FRAGMENTED OWNERSHIP LEADING TO DIFFICULT LAND ASSEMBLY
The vast majority of brownfield properties are located in urban areas, called infill areas because any development fills in between existing built-up properties. Ownership in cities, however, is often more fragmented than in undeveloped areas – and infill areas typically have a greater number of parcels than an area of equal size in a greenfield location. Consequently, land assembly for redevelopment in infill areas is more challenging because multiple owners require additional time for negotiations and the amenity of infill locations often drive transaction costs up. Furthermore, in older, infill areas where properties have been purchased several times, it is more difficult to establish chains of title before ownership can be transferred.
Fortunately, there is an easy and logical solution to problems of land assembly: denser development. Indeed, smaller sites can still host profitable developments, and in many cases the benefits of prime location outweigh the negatives of a small footprint. Some municipalities also offer land assembly assistance programs to infill developers interested in creating affordable housing.
By definition, brownfields are sites with real and/or perceived environmental contamination, and therefore redevelopment on such land is more difficult since contaminants must be removed before construction can begin. The risks of contamination and cleanup costs can be a daunting prospect for potential developers, but often the sale prices of such properties reflect the associated liability for cleanup. The lower purchase price associated with brownfield properties can offset later cleanup costs.
Fortunately, there are a number of options for developers to limit cleanup costs. Among insurance products available to developers, pollution liability insurance covers property value declines associated with the discovery of pollution, and cost-cap insurance limits cleanup cost overrun by covering costs exceeding those projected in a remediation plan. Further, federal, state, and local governments often work with brownfield developers to provide tools and assistance for contamination assessment, cleanup, and redevelopment. In Minnesota, U.S. EPA, the Minnesota Department of Employment & Economic Development, the Metropolitan Council, and some county (Hennepin and Ramsey) and municipal governments offer funding programs to infill developers.