UNFINISHED BUSINESS: ‘Zombie’ subdivisions linger years after housing crash
Haisten Willis / Douglas County Sentinel

With all the talk of foreclosures the last five years, it can go unnoticed that there are hundreds of lots in our area suffering an even worse fate in the Great Recession.

Unseen by most motorists, full of asphalt, curbs and gutters but few people, Douglas County has 39 residential housing developments in its borders sitting unfinished. Call them zombie subdivisions, PVC cemeteries or suburban ghost towns, if you live in Douglas County, there’s one nearby.

Absent any new subdivision projects since 2007, each of these developments have sat incomplete for at least five years, most longer. They are a drain on property values, invite bad behavior and cause maintenance issues.

“It affects the tax base here because there’s no improvement on the property,” said Douglas County Planning and Zoning Director Amy Brumelow. “It’s vacant land still zoned for a subdivision.”

Metro Atlanta’s outer suburbs were among the nation’s hardest hit in the foreclosure crisis that began in 2006. John Hunt, an analyst with Marietta-based real estate tracking firm Smart Numbers, dubbed Atlanta’s fringe the “ring of death.”

“There was both an oversupply of lots and a sub-prime mortgage issue,” said Hunt. “Douglas was hit hard.”

Twenty thousand people moved to Douglas County in the 1990s, a decade that ended with the arrival of Arbor Place Mall in the fall of 1999. Thirty thousand more joined in the last decade.

“Following September 11, 2001, interest rates and loan qualification requirements were significantly reduced in an attempt to encourage the purchase of homes,” said Chris Collier, executive director of the Westside Homebuilder’s Association. “Douglas County had land prices at a level that allowed for lower priced construction in home sales. This created significant demand and significant growth up through April of 2006, when the market collapsed.”

A look at residential building permits per year since 2000 tells the story from there. In 2000 there were 645 residential permits issued in Douglas County. That climbed to 946 in 2002 and 1870 in 2003. In 2006 it stood at 1,822, followed by 835 (2007), 333 (2008), 228 (2009), 101 (2010) and 61 (2011). There are 88 so far in 2012, with three pending.

Because counties in the outer edge of the metro area experience growth later than core areas, they took a harder fall when growth stopped. Today an estimated 150,000 empty lots can be found area-wide.

Hunt sees hope. His analysis says prices have hit bottom and banks are getting low on inventory. Only about four months of inventory are left, Hunt said, and the formula will soon be right for new construction. When that happens, more than three dozen failed developments in Douglas County will need to be finished.

‘Dictated by the market’

There are three entities behind a subdivision: the bank, the developer and the bond company. For logistical purposes, streets must be built first before any houses are built. The developer builds the streets and sidewalks, but leaves the top 1.5 inches of asphalt for a later date.

“Typically, the top coat is not done until a certain percentage of completion is reached,” said County Attorney Ken Bernard. “That way trucks don’t tear up the road.”

When the bank or developer fails, governments call the bonds to pony up funds and finish the street. The problem is, sometimes all three fail. Douglas County’s Director of Development Services and County Engineer Mark Teal said the situation gets tough when that happens.

“It’s very complicated,” he said.

Bernard has announced at Douglas County Commission meetings twice in the last two months that the county successfully sued for bond funds to pave roads at Palmer Falls and Whitestone subdivisions. This means that when those neighborhoods reach substantial completion, funds will be around to cover the cost.

Douglasville and Villa Rica taxpayers haven’t been so lucky. The Federal Deposit Insurance Corporation (FDIC) denied Douglasville bond funds for four subdivisions, leaving taxpayer money to finish streets.

“We built subdivisions for many years with no problems, but never had a bank go out of businesses,” said Jeff Noles, Douglasville director of development services. “We had the availability to use a bond or letter of credit, and when banks go out the FDIC chooses whether or not to use those letters of credit. Some they chose not to honor, we had to pay out of city funds at that point.”

Villa Rica hasn’t received bonds for any of its five failed subdivisions on its Douglas County side.

Banks feel the crunch too. The Strickland Manor development in the county’s far southwestern corner has 32 lots holding just 11 houses. Of those 11, eight are owned by Douglas County Bank. As hard as selling a home is, selling a half-finished subdivision is far harder in a buyer’s market.

The View at Cedar Mountain, Ashley Place and Gateway Villages don’t have a single house between them.

Weight from lost subdivisions has sunk many a Georgia bank and threatens many more. Nine have failed in Georgia in 2012 alone and the state leads the nation in bank failures since the recession began. Inflated land prices from a half-decade ago vanished leaving lots to sell for 30 percent of its original price.

“People will say a deal was 30 cents on the dollar, but the original dollar was 300 percent overinflated,” said Hunt.

The peak median lot price for metro Atlanta in 2007 was $57,000. The current median lot price is $18,000.

Benny Waldrop, appraisal supervisor for Douglas County, said there’s no real way to know how much property values get hit when a subdivision fails.

“Common sense tells you it affects values, but we try to look at that by data,” he said. “The only way to determine is by actual sales figures. If you look at two very similar subdivisions but one is not finished and look at the difference in sales prices. We haven’t isolated that one factor, we just look at sales in general.”

Most involved say there’s no real alternative to the methods used to build subdivisions.

“The market dictates when the houses get finished,” said Brumelow.

‘Looks like the woods’

Pauline Hall knows the effect zombie lots have on property values. Since buying her home in the Brookmont neighborhood off of Chapel Hill Road in 2006, her values plummeted.

“A friend of mine from Florida bought a house across the street for $300,000,” she said. “It sold the other day for $145,000.”

Hall isn’t upside down in her own house though, she made a large down payment using built-up equity. Like many, she plans to stay put and see if values rebound.

Billy Crutcher mostly escaped the collapse when he bought his Whitestone subdivision home in early 2010. More recent sales on his street were done for similar prices, but he’s been discouraged by some.

“I have seen one house that sold for significantly less than what I paid for mine,” he said. “It was a little disturbing. I don’t think mine has lost a lot of value though.”

Crutcher’s home sits directly adjacent to an empty lot which is left unkempt. He tries to keep weeds near the border down, and someone comes by once a month to trim growth near the road.

“I understand why they haven’t built a house there, I don’t understand why it’s not maintained,” Crutcher said. “It looks like the woods.”

Hall and Crutcher said this is the worst part of the empty lots: maintenance. Both have approached their local homeowner’s associations with little luck. Hall said the weeds reduce visibility and can lead to auto accidents.

It’s not the only problem. The back of an empty subdivision can become littered with empty beer bottles and rolling papers from revelers. Trash and tire dumping is common as well.

The solution usually involves a big gate placed at the entrance, either by the government or developer. This ends mischief for the most part. Though asphalt erodes faster when not in use than when it’s being driven on regularly, deterioration won’t pose a threat for several more years.

More bizarre things happen when empty homes go unmonitored, sometimes becoming targets for opportunistic joyriders. In the fall of 2011, Roderick Walker gained infamy as the Douglasville “squatter” who lived in an abandoned home in the unfinished Brookmont neighborhood for nearly six months and trained others how to do the same. Only his boldness in taking the story to Atlanta television saw his squatting moved from an empty house to a jail cell.

‘A history of high demand’

Douglasville’s Tributary subdivision sits nestled in the southeastern part of the county. Planned nearly a decade ago with 2,000 homes and a retail center, just 400 houses have been built and a lone restaurant occupies the development. A golf course was planned at one time that never came to fruition, but commercial developers have purchased the land and hope to line it with data centers that will bring more business and traffic.

Making the most of things, residents have turned the empty land into a series of running and hiking trails frequented by outdoorsmen. Runners and bicyclists can be seen exercising on empty streets and trails each morning.

Tributary managers say the development has a high occupancy rate in its existing homes, and remain optimistic more homes are on the way when the economy recovers.

“All of our inventory is practically gone,” said Barbara Laughlin, Tributary’s manager of community operations. “We anticipate as soon as the economy shows there’s time to start building, we will be doing that.”

Smart Numbers’ Hunt offered a less optimistic view.

“At one time you could sell anything to anybody,” Hunt said. “Tributary was a small-lot product you’d typically see closer to town. I don’t think it was a fit for Douglas County, but we’ll see.”

Tributary is more high profile than most, but is just one of many failed subdivisions on the Highway 166/92 corridor. The area is convenient to Atlanta’s airport, but the long distance to I-20 poses a sales challenge along with the large, expensive size of many homes.

Selling any real estate is hard today, but Hunt tells anyone who will listen the market is on its way up.

“I’ve said this in front of Douglas County audiences,” Hunt said. “I feel better long-term about Douglas for a lot of reasons. You aren’t as oversupplied as a lot of counties surrounding you. You have major thoroughfares and I-20 running right down the middle and you have a history of fairly strong demand. If you’re talking about who’s better in the ring of death, I’d county Douglas as better for those reasons.”

Bank inventory is getting dangerously low, he says, and will force construction to begin soon. Banks have to cooperate, as starting again requires releasing new investment money in the developments, new risk.

Nearly every developer that existed five years ago either doesn’t exist today or has reorganized under a different name. Any that do might be more careful going forward, but they have plenty of streets to choose from waiting for houses to be built.

National developers are starting to build again with private funds, if not local builders. More residential permits have been issued this year than last in Douglasville, a modest sign of growth.

Most everyone with a stake in the game hopes things pick up soon. Some look to the construction jobs, some to property values and some just want neighbors to replace weeds.

“Hopefully they will build on it and I’ll be happy,” said Crutchfield of the empty lot next to his house. “There’s another one about three houses down, I’m sure those folks feel the same. I think this is the worst-looking vacant lot in the subdivisions. Basically it’s what it would look like if it hadn’t been cleared.”

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