The Hidden Crisis: Developers Are Getting Crushed by Land Valuations
It’s not just that prices aren’t dropping fast enough to help affordability—there’s another major problem brewing: land valuations for financing are falling short, and developers are getting squeezed hard when they try to finance or refinance their projects.
1. The Valuation Gap: What’s Happening?
Developers bought land at peak prices based on projections that no longer make sense in today’s market. Now, when they go to finance or refinance, they’re facing a rude awakening:
🔹 Appraisals are coming in lower than expected—sometimes way lower.
🔹 Lenders are getting conservative, adjusting valuations to reflect today’s tougher market conditions.
🔹 Even zoned land is sometimes being valued at the original purchase price. That means the price hasn’t gone down, but the developer also isn’t getting the “lift” they were counting on to refinance or secure construction financing.
🔹 The numbers don’t support the debt loads developers thought they could carry.
2. Why This Is a Developer’s Worst Nightmare
A year or two ago, developers were securing land with aggressive valuations, expecting to finance at, say, $300M, based on the projected value of a fully zoned site. But today?
Lenders aren’t seeing those same values anymore.
Suddenly, that $300M site is only getting appraised at $225M or less.
Worse still, some zoned sites are still being valued at the original purchase price, meaning the expected increase in value from entitlement work isn’t materializing in financing terms.
But here’s the kicker: the developer already structured their financing around the original number, and now they’re short.
So now what? More equity injections, more stress, or worse—fire sales.
3. The Ripple Effect: Why This Matters
If developers can’t finance land properly, we’re looking at a chain reaction:
🚧 Projects get delayed or outright canceled – because the money isn’t there.
💰 More distressed land sales – which, in theory, should bring prices down, but…
🏗 Less new supply coming online – which keeps housing unaffordable for longer.
📉 Developers who counted on zoning “value lifts” are stuck – making projects financially unworkable.
It’s a Catch-22: Prices need to drop for affordability, but if valuations drop too much, developers can’t build at all.
4. The Only Way Out?
The industry needs to recalibrate expectations on what land is actually worth in today’s environment. That means:
✔ Sellers need to accept reality. No, your unzoned land isn’t worth peak-market pricing anymore.
✔ Developers need to structure deals differently. More creative financing, more partnerships, less reliance on proformas from 2021.
✔ Governments need to ease up on fees & timelines. If they want affordability, they need to help make projects feasible again.
The Assembly King’s Take
"The valuation game is a nightmare right now. Developers are stuck between overpriced land from yesterday and lenders who don’t believe in their numbers today. And when zoning ‘lifts’ aren’t being recognized, deals that should have worked are suddenly dead in the water. Until this corrects, expect slower development, more land sales, and a brutal squeeze on the industry."
What do you think—are we about to see a wave of land repricing, or will developers just hold on for dear life?