If Your Project Doesn’t Pencil, Your Land Is Silently Depreciating

If your project doesn’t pencil, your land is silently depreciating.

Land value is being reset in real time—and most owners won’t notice until it’s too late.

Across Santa Clara County, thousands of housing units are fully approved—yet very few are being built. The reason isn’t zoning, political resistance, or lack of demand. It’s feasibility.

In today’s market, entitlement alone no longer preserves value. Residual land value does. And when feasibility slips, land value doesn’t pause—it quietly erodes.

Why Approved Land Is Losing Value

Santa Clara County isn’t one housing market. It’s several—and each behaves differently under today’s cost structure.

Custom-built estate homes remain insulated. Wealth-driven buyers fund construction directly, absorbing cost overruns as lifestyle choices. Land values in this segment often remain strong—but these homes don’t scale and don’t solve supply.

Single-family homes continue to pencil where lots are well-located and infrastructure is in place. Predictable costs and deep buyer demand keep residual land values positive. The constraint here is land scarcity, not feasibility.

Wood-frame multifamily—townhomes, duplexes, stacked flats—is carrying most new production. These projects still generate healthy residual land value because construction costs align with achievable rents.

The “missing middle”—mid-rise podium buildings—is where the tension lives. These projects are often just 5–15% below feasibility. Small changes in parking, fees, or timing can move land value from negative to positive. This is where smart policy and early repositioning matter most.

High-rise steel and concrete projects, however, are largely frozen. Construction costs and structured parking overwhelm achievable rents, pushing residual land values deeply negative. When land is worth less developed than undeveloped, capital steps away.

Why Residual Land Value Is the Real Signal

Residual land value is what remains after construction costs, financing, fees, and required returns are deducted from projected revenue.

• Positive residual value: land trades, projects finance, homes get built

• Zero residual value: projects stall

• Negative residual value: projects die

This is why approvals don’t guarantee construction—and why waiting without recalculating is risky.

From the outside, stalled projects look like patience.

From the inside, they look like unnoticed depreciation.

Capital doesn’t wait for markets to recover—it reallocates. And when feasibility fails, landowners lose leverage first.

The most expensive mistake right now isn’t selling too early.

It’s waiting too long without adjusting the math.

Success Stories: How Value Is Being Preserved

Projects moving forward today share one trait: residual land value was protected early.

That happens when owners:

• Re-test feasibility before land trades

• Adjust product type, not just price

• Right-size parking and density

• Use targeted incentives strategically

These are not speculative wins—they’re disciplined, feasibility-first decisions.

Overcoming the Challenge

Santa Clara County doesn’t need more approvals. It needs alignment between cost, product, and value.

Housing gets built when land retains value. When land value collapses, supply follows.