Among the more intriguing stories coming from the golf world is the ever-changing relationship between homeowners inside certain golf communities and the owners of the golf courses that are core amenity of these communities.
These golf courses were intentionally developed to provide a view amenity and support the sale of residential units, many of which would carry a “lot premium” specifically for the golf course view. It was assumed that most of the home buyers would be golfers, thus providing support to the golf course, although many courses also required some direct support from the developer.
As these communities matured, later generations of homeowners seemed less interested in golf and, as a result, some of their golf courses began to struggle.
We now find that the number one issue facing NGF’s consulting practice is helping to resolve conflict between golf community residents and golf course owners. In some cases, the conflict has risen to the level of litigation, whereby homeowners are suing club owners in an effort to force the continued operation of golf courses, even when they are failing economically.
This begs the question: “What do we do with development golf courses when the community that surrounds it no longer supports it?”
While this question presents a frequent challenge, increasingly I am seeing solutions that work, and these almost always involve community residents and golf club owners working together. I think we can all agree that it is in the best interest of both parties to prevent these golf courses from closing and ruining the “view amenity” that was so attractive in the first place.
Potential Impact of Golf Course Failure
Golf course closure is a worst-case scenario for golf communities. Just as there was a premium for a golf-view lot upon initial purchase, there is clear diminished value for homes in communities with closed golf courses. Initial review of Multiple Listing Service (MLS) data in Florida suggests a value reduction that could be 20% or more, although a more comprehensive national study is ongoing at NGF.
The negative impact is mostly a result of unpleasant views of a fallow golf course, but there can also be a wider message the course closure sends about the neighborhood. Potential home-buyers often think “the whole community must be in decline,” not just the golf course, and shy away unless enticed by extreme price discounts. This can have a broader impact, with local municipalities feeling the brunt of depressed home values on tax rolls and the ability to provide municipal services.
And yet all of this is “blamed” on golf. We often hear the common refrain that “golf is dying and taking real estate down with it.” I have a different view.
These golf courses were originally designed to support golf demand from within the development that surrounds the facility. As this demand declines due to non-golfers moving in, the development golf courses are forced to reach outside the neighborhood for support, and in many cases the facilities are just not designed to adequately service this line of business. And so we have residents moving in to golf communities because they like the view, but are not providing the economic sustenance the course needs to survive. To me, this is the core of this crisis, not waning golf demand.
As this issue has become central in NGF consulting in the last few years, we are seeing many communities faced with a “day of reckoning” in deciding whether to sustain the golf amenity or just let it close. While this decision can be difficult, more and more we are seeing “win-win” solutions for homeowners and golf course operators, including the three most common examples of what successful communities are doing to help save the golf course that is so important to the value of their homes:
- Buy the course outright – There is a growing trend of homeowners purchasing struggling community golf courses themselves. What better way to preserve the centerpiece amenity of your neighborhood than to buy the course and operate it yourself. While this action puts residents in a business they are often unfamiliar with (the golf facility business), the feeling of having direct control over this asset help to create a spirit of cooperation and end the “us vs. them” mentality we often see. As the homeowners become responsible for the economics of golf in their community, they may have to cover economic losses through assessments and increased Homeowner Association dues, but the core amenity is protected, preserving home values.
- Establish financial commitment – Absent direct ownership, some communities have come up with creative ways to provide external economic support for the golf facility to help secure financial viability. Among the most common that I have seen include minimum membership requirements and mandatory HOA dues support. These solutions can provide a fixed mechanism of additional revenue from the very people who benefit most from the club’s economic viability – the homeowners. A key to making this solution work is a requirement that all revenue derived from these sources be put back into the golf facility to support operations or new investment in enhancements.
- Allow for partial re-development of golf course property – In some cases where property characteristics permit, allowance of small portions of golf course land to be re-developed into some alternate use that can generate income for golf course owners can be a workable solution. What I am finding makes this strategy work best are changes that retain the basic integrity of the golf course, but avoids any direct impact on existing homeowners’ view amenity. Examples include new townhomes or high-end apartments added to open property in and around clubhouses, driving ranges and/or parking areas. This can be a great compromise for golf course owners looking to close a golf course and replace it with intense development that would ruin everyone’s view amenity. In the last two years, I have seen several golf communities take this compromise route.
Can We All Just Get Along?
So you see all is not doom and gloom in golf. The golf course amenity that was so important in the original conception of these master-planned communities can still be viable as a business in its own right, but it just needs a little extra support from the homeowners. Many communities have made efforts to support their neighborhood golf course through direct financial commitment, or by allowing some form of limited development when allowable by local guidelines. By working together, many of these communities are finding that they can sustain golf in their development and prevent the golf course closure nightmare that can only have detrimental effect on the value of their most important family asset – their home!
Richard has been the Director of Consulting Services for the National Golf Foundation since 1997 and has more than two decades of golf facility consulting experience. During his tenure, he's prepared hundreds of research studies for specific golf facility projects, visited and/or profiled more than 2,000 golf courses and is an expert in matters related to golf facility operation.