MF YYC Politics - there, I mega did it

[you&me]

Originally Posted by bizaro86

The less the mortgage the more expensive the holding period is. Equity capital for real estate development is very expensive (double digit expected returns easily).

Right, so assuming the developer has zero cash and has to borrow the equity to acquire the the property in the first place, now he's paying 10+% on that ~$260k for a year until the project is done... Call it another $30k... But of course, if that cost to borrow the equity is reduced by 3-4 months of interest (because the project will be completed fast thanks to the more efficient zoning / approval process), he can save another ~$10k in interest... that will surely be passed along to the end purchaser.

I have a feeling you know more about this than I do, so I'm genuinely wondering if you can demonstrate how shaving 3-4 months off the pre-construction carrying period through more straightforward zoning will result in a meaningful improvement for affordability (to be fair, I don't think you made the claim in the first place, so no worries if you can't be bothered).

[topfiverecords]

Originally Posted by you&me

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...

There's also about a $5000 fee for a land use change application (in R zones) plus consulting fees to prepare the application that wouldn't be required.

[Fuzz]

Originally Posted by you&me

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...

I think you miss the picture on that, and I disagree with your conclusion. I'm going to assume that builders in these communities tend to build duplexes and infills because they are easy compare to the process for multi unit builds. Take away the consultation and council stuff, and you don't think more builders would move to more units which would mean more profit? If not, why are they building any now, considering the onerous process? Why not just stick with duplexes?


Because we know they do go through the extra effort now, it must be worth it to them, so not only are there the extra costs right now to build these, there is also the motivation of extra profits once a barrier disappears. As long as there is demand(which we've covered), logically we can predict where this will go. And with more units, there is more competition, and price pressures. And I haven't seen one logical argument that this will cause prices to increase, so that only leaves 2 other options. The same, or less.

[you&me]

Originally Posted by Fuzz

I think you miss the picture on that, and I disagree with your conclusion. I'm going to assume that builders in these communities tend to build duplexes and infills because they are easy compare to the process for multi unit builds. Take away the consultation and council stuff, and you don't think more builders would move to more units which would mean more profit? If not, why are they building any now, considering the onerous process? Why not just stick with duplexes?


Because we know they do go through the extra effort now, it must be worth it to them, so not only are there the extra costs right now to build these, there is also the motivation of extra profits once a barrier disappears. As long as there is demand(which we've covered), logically we can predict where this will go. And with more units, there is more competition, and price pressures. And I haven't seen one logical argument that this will cause prices to increase, so that only leaves 2 other options. The same, or less.

I mentioned this earlier - a property is worth more if zoned for highest and best use. Take two properties currently and the one zoned for multiple units will be worth more than the one strictly zoned for a single dwelling, all else being equal... Could being zoned for highest and best use cause prices to rise, or because it's across the board, status quo remains?

Anyways, as I've admitted, I'm clearly not as familiar with this as some of you here are, so I'm honestly not trying to be a pain and just looking at this from my (uneducated) perspective... I've always found the redevelopment part of building the most interesting and, despite how my posts probably come across, hope this is a success... No, if we could only get the local developers to raise the painfully low bar they've set when it comes to quality of design... That's another topic altogether.

[bizaro86]

Originally Posted by you&me

Right, so assuming the developer has zero cash and has to borrow the equity to acquire the the property in the first place, now he's paying 10+% on that ~$260k for a year until the project is done... Call it another $30k... But of course, if that cost to borrow the equity is reduced by 3-4 months of interest (because the project will be completed fast thanks to the more efficient zoning / approval process), he can save another ~$10k in interest... that will surely be passed along to the end purchaser.

I have a feeling you know more about this than I do, so I'm genuinely wondering if you can demonstrate how shaving 3-4 months off the pre-construction carrying period through more straightforward zoning will result in a meaningful improvement for affordability (to be fair, I don't think you made the claim in the first place, so no worries if you can't be bothered).

It doesn't matter whether the developer has the cash or not. Equity of any kind in a real estate development won't be available for single digit returns. You seem quite aware that developers are profit-motivated, why would they put down money they don't expect a return on.

And I agree that lowering costs in and of itself won't reduce pricing. Developers have always and will always sell for the most they can get, not at some formula based on their costs.

But if costs (capital, taxes, fees, consultants, insurance) go down, and it gets faster to do developments, you can reasonably expect more developments will get done. And increasing the supply of anything lowers the price relative to what it would otherwise have been.

I think the big benefit here is projects that nobody was willing to try before because they thought the zoning would fail will now get built. The savings on currently buildable projects (ie duplexes) probably help, but the bigger upside from a supply point of view is entirely new projects that would never have happened. Also projects being upsized, for example an r2 duplex project now becomes an rcg four plex project. Three new units instead of one are created by that change (assuming a SFH existed previously).

[Fuzz]

Originally Posted by you&me

I mentioned this earlier - a property is worth more if zoned for highest and best use. Take two properties currently and the one zoned for multiple units will be worth more than the one strictly zoned for a single dwelling, all else being equal... Could being zoned for highest and best use cause prices to rise, or because it's across the board, status quo remains?

Anyways, as I've admitted, I'm clearly not as familiar with this as some of you here are, so I'm honestly not trying to be a pain and just looking at this from my (uneducated) perspective... I've always found the redevelopment part of building the most interesting and, despite how my posts probably come across, hope this is a success... No, if we could only get the local developers to raise the painfully low bar they've set when it comes to quality of design... That's another topic altogether.

Not to worry, I'm only an internet expert on this, too! As to the point about zoning value, if all properties are the same zoning, then that would be moot. The fact that they are more valuable now should tell you something about desire and demand, though!

[bizaro86]

Originally Posted by you&me

I mentioned this earlier - a property is worth more if zoned for highest and best use. Take two properties currently and the one zoned for multiple units will be worth more than the one strictly zoned for a single dwelling, all else being equal... Could being zoned for highest and best use cause prices to rise, or because it's across the board, status quo remains?

I think removing a zoning premium is a likely outcome here, and one of the big benefits. Right now if you can get land rezoned for multi family it trades at a premium because there isn't much of it available.

If all the land is zoned RCG the supply of RCG land goes way up and the price premium for that land should go down. That's another way you've lowered the cost of developing new supply.

I'd still expect MC/MH zoned land to trade at a premium because it isn't seeing new supply here.

[GullFoss]

Originally Posted by Torture

The more I have this debate the more I realize how hard it is to convince somebody with facts when they've already made up their mind based on feelings. Like, I literally just posted the article which references studies in Auckland and Minneapolis. It literally talks about cases like Elbow Park, etc in there, that yes, some high priced homes will be made, but that increased supply still helps.
Want to go dispute that? Fine, read the multiple papers that are cited and tell me where they got it wrong but this "what about Elbow Park / Houston / wherever" is tiring.

People that study planning and urban studies have across the board said policies like this are beneficial. Are they the silver bullet, no, they're part of a solution. (just like this strategy). Want to dispute that it doesn't work? Fine, but bring some stronger arguments.

I think the problem is more that other people understand the issue to be more nuanced than just trying to maximize affordability at all costs.

If you're weighting affordability as supreme over all other variables, the answer isn't going to be "blanket R-CG". It's going to be "blanket high-rise buildings with zero aesthetic value" akin to Soviet bloc housing projects.

[GullFoss]

Originally Posted by kevman

I'm not going to try and change anyone's mind but we live in a SFH in an M-CG district and it's great. We share the community with great people from all walks of life. It turns out the student renters, young families, old retirees and everyone in between all bring something different to the community.

10/10 would recommend!

I live in a mid-rise condo in the downtown community and it works great for me for now. If I wake up one day and decide I want to pay commissions of 7%+3% to live in a different style of community, I should get that choice.

There should be a solution that drives affordability by opening up more land to r-cg. It doesn't require a full blanket of the city to get the major affordability, time-savings and cost reduction impact.

[GullFoss]

Originally Posted by bizaro86

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.

This is a major factor. Most of the developers on the R-CG side are mom and pops, maybe doing 2-5 projects per year. For each project, they're having to put down personal guarantees for the entire construction loan. So they're severely capital constrained.

Faster permitting times will drive faster development times, which allows them to turnover projects quicker and deliver more townhomes faster and cheaper.

[Bill Bumface]

Going back to the Bridgeland example, there is a duplex I know of from 1985 that is assessed at $712k for both sides, so $356k a pop. That's affordable.

The shiny new 4 unit row house that makes a developer rich will be a mediocre 4 unit row house after it ages enough, and this will turn into more affordable housing with age. It won't if we don't build it.

It also seems obvious that brand new depreciating things are more expensive when brand new. Houses can easily last 50-100 years and we have to look at the full lifecycle of what gets built.

The best time to plant a tree was 20 years ago, the next best time is today.

[powderjunkie]

Originally Posted by GullFoss

I think the problem is more that other people understand the issue to be more nuanced than just trying to maximize affordability at all costs.

If you're weighting affordability as supreme over all other variables, the answer isn't going to be "blanket R-CG". It's going to be "blanket high-rise buildings with zero aesthetic value" akin to Soviet bloc housing projects.

I think 'availability' might be a more appropriate word than affordability...they are obviously tied at the hip, but even if we have to accept that housing costs are unlikely to decrease in a significant way, reducing the need to compete with hundreds of other suitors for a rental or purchase would go a long way to improving individual housing situations (and of course lead to slowed growth on pricing, which is apparently a confusing concept)

[Torture]

No word on dollars yet, but this is good news and likely wouldn't have happened without approving the affordability strategy.

Calgary will receive a yet-to-be-disclosed amount of federal funding for new housing builds after the city’s application to the Housing Accelerator Fund was approved.

In a letter, federal Housing Minister Sean Fraser informed Mayor Jyoti Gondek on Sept. 21 that the city’s application to the program was successful.

His letter comes after city council voted in favour of a new seven-year housing strategy on Sept. 16 — a plan that intends to boost the city’s market and non-market housing supply by loosening residential zoning restrictions to allow for more density and accelerating affordable-housing projects.

London, ON received $74M from the $4B program so I think it's safe to expect this to be a pretty sizeable cheque.

https://calgaryherald.com/news/local...ation-approved

[Faust]

Wrong thread

[transplant99]

[bizaro86]

Originally Posted by transplant99

I mean, that's good I guess. Would have been better before all the kids got sick...

[calgarygeologist]

Originally Posted by bizaro86

I mean, that's good I guess. Would have been better before all the kids got sick...

This is just a paperwork/licensing and money issue for the city though. Whether or not this business had a license with the city is pretty irrelevant in what happened because the City doesn't do any sort of food handling inspections or deal with issues at that level because it is AHS jurisdiction.

It might help to build a case against the operation though to show gross incompetence about how to run a proper establishment.

[bizaro86]

Originally Posted by calgarygeologist

This is just a paperwork/licensing and money issue for the city though. Whether or not this business had a license with the city is pretty irrelevant in what happened because the City doesn't do any sort of food handling inspections or deal with issues at that level because it is AHS jurisdiction.

It might help to build a case against the operation though to show gross incompetence about how to run a proper establishment.

Fair enough. Although if it's just a money thing I think I'd prefer whatever money is left in that business/available from their insurance go to the families of the sick kids than to the city.

[Faust]

Calgary city council to look at utility fees in December, one-time relief in November:

https://globalnews.ca/news/10002961/...-utility-fees/

[gasman]

Originally Posted by Bill Bumface

Going back to the Bridgeland example, there is a duplex I know of from 1985 that is assessed at $712k for both sides, so $356k a pop. That's affordable.

The shiny new 4 unit row house that makes a developer rich will be a mediocre 4 unit row house after it ages enough, and this will turn into more affordable housing with age. It won't if we don't build it.

It also seems obvious that brand new depreciating things are more expensive when brand new. Houses can easily last 50-100 years and we have to look at the full lifecycle of what gets built.

The best time to plant a tree was 20 years ago, the next best time is today.

assessments don't mean anything if the house hasn't changed hands recently. I bought my house in 2009, it appraises for about 70% of market value, My neighbor has lived in their house since the 90's and their assessment is about 40% of market value.