Oak Lawn Downzoning Likely Opens Dallas to Lawsuit

Last week, a group calling themselves “Stop the Downzone” sent out a packet of information that I was unknowingly part of.  It included a pair of articles I wrote … Teixeira Duarte’s move to build a by-right plan on their Dickason and Hood plots and the prior piece written about the downzoning campaign. I am not aligned with either side of this issue.

However …

The downzoners … who don’t admit downzoning is their goal … will be holding a meeting 6 to 8 p.m. Feb. 13 at The Mansion on Turtle Creek in the Sheppard King Suite.  It seems to be their first community meeting since August’s Plan Commission approval to study the issue and in such a high-falutin’ location.  Someone’s got connections or a bank balance … which should come as no surprise with lawyers, including former  Dallas City Council member Angela Hunt on the payroll.

I call them downzoners for the simple reason that were their goals to maintain the status quo on area zoning, they wouldn’t need to meet … and surely they do not wish to increase zoning density.  That leaves only one direction … down.  Instead they couch their movement in opaque words.  They claim the meeting is about beginning, “an informed conversation focusing on the challenges arising from this area’s allowed zoning density, and ways to address those challenges.”

According to emails sent to CandysDirt.com, one draft of the downzoners proposal is/was to create a walled garden in the area by limiting taller buildings to the major roads on the periphery of the down zone area.  This would do little for the supposed traffic concerns … but would certainly protect The Plaza’s northern high-rise views from the Toll Brothers project … NIMBY-ism at it’s best.

Municipal Give and “Take”

I wrote previously that in my lay opinion downzoning steals value from the property owners within the downzone area. Since then I’ve been doing some reading to see whether municipalities had the ability to negatively change a property’s zoning without compensation.  The answer seems to be mostly “no” they don’t.

In a majority of cases I’ve read from across the country, residents have generally won lawsuits filed against their cities for “taking” value from their property through zoning changes.  This makes sense.  I submit that were Dallas to approve a downzoning, a lawsuit would be filed by one or more landowners seeking compensation from the city equal to the value being “taken” by a downzone.

In this case, let’s say the city rezones for four-story development while today’s MF-3 zoning offers 25-stories (give or take).  The city could owe property owners the difference in value of the now unusable 21-stories. Think of it as the city being required to purchase the air rights they’d be reneging on (remember the movie Burlesque?).

Isn’t that just what the city’s checkbook needs, more loser lawsuits to pay out?  What would it cost the city to pay all the affected landowners between Oak Lawn, Fairmount, Turtle Creek, and Cedar Springs?  Millions?  Easily.

It would handily sweep up the Turtle Creek Gardens deal, the Limited Edition plot, possibly the old Republic Insurance building, and Toll Brothers into their maw … perhaps even Teixeira Duarte if they can’t get their plans out of Planning fast enough.  Those are owners with serious lawyer money to spend, not to mention all the smaller landowners in the area.

The most twisted part of this is the likelihood that the very people seeking to downzone the area would also be eligible for city compensation from their own downzoned properties should the city lose such a lawsuit.  This group can stop development and then cash in on a windfall all in the same day.

The two groups I can see who might get left out are those who purchased their properties before the upzone occurred in the 1980s.  They didn’t purchase their properties with the upzone in place and so are not damaged if zoning reverts to what it was when they bought … it’s essentially a windfall removed.  Given that the upzone was decades ago, this is a pretty tiny group of owners.

The other group would be owners in currently constructed high-rises (like The Plaza) who have already taken advantage of the zoning and lost nothing. Their “win” is view retention.

Why Do Cities Upzone?

“Money” and “money” are the easy answers.  When the city upzones, it does so with the intent to increase density and move property towards its highest (most taxable) use.  The upzone is “given” to property owners to facilitate increasing tax revenues.

Now that this decades-old upzone is finally taking hold and performing as it was intended to do, I do not see how the city can snatch it away uncompensated.  It would be like Nana giving you $100 to invest, and when you turn it into $500, she returns to take it away.

Now if the city decides they no longer want that level of density in this location, that’s fine, they can do that.  But again, I don’t see how “zoner’s remorse” gets them out of compensating property owners for taking value, regardless of the fact the city gave the added value in the first place.

Natural Separation

What I find most interesting about this charge to downzone is that it’s likely unnecessary.  After all, we’re not talking about the high-rise canyons of Midtown Manhattan.  Dallas residential high-rises need space to breathe (i.e. see).  Imagine if someone built two residential high-rises next door to each other in Oak Lawn or Uptown. One exposure of each building would be financially impaired.  Who would pay full price to buy or rent a unit whose expanse of windows was dominated by another building just feet away?  I’m not sure which would be worse, a wall of windows facing a brick wall or facing a neighbor’s wall of windows.

For example, were the Federal Reserve Bank to build a high-rise in front of The Jordan apartments in Uptown, rents on that side of the building that command more today for their in-your-face downtown views would take a hit. Likewise, that new building wouldn’t be able to charge as much for the units that were feet away from The Dillon.  Simply, boxing in views hurts both buildings.

Mutually Assured Destruction

I doubt developers are dumb enough to economically impair their projects before they even got out of the ground.  Meaning that those properties that are first to sellout to mid- or high-rise developers will, through natural separation, cock-block the others from attracting a similarly sized building next door.  The only exception in this area might be Turtle Creek where the city and creek views may outweigh the economic dent from a too-close neighbor.

So IF the downzoners succeed and IF the city doesn’t lose its butt in the resulting lawsuit, the success will likely be measured in a very few large buildings not built in the area.

In my mind, downzoning isn’t the answer.  If anything, connecting building height to building separation (higher requires further away) is the real answer to allowing density without creating sun-blocking, high-rise canyons.  It’s also a way to preserve land values.  Developers would then build thinner structures and purchase additional land to increase setbacks.  Done right, it might even increase the green space in the area.  A win-win for those willing to entertain compromise.

Unfortunately, on the 13th, I’ll be at The Duomo not The Mansion.

Remember:  High-rises, HOAs and renovation are my beat. But I also appreciate modern and historical architecture balanced against the YIMBY movement.  If you’re interested in hosting a Candysdirt.com Staff Meeting event, I’m your guy. In 2016, my writing was recognized with Bronze and Silver awards from the National Association of Real Estate Editors.  Have a story to tell or a marriage proposal to make?  Shoot me an email [email protected].