Quote:
Originally Posted by bizaro86
I think your math is a bit aggressive. Assuming $560k pre-development costs and $15k in interest over 6 months, that implies a 5.36% cost of capital. I'd suggest that number should be higher. I also think it's likely the city will probably still want to collect property taxes during that time.
Finally, to the extent developers are capital-constrained (and many/most are, imo) the longer they have their borrowing capacity tied up in a project the longer it takes for them to be able to start the next project.
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Apologies, it was 'napkin' math, without the napkin, while on a call (aka, off the top of my unfocussed head)... But I was thinking that a bank wouldn't be happy loaning full freight on what's soon to be a vacant lot (
sale price $560 in 2019), so assumed something like $300k mortgaged. And you're right, surely the city would still want their property taxes, and that will be to the tune of about $300 a month...
So double the property tax due (just 'cause) and triple the monthly financing costs (also 'cause) and you still end up with pre-groundbreaking carrying costs of ~$50k... But since the rezoning will speed up that process, hopefully cutting the time in half, the developer now has pre-groundbreaking costs of $25k, instead of $50k.
I guess my point is two fold; for one, a $25k cost savings isn't going to move the needle for any developers looking at a project like this, i.e. this will not result in a bunch of new projects that otherwise wouldn't be going ahead based on that cost saving alone.
Secondly, the cost savings are again immaterial in the scheme of the end value of these projects, so the thought that streamlining the approval process and the resultant reduction in costs will somehow have any affect on affordability is silly... And that's (a big, fat)
if anything is passed on to the purchasers in the first place...