Municipalities Should Never Be Residential Condominium Developers

They were teased by the success of small scale urban development projects that successfully helped their community. But when the Borough of Collingswood NJ decided on being the developer of their own downtown condominium project, they took on a multi-year headache now culminating in over 8 million in debt for the municipality.

The 120 residential units, the commercial units, and the parking facilities of The Lumberyard Condos were the cornerstone plan in revitalizing their municipality. An 18 million loan to the municipality started the project in 2006. Now, 5 years later and with only 2 of the 3 phases completed, Collingswood will issue a six million ordinance to help cover the remaining 8.3 million on the loan and now focus on renting the remaining 14 (of 24 units in phase 2) to help pay down the remainder.

In March, the Mayor James Maley indicated the project was picking up, and 8 of the 24 units had been sold. It appears that things weren’t looking up that much, and only 2 more units sold in the last 6 months.

Development risks should really be left to developers – and not to municipalities where the cost to citizens, as in this case, is expensive against both tax revenue and in the energy expended by the municipality in working with this long losing project.

I agree that municipalities should take a very active role in wooing developers if they feel a population “mini-boom” is required to keep their city alive. I also believe in the municipality, in hand with the wooing, set out strict development requirements that would have generated a project that meets their vision and goals.

But they should always refrain from being the actual developer.