Steep slope, slippery slope

Room to grow?: The Cliffs at Walnut Cove plans a 126-lot expansion “compatible with the land,” according to planner Don Nickell. photo by Jonathan Welch

Historically, more people have brought fortunes to Western North Carolina than have made them here. As a result, the region has been shaped more than most places by outside money invested in local real estate.

It happened when George Vanderbilt pieced together his Biltmore Estate from a multitude of small parcels, and again when the federal government bought 87,000 acres from his widow to assemble the Pisgah National Forest. It happened when Tennessean E.W. Grove poured his profits from the Tasteless Chill Tonic into his various Asheville projects. Seven decades later, Julian Price used his inherited insurance fortune to help revitalize downtown Asheville. (Among the many properties benefiting from Price’s involvement was the Grove Arcade.)

Yet another transformation is happening now, as outside money floods into nationally marketed, high-elevation resort projects across the region. But whereas those past investors were often driven more by grand visions than by the profit motive, today’s gated resort communities are wholly creatures of capitalism — born of market research, designed to maximize returns, and advertised accordingly (often in the pages of The Wall Street Journal). And many of today’s investors have no intention of living on the property they buy.

First and foremost, these new communities are catering to a huge demand for upscale second and retirement homes in Western North Carolina, which analysts say is beginning to rival south Florida for regional supremacy in this market. But that fact alone is enough to send chills up the spines of many WNC residents, who tend to regard south Florida’s sprawl, high cost of living and environmentally devastated wetlands as precisely what they want to avoid.

Keeping watch: Gracia O’Neill of Clean Water for North Carolina is drawing attention to what she says are environmental-justice issues surrounding developments like Wolf Ridge. photo by Jonathan Welch

“I moved here because I wanted to live in a rural setting, because I wanted to live in an area where there were farms and undisturbed mountains,” says Garland Calloway, who lives in Madison County’s Laurel Valley, where several large, upscale developments are in the works near the Wolf Laurel Resort. “In fact, I’m seriously considering whether to stay in this area or leave.”

Proponents of such projects say they boost tax revenues and bring jobs (often to outlying rural areas), while their typically part-time or retired residents place few demands on essential services. Many of the developments themselves include hiking trails and preserve a significant portion of their land.

For several reasons, however, the proliferation of local resort projects has also accelerated the development of steeply sloping properties. Few large tracts of bottomland remain, and high-end buyers can afford the extra engineering-and-construction costs such projects entail. Just as importantly, the breathtaking views these sites offer are prized by buyers and look great in advertisements.

To obtain those sweeping vistas, however, a lot of people living in the valleys below may have to give up their scenic views of the surrounding mountainsides. They may also have to deal with less picturesque things like increased runoff, sedimentation and traffic congestion on winding mountain roads.

Versant, an eco-friendly development in the works just north of Beaver Lake in partnership with the conservation group Audubon International, has taken out a series of quarter-page advertisements in The Wall Street Journal. Each features a photo of a beautiful mountainside with a wooden sign proclaiming: “Future site of ….” The end of the sentence changes from ad to ad. One reads, “Future site of no regrets.” Another, “Future site of where you want to get off when you finally get the world to stop.” A third shows a gorgeous view of the tree canopy in the valley below, pierced only by distant downtown towers. The sign reads: “Future site of your kids wondering if you can see Asheville, can the people in Asheville see you?” An honest answer might be: Well, yes, they can at least see your house — and they’re not happy about it.

Reining in development

Responding to the growing clamor, Asheville’s Planning Department is drafting a steep-slope ordinance, and at press time, Haywood County was preparing to pass one. Since last spring, two other local governments — Buncombe County and the town of Boone — have already done so. These ordinances use various tools to control development on steep slopes and the resulting erosion: restricting density, requiring permits for cutting or filling on slopes, limiting road grades, requiring retaining walls, encouraging developers to make buildings less visible and so forth.

Buncombe County’s ordinance, unanimously approved last spring, is notable for its curbs on density. If the controversial 160-acre Bartram’s Walk project planned for Beaverdam had been located in an unzoned part of county, for example, it could have had as many as 1,400 lots under the old rules, according to Buncombe County Planner Jim Coman. The new slope ordinance would allow a maximum of 103 lots. (In fact, however, local zoning in Beaverdam would have limited the project to 117 lots, even under the old rules.)

But because the ordinance didn’t take effect until July 1, 23 developments (collectively involving more than 2,000 potential homes) were able to get around the new restrictions by submitting plans just before the deadline. That outraged neighboring property owners, who successfully pushed the county commissioners to instruct the Planning Board not to grant variances for any of these under-the-wire projects.

Many developers submitted master plans consisting of little more than a map showing how the property is to be subdivided. That means they still have to run the gauntlet of permitting requirements from various agencies before any building can start, leaving their fates far from certain. Both Bartram’s Walk and Brittain Knob (near Weaverville) involve Atlanta-area development interests, and both have encountered well-organized neighborhood resistance.

At this writing, legal questions concerning access to the property appear to pose a significant hurdle to Brittain Knob. But even if the developer resolves that issue, Buncombe County attorneys and planning staff have suggested that changes to the plan probably mean the project will have to meet the new, stricter rules (see “A Rocky Road,” Nov. 8 Xpress.) Meanwhile, there are indications that Bartram’s Walk may also be stalled.

The Cliffs Communities, based in Greenville, S.C., also submitted only master plans for two of its WNC projects: an expansion of The Cliffs at Walnut Cove (126 lots) and High Carolina (the largest of all, with 592 lots). “Our developments are very compatible with the land,” Cliffs planner Don Nickell told Xpress. You won’t see us tearing up the world.” At High Carolina, on the other hand, county staff — tipped off by neighbors — recently shut down road construction begun without Planning Board approval.

Part-time residents

Although some of these prospective developments lie within a short commute of Asheville, many buyers are looking for second or retirement homes. “You’re probably talking few if any school kids in a place like The Cliffs,” says Coman.

Of course, this is nothing new. Retirees have long accounted for a big chunk of those moving to the region’s southern counties, such as Polk and Henderson, and well-heeled lowlanders have long flocked to resort towns like Cashiers (Jackson County), Highlands (Macon) and Blowing Rock (Watauga) in the summer. To meet that demand, developers have been building upscale gated communities in these places for quite some time now.

But in recent years, the pace of such construction has picked up considerably and has spread to other mountain counties. In particular, Asheville’s growing reputation as a vibrant city has helped spur such development in Buncombe and in neighboring counties with good interstate access to the region’s urban hub.

Finding hard figures about these trends is difficult. Census data, for instance, don’t count second-home owners, and wealthy retirees who split their time between here and Florida will almost always declare Florida residency, because they don’t pay income tax there and state residents get a break on their property taxes.

However, one admittedly imperfect way to track the growth and spread of real-estate development aimed at wealthy retirees and second-home buyers is through the county rankings published by the Public School Forum of North Carolina in its annual Local School Finance Study. The study gauges counties’ respective ability to provide funding for their public schools by considering property-tax valuations per student enrolled in those schools and then subtracting mandated social-service payments, such as for Medicaid. Wealthy retirees and second-home owners neither put children in the local schools nor require Medicaid payments, so when counties that have low per capita incomes compared to the state average — a description that fits all of North Carolina’s mountain counties except Polk — do well on this measure or make rapid gains, it’s a fair bet that second-home owners and retirees are playing a role. Most mountain counties have shown significant gains in this ranking in recent years. (The other top scorers include coastal counties with beachfront property and the urban centers of the piedmont.)

Between 1997 and 2004, Watauga’s ranking among the state’s 100 counties jumped from 18 to 2, Macon County’s from 10 to 3, Jackson’s from 19 to 7, Transylvania’s from 11 to 9, Clay’s from 36 to 20, Buncombe’s from 25 to 21, and Haywood’s from 37 to 27. Henderson and Avery, which ranked 14 and 15 in 1997, swapped places in 2004. In both years, Yancey ranked in the 30s and Mitchell in the 50s, and even Swain — the only far-western county that the School Forum still considered “poor” in 2004 — improved from 83 to 66. Meanwhile, Madison County, which at 88 had ranked even lower than Swain in 1997, had advanced all the way to 32 by 2004.

Changing communities

Nowhere in the region are the changes being wrought by resort development starker than in Madison County.

Several decades ago, Madison was one of the poorest counties in the state, if not the nation. Old ways had persisted. Ethnographers went there to collect folk songs that had been passed down from generation to generation in its Scotch-Irish farming communities. Families grew much of their own food, kept milk cows, and planted burley tobacco as a cash crop.

Change came gradually. Electric and telephone service were extended throughout the county in the 1950s. Wolf Laurel Slopes (now the Wolf Ridge Ski Resort) opened in 1969, and transplants began to move in and take root. Back-to-the-landers, mostly baby boomers who grew up in suburbia, discovered the county in the 1970s, and after they tired of working the land, some stayed on, finding other work or starting businesses. More recently, professionals (who often commute to Asheville or elsewhere) have arrived in growing numbers. So have retirees. And the extension of Interstate 26 beyond Asheville is helping accelerate the pace of change, making the county much more attractive to resort developers.

After successfully petitioning the county to rezone the property, the owners of the Wolf Laurel Ski Resort and other developers are building several new communities (including The Preserve at Wolf Laurel, Wolf Ridge and Breakaway) adjacent to the ski resort. All told, they may add as many as 1,000 new homes on the slopes of Big Bald Mountain, potentially making the resort area a larger settlement than either Mars Hill or Marshall, the county’s biggest towns.

The developers are also putting in a mountainside airstrip within a few hundred yards of the Mars Hill watershed. Gracia O’Neill of the nonprofit Clean Water for North Carolina, citing a 2002 plane crash at Mountain Air (a resort community in neighboring Yancey County), worries that a similar accident here could put jet fuel in Mars Hill’s water supply.

Furthermore, the state has granted a permit for a sewage-treatment plant to serve several of these develpments. According to O’Neill, discharges into Puncheon Creek, a Class C trout stream, will equal about 27 percent of the creek’s normal flow.

Environmental justice

Of all the environmental problems connected to high-density, steep-slope development — including loss of habitat and increased risk of landslides — those involving water loom the largest. And almost all such potential problems are on full display at Wolf Laurel.

For starters, there’s the risk of increased sedimentation due to construction. “Sediment is widely believed to be the No. 1 water-quality problem in North Carolina surface waters,” O’Neill explains. “It gets into the gills and basically suffocates fish. If you have it in an ongoing way, it can cloud the water and decrease the amount of photosynthesis that can take place within the water column, and that hurts the aquatic-plant community that, in many cases, is the basis of the food chain.”

Although O’Neill describes the state’s Sedimentation Pollution Control Act as “strongly worded,” she also notes: “The more technical aspects about the requirements of [an erosion-control] plan were designed using models from regions of the state that are much flatter than Western North Carolina. They don’t reflect the steep slopes on which a lot of building is happening in [this area], and therefore they’re not adequate to [prevent] sediment from leaving a construction site.”

Moreover, the state Department of Environment and Natural Resources is overworked, understaffed and lax about enforcement, says O’Neill. When a developer does come to the agency’s attention, DENR may hold off on issuing a notice of violation or may choose to issue a second violation instead of levying a fine.

With regard to the Wolf Ridge project, a “handful” of notices of violation have been issued, “but no fines have ever been assessed by [DENR’s] Division of Land Quality” against the project, says O’Neill. DENR’s other branch, the Division of Water Quality, rarely issues notices of violation at all, she maintains.

Susan Massengale of the Division of Water Quality says her division has asked nearby developments, such as Breakaway, to institute restoration projects. “Not all enforcement has to be punitive per se,” she says. “The goal is to restore and improve the environment.”

And Mell Nevils, the section chief for the Land Quality Division, notes that his division has fined neighboring developments if not Wolf Ridge, including Breakaway (to the tune of $3,200). It has also fined B&E Ventures ($5,000), whose partners, Orville English and Rick Bussey own or have stakes in the Wolf Laurel ski resort and the Puncheon Creek sewage-treatment plant. (Bussey did not return calls requesting comment, and Breakaway was not answering its phones.)

O’Neill also worries about the impact of new development on current residents’ water supplies. “Everyone in the Laurel Valley is on a spring; they’re not even on wells,” she notes. “Some of them are lower-income folks; they might even be on fixed incomes, and the way that they get their water is they’ve got a pipe sticking into a rock a couple of hundred feet behind their house. And they’re terrified of what’s going to happen once [newcomers] start making ground-water withdrawals for high-end houses up on the top of the mountain.

“What happens when their spring dries up? Folks up there have asked this question and have been told, ‘Well, you’ll have to dig a well.’ You can’t just drop six grand on a new well when you weren’t expecting to. For [O’Neill’s group], that’s where the environmental-justice issue comes into play: When you have wealthy people taking advantage of a common natural resource to the detriment of lower-income folks.”

Killing the golden goose?

Laurel Valley Watch, a community group formed in response to these projects, argues that their scale is entirely inappropriate for the area. The group has filed separate lawsuits against the developers, the county and DENR, challenging various aspects of these projects as well as the approval process itself.

As things now stand, developers have “a free run of the county,” argues Garland Calloway, who serves on the group’s board. He wants the county to develop a comprehensive land-use plan — and to levy new development fees to pay for the needed economic and environmental studies.

In March, with the development debate raging, County Manager Ricky McDevitt recommended forming a broad-based task force that would include commissioners, developers, planners and activists to consider the county’s hot-button development issues. But the commissioners nixed that idea on a 3-2 vote, instructing the Planning Board to tackle the problem instead. The board, in turn, has hired the Land-of-Sky Regional Council, a local council of governments, to conduct a study.

All three incumbents who were up for re-election Nov. 7 prevailed, and one of the first things they did was to vote — by the same 3-2 margin — not to extend McDevitt’s contract. Local observers say the pro-growth majority regarded him as being too ambivalent about development. McDevitt says he sees both sides of the development issue. There’s not much manufacturing in the county, he notes. Development and new homes will bolster the tax base and attract more retail businesses. And most of the people buying homes in those resort communities will be part-time residents who aren’t likely to commit many crimes or put children in the schools. “It’s a money earner for the county,” says McDevitt. “There isn’t any way to dispute that.”

“On the other side,” he continues, “this county has an easygoing character. It’s been a farming community forever. Its tourist beauty is what makes people want to move here, so you’re a little bit killing the golden goose. Our kids play in the creek; our kids actually get baptized in the creek. And we ride up that road in our bicycles and don’t get run over by cars. So the character of the community is at stake as well.”

Sunshine and clouds

Both The Preserve at Wolf Laurel and Mountain Air have been advertising in The Wall Street Journal this fall. Mountain Air’s catchy slogan is, “If you’re going to spend a million dollars, why not have a million-dollar view?”

A more common theme is golf. The Lutgert Companies of Naples, Fla., offer “lifestyles from $950,000” at their Linville Ridge development in Avery County. The words “avoid the rush hour DRIVE” are superimposed over a photo of a golfing threesome.

In a similar vein, Sylva’s Balsam Mountain Preserve boasts of “Golf at a Higher Level.” But Henderson County’s Champion Hills takes a more cosmopolitan tack: “Fazio Golf for Me … Civilization for Ann!” declares its silver-haired, chiseled-chin protagonist as fine-featured Ann looks on, smiling.

Other Western North Carolina developments that have advertised in the paper recently include the Maggie Valley Club, Chinquapin, Mount Wilderness, Bear Lake Reserve, the Ultima Carolina Communities (Avalon, Black Bear Falls, Black Rock, Fontana Trace, Wildflower), Red Wolf Run, Wild Ridges, Chestnut Flats Preserve, Big Cove Estates, The Divide at Bald Rock, Mountain Park at Lake Adger, River Rock, Grey Rock at Lake Lure, The Ramble, Bill’s Mountain, Trillium Arbor, Bear Wallow Springs at Lake Toxaway, Queens Gap, Echota, Firefly Cove at Lake Lure, The Settings of Black Mountain … and the list goes on.

Until recently, ads for Florida real-estate projects predominated in the Journal, recalls Florida-based housing consultant and market analyst Jack McCabe. The Sunshine State has attracted large numbers of in-migrants for decades, and it’s been the East Coast’s most popular destination for retirees.

Just a few years ago, the real-estate market there was booming. Investors would camp out to get a chance to buy “pre-construction” condos, which they financed with exotic loans and flipped for big profits before the properties were even built. Perhaps not surprisingly, the market overheated. Prices are now dropping, especially for condos, and the state leads the nation in mortgage foreclosures.

“The markets in Florida are all projected to go through a downturn in valuation over the coming years, and in some cases it’s expected to be pretty severe,” says McCabe, citing hurricanes as well as high insurance costs and property taxes as contributing factors.

But his state’s poor outlook has only served to ramp up investor interest in Western North Carolina as an alternate Southeastern market, he notes. McCabe says he gets e-mails from Florida investor groups every week organizing “caravans” to check out property in the region.

Boom or bust?

There are some similarities between Florida’s condo market a few years back and the resort properties now being peddled in the mountains. Most of these gated communities are offered “pre-construction,” with lots, not homes, for sale. And many of those lots are being sold to investors who don’t plan on living there. The financing packets provided by developers even provide details about which banks offer interest-only loans.

Pricey subdivision lots are not the only local properties piquing flippers’ interest, either. Asheville and Buncombe County staffers have also seen evidence of speculation involving larger parcels. According to Asheville Water Resources Director David Hanks, a lot of the requests he gets for water service come from land speculators who aren’t really planning to develop their property but hope to increase its value before they sell it. Then, several years later, a new owner will once again apply for service for the same property, which now has a different subdivision name.

“In terms of speculation, I see a lot of parallels between right now and 1929 [in Asheville],” says Coman, the Buncombe County planner.

That raises a key question: Is the Florida condo market a harbinger of what’s in store for Western North Carolina? Will we see housing prices and sales start to fall here too?

Duncan Haggart, president-elect of the Asheville Board of Realtors, dismisses that notion, saying he hasn’t seen much sign of overt speculation and isn’t worried about the impact of people investing in resort property because of “a disconnect” between those communities and the general Asheville market. “People in Asheville aren’t deciding whether to live in Norwood Park or Mountain Air,” says Haggart.

In Asheville as a whole, he notes, “We haven’t seen the kind of run-up [found] in other markets, where you hear about 20 percent gains in six months. We’ve had steady growth for a long time.” Both Haggart and the board’s CEO, David West, describe a strong market, with total unit sales expected to break last year’s record and prices rising.

However, statistics published by the North Carolina Association of Realtors paint a cloudier picture. In September (the last month for which figures were available), the average selling price of an Asheville-area home was $282,911 — an all-time high — and unit sales for the year were also ahead of 2005 through September. But that was largely thanks to strong growth early in the year. In both July and August, unit sales were down 1 percent from the same months last year. And September unit sales were down 18 percent — the first double-digit decline in 19 months.

With high levels of inventory and sales down for three straight months, it would hardly be shocking if home prices also started receding from their record levels. Nevertheless, no one interviewed for this story predicted a major market shakeout here, and they typically cited two reasons: demographics and the region’s growing popularity.

Demography is destiny

Nationwide, aging baby boomers are stoking the demand for second homes; people ages 55 to 64 buy more of them than any other cohort. And eventually, of course, boomers will also start buying retirement homes en masse. Moreover, these demographic factors are coming into play just as North Carolina is gaining popularity at Florida’s expense.

Since 1997, Harris has conducted an annual telephone poll asking, “If you could live in any state in the country except the state you live in now, what state would you choose to live in?” From 1997-2001, Florida came in first. The state ranked second from 2002-05, and it slipped to third place earlier this year as North Carolina was moving up from eighth to fourth. (California and Hawaii ranked first and second, respectively.) And just last month, the Anholt State Brands Index released results showing North Carolina as the state “where Americans most want to live,” based on a survey of 9,000 U.S citizens. (Virginia came in second and Florida third.)

Asheville and the mountains are seen as particularly desirable, cherished for their scenic beauty, cultural activity and moderate summers. So growing speculation in the WNC real-estate market is only logical, analysts say.

“The Western North Carolina area is expected to be one of the better-appreciating and more vibrant real-estate markets in the next five to 10 years,” says McCabe. “You still have a lot more affordability there. You can get a three-bedroom, two-and-a-half-bath house with a beautiful mountain view for the same price as a condo conversion that’s 20 years old in Florida. And the investors in particular … read The Wall Street Journal in all parts of the country, and they’re looking for ‘up’ markets where they can invest and speculate.

“It should be a concern for Asheville, because it will artificially prop prices up and there will be a lot of profit-taking [by] out-of-state investors,” McCabe predicts. “It will force a lot of the local folk out of that area, which is what we’re seeing happen in Florida.”

“For the typical Asheville resident [who] may be working at a median wage, if they own their homes now it could be a very good thing, because the prices of their property will definitely go up and they’ll make money,” McCabe continues. “But for the people that can’t afford to own there right now, it means that in many cases they’re not going to ever be able to afford a home in that area — and more than likely they’ll leave and look for some more affordable places.”

[Jonathan Barnard, a freelance translator and writer, lives in West Asheville.]