There are 3 Different Kinds of Developers

Developers are a major source of political influence in cities large and small, but also a major political football—you’ve no doubt heard claims like “(Such-and-such city council member) is backed by developers” or “Developers are pushing for (such-and-such plan or proposed law).” The reality is probably that a much more specific subset of people are doing it. And that’s important to understand. Overgeneralization is not helping your ability to understand the forces actually shaping what gets built in your community and where, let alone change it.

There are actually different types of developers who operate by almost completely different business models. They build different types of buildings, in different places. They use different sources of financing. Local rules and regulations affect these different groups very differently, and—importantly—their interests often do not align.

If we focus specifically on residential developers, we can group them into three rough categories that barely overlap with each other.

6 Things to Know About How Development Works

Depending on the circles you travel in, the word “developer” may elicit a strong reaction in you. Maybe you hate and mistrust them; maybe you see them as enterprising risk-takers improving your community; maybe you are one. (If you are one, this article is probably not for you.) Americans have strong opinions about real-estate developers as professions go, to the point where academic research has even found that one of the strongest predictors of how opposed people will be to a new building in their neighborhood is whether they think a developer is going to make a profit from it.

There is, however, a lot of misunderstanding about what developers do and how their business model works. Here’s a super-dumbed-down, 101 guide to six things you want to understand if you’re going to have informed conversations about development in your community. (This article will focus on housing, but note that some of these apply more broadly to retail, office buildings, or any sort of project.)