Fundamental Facts About Zoning Data In Real Estate

Zoneomics is a real estate intelligence platform utilizing detailed land-use zoning data for investment analysis and business process optimization.

Zoneomics is dedicated to capturing planning and land-use zoning data from fragmented sources and making these important decision-making datasets available in one place and in multiple formats, including a map-enabled Web Platform, quick Zoning Reports, Zoning Data API, and Bulk Data.

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Fundamental Facts About Zoning Data In Real Estate

On this show, we have Matthew Player, the Founder and CEO of Zoneomics. What is Zoneomics? Do you know when you’re trying to do something in real estate, you’ve got to deal with the zoning data, and figure out what’s going to happen there? These guys provide zoning data and land use data.

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Matthew, welcome to the show. How are you?

I’m good. Thanks for having me, Zain.

I’m sure a lot of our readers are wondering. Zoning sounds like a headache. What is zoning? Let’s dive into that.

I like to keep it nice and simple. Zoning restrictions and regulations are a way local municipalities around the world, particularly in the US, Australia, and Canada, utilize zoning maps to control where land use can take place in certain real estate activities, business or residential. Also, the full density of development. How big can a building be, and how intense of a property can take place?

Matthew, I appreciate that you want to keep it simple. From my experience, and I’m sure many people who are in real estate, zoning is not simple. It can get quite daunting and complex. What are some of the challenges that exist, and what inspired you to start Zoneomics?

The data that identifies what's legally possible for the use of real estate isn't actually being collected, analyzed, or utilized.

I’m an urban planner and GIS consultant by background. That’s what I did in university. I then went into private consultancy. I started off by advising real estate developers from mom and pops doing remodeling to the largest real estate developers getting billion-dollar shopping malls, subdivisions, land releases, and commercial projects.

During the years, I kept coming across recurring issues because of a big problem, despite the collection and analysis of data becoming a key factor in all facets of real estate. The data identifies what’s legally possible for the use of the real estate. Also, the potential size of a building isn’t being collected, analyzed, or utilized.

To give you an example, from a big real estate developer’s point of view, you’ll often get friction between a city and a developer. In many cases, a developer will go and purchase a site and then want to go and develop it. They’re only finding out at later stages when they’re lodging plans that the project they want to pursue isn’t permitted by zoning restrictions. Either it can’t be done or it’s years and years of fighting through the city to make sure that project can take place. This can all be front-loaded if the data was analyzed before the purchase takes place.

It’s not just people that have an idea and then a plan to do something with the property and then find the fighting with the regulations. I understand there’s also information and a symmetry aspect here. One thing that makes real estate interesting and prop-tech exciting is there’s a lot of information on symmetry.

Often, people make money in real estate by knowing something that someone else doesn’t know. There’s an arbitrage somewhere. Ideally, the seller and the buyer thinks they’re getting a great deal. Sometimes, people can bid on a property knowing that if they have the zoning sorted out, they can do a lot more with this building than the current owner realizes.

I’ve been involved in real estate transactions where that’s certainly been the case, both on the buy and sell side where someone has a better idea and can extract far more value from this property. You don’t instinctively think. You’re looking at this business as what it is now with its rent rolls and net operating income. You’re selling a multiple of that. The sophisticated buyer realizes, “This community property here can be torn out. You can build a skyscraper here or you can build commercial stuff here.”

You’ve hit on what makes me passionate about. It’s democratizing this opportunity. They don’t even have to purchase it. Many developers will option off the site knowing more about it than the current owner. They don’t even have to transact until they’ve got the permitting through, and then they transact at that stage.

What we’re passionate about is that when that data is available, you can get this Robin Hood element to where you’re making the average real estate buyer or homeowner investor. Previously until now, real estate developers usually consist in the main of a big national real estate developer with the resources. Even a local real estate developer who has the connections knows this information, this is happening, and can capitalize on it.

What we can do with this data is that everyone can be as informed as that big developer, national brokerage, or local real estate developer and then act upon it. The next element is now that you’ve connected, that information is connecting them with the buying power and financing, and then a real investment revolution could take place. We have prop techs that are working on that. Maybe crypto can play a role in that. The start of it is making sure everyone is on a level playing field with the information.

I’ll give you an example that I’ve experienced. This goes back to how all the tax laws were written by real estate people, and real estate was a way to hold power. The regulations and laws are built around enriching loans that have real estate. I’m not going to mention which place. I don’t want to get in trouble, but I was in a certain place looking at property. The talk of the town is that the mayor of that town was able to buy a bunch of lands and started building hotels.

Many real estate developers know more about a homeowner's land than the current owner.

This person’s project and their friends’ project pushed through. A bunch of bills passed, and suddenly, all this money went into revitalization and infrastructure. The mayor of that town made a fortune. These types of things happen all the time. Many times, an opportunity comes to invest in a project and you wonder, “How did they get so close with the politics?” This city is going to build a hospital, for example. It’s fascinating that if you know the city is going to build a hospital, a transportation hub, or something big is going to happen, and you get that insider information, you pretty trade that. That happened in the public stock markets.

You work at a company, for example. Let’s say you work at Netflix. Netflix is very open. They share their public financials internally with a big disclaimer, “If you share this, you’re going to jail.” They share this data. If that data leaks out, they’re going to jail. The SEC is coming down on them. These laws exist to protect consumers. In real estate, it seems to be that it’s okay. You can trade this inside information and then you can make a fortune. Unfortunately, this is how real estate is. My view is if that information is transparent and available to everyone, that levels the playing field. It doesn’t have to be hidden. You make money because you know people. To me, that feels wrong. It’s hard for people to break into real estate if that’s how things will stay.

The issue is twofold. You’re pointing out what might seem like the instances where a developer is in the know and the man is making money. I’ll give you an example from my home in Sydney, Australia. In Australia, it’s gotten to the point where we had a serious incident with state politicians doing that very thing back in the early 2000s and the ‘90s. Now, when you submit a development project permit in that state, the developer has to submit any political contributions they’ve made. They try to bring a bit of transparency to it.

We jumped over something. They have to disclose the political contributions they’ve made.

Yes. The City of LA has been working on this as well. It’s not widespread in the US practice in permit submitting. That’s one way of trying to solve it. In that particular case, a lot of the states in Australia where it’s that way across any jurisdiction. It’s a statewide policy. LA has implemented something like this.

PTVC 115 | Zoning Data

They’re implementing this. The fact that it needs to be disclosed suggests that this happens far too often. In other industries like Big Pharma, supporting studies, lobbying, and donating lots of money is how the world works. You can bet that if it’s working anywhere else, it’s working in real estate. Real estate is going to be the testing bed for all types of business dynamics. One of those dynamics is the political connections and the contributions you can make. It’s good to see that’s changing.

It goes a little step further. We think about the process of how that non-urban land next to where you’ve currently got residential land in an area. You’ve got a rural farming area and how that land release happens. It’s usually flagged, but by the time it’s flagged on the strategic plan, it’s been talked about for a while and moved around.

At some point, it starts to become where they have to make a public exhibition. The future land use plan and goes up for public exhibition. There’s a clear process that takes place, and then eventually, it gets rezoned. There are other things like spot rezoning, which we can get into where there are more issues around that. Certain cities try to claim that they don’t do spot rezoning and those things.

The biggest issue Zoneomics is at least trying to start is even when a city does make the information publicly available, it goes, lives, and dies in a PDF document. It’s all analog. It sits there either in the city center. If it finally gets put up on a website, it still lives and dies in a PDF eventually. It’s not analog. It’s not searchable. It’s not easily available like you see with the stock market, where anyone can go on Robin Hood or a Bloomberg terminal and get access to that information.

It is available. It’s just that it lives in a PDF document. It’s not searchable and not standardized. It’s on multiple different websites. In the US, we’re talking about 19,000 different municipalities or more and 3,000 different counties that all have different systems and PDFs where they’re saying where the future of this city is going.

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About Zain Jaffer:

Zain Jaffer is an accomplished executive, investor, and entrepreneur. He started his first company at the age of 14 and later moved to the US as an immigrant to found Vungle, after securing $25M from tech giants including Google & AOL in 2011. Vungle recently sold for $780m.

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