lerch, Early & Brewer principal Christopher Hatcher, a land-use attorney who works in Prince George's County, said the online process is taking longer than normal, but he is glad the county is still issuing permits. 

"Right now everything is moving slower, but everything is indeed moving in Prince George's County," Hatcher said. "They might be taking a little bit longer, but they are moving forward, which gives clients comfort for deals they have in queue."

Prince George's County Economic Development Association CEO David Iannucci said he is glad to see the planning department and permitting agency moving functions online. 

"We do not want the county to be the source for exacerbating the economic slowdown," Iannucci said. "That's why the planning department and permitting are working on processes to keep the approvals moving, so that those companies that want to proceed can continue their projects."

Developers with upcoming projects aren't the only commercial real estate players being impacted by local governments moving functions online. Companies looking to record sale and loan documents are also facing hurdles.

"Most recording offices haven't adopted standards for documents to be e-filed, and their systems aren't prepared," Walker & Dunlop Executive Vice President Don King said. 

King said local governments should classify document recording as an essential function and allow a small number of officials to go to work to process deed and loan records. If that doesn't occur, he said it would make it difficult for the capital markets to function.

"It has such important implications for the broader economy to make sure we keep liquidity in the system," King said. "It is such a huge issue that I think we'll be coming at it from so many angles with the government and private industry to try to figure out how to prevent it from stopping, that I'm hopeful we can come up with something."