Primer on Brownfields Redevelopment

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BrownfieldsThe redevelopment of brownfield sites can be difficult. These sites, which are contaminated to some degree with harmful substances usually due to prior industrial use on the site, pose challenges to redevelopment beyond those of a typical project. However, the reuse of these sites can be a boon to economic development, as it helps to reduce the blight of empty buildings, allows for the use of existing infrastructure, and can help expand the tax base through increased property values. Brownfield properties can range from large-scale industrial factories to smaller scale commercial uses such as dry cleaners and gas stations. While there is no published list of brownfield sites in the state, the North Carolina Division of Waste Management, overseer of the North Carolina Brownfields Program, notes the total number of sites to be in the tens of thousands.

Challenges to Redevelopment and Policy Responses

One of the biggest impediments to returning brownfields to productive use is the issue of liability for environmental cleanup costs. Developers are often wary to undertake redevelopment of a property where potential liabilities for environmental cleanup costs are unclear. Similarly, financing is difficult because banks are unlikely to finance a redevelopment project where environmental liabilities may exist. Brownfield redevelopment also poses added technical challenges and costs that do not occur in greenfield development, which can make these projects less attractive to a developer. Beginning in the 1990’s and continuing into the 2000’s, a number of federal and state policies were put in place to address these issues and encourage brownfield remediation.

With the launch of the Brownfield Program in 1995, the U.S. Environmental Protection Agency initiated a federal grant system to promote redevelopment of properties labeled as brownfields. This helped to distinguish these sites from more highly contaminated hazardous waste or “superfund” sites while providing financial resources to help defray the added redevelopment costs associated with remediation. Local governments apply for the grants and are then in charge of distributing the funds to specific sites. Individual developers are also eligible for certain federal tax benefits.

To address issues related to liability, the state of North Carolina implemented brownfield agreements. These agreements between the state and a developer put in place covenants that take away environmental liability burdens as long as specified actions are taken that make the site suitable for reuse. With the agreements, developers become more comfortable working on brownfield projects without fear of unexpected costs or lawsuits. Financing for redevelopment projects also becomes more readily available.

Land Value and Brownfield Redevelopment

A report released in June by the National Bureau of Economic Research underscored the value of brownfield remediation to municipalities as well as residents. The report looked at housing values surrounding brownfield sites before and after remediation, finding that the rise in housing values of properties near cleanup sites generally exceeded the cost of site remediation. The study estimated that an average brownfield remediation cost $602,000 (up to $200,000 of which can come from an EPA grant). This compares to a median benefit value of $2,117,982 from increased housing values. The average increase in home values directly attributable to brownfield remediation (while accounting for other variables) was estimated to be between 5 and 15% for each home.

Though this potentially raises some issues related to affordability and gentrification, it also shows the positive effects of remediating contaminated sites. Particularly in older towns and cities with a history of industrial economic activity, brownfield redevelopment can help to make more productive use of land, extending economic and environmental benefits to the broader community.

Steven Reilly is a current graduate student in the Department of City and Regional Planning. He is also a Community Revitalization Fellow with the School of Government’s Development Finance Initiative (DFI).

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