Losing More Golf Courses for Affordable Housing?

According to an article in “The First Call” by Bradley Klein, California is about to consider a law targeting municipally owned golf courses for repurposing into affordable housing sites. While repurposing of golf courses is nothing new, state and local governments actively targeting those sites for affordable housing is. For an appraiser, this raises the question of Highest and Best Use, defined in the Appraisal Dictionary as: The reasonably probable use of property that results in the highest value. The four criteria that the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum productivity.

In California, one question, for each of the potentially targeted golf courses, will be if the affordable housing represents highest and best use, not only from an economic perspective, but also from the perspective of utilization of community assets. Certainly, there is no debate that many communities in California need of affordable housing. A broader view of the issue also requires answering the question of whether use as an affordable housing project would better serve the community’s needs than alternatives, including golf. Not only does the property have a highest and best use, but the community needs to identify the best solution. How would that be determined?

A public access golf course potentially brings considerable advantages to any community. Typically, it avails affordable recreation to a broad cross-section of the community and can often enhance (along with other recreational facilities) a community’s desirability for business relocation, housing growth and resulting job creation. It also preserves open space so vital in many communities where high population density and congestion have diminished the quality of life. A golf course also contributes numerous environmental benefits and jobs.

Among the issues to be considered are:

  • Is the golf course location suitable for affordable housing?
  • Does the affordable housing project require a site of 150+/- acres?
  • Is there a site (or sites) where an existing building (already constructed) could be repurposed?
  • Is the existing golf course generating positive cash flow?
  • Is open space a community priority

One of the fundamental principles of real estate valuation is the principle of substitution. This principle states: “When several similar or commensurate commodities, goods, or services are available, the one with the lowest price will attract the greatest demand and widest distribution. This is the primary principle upon which the cost and sales comparison approaches are based.” This principle raises the question of what other options might be available, in this case, to create affordable housing. Maybe a smaller site, possibly with an existing building that is vacant, under-utilized or in need of repairs could be converted to affordable housing units. In many locations there are old, sometimes high-rise industrial facilities or largely vacant shopping malls or office facilities that could potentially be repurposed. Numerous communities have developed new municipal facilities that have been converted into a variety of residential facilities. To solve the affordable housing problem expands the highest and best use question beyond a specific property to where the more relevant question becomes What is the best option (substitute)?

For sure, as a golfer and golf property consultant/appraiser, I hate to see golf courses disappear. The club I grew up at and played for nearly 50 years is now a mixed use development. During the past 15-20 years I’ve observed many of my clients and their clubs go under. I’ve even won club championships at 2 clubs that no longer exist. That said, there are most definitely golf courses that should be repurposed into alternative uses. In communities that need affordable housing, it seems as though (in some cases) golf courses have become convenient targets for political interests even when they aren’t the best option for solving the affordable housing crisis.

Thus, it’s incumbent to the community to identify the best option for siting the needed affordable housing given consideration of all the factors mentioned above. In a sense, it’s more of a “best option” analysis for the community, including consideration of the highest and best use of the sites potentially available. Simply targeting golf courses owned by municipalities seems like a political solution to a problem rather than an analytical solution.

NOTE: Since this post, a “watered down” version of HB 672 has been brought forth: https://golfweek.usatoday.com/2022/01/14/california-assembly-bill-672-threatens-municipal-golf/