A lot of time I hear liberal urbanists claiming that trading development rights for community amenities (I’d definitely include affordable housing mandates here) is a win-win situation, but there’s a real danger of killing the goose that laid the golden egg, as appears to be happening in Vancouver:
Development of the Cambie corridor is being “paralyzed” because the City of Vancouver is taking too much of the profits resulting from property rezonings, the Urban Development Institute says.
Paul Sullivan, chair of the UDI taxation committee, said at least three potential developments along the new Canada Line have fallen apart because the city is being too aggressive in seeking community amenity contributions when rezonings take place.
The city uses the money — an average of 75 per cent of the profits resulting from rezonings — for community amenities like parks and seniors’ centres.
It’s interesting that the city openly admits to taking the vast majority of the upshot from the rezonings. One could interpret this as a marginal tax rate on dense development of 75% – I’m not sure that you could find a single politician or economist who would support a such a tax bracket on income, but I guess developers are viewed as less productive and more easy to leech off of than even the ultra-rich.
Another odd aspect of the story is that the rules are in fact not even formalized:
Sullivan, a real estate appraiser by trade, said the city could solve the problem by establishing a set amount for CACs that developers can factor into their purchase prices. “What we need is certainty in the policy, not just in the density but in the lift so that land can get priced fairly,” he said. “If you don’t have that it makes it very hard to get a grip on this problem.”
Vision Vancouver Coun. Raymond Louie disagrees.
“I am not sure that a blunt instrument [like set fees] would best serve our citizens. I think a finer-grain discussion or negotiation on what’s appropriate based on what the local needs [are] and what the individual property generates in profit is more appropriate,” he said.
My first reaction was that this is very bad, because it adds an element to uncertainty to development. But my next reaction was: If it weren’t for the ad hoc nature of the program, we might never have known its cost. In the US, where affordable housing mandates are known before developers start making their pitches, it can be difficult to see when the law is having a deleterious effect, because proposals simply won’t be made, and even sophisticated statistical analyses haven’t yielded definitive data on the effects of things like affordable housing and other community benefits. In Vancouver, though, we can see the tangible effect: “at least three potential developments along the new Canada Line have fallen apart.” But who only knows how many were never even proposed.
Anyone know of anything similar happening in other cities? Or maybe someone’s found more convincing evidence than I could about the tangible effects of things like this?
David Sucher says
December 24, 2010 at 7:56 amStrikes me as quite consistent with market urbanism — the City is selling entitlements. If they are asking too much then development will decrease and the City will lower the cost of the exactions, (assuming it wants development.)
“Zoning for sale” sounds corrupt but it could be quite ethical and effective.
Lots of caveats, however, I will admit.
Stephen says
December 24, 2010 at 8:29 amI guess my issue with that logic is that you could extend it to anything the state does. America waging unnecessary wars abroad? If they were doing it too much, then its coffers would run dry and it would stop. Except, in reality, that’s not how it usually works. The state tends to have a very different logic than the private entrepreneur.
Anonymous says
December 24, 2010 at 2:05 pmIn many cases, I think extracting concessions from developers is just the nominal goal of restrictions. In reality, though, the driving force behind these restrictions is sympathy for poor people or desire for more parks but the desire to raise property values.
Basically any time it costs more than $200 a square foot to buy housing some place, development restrictions (along with needless construction rules) are responsible. Given that overall human welfare undoubtedly grows when housing prices fall (Would you be better or worse off if houses were truly free, not only in price but in terms of consuming no resources?), you’d expect most people to be against such rules. But people who have already bought in believe they benefit from rising housing prices (sometimes correctly, mostly incorrectly) so they rally for rules that will make their property more valuable by stealing property from others.
The point to attack isn’t the so-called the value of the concessions; it’s the underlying belief that people really benefit from having to pay $1,000 a square foot rather than $100 a square foot (or maybe $200 if you’re someplace where real estate constraints and demand spur tall buildings, which are much more expensive per square foot).
Unfortunately, it’s going to be very hard to convince homeowners that they’d benefit from a massive decline in housing prices, as you can see by watching the news. All stories about home prices start with the outrageously incorrect assumption that high prices are good.
J Findlay says
December 24, 2010 at 3:41 pmThe article found at this link outlines how a similar process in Canmore, AB was changed after 3 years of lobbying the Provincial Government.
http://www.rmoutlook.com/article/20100212/RMO0801/302129994
Stephen says
December 24, 2010 at 4:15 pmHmm, interesting. Canmore looks like a sprawl-y place…I wonder if provincial governments have ever stood up for the rights of urban developers like this.
Benjamin Hemric says
December 25, 2010 at 3:28 am1) Although I can’t comment on the Vancouver experience, generally speaking it seems to me that “zoning” for sale (i.e., changing zoning rules because of payments from a developer) is an VERY bad idea for both theoretical and practical reasons.
Theoretical:
For one thing it seems to me that such an approach undercuts the legitimacy of zoned regulations. Legitimate zoning, in my opinion, is an exercise of the police power of the state to set standards that are of benefit to the community-at-large (e.g., how much shadow a neighbor’s building may cast on your property and vice versa, etc.). It seems to me that these standards shouldn’t be changed lightly, especially as a product of some sort of sale (even in those cases where the government, rather than an individual politician, gets the money).
Practical:
The selling of zoning seems to lead VERY QUICKLY to one form of corruption or another. Although it’s rarely labeled as such, it does seem to me to be genuine corruption. You have community groups “personally” benefitting from the sale — at the expense of the community at large (which is what I think is the case with Atlantic Yards “Community” Benefits Agreement in Brooklyn). And you have politicians and bureaucrats also “personally” benefitting (at least in terms of power and influence) from the sale at the expense of the community at large (which may be the case with Vornado’s planned skyscraper down the street from the Empire State Building).
– – – – – – – –
2) My opposition to zoning for sale has been greatly influenced by one of Jane Jacobs’ most magnificent books, “Systems of Survival.” (I don’t know, of course, whether Jacobs would agree or not with my application of her thinking to this situation, however. Jacobs did endorse inclusionary zoning, which kind of surprised me.)
In “Systems of Survival” Jacobs points out that humans have two different ethical systems, one that is, essentially, for commerce and one that is, essentially, for governing. It’s important for people to be aware of this and to “keep them apart.” (This is a quick and, maybe not particularly good summary of her book. For a better summary see Wikipedia or some of the reviews on Amazon.)
It seems to me that “zoning” for sale is an instance where “commerce” and “government” are mixed together inappropriately and that this leads to bad (and corrupt) results. Jacobs calls such such a set-up a “monstrous hybrid.”
– – – – – – – – – –
3) David Sucher wrote:
Strikes me as quite consistent with market urbanism . . . “Zoning for sale” sounds corrupt but it could be quite ethical and effective . . . . Lots of caveats, however, I will admit.
Benjamin Hemric writes:
Hi, David!
A few weeks back on this “Market Urbanism” blog I commented that I thought it would be useful to talk about what people think are the “limits” of legitimate market urbanism (in other words where people think market urbanism should NOT apply). For me this is one of those areas. I also think city streets are another one of those areas.
Don’t have time to go into depth at the moment, but basically I feel that zoning and streets are legitimate government activities that shouldn’t be tainted by commerce. The same holds true for, among other things, the enforcement of criminal laws, the appointment of a replacement senator, and so on.
I think this current example may be a better application of Jacobs’ book, by the way, than the Prince Charles example I commented upon on your blog, “City Comforts,” a few weeks ago. (I’ve been meaning to mention that I may have been mistaken in applying her book to that particularl Prince Charles example, but I haven’t had the chance.)
– – – – – –
4) Stephen Smith wrote:
I guess my issue with that logic is that you could extend it to anything the state does . . . . The state tends to have a very different logic than the private entrepreneur.
Benjamin Hemric writes:
If I’m understanding you correctly, this is kind of what Jacobs is talking about. If so, I think you’d really enjoy this book. (The book is rather short by the way and it’s written as a “dialog”; it reminded me of a novella or a “talky” play). Jacobs has really done a lot of research — and has lots of “fun” examples — to support her thesis.
Benjamin Hemric
Fri., Dec. 24, 2010, 10:25 p.m.
Anon. says
December 27, 2010 at 11:00 pmHaving been to Vancouver it would seem their system has worked quite well to produce world-class amenities which would have not otherwise been available. (As they are not available in cities which do not exact them). It sounds like Vancouver was just being a firm negotiator. Sorry – I cannot agree with you on this one after seeing the positive results they have had.
Stephen says
December 27, 2010 at 11:10 pmOut of curiosity, what are the amenities that you remember being the best?
I’ve never been to Vancouver, but from what I understand you’re right about it being a beautiful city with a lot of high-cost amenities, but my fear is that taking 75% of a significant part of a building’s value is going to lead to the poor being priced out. Vancouver is a beautiful city, but it’s also very expensive and rather small for what it is – it could stand to grow a little more.
Another possibility is that a 75% marginal tax rate could in fact be to the right of the Laffer curve, as they say in economics – that is, if they lowered the rate of concessions they sought, they might get so much more development that the total dollar amount that they extracted would be even higher than it is now.
Benjamin Hemric says
December 28, 2010 at 2:11 amAnon wrote:
Having been to Vancouver it would seem their system has worked quite well to produce world-class amenities which would have not otherwise been available. (As they are not available in cities which do not exact them). It sounds like Vancouver was just being a firm negotiator.
Benjamin writes:
Without more information it’s hard judge this comment. What are the amenities being discussed, and where is the evidence that they supposedly “can’t” be produced using other methods?
Also , it would be interesting for a skeptic to investigate what the negative consequences, if any, of Vancouver’s approach might be.
As mentioned in my original comment, I wasn’t referring to Vancouver, but thinking more of New York City, and I am very skeptical about what I’ve seen of such an approach in New York City.
Benjamin Hemric
Mon., Dec. 27, 2010, 9:12 p.m.