Barbara Siegel learned about the terrace exemption the hard way.

Her new neighbors in Bethesda wanted to tear down the home they had just bought and replace it with a larger one. Curious, Siegel asked to review their building plans. Siegel, an architect by trade, was shocked when she saw the blueprints. "I couldn't believe it was so tall," she says. "I asked the guy how he could build it so tall in a residential area. He said, 'That's the terrace exemption.' I said, 'Where?' He pointed to a planter box in the blueprints and said, 'That's your terrace.'"

The exemption, part of the Montgomery County zoning code, lets the Department of Permitting Services measure the height of the house from terraced land — in this case the planter box — not the level ground. The owner then could build a house that appeared to be much taller than the county's 35-foot height restriction.

Siegel is not opposed to tearing down older, smaller houses and building larger ones in their place. "Teardowns can be done in a nice way," she says. "My concern is what's usually going up in their place. The suburban ideal is based on the concept of shared landscape. When a teardown is done poorly it reduces the quality of life in the neighborhood."

The battle lines over teardowns are clearly drawn. On one side are developers and Realtors who say they are merely responding to the market, as well as home buyers, who say that it is within their rights to build the home they want on their property. On the other side are people who live near a teardown and say the new homes are spoiling the aesthetics and character of their neighborhoods.

Whatever the pros and cons, one thing seems certain: The teardown trend will continue in the years ahead, transforming our neighborhoods even further. "In the next 10 years there isn't a single neighborhood inside or outside the Beltway that will look the way it is now," predicts Don Marette, a Chevy Chase resident and teardown developer. "Every 1950s rambler will be gone in 10 years."

Jeffrey Slavin, vice president of the Greater Capital Area Association of Realtors and president of C. J. O'Shaughnessy, a real estate firm in Rockville, says that teardowns "represent a generational change. A lot of residents who have been here for a long time don't understand why the next generation needs every bedroom with a bathroom that they had never really needed. They feel threatened."

But Slavin, who is a member of the Town of Somerset Council, also sees the issue from a community standpoint. "This is a huge issue in our town," he says. "We are getting to the point where we might just have to say no to developers."

A Rising Trend

Teardowns are nothing new to the metropolitan area. Since the early 1980s, developers and homeowners have been tearing down existing homes in various states of repair and replacing them with larger, more luxurious houses.

But the teardown trend really took off in the late 1990s and early part of this decade, both locally and nationwide. Today there are more than 50,000 teardowns annually, estimates Gopal Ahluwalia, staff vice president for research with the National Association of Home Builders. The National Trust for Historic Preservation identified the teardown trend in more than 100 communities in 20 states in its 2002 report, "Taming the Teardown Trend," and it listed teardowns in historic neighborhoods on its list of "America's 11 Most Endangered Historic Places." Big cities like Chicago, Dallas, Denver and Philadelphia also are wrestling with this issue, as are several suburbs of New York City.

In 2003 Montgomery County issued 145 teardown permits out of 1,640 construction permits for single-family dwellings (including revisions to existing permits). This year, as of Sept. 13, the county had issued 93 teardown permits out of 1,640 (including revisions to permits), "and we still have a few months to go," says Susan Scala-Demby, the county's manager of permitting services.

What's behind the teardown trend? Experts say there are several causes.

• Older houses are functionally obsolete. Today's homeowners want more of everything: more square footage, more bathrooms, more closets. And many will gladly live with less back yard as long as they get more house. "What I started finding was that a lot of my clients wanted to stay in their old neighborhood but wanted modern conveniences," says Richard Mandell, who owns Sandy Spring Builders, which does customized teardowns instead of spec jobs. "People live differently today than they did in the 1920s, 1930s and 1940s. They want larger rooms with higher ceilings."
  
  
• Potomac residents got tired of the commute. After building the home of their dreams outside the Beltway, many residents in Potomac and other areas grew tired of hour-long commutes. "The reality is, this area is about a way of life," says Mel Silicki, co-owner of Georgetown Development Corp., a custom home builder based in Monrovia, Md. "People want to be close to work, and walk to the Metro and downtown."
  
  
• The late 1990s stock market bubble burst. When wealthy investors saw their high-tech stocks begin to plummet in value, they decided to shift their money to real estate. "The stock market fell, so people pulled their money out of the market and put it into houses because it made more financial sense," says Siegel.
  
  
• Historically low interest rates made larger homes increasingly affordable to more people, fueling spec building. Teardowns could not boom until more buyers enjoyed access to inexpensive credit and interest rates fell to historic lows in the late 1990s. "Someone can say, 'I can afford another $100,000 of mortgage' because it might really only cost them $300 a month," says Roger Lewis, an architect who teaches at University of Maryland and writes a bi-monthly column for the Washington Post's Real Estate section.

The demand for teardowns seemingly attracted as many developers as homebuyers. Silicki switched from selling mortgages to developing teardowns, while Sandy Spring Builders stopped developing new houses on virgin land years ago. "Part of it had to do with large national and regional builders in the suburbs that have taken small local builders like us and forced them into an ever-shrinking geographic area," says Mandell.

Bigger competitors may have elbowed Sandy Spring Builders out of developing subdivisions, but it is fair to say that Mandell, Silicki and other teardown developers are not financially hurting. Local teardown developers agree that the average profit margin is 6 percent to 8 percent. Multiply a typical teardown sale of $1.5 million by several annual projects — Sandy Spring Builders will "recycle" eight houses this year, says Mandell, while Georgetown Development averages six — and it is easy to why teardowns make sense for developers.

Customizing homes to buyers' tastes

Once developers purchase the home they already are hundreds of thousands of dollars in debt. To erase the red ink as quickly as possible, they frequently engage a real estate agent to list the house well before it is completed. Sometimes developers only have a blueprint and a cleared lot, but for buyers desperate to live closer in to Bethesda and Washington, that is enough. They buy the land and buy into the plan. Chevy Chase Builders prefers this method, because it can customize the home to the buyer's tastes, says Mandell.

Adrian Scott Fine, of the National Trust, says the latest teardown houses tend to feature an Arts and Crafts style, complete with wood shingles and copper finishes. Another trend: placing the garage under the front of the house to fit as much house as possible into tight lots. Fine calls this practice an eyesore. "The garage is the dominant feature; the garage door is what you are attracted to," he explains. Says Roger Lewis: "A lot of the problem is just crappy architecture. Some of these things are just really ugly buildings."

Although a new house's appearance may offend critics and many neighbors, it is the size of the new building that really angers them. They say that some developers unscrupulously push the boundaries of Montgomery County's zoning regulations to the limit. They complain that the new home is too high, is not set back enough from the property line, has too many stories, or all of the above.

The cost to a neighborhood

Bethesda resident Norman Latker knows all too well about the impact a teardown can have on a neighborhood. In 1996 he became one of the first area residents to fight a teardown. "When we moved to this house in 1989, we were one of the first to renovate an older house," he remembers. "There were no teardowns. We never thought of the idea."

Latker says his neighbor's new house has overlooks with windows above his bedroom, and decks on the second and third floor that overlook his back yard. In response, Latker planted cypress trees to block their views. "I'm a libertarian by nature, but watching this I'm inclined to believe that there have to be some kind of respectable rules to live by," he says. "We have a different neighborhood than the one we decided to live in." Observes Fine, "The things that people are attracted to in the first place are the things that often get lost when teardowns occur."

Latker, Siegel and other area residents have appealed to the Montgomery County Board of Appeals to little avail. The county's zoning regulations were not written with teardowns in mind because there was no need to address the issue when they were written. The current zoning code took effect in 1956, and parts of it were written as early as 1928.

The regulations that do exist are not well suited for teardown development. Montgomery County Councilman Howard Denis, a Republican who represents Bethesda and Chevy Chase, introduced legislation that would close the terrace loophole, but it failed to pass. "I think it's important to preserve the integrity and ambiance of the neighborhood," says Denis. "It's essential to smart growth." Denis has convened a task force to suggest solutions to the zoning regulations.

Perhaps even more frustrating for residents who live next to teardowns is that the appeals process offers little help. County inspectors are not required to inspect new buildings unless someone complains. Even when there is a complaint, the county cannot inspect homes unless it receives permission from the owner.

Scala-Demby, who manages the county's zoning department, says the number of appeals related to teardowns has dropped recently, partly because her inspectors are reviewing plans more thoroughly and catching problems before the houses are built, and partly because she believes residents are better educated about the regulations. "I think the sticking point is the regulation limiting residences to two-and-half stories," she says. "It confuses the issue. If we said a house could only be 35 feet tall and there was an accepted way to measure the house, we'd have no problem."

Other legal options hold little promise for a resolution. Designating areas like Bethesda and Chevy Chase as historic neighborhoods would make it more difficult to tear down historical homes, but Fine says the towns are unlikely to meet the criteria. Creating a design committee to review building plans has helped make the new development of Carlyle in Alexandria, Va., more aesthetically pleasing, says Lewis, who sits on the committee, but only to a certain point. "We try to get the C projects up to a B-plus," he says.

Meanwhile, the Town of Somerset is considering more strictly enforcing an ordinance that limits cutting down trees, as a way to stem the teardown tide.

Higher property values, higher taxes

Jim Humphrey, a Bethesda resident who has fought teardowns in his neighborhood, worries that teardowns will drive real estate taxes so high that only the wealthy will be able to afford to live here. "Two houses from mine, the kids sold the home for $500,000 after their parents died. Within weeks they had torn it down and built a property for $1.3 million. That raised my appraisal price from $390,000 to $500,000 and my real estate taxes with it," he says. Area residents on fixed incomes find the rising real estate taxes especially hard to bear. "In a lot of places where you have a lot of teardowns, you get one demographic," says Fine. "From our perspective, that's not a healthy community."

Developers and many teardown neighbors see things differently. They believe that the financial benefit of a teardown in the form of increased property values more than compensates for the higher taxes. Dale Mattison, past president of the D.C. and Greater Capital Area Association of Realtors, recently moved into a teardown house and says he received nothing but praise and warm welcomes from his neighbors. "I got flowers from one, a bottle of wine from another and a personal visit from the third," he says. "Anybody looking to buy in the suburbs close in to the city in that price range wants a big house and is not concerned about a big yard."

Some developers concede that some of their brethren sacrifice beauty and proportion in their quest to reap the highest profit. Carey Hoobler, who owns the Ellison Construction Co., has experienced both sides of the issue. As a builder, he has faced some "really wretched neighbors who make you think, 'What did I do?'" As a homeowner in Silver Spring, he admits he has a "monstrosity" next door. "It wasn't the size as where it was set," he explains. "They just didn't know any better. But they were within their rights.

"The worst problem is bad architecture," Hoobler says. "I'm not saying that with super-clean hands. There's a lot of stuff out there that's just really ugly, really doesn't even fit with trends. But I don't know if that's something you can zone."

Many developers say they take care to tailor homes to the neighborhood. Part of the reason Marette looks for existing colonial homes in a neighborhood as he considers a teardown candidate is to make sure that his proposed design will not shock neighbors. "No one's ever said anything bad about our projects," he says. "When we leave, neighbors feel they have something good to look at."

Mandell says neighbors often do give him "flack" when Sandy Springs Builders begins a new teardown. He says he has modified building plans to placate neighbors. "We've taken a lot of time and pains to get our good reputation," he says. "When we used to do spec, we'd study the architecture of the neighborhood to make sure that we kept the scale at least in the front of the house. We have a responsibility for people we build for and the neighborhoods we build in."

No More Ramblers?

Wrecking cranes seem to be in full swing, especially in Bethesda and Chevy Chase. Yet there are only so many small ramblers in the area, so when will teardowns stop?

Changing market conditions could slow the trend. A spike in mortgage rates would slow the buyer market, as could rising real estate prices. Rising real estate costs increasingly affect developers' margins. "Years ago, you figured it (buying the house) was 25 percent to 28 percent of the total cost of the project," says Mandell. "Now it's 50 percent or more of the cost." Between the second quarters of 2003 and 2004 alone, median sales prices for homes in the Bethesda and Chevy Chase Zip codes rose an average of 22.75 percent, according to MRIS, a Rockville-based real estate information company.

Rising building costs also could dampen developers' enthusiasm for spec teardowns. "My steel costs have gone up 60 percent in the last year," says Silicki.

Realistically, however, teardowns will continue unabated for the foreseeable future. With no end in sight, and no legislative, regulatory or design remedies forthcoming, teardowns likely will pit neighbor against neighbor and residents against developers for years to come. Perhaps the best thing for critics is to look for the proverbial silver lining. "The guy who lost his view probably just made a helluva lot of money," says Mandell.

Ira Apfel lives in the English Village neighborhood of Bethesda with his wife and two daughters. The house they own is a teardown candidate.