A Critique of the "Draft" Planning Department Study On the Role of the City in the Residential Land Development Process
dated (1982 09 14)
Prepared by Real Estate and Housing Department 1982 09 27
Planning and Development
LIBRARY The City of Edmonton
GENERAL COMMENTS 1.
It is not clear why the report has been prepared except that the Commission Board adopted the following recommendation: "That a four month in depth study evaluating the longer term role of the City with respect to residential development be prepared and submitted to Commission Board by 1982 10 01." The background to this recommendation e.g. outstanding issues such as existing inventory levels, pricing, financing is not identified. Consequently, it is very difficult to understand what this report is attempting tc address.
2.
The methodology appears to be as follows: a) present policies/activities are defined b) several "roles" are chosen for testing c) recommendations are made
a)
While policies and activities are defined, no assessment has been undertaken to ascertain the benefits/costs of previous and present approaches.
What has the City learned from the past? What does
it choose to repeat in the future? b)
Five roles are prescribed for the municipality in terms of residential land development.
Unfortunately these roles were
formulated in isolation as it is difficult to judge their significance vis-a-vis a total range of potential rcles (i.e. from a "do-nothing" role to a "do-everything" role) and furthermore it is difficult to judge these roles in terms of what has been chosen as a role by the City. same one.
Roles 2 and 3 appear to be essentially the
2
c) Several recommendations are made pertaining to both a long term "role" for the City and a short term strategy in terms of land inventory.
The specific justifications for these recommendations
is not evident in the report..
SPECIFIC COMMENTS PHASE I P.3
Study Purpose - as stated in the general comments this is not clear.
P.4
The use of Area Structure Plans as a means to categorize land supply is very broad in terms of timing.
P.4
This inclusion of the Tawa neighbourhood shows the figures depicting present inventory. The lands in the Tawa neighbourhood were subdivided and serviced to provide a site for the proposed Mill Woods Hospital, not to bolster the inventory of serviced multi-family lands. In fact the RPL site remains unserviced.
P.4
The inventory levels require verification through the Real Estate and Housing Department.
P.10
The basic list of supply and demand factors is incomplete.
P.11 The housing and land markets are radically different from a market adjustment standpoint due to the impact of time lags.
P.11 An explanation of the comment "Although the overall demand for housing is better directed and manipulated at the federal level...", is required.
P.21
Often, multi-family sites are created due to the Planning Department's density requirements of 22-24 units per acre. This usually results in a 60/40 split of single family to
multi-family properties within a plan area.
Also, as it is
mentioned in the report City land holdings are often adjacent to proposed or existing Town Centres.
The reference to a 9 year
supply of multi-family properties that the City of Edmonton now has is also misleading, because by the Planning Department's calculations there is a 14 year supply of multi-family lands overall in the City of Edmonton.
Therefore, the City as developer
is not alone in terms of being caught with invertory levels above market absorption rates.
In part this situation results from
the Planning Department's guidelines.
P.23 Again this relates to the general comments section, but where is the definitive work on the purpose/objective of City policy, the conflicts, the results of all activities to date and planned, in order to capture the BASE CASE.
These are essentially Council
documents and not something ultimately ratified by Commission Board.
P.33 Features of the future private development sector is selective and not comprehensive with several of the features already listed being very debateable.
PHASE II P.47 As stated in the general comments section these five roles are difficult to relate to: 1. any range of potential roles, 2. the politically perceived existing role, 3. the politically desireable future role.
P.48 Under role "2" - it is hard to conceive of a City role which
,
3 doesn't hawe integrated acquisition, servicing and marketing policies. In short, this should not be a unique characteristic of one role but a hallmark of sound management.
- P.48 What is meant by flexibility of investment?
P.48 The distinction between roles 2 and 3 is ambiguous.
P.52
In Role 2, if "the primary objective would be to provide an adequate inventory of serviced and unserviced lots should the private sector fail to maintain an appropriate inventory" then what assurances would there be that the City would only provide the low financial yield land uses and the private sector would provide the profitable ones.
Clearly, one implication of this broadly stated role is a
potentially financially troubled civic operated development program.
P.71
".... to ensure the City development activity tops off or complements those housing types where the private sector is unable to meet housing demands." - capable or unwilling?
Once again the City would be, under this
mandate, charged with the responsibility of supplying the low-yield or no-yield land use types, as well as subsidized social housing, while the private industry would concentrate on the high-yield developments.
P.75
"The inventory of City owned vacant subdivided land, especially for multi-family units is excessive relative tc present market conditions." - land markets cannot be judged relative to short periods of time as land development programs are planned over a 3-5 year time frame.
4 To suggest the market position is excessive and to not qualify the statement is to treat the subject superficially.
Parameters
affecting the build up of inventory need to be at least referenced and hopefully analysed.
Under what conditions should this
inventory level be maintained and is it reasonable to plan to meet these conditions?
P.75
"City Policy C140 is inadequate because it does not clearly indicate the objectives of City residential land assembly.
The
lack of objectives in Policy C140 results in insufficient guidance to determine which lands, for what residential use and in what amounts, should be purchased.
The lack of direction can also
result in the uneerutilization of the existing inventory because specific objectives for inventory levels are not given."
How specific and how much direction is required?
Carried to
the exteme the City through policy could tip the market players as to where the City wants to buy land, when, how much et cetera. Clearly the policy needs to be somewhat vague in order to permit the City to act as opportunities emerge.
P.76
.... in the future the private land development industry may have both a reduced production capacity and/or a reduced interest in residential land development."
The basis for this assertion is difficult to identify. the assertion is highly questionable.
Moreover
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P.78 Recommendation #3 - "Selective land assembly for residential development be undertaken by thE. City with the primary objective of providing an adequate inventory of serviced and unserviced lots in those areas and for those housing types where the private sector is unable to maintain an appropriate inventory.
Lower
priority objectives are to influence urban spatial expansion in terms of location and housing in support of the City growth strategy and to provide land for direct municipal requirements to service residentia] development."
As repeated throughout this critique the implications of this approach need to be thoroughly examined before it could be considered for adoption.
P.78 Recommendation #4 - "Residential land development in the City should generally be run on a break-even basis; however, subsidy activity to provide land for housing not met by the private sector may be required."
As mentioned earlier the justification for this recommendation is not evident and again the implications have not been comprehensively analysed.
P.79 Recommendation #1 on this page is missing.
Recommendation 2 and 3 are in need of analysis prior to consideration.
Recommendation 4 is correct.
However, the research and analysis
work should be undertaken before solutions are recommended.
WORK PROGRAM June - October 1982
THE ROLE OF THE CITY OF EDMONTON IN RESIDENTIAL LAND DEVELOPMENT
PROJECT DIRECTOR:
Malcolm Barrow DIRECTOR GENERAL RESEARCH SECTION 42B-3405
PROJECT COORDINATOR:
Harvey r one SENIOR PLANNER SPECIAL STUDIES 428-3536
GENERAL RESEARCH SECTION 11th floor Phipps-McKinnon Building
June 1982
CONTENTS
Executive Summary
1.
Introduction
2.
Work Program
3.
Schedule
4.
Manpower Plan
1 EXECUTIVE SUMMARY
STUDY PURPOSE
To evaluate the longer term role of the City in the residential land development process.
WORK PROGRAM
Three phases of work are involved in the Work Program:
Phase 1 - Policy Context
- establish past, present City land development policies, activities and implications - lessons from other cities' experience - nature of the Edmonton housing market
Phase 2 - Policy Alternatives and Evaluation
- identify and evaluate alternative policy roles for the City in the land development process.
Phase 3 - Recommendation and Final Report.
- consolidate findings from Phases 1 and 2; identify recommendations
2 Progress reports will be prepared at the end of Phase 1 and 2. The reports will be written to allow their direct incorporation in Final Report and allow on-going senior staff review of outputs.
SCHEDULE
Commission Board requires the study by 1982 10 01.
The following schedule will meet this requirement:
1982 07 15 - Completion of Phase 1 - Policy Context.
1982 08 13 - Completion of Phase 2 - Policy Alternatives and Evaluation.
1982 08 31 - Completion of Draft Final Report/Circulate to Senior management
1982 09 23 - Completion of Phase 3 - Final Report - Submission to Commission Board of Final Report.
I
INTRODUCTION
s A number of issues regarding the City's land development activities have arisen as a result of the submission of the "Status of Residential Land Report" to the'Technical Advisory Committee (TAC) on 1982 05 06 and changed economic conditions? TAC recommended that the "Status of Residential Land Report" be submitted to Commission Board and Council.
On 1982 06 02, Commission Board agreed to the following recommendations:
"That a 4-month in-depth study evaluating the longer term role of the City with respect to residential land development be prepared and submitted to Commission Board by 1982 10 01."
This Work Program outlines the proposed activities and schedule to meet these study requirements.
The perspective of the study will centre on the nature of the City's role as a "developer" rather than the City as a reaulator or planner of_housing.
The work program includes Planning Department staff only. The specific involvement of Real Estate and Housing in providing information and reviewing outputs will be determined in consultation between the two Departments.
•
H
WORK PROGRAM
Three phases are involved in the work program:
Phase 1
- Policy Context
Phase 2
- Policy Alternatives and Evaluation
Phase 3
- Recommendations and Final Report.
Within each phase, there are specific activities. Figure 1 shows the activities, schedule and staff assignments for the project.
An important feature of the work program is the preparation of Progress Reports at the end of Phases 1 and 2. These reports will be written to allow their direct incorporation in the Final Report; this procedure is designed to achieve two significant objectives:
- to ensure results are reported as available, thus maintaining the project schedule;
- to allow senior staff review and approval as the work progresses, reducing review time in the final stage of the project.
FIGURE I ACTIVITY SCHEDULE PHASE
STAFF
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 ,._ • :•:•:••:•:•::•:•:••••
Phase 1: Policy context Activity
1.1
Present role of City
WEEKS
CH
1.2_ Review past activities
CH
.. ....:-.:-. ...xx,..:,
1.3 Review other municipalities' experience
AK
K•:•:;::::•>:•:, .• ,:•:•:•):•:•:•••••:-
1.4 Nature of Edmonton land development process 1.5 Nature of urban land • market
'
:• '. - .: :*: . • • :: : : :1
CH
`:•:•::•:•: ':::'"::::::•
. -
1.6 Prepare Progress Report 1
HC, CH AK
Phase 2: Policy Alternatives and Evaluation Activity 2.1 Alternative roles for City in land development
CH
2.2 Prepare evaluation criteria CH 2.3 Evaluate alternative roles
CH
2.4 Prepare Progress Report 2
HC, CH, AK
Phase 3: Recommendations and Final Report Activity Prepare draft Final 3.1
3.2
Prepare Final Report
HC,CH AK It
x ' ....•.... 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 i•::: f:::: :•:: :i:1" • :•:. :•:-.•:::::::?, • ' • :, .. . -.. ;..:
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 _ :: x
•... :::::::::. • .....• • :,%%:-: :•:•:•:1
PHASE 1- POLICY CONTEXT
The work in Phase 1 is designed to provide background information on the City's activities in the land development process. Emphasis will be placed on highlighting policy implications rather than extensive data gathering.
Work in Phase 1 is scheduled for completion 1982 07 15.
ACTIVITY 1.1 - IDENTIFY PRESENT ROLE OF CITY IN LAND DEVELOPMENT
- Identify 'xtent of City land holdings intended for development (location in the City, development potential by unit type, servicing status, major vacant land holdings).
- Describe present City policies and practices for land development.
- City agencies to be contacted include Real Estate and Housing, Corporate Policy Planning Office and the Land Development Coordination Branch.
ACTIVITY 1.2 - REVIEW PAST CITY LAND DEVELOPMENT ACTIVITIES
--Identify major City activities in the residential land development since 1971.
Identify and analyze problems and successes of past City land development activity (impacts on market activity and housing prices in Edmonton, profits/costs to City, achievement of an appropriate housing mix to achieve social objectives, effect on private land development activity).
/ACTIVITY 1.3 - REVIEW OF OTHER MUNICIPALITIES' EXPERIENCE
- Analyze briefly the experience of other selected Canadian municipalities (suggested as Calgary, Regina, Winnipeg, City of Toronto) in the development -
process (land banking activities, impkts on housing units, achievement of other municipal objectives).
Identify problems/success and implications of the Citie's experience.
ACTIVITY 1.4 - NATURE OF EDMONTON LAND DEVELOPMENT PROCESS
- Describe the past, present and possible future nature of the land development process in Edmonton.
Confirm trends in the private land development industry (such as developers getting out of the business) and implications for planning and development in the City.
ACTIVITY 1.5 - NATURE OF THE URBAN LAND MARKET
- Describe the processes by which urban land prices are determined, particularly in terms of the characteristics of the housing market and supply/demand considerations.
- Examine the role of municipal land development and land banking in the process and identify the features of the market where a municipality can affect supply, demand and prices.
ACTIVITY 1.6 - PREPARE PROGRESS REPORT 1
- Consolidate findings from Activities 1-1 to 1-5.
- Content will summarize significant findings in a format suitable to allow direct inclusion in the Final Report.
- Review Report with senior staff; incorporate required modifications.
PHASE 2- POLICY ALTERNATIVES AND EVALUATION
In Phase 2, work will concentrate on identifying and evaluating alternative policy roles for the City in the land development process.
Work in Phase 2 is scheduled for completion by 1982 08 13.
ACTIVITY 2.1 - ALTERNATIVE ROLES FOR CITY LAND DEVELOPMENT
7/Because the number of potential roles span a spectrum from profit-maximizing
developer to a provider of social housing, four or five "prototype" roles will be identified.
- Prepare for each prototype role, a description of the significant City activities or features, such as profit direction, land acquisition policies and development methods.
ACTIVITY 2.2 - PREPARE EVALUATION CRITERIA
- Specify criteria to evaluate prototype alternatives generated in Activity 2.1.
_ - Provide rationale for evaluation criteria. Potential sources for the evaluation criteria include the General Municipal Plan, Local Policy Plan and staff suggestions.
ACTIVITY 2.3 - EVALUATE ALTERNATIVE ROLES
Undertake a comparative evaluation of the alternative roles. Specify their performance in relation to the criteria.
Identify potential trade-offs or recombination of alternatives which may be more consistent with the evaluation criteria.
- Identify the preferred alternative in performance terms.
ACTIVITY 2.4 - PREPARE PROGRESS REPORT 2
- Consolidate findings from Activities 2.1 to 2.3.
- As with Progress Report 1, the format will be suitable to allow the findings to be incorporated directly in the Final Report.
- Review Report with senior staff; incorporate required modifications.
PHASE 3- RECOMMENDATIONS AND FINAL REPORT
Phase 3 will result in the preparation of a Final Report containing the recommendations and analysis.
The draft report is scheduled for completion by 1982 08 31, allowing three weeks for senior staff review and completion of the final report by 1982 09 23.
ACTIVITY 3.1 - PREPARE DRAFT REPORT
- Prepare the draft report, using the results from Progress Reports 1 and 2.
- Review the draft report with senior staff.
- Review the draft report with other Departments.
ACTIVITY 3.2 - PREPARE FINAL REPORT
- Incorporate staff comments and revise text accordingly.
- Prepare required number of copies of Final Report.
III SCHEDULE
The completed study must be prepared and submitted to the Commission Board by 1982 10 01.
The following schedule will meet this completion date:
1982 07 15 - Completion of Phase 1 - Policy Context
1982 08 13 - Completion of Phase 2 - Policy Alternatives and Evaluation
1982 08 31 - Completion of Draft Final Report/Available for Senior Staff Report.
1982 09 23 - Completion of Phase 3 - Final Report.
The Final Report would be available to the Commission Board by 1982 09 23.
IV
MANPOWER PLAN
The following staff, their responsibilities and time allocation to the project to 1982 09 23 are outlined.
STAFF
Project Director Malcolm Barrow Project Coordinator Harvey Crone
TIME
5 days 30% of •available time
RESPONSIBILITIES
Review of Progress Reports 1, 2 and Final Report. Establish work program. Provide technical direction to staff. Coordinate production of Progress Reports 1, 2 and Final Report.
Principal Planner Colin Hefferon
100% of available time
Planning Assistant Anita Kroeger
20% of available time
Activities 1.1, 1.2, 1.4, 1.5, 1.6, 2.1, 2.2, 2.3, 2.4, 3.1 and 3.2 - Undertake Activity 1.3; assist in Activities 1.6, 2.1, 2.2, 2.3, 2.4 and 3.1
Other staff may be utilized, particularly in Phase 1. Graphics staff may, also be required for map preparation.
Development Industry Liaison Committee Record of Meeting, 1982 08 10
1-1.E' CITY OF EDMONTON PEAL ESTATE & ;-fOUSING DEPT.
AUG 3 0 1982 •
In attendance: R6 re.-; to
Brian Samuell, UDI Mary Oldring, UDI Greg Latham, TSD Hans Arends, Planning Jim Lowden, Planning The purpose of the meeting was to discuss a revised teiins of reference. This was based on the Committee's request to Council for a clarification of the committee's role. The request was sent to the administration and hence the Planning Department for comment. Mr. Latham indicated that TSD recommendations for a teLms of reference did not vary from the items put forward by Mr. Heise in his letter of 1982 06 24. (copy attached) Mary Oldring pointed out that the committee's activities should concentrate on policy level issues so as not to conflict with the work of the Land Use Bylaw Monitoring Committee. Mr. Arends restated that problems with the confidentiality of information used in policy formulation would continue. He cited the fact that specific requests had been made by agencies providing inputs to the UGS program to withold the information from public circulation. There was consensus on the following broad outlines for a terms of reference. 1. the committee would report to the General Manager of Planning. 2. the main reporting vehicle would be the minutes of the committee. 3. committee positions should be reported by the planning department to Council in conjunction with planning policies sent to Council. 4. a clear appeal mechanism was required to deal with confidential information issues 5. the Committee should have the ability to choose its role in dealing with each issue, for example; no position; concurrence; recommendations either pro or con, removed from the committee to be dealt with by individual agencies at the political level. 6. the committee should have access to info illation at the time of first assessment of an issue or topic, that is, at the foiwulative stage of planning policy. 7. the committee should have input at this folaulation stage through reviews and recommendations of draft proposals and position papers. However, the committee was not to be a final reviewing agency between the civic departments and Council. Mr. Lowden agreed to prepare these positions in a draft terms of reference for the next meeting.
It was agreed that the members would come to the next meeting with suggestions for upcoming agendas as well as to review the draft terms of reference. The meeting adjourned at 1:00 p.m. The next meeting will be held at noon, Wednesday, September 8, 1982 in the planning boardroom on the 5th floor of the Centennial Library. Mr. Hunt representing HUDAC was unable to attend the meeting but sent his comments on the terms of reference to Jim Lowden. (a copy is attached)
DRAFT TERMS OF REFERENCE DEVELOPMENT INDUSTRY LIAISON COMMITTEE
Purpose: 1. The committee should be a means for the mutual provision of base line information and preliminary analysis on topic areas volunteered or requested, based upon the availability of this infoLwation. 2. The committee should be a means of defining and discussing areas of mutual concern, including the possible creation of joint position papers on specific issues as decided by the committee. 3. The committee should be a means for development industry input in the formulation of planning policies by the planning department which have an impact upon real estate industry activities. Reporting/Accountability: 1. The Committee will report to the General Manager of the Planning Department. 2. The main vehicles for the transmission of the Committee's views will be the minutes of the meetings and any specific position papers which the Committee chooses to generate. 3. The committee will attempt to reach decisions and make recommendations on the basis of a consensus or general agreement. Where consensus does notappear to exist, any member may request a vote on the matter and a decision or recommendation will be carried by a simple majority. 4. In those cases where the Committee makes consensus or majority recommendations on planning proposals which are destined for Council, the Planning Department will include reference to the Committee's position as part of the justification section in an action report or where appropriate in an information report. Procedures: 1. The material to be reviewed by the Committee should be based on broad level planning policies eminating from the General Municipal Plan, related statutory plans and Transplan. Specific issues for discussion and review may be placed on the agenda by any committee member 10 days prior to a meeting. 2. The committee, on the basis of a simple majority vote, may chose not to deal with an issue or subject area in cases where: a) the majority have no interest in the topic b) the majority feel that their particular individual interests are better served through the established political channels.
3. In dealing with material generated by civic departments, the committee may choose to: a) offer no comment b) concur with policies being developed c) make specific recommendations either supporting or in opposition to the developing policies. All of the above would be noted in the minutes.
4. The Committee may choose to generate its own position papers on specific issues beyond the coverage they receive in the minutes. These also would be forwarded to the General Manager of Planning. 5. In possible cases of strongly dissenting opinion, that party may remove his/her agency's name from any recommendation or report of the committee. Minority reports will not be generated under the auspices of the committee, but members are free to express their opinions through their established political channels. 6. In cases where civic information and analysis required by the Committee in their review of an issue is considered by the City representatives to be of a confidential or restricted nature, the majority of the Committee may make a request to the Commissioner of Public Affairs via the General Manager of Planning for a ruling on the availability of the 'infoLulation. Review Function: * The Committee's role is not to review final submissions of civic .departments sent to Council via the Administration. The Committee will examine and make recommendations on working dF-afts and position papers generated by civic departments. While the Comm*tee's position on issues related to this material will go forward with the final documentation, final review or control of the documents does not lie with the committee. * Mr. R. Hunt. is not in agreement with this section.
Membership: The Committee should be composed of one designated member or an alternate from the following agencies. Urban Design Institute Housing and Urban Development Association of Canada Edmonton Chamber of Commerce Mortgage and Loans Association of Alberta Planning Department Transportation Systems Management Real Estate and Housing Department
Administration: 1. The Chairman of the Committee will be elected on an annual basis by the committee membership. 2. The Planning Department representative will be the committee secretary and coordinate the agenda and produce the minutes. 3. Production of specific position papers by the Committee will be decided on an ad hoc basis. 4. Meetings will be held approximately once monthly or when requested by the committee. 5. A quarom for meetings will be three members, not less than two of whom represent the development industry.
THE ROLE OF THE CITY OF EDMONTON IN RESIDENTIAL LAND DEVELOPMENT
PROGRESS REPORT PHASE 1 - POLICY CONTEXT
CITY OF EDMONTON PLANNING DEPARTMENT
1982 09 08
CONTENTS Summary 1.
Introduction
2.
General Objectives for Municipal Activity as a Land Developer
3.
Price Determination in the Urban Land Market
4.
City of Edmonton Land Development Activities
5.
City of Edmonton Land Assembly and Development Policies
6.
Other Cities' Experiences in Land Assembly
7.
Future of Private Land Development and Implications for City Land Assembly
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SUMMARY
Study Purpose The purpose of the study is to evaluate the longer term role of the City as a residential land developer. This Phase I Progress Report provides background information on the City's land development activities. The Phase 2 Progress report will evaluate alternative policy roles for the City. A Final Report, due on 1982 09 23, will make recommendations on the future role of the City as a residential land developer.
Objectives for Municipal Land Assembly and Development A municipality undertakes residential land development to achieve one or more of the following objectives: to reduce housing costs for the consumer; -
to support planning goals;
-
to provide land for social housing;
-
to generate net revenue (profit); to provide land for municipal purposes.
However, there may be substantial internal conflicts among the objectives and conflicts on the priority of the objectives. Price Determination in the Urban Market Municipal land assembly operates on the supply side of price determination rather than on the demand side. The price objective of moderating housing costs for the consumer is very difficult to achieve and may conflict with other objectives of land assembly.
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City of Edmonton Land Development Activities City land development has gone through distinct phases reflecting the pace of economic activity and changed City policies. Provincial activity to establish Mill Woods arose from concern over rapidly rising housing costs in the late 1960's. The Province initiated Mill Woods, but the City subsequently became the agency responsible for planning and administering the project. At the end of 1981, City owned raw land in Area Structure Plan (ASP) areas represented about 14 percent (403 hectares) of all raw land in the approved ASP areas. There is a potential for 8,077 dwelling units (2,126 single family units, 5,951 multi family units) on City lands in ASP areas when the Tawa neighbourhood is included in the development totals. Approximately 96% (with a potential for over 7,600 units) of the City subdivided lots are serviced. Clearly, this is a significant inventory of City-owned subdivided land which must be considered in any analysis of policies for City land development. At the average selling rate over 1979-81, it will take 3.1 years to sell all the presently subdded City land in ASP areas for single family units and 9.1 years for multi-family units, assuming no additional City land is subdivided. The City is a major residential land developer, with the potential dwelling units on City lands accounting for 23.4% of all potential units in ASP areas.
City Land Assembly Policies The general policies for land assembly are contained in City Policy C140: 1.
The City will pursue a policy of land banking of residential land in concert with the Provincial Government.
2.
Major land banking for industrial purposes (will) be undertaken by the City.
3.
Selective land assembly (will) be undertaken by the City with the view to maintaining a land ownership position in each major residential and industrial plan area, and
4.
The acquisition of sites in developed parts of the city (will) be undertaken to facilitate the achievement of certain development goals. -4-
These general policies do not clearly indicate the ultimate purposes or objectives of City residential land assembly. Consequently, there is insufficient guidance to determine which land, in what location, for what residential use and in what _ — amounts should be ,purchased. Future of Private Land Development and Implications for City The present Edmonton housing market has been influenced by several significant events including substantial Provincial activity in housing, a sudden downturn in the economy, high interest rates and unemployment. Affordability problems and uncertainty among home buyers have created major problems for the private land development industry. Instability in the private residential land development process appears to be increasing as the industry attempts to respond to the present economic uncertainties. There are conflicting implications for the City as a land developer as a result of these changes in the private sector. Some of these implications suggest more involvement by the City to ensure an adequate inventory of lots, while others point to less involvement as bigger land companies can provide more comprehensively planned projects. These implications will be used in Phase 2 to assist in identifying and evaluating alternative roles for the City.
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1. INTRODUCTION Background A number of issues regarding the City's land development activities have arisen as a result of the submission of the "Status of Residential Land Report" to the Technical Advisory Committee (TAC) on 1982 05 06 and changed economic conditions. TAC recommended that the "Status of Residential Land Report" be submitted to the Commission Board and Council. On 1982 06 02, the Commission Board adopted the following recommendation: "That a 4-month in-depth study evaluating the longer term role of the City with respect to residential development be prepared and submitted to Commission Board by 1982 10 01." This study examines the nature of the City's role as a "land developer"; that is, the process by which the City acquires land, prepares plans for its future use, obtains the necessary approvals, undertakes servicing (i.e. providing water, sewers, roads, etc.) and the subsequent marketing and sale of the land. This definition will apply throughout the study in relation to the City's activities as a "land developer". Although the activity of the City as a regulator of land development through subdivision and redistricting approvals is an important function of local government, it is not discussed in this study. Purpose of Phase 1 and 2 Progress Reports This Progress Report contains the results of the work-to-date in Phase 1 of the Study. The work in Phase 1 concentrates on providing background information on the City's activities in the land development process and discusses the following topics: -
general objectives for municipal activity in land assembly and development; -price
determination in the urban land market;
past and present City land assembly and development activities; •
City land assembly and development policies;
-
experiences of other municipalities;
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2
future of the private land development sector and implications for City activities. In Phase 2 of the Study, alternative land development policy roles for the City will be identified and evaluated. A Progress Report will be prepared to present the results of Phase 2. Phase 3 will provide recommendations and a Final Report, with completion of the Final Report scheduled for 1982 09 23. The Progress Reports provide an opportunity for review of interim findings within the Planning Department, Real Estate and Housing Department and the Corporate Policy Planning Office. Additional information on the operating policies of the City for land assembly and development is being gathered at this time. When this material is received, the analysis will also be circulated for review and comment.
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2.
GENERAL OBJECTIVES FOR MUNICIPAL ACTIVITY AS A LAND DEVELOPER
This section identifies several objectives which a municipality might attempt to achieve through public land assembly and development. These general objectives provide a framework for the subsequent discussion of Edmonton's land assembly and land development activities. Objectives for Municipal Residential Land Assembly and Development Generally, a municipality becomes involved as a developer in the residential land assembly and development process to achieve one or more of the following objectives: -
to reduce land costs and thus make housing more affordable for a larger group of consumers;
-
to control urban spatial expansion in support of planning goals;
-
to provide land for various social needs, such as assisted community housing, not met by the private sector;
-
to generate net revenue (profit);'
-
to provide land for direct municipal requirements such as parks or utility installations to service residential development (although this could be considered as an essential function for a municipality).
These objectives may be undertaken individually or simultaneously in a municipal program. However, there can be substantial internal conflicts among the objectives (providing land for social needs is not likely to generate a profit) and conflicts in terms of the priority among the objectives (deciding which ones are most important) especially in the absence of formalized methods and criteria to establish the priorities. A further difficulty is that a land assembly and development program may not have these objectives
identified explicitly. 1
Rose, A., "Canadian Housing Policies, 1935-80", Pages 152-153. -8-
Within each of these objectives are several issues, such as who benefits, extent of subsidies and degree of success in achievement. These issues will be raised as the activities and policies for Edmonton's land assembly and development programs are examined in the following sections.
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3.
PRICE DETERMINATION IN THE URBAN LAND MARKET AND MUNICIPAL LAND ASSEMBLY
This section discusses the mechanisms for price determination for urban residential land and examines the role of municipal land assembly and development in influencing the urban land market. An understanding of the price determination process is important as it illustrates the effect of municipal land assembly on prices and highlights potential conflicts between benefits and costs which arise from pricing policies. Further, this discussion outlines the economic context within which municipal land development has to operate. The examination of prices also is important because of concern regarding the impact of municipal land assembly driving up land costs when the land is assembled. Urban Housing Market
The housing market has two main characteristics: immobility -
housing is consumed where it is located;
durability -
housing is used for a long period of time; new housing each year generally accounts for less than five percent of total housing stock.1 (In Edmonton, as an example, the figures were 5.9% in 1981 and 3.8% in 1980).
The demand for the existing housing inventory is the dominant factor in short term price determination because new housing production does not substantially affect the total housing market over short periods of time. Over the longer term, however, the supply of new housing will affect the total housing market and influence price setting. The basic demand and supply variables of the housing market are: Demand
population growth -
Supply
household
-
financing
-
land
formation and characteristics
1
Heung, R., "The Do's and Don'ts of Housing Policy", Page 49
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elimination of overcrowding
-
labour
and doubling-up
-
building materials
price and rents
-
technology
-
financing
-
entrepreneurship
-
vacancy rates
-
regulation.
-
The price or rent of housing is determined by the interaction of supply and demand in particular housing market areas. Over time,. if effective demand is greater than supply, prices will be bid upwards. However, if supply is greater than demand, prices will fall. The market functions such that demand that cannot be satisfied by the existing supply of housing results in an increase in prices. In response, the supply may be increased to attempt to satisfy demand. Where supply approximates demand, an equilibrium price is established. Noting that demand has a more immediate effect on the market than does supply, in the short term, excessive demand can bid up price higher than the level at which new supply can be priced. A similar demand/supply relationship exists for urban land, even though the demand and supply of land is strongly influenced by the demand and supply of housing. The price of raw land is determined on the basis of the anticipated market value of the lots produced, 1 which in turn is influenced by factors such as location, servicing status and timing of development. Costs of development, profits, and an adjustment for time variables are deducted from anticipated market value to determine the price a developer would be willing to pay for raw land. The price of serviced lots is determined by the anticipated market value of the housing units to be produced. A miscalculation of demand and the corresponding distribution of housing types could result in a need to resubdivide, rezone or otherwise revise the form, selling price, and timing of such development. Municipal Intervention in the Land Market - Land Assembly as a Land Development Tool Government intervention in the land market may be in several forms. Although the overall demand for housing is better directed and manipulated at the federal level, the supply of housing and lots may be influenced most directly at the municipal leve12.
Provincial/municipal powers include:
1
Derkowski, A., "Costs in the Land Development Process", Page 18. Hamilton, S.W., "Public Land Banking Real or Illusionary Benefits"; Page 9
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-
regulate commerce in land; property taxation, financial incentives;'
-
control of the extension of major piped services to raw land;
-
regulating land use planning including zoning and subdivision control;
-
the ability to assemble a public land bank and enter the market as a developer.
This discussion centres on the latter role of the municipality as a "land developer" as defined in the Introduction to this Progress Report. The land banking or assembly activity generally operates as follows: -
raw land is purchased at a price not yet significantly inflated by speculation and urbanization pressures;
-
the land is held until urbanization encroaches and the land has reached a higher potential use;
-
the initial purchase and holding costs tend to be less than the potential residential land use market value, providing the holder with a significant margin between costs and potential land price; the land is sold, or serviced and sold, when appropriate.
(It is important to note that the public land assembly process does not necessarily require that all of the above activities be undertaken by the same government level. For example, in the case of Mill Woods, the Province acquired the raw land, while the City undertook development and subsequent sales.) To remain active in the long term, a developer must purchase replacement land to maintain a presence in the marketplace. The larger the land bank and the larger the volume of lot production relative to total lot production in the municipality, the greater the market power of the holder of the land bank. A public land bank should be established in conjunction with a set of predetermined objectives such as those discussed in Section 2. The set of objectives would also have to be accompanied by a pricing policy and by locational purchase criteria. Decisions are required regarding: the cumulative size of the land bank; whether the land bank is to be concentrated or to include lands throughout the city or thoughout certain growth areas; whether to lease or sell some or all of the land bank, and disposition of revenues.
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The pricing policy for selling lots is particularily important in light of potential conflicts between benefits and objectives. Land sold at market value would increase municipal revenues but would not facilitate general price control or other social objectives. Land sold at cost would yield no net municipal revenue but could enhance the achievement of price control and social objectives. The sale of land between cost and market value would provide some municipal revenue and facilitate some social objectives, but may not enable effective price control. Purchasers obtain benefits in the form of obtaining housing previously not affordable or by saving from purchasing housing at sale prices and the subsequent investment of the savings. An additional benefit is obtained when housing, purchased by the original owner at below market value, is resold at market value. The pricing policy would also have to consider which benefits are desirable. Municipal land development and land banking are policy tools which can affect the supply side of the demand/supply relationship of the housing and urban land markets; they cannot • stimulate or moderate demand without first supplying or withholding lots or housing. Such a policy could, depending on other related policies, enhance the achievement of general price control, redistribute land profits, assist in the attainment of social objectives, and influence orderly development as noted in Section 2. The important elements are that the land assembly operates on the supply side of price determination and that the price moderation objective has potentially significant internal conflicts.
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4.
CITY OF EDMONTON LAND DEVELOPMENT ACTIVITIES
This section describes, in general terms, the history of the residential land development process in Edmonton, highlighting the City's activities as a "developer". Although there is a discussion of historical activities, the emphasis is on the City's recent activities and its proposed development; schedule. Information on past and present activities is important to help understand what the City has done and where it stands as a force in the market. By examining proposed future City servicing activity, especially in relationship to the present inventory of lots and historicalW selling rates, it is possible to assess the significance of present inventory levels. Pre 1960's Era
Land development activity in Edmonton and the role of the City went through several distinct phases from 1900 to 1960 reflecting the pace of economic activity and changed City policies'. During the early part of the twentieth century, the City was promoting private development through purchasing and subdividing land and establishing the basic urban services. Spurred on by the prairie wheat boom and the City's initiative to provide land, Edmonton grew rapidly and large-scale private land subdivision was undertaken. However, by 1918, the land boom had collapsed and speculative private subdivision activity had ended. The City acquired large amounts of land from tax defaults: "When the boom collapsed, 70,000 lots went into municipal ownership after tax sales between 1918 and 1920, and through the twenties 43% of the City's buildable area was forfeited."2 Because of the large scale civic land assemblies, Edmonton was able to introduce the comprehensively planned neighbourhood concept by 1949, well in advance of most other jurisdictions. 1
This discussion is based on material from Spurr, P., "Land and Urban Development", Page 148-160.
2
Spurr, P., "Land and Urban Development", Page 143.
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During the 1920's and 1930's the City continued to acquire tax default lands and it unintentionally became a major land owner. City policy at the time was directed towards acquisition of tax default lands3, not primarily for development, but to protect the City's financial interest. As the economy started to recover in the late 1930's, City resales of tax lands increased as people were able to buy and the City wished to obtain revenue. As Edmonton grew in response to the development of the oil industry in the late 1940's, the City-owned tax-defaulted lands were drawn upon to provide lots: "Most of this new construction occurred in city-sold, low cost lots replotted on the tax-defaulted subdivisions of the previous boom. By 1954 the city had sold 7096 of the tax land, and private developers were producing subdivisions across the urban periphery."4 The period from 1900 to 1960 is characterized by discrete phases in City policy towards land assembly and development. The City initially encouraged the private sector through City assembly, subdividing and servicing. As development progressed to 1914, City policy switched to letting the private sector undertake land development. Following the land crash in 1918, City policy concentrated on acquiring tax default land. Land assembly was a by-product of the tax-default policy, while the development process (resale of the lands) helped to provide revenue to the City and return land to the private sector. After World War II, the City reduced its activity as land assembler by the sale of taxdefault lands and it made no new purchases of other major tracts for new residential subdivision.
The 1960's to 1980 Era During this period residential land development was increasingly undertaken by the emerging private land development industry. Across Canada, in the major metropolitan centres, including Edmonton, the land development industry changed from many private builders/developers providing numerous subdivisions in 1950's to much larger, but fewer, land development companies in the 1960's and 1970's. This consolidation occurred for a number of reasons including pressure to build large number of houses, municipal shifting of the growing servicing expenses to the developers, more rigerous planning and servicing standards and the identification of large-scale areas for new suburban growth. 3
Spurr, P., "Land and Urban Development", Page 146.
4
Spurr, P., "Land and Urban Development", Page 146-147. -15-
The private sector land development industry which emerged undertook the following steps in the land development process: -
land acquisition and assembly
-
financing
-
obtaining plan approvals negotiations with the municipalities on a development agreement
-
lot servicing
-
marketing and selling of lots.
In Edmonton, consistent with national trends, several companies emerged as major developers of residential subdivisions. Appendix 1 provides a sample listing of the percentage of single family dwellings provided by the various companies operating in the City over the period 1973-79. However, by the late 1960's there was growing national concern over the evolving nature of the private land development industry and rapidly rising house prices. In response to public concern with house price inflation in Edmonton, the Alberta Housing and Urban Renewal Commission began in 1969 a major public land assembly in the area subsequently known as Mill Woods. The Province acquired the land and initiated the planning process for the community. The agreement between the City of Edmonton and the Province of Alberta stated that the objectives of the Mill Woods land assembly program were as follows: HI. 2.
The maintenance of the continuous and adequate supply of land for housing so that the trend in spiralling costs, particularly for land, may be reversed. The progressive servicing of land in the area to provide public and private housing of good quality at cost."1
Specific objectives of the assembly were: _• to guarantee the availability of serviced lots for general housing purposes; to guarantee sites for specific needs such as schools, public housing, hospitals, parks at minimum costs; to guarantee the most economic form of growth for the City as a whole; -
to control land value escalation so that fewer residents will be forced to rely on some form of subsidized housing;
-
to implement, at lower right-of-way costs, major transportation facilities within the City.2 -16-
The significant characteristics of the Mill Woods project were that the impetus for the land assembly arose from strong public concern with rapid housing price inflation in Edmonton and that the Province undertook the initial assembly, with the City involved in the subsequent planning, administration and sale of lots. Present City Land Holdings for Residential Development in Area Structure Plan Areas
Subdivided Residential Land
At the end of 1981, City-owned subdivided residential land, including serviced and unserviced lots, had a development potential of 4,616 units as shown in Table 1. This figure represented a decline from a development potential of 6,332 units at the end of 1980; most of the decline at the end of 1981 resulted from sales of lots for multi-family units as a result of the Multiple Unit Residential Building Program (MURB). However, the addition of the potential dwelling units in the Tawa Neighbourhood of Mill Woods substantially increases the number of City units as percentage of potential dwelling units in ASP areas as shown in the note to Table 1. Adding Tawa to the 1981 figures raises the number of potential dwelling units on City lands in ASP areas to 8,077 units (2126 single family units, 5,951 multi-family units). Approximately 96% of the potential dwelling units (over 7600 units) on City land are fully serviced. The City has significantly increased its importance during 1979-81 in the land development activity in ASP areas including Mill Woods. As shown in Table 1, potential dwelling units on City lands as a percentage of total potential dwelling units in ASP areas rose from 14.6% in 1979 to 23.4% in 1981 if Tawa is included. Sales of City-owned lands have varied considerably over 1979-81 as shown in Table 2. -Almost all the variation has occurred in multi-family development, although sales of single family lots declined from 805 in 1979 to 625 in 1981. The extreme variation for multi-family use is shown by the sales of land for 235 units in 1979, 62 units in 1980 and 1661 units in 1981. Sales in Mill Woods account for almost all the total City sales in ASP areas.
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TABLE 1
SUPPLY OF POTENTIAL DWELLING UNITS OF CITY OWNED VACANT, SUBDIVIDED (SERVICED AND UNSERVICED) RESIDENTIAL LAND IN ASP AREAS
1979
1980*
City Units as a% Potential Dwelling Units in ASP Areas
City Units as a% Potential Dwelling Units in ASP Areas
1981** City Units as a% Potential Dwelling Units in ASP Areas
Type
If of Units
Single Family Units
1,335
15.1%
2,078
19.7%
1,894
19.6%
MultiFamily Units
2,662
14.4%
4,254
17.9%
2,722
12.7%
Total
3,997
14.6%
6,332
18.5%
4,616
14.8%
Source:
City of Edmonton Planning Department, "Status of Residential Land in the City of Edmonton, December 31, 1981", March 1982, Page 28, 35.
# of Units
# of Units
*The increase in multi-family units resulted from changes in the Land Use Bylaw provisions **The plan of subdivision (822-0154) for the Tawa neighbourhood of Mill Woods was registered on 1982 0114. Although serviced prior to 1982, data for these potential dwelling units, (232 single family and 3,229 multi-family units), were not reported in the 1981 "Status of Residential Land" report. The addition of these units to the 1981 figures produces: Type Single Family Units Multi Family Units Total
# of Units
City Units as a% of Potential Dwelling Units in ASP Areas (Includes Tawa)
2,126 5,951 8,077
21.5% 24.1% 23.4%
TABLE 2 CITY-OWNED LAND SOLD FOR RESIDENTIAL DEVELOPMENT* 1979 - 1981 (MEASURED BY POTENTIAL DWELLING UNITS)
Single Multi AREA STRUCTURE Family Family Total Units PLAN AREAS Units Units Mill Woods
805
Other Plan Areas
60
Total Combined Plan Areas
865
SOURCE:
235
1040
60
235
1981
1980
1979
1100
Single Multi Family Family Total Units Units Units 512
62
14
526
62
Multi Single Family Family Tot, Uni Units Units
574
625
14
8
588
633
1661+
8
1661
City of Edmonton Planning Department, "Status of Residential Land in the City of Edmonton, December 31, 1981", March 1982, Page 36
*Sales of a City-owned lot carried the obligation to begin construction on a residential unit within four months. +1981 multi-family sales included lots sold and lots under option (sold = 740, under option = 921).
228,
229,
At the average selling rate over 1979-81, it will take 3.1 years to sell all the presently subdivided City land in ASP areas for single family units and 9.1 years for multi-family units, assuming no additional land is developed or serviced. Raw Land in ASP Areas (Unsubdivided)
The City owned 403 hectares in ASP areas at the end of 1981, representing approximately 14% of the total amount of raw land (2,922 hectares) in the approved ASP areas. Of the City's 403 hectares, 160 hectares (or 406) were in Mill Woods. In future years, it is anticipated that Mill Woods will decline in relative importance as the major City residential holdings in ASP areas in other ASP areas are brought on stream. Present City Land Holdings for Residential Development in the Inner City There is no readily available inventory, in summary form, of City-owned land in the inner city areas which is developable for residential purposes. In general, City residential land in the inner city appears to be held for social housing. In Real Estate and Housing's "Annual Housing Report 1981," a potential of 290 units is identified as the City's supply of land for social housing in the inner city1. As noted in the Annual Report, this land supply in the inner city is being depleted because acquisitions cannot be undertaken in the current conditions: "Prohibitive land costs combined with restrictive 'Maximum Unit Price' guidelines and difficulties related to districting have hindered acquisitions in older established neighbourhoods.2 The inventory of City land for social housing in the inner city was projected to be exhausted by 1982.3
1
City of Edmonton Real Estate and Housing, "Annual Report 1981", Page 25.
2
City of Edmonton Real Estate and Housing, "Annual Report 1981", Page 11.
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Future City Residential Land Development Activities A proposed schedule for the servicing of City-owned residential land for the years
1983-87 has been prepared by the Department of Real Estate and Housing. The proposed program specifies the number of potential dwelling units to be serviced on a neighbourhood basis, by land use classification, annually. According to the program, a total of 3,905 potential dwelling units are to be serviced over the period 1983-87. The schedule indicates that servicing activity will increase in 1984 through 1986, but will then be curtailed somewhat in 1987. Of the total of 3,905 potential dwelling units, the shcedule proposes that 1,475 (or 38%) be single family units, while 2,430 (or 62%) are to be multiple family units. Clearly, the proposed emphasis is on the servicing of multiple family units. This is likely due to the fact that much of the City-owned land lies in proximity to proposed or established town centres which tend to be higher density districts in the various ASP areas. The majority of the servicing is scheduled to occur in the northeast sector of the City, more specifically in the Lake District ASP (950 units), the Pilot Sound ASP (865 units) and the Casselman NSP (335 units). Servicing will also be concentrated in the southeast sector, in the Burnewood NSP (710 units) and the Meadows ASP (650 units). A marginal amount of servicing activity is proposed for the Riverbend ASP (60 units) and the West Jamieson NSP (100 units) (See Table 3). An anomalotes situation appears to be developing when the past sales rate of City land is compared to the present inventory of serviced lots and the proposed servicing schedule for 1983-87. If the average annual sales rate of potential dwelling units on City lands over 1979-81 is assumed to continue (675 single family units and 653 multi-family units), and lots are serviced according to the schedule in Table 3, then by 1986 all the inventory of land for single family units will be utilized and production would be insufficient to meet sales. However, under the same set of assumptions for multiple family development, the present large inventory of potential multi-family units remains high to 1987 (over 4,400 units compared to 5,951 in 1982). Although a variety of assumptions can be made regarding projected sales rates and servicing schedules, the effective utilization of the existing substantial inventory of serviced City land must be an overwhelming consideration. Continued servicing of multifamily sites, unless undertaken for clear reasons related to a market failure by the private sector to provide this type of housing, will lead to an ongoing large inventory of serviced calt4 4 City sites, tt+FReel at high cost. -21-
TABLE 3 - PROPOSED ANNUAL SERVICING PROGRAM FOR CITY - OWNED LAND, 1983 - 1987* Year and Neighbourhood
Units
Land Use Classification
1983:
Riverbend Burnewood
- NH 5 - Stage 1B
60 150 110
RF1 RPL RA7
1984:
Pilot Sound
- NH! - Stage 1
105 10 100 200 335 235
RFI/RPL RF4 RF1/RPL RF5/RA7 RF5 RF6/RA7
100 300 100 110 100 125
RF1/RPL RF5/RA7/RA8 RFI/RPL RF1/RPL RF1 RF5/RA7
150 250 100 300 100 125
RF I RF5/RA7 RF1 RF5/RA7 RF1 RF5/RA7
90 150 100 150 100 150
RF1 RF5/RA7 RF1 RF5/RA7 RF1 RF5/RA7
Lake District - NH 8 - Stage 1 Casselman Terra Losa 1985:
- NH 5
Lake District - NH8 - Stage 2 West Jamieson Pilot Sound - NH1 - Stage 1 Burnewood - Stage 2
1986:
1987:
Pilot Sound
- NH! - Stage 3
Meadows
- Stage 1
Burnewood
- Stage 3
Pilot Sound
- NH! - Stage 4
Meadows
- Stage 2
Lake District - NH8 - Stage 3
The qualification is noted that "the attached schedule may be accelerated or retarded to suit market conditions." SOURCE: Memorandum from Real Estate and Housing Department 1982 07 28.
5.
CITY OF EDMONTON LAND ASSEMBLY AND DEVELOPMENT POLICIES
In this section existing City policies for banking and selective land assembly are discussed. These policies, and their justification at the time of adoption by Council, are intended as a basis to assist in developing and evaluating alternative policy approaches in Phase 2. Specifically, the existing City policies for land assembly will be used in Phase 2 as one alternative role for evaluation and comparison. General City Policies for Land Banking and Assembly The general City policies for land banking and selective land assembly where the City acts as a "land developer" are contained in City Policy C140: �1.
The City will pursue a policy of land banking of residential land in concert with the Provincial Government.
2.
Major land banking for industrial purposes (will) be undertaken by the City.
3.
Selective land assembly (will) be undertaken by the City with the view to maintaining a land ownership position in each major residential and industrial plan area, and
4.
The acquisition of sites in developed parts of the City (will) be undertaken to facilitate the achievement of certain development goals."
The justification for these policies, as supported by the Commission Board in 1979, is presented in Table 4. (It should be noted that these policies were preceded by extensive discussion on alternative approaches to land assembly and City concerns with rising land prices. The policies also appear to have been intended to provide a basis for the City approach to further negotiations in 1979 with the Province regarding a joint venture land banking agreement). There are several significant features of City policies and their justification for residential land development. First, the policies do not discuss the pricing approach or establish price moderation of residential land as an objective. Second, the justifications for residential land assembly are to provide land for municipal purposes, land for social housing and the opportunity to experiment with innovative neighbourhood design. However, these specific justifications are not reflected in the policies. Third, the percentage of land to be acquired in new areas was anticipated to be 10-15%. This amount is not likely to be sufficient to influence prices nor it is likely sufficient to -23-
TABLE 4 CITY OF EDMONTON LAND BANKING AND SELECTIVE LAND ASSEMBLY POLICIES POLICIES "I.
That the City pursue a policy of land banking of residential land in concert with the Provincial Government.
3USTIFICATION1
"The decision to pursue land banking, an alternative detailed in the January, 1979 discussion paper, would be based on conclusions related to land values, provision of low-income housing, innovative and experimental neighbourhood design, allocation of profit, availability of funds and lot supply. Also, a land bank provides an opportunity for small builders to operate without maintaining their own land positions. In the pursuit of the recommended land banking policy, the location and timing of purchases would be related to confirmation of the nature of Provincial conditions, land purchase price, number of areas to be involved, annexation policy, and utility and transportation factors.
2.
That major land banking for industrial purposes be undertaken by the City.
Prepared by Corporate Policy Planning Office, 1979 06 21
Recommendation 2 is justified in view of the great significance industrial development has in facilitating our residents' achieving a most essential objective - a job. Current Provincial Government policy provides for land banking for industrial purposes in all communities except for Edmonton and Calgary. Therefore, the City must plan for and give effect to an industrial land strategy which permits the development of, for example, the Edmonton Industrial Research Park.
POLICIES
JUSTIFICATION
3.
That selective land assembly be undertaken by the City with a view to maintaining a land ownership position in each major residential and industrial structure plan area.
3.
The recommendation for selective land assembly, a policy consistent with a practice of this City for most of the last half century, is justified in that: land for public purposes, beyond that dedicated, would be available; that there would be land for social housing programs, land for new industry and that which may be relocated by local government policy and the opportunity for experimenting and innovation in neighbourhood design. It is envisioned that 10 to 15 percent of the land in new areas would be City-owned. This percentage would be more an average of the areas rather than a level to be achieved in each structure plan area. It would take perhaps five years to achieve this level of ownership, but this would depend upon the availability of funds, the amount of land offered to the City and the price. Care would be taken to minimize increases resulting from the entry of another bidder for urban land.
4.
That the acquisition of sites in developed parts of the City be undertaken to facilitate the achievement of certain development goals.
4.
Recommendation 4 is included to ensure that acquisition of sites in existing, developed areas of the City is brought forward by the Administration. A large variety of community goals could be used as the basis or the justification for this action. Included here would be the purchase of land for projects such as the South-East Civic Centre area, land for housing in the downtown area, and for development in the vicinity of future rapid transit stations."
influence the staging or timing of development in new areas. (As noted in Section 4, present City holdings of raw land in approved ASP areas constitute about 14% of the total raw land in these areas.) These policies do not clearly indicate the ultimate objectives of City residential land assembly. Policy 3 proposes City assembly to provide a "land ownership position in each major residential....plan area" but does not state explicitly for what reasons ownership is to be undertaken. In the absence of a stated policy for land assembly which outlines the explicit objectives of residential land assembly, there would seem to be insufficient guidance to City officials to determine which lands, in what location, for what residential uses and in what amounts should be purchased. There are several other City policies which are related to the issue of residential land development. Although they do not clarify the uncertainties discussed above, to a limited extent they affect the issue and should therefore be included in this discussion. Policy C127, for example, is intended to provide guidelines for the use of any surplus funds resulting from the Mill Woods Project. The Policy statement reads as follows: "For the period 1981-85, any surplus funds available from the Mill Woods development project, after providing for the retirement of Mill Woods debt and not required to finance other land inventory, shall be applied as a source of financing for general municipal capital expenditures (tax-supported). It is interesting to note that although the objective "to generate net revenue (profit)" was not a stated objective in the initial proposal for Mill Woods, it would appear that it has over time become an expectation. Evidence of a "projected" Mill Woods cash surplus is also found in the City of Edmonton Local Policy Plan 1983-87 (CPPO, May 1982). This report projects a cash surplus of $44.0 million over 1982-84. The policy therefore implies that any such surplus funds may be used for general capital expenditures should no plans for further land acquisition exist. Policy C1831 which deals with the leasing and licensing of City-owned land or facilities, should also be noted. The policy statement lists several purposes for such activities including: to render a service to the public; to obtain a return on investment; to minimize City costs; and/or to permit the utilization of land or facilities while maintaining City control.
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It is not clear from this policy the extent to which the City actually leases City-owned land. However, it does indicate that the option to lease rather than sell assembled land is available. Of interest is also the fact that the purposes for leasing, stated above, are very similar to some of the general objectives for municipal residential land assembly and development listed earlier. Numerous other City policies have been reviewed in terms of their relation to residential land development. However the policy statements were found to be general in nature and did not apply to the City as a land developer. General Municipal Plan Policies Additional City policies on residential land assembly are found in the General Municipal Plan (3ylaw 6000): "1.B.2 The City will facilitate the provision of a sufficient supply of appropriately designated and serviced land by the private sector and, where approved by City Council, the public sector for residential, industrial and commercial needs. 1.6.3 The City will pursue increased municipal involvement in, and active support of, Provincial Government efforts in housing those groups often excluded from the market place, such as low income, elderly and young households.
•••
5.H.3 The City will continue to acquire land in suburban areas for the purpose of developing community housing for both the elderly and lower-income households in accordance with projected demand. 5.H.4 The City will endeavour to obtain suitable sites for community housing projects in the inner city areas on the basis of the location of demand." These policies are general and do not provide specific guidance for land assembly.
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6.
REVIEW OF OTHER MUNICIPALITIES' EXPERIENCES
Several cities in Canada have to varying degrees intervened in the residential land market. Their aims, objectives and motives varied in many ways, but there were some common concerns. With this perspective in mind, an examination of selected municipal involvement in residential land assembly was undertaken to indicate the objectives, activities and results of their involvement'. This comparison can highlight perceptions, aims, and reservations that municipalities similar to Edmonton may have experienced. The activities of six Canadian municipalities: Vancouver, Calgary, Saskatoon, Regina, Winnipeg and Toronto, were chosen as a cross-section of cities whose experiences could perhaps be related to Edmonton's situation. glgary, Regina and Winnipeg Three of the six cities examined, Calgary, Regina and Winnipeg have not been involved in any residential development beyond the normal subdivision approval process. Although the City of Regina owned large tracts of land from 1904 through World War II from tax defaults, the City chose to sell off this land unconditionally to the private sector. In both Calgary (in 1969) and Winnipeg (mid 1970's) proposals for landbanking programs were initiated. However, in both instances the programs were never fully implemented. In Winnipeg, landbanking had begun (nearly 1000 acres in 3 areas of the city were expropriated), before the entire program was abandoned. The objective of the program was to bring lots onto the market at a price lower than those provided by developers. However, Council concluded that this objective would not be attainable as the City's attempt to bank land was too late as the best land had already been acquired by developers and the Province who had also undertaken extensive landbanking. Vancouver, Toronto and Saskatoon
The three other cities examined: Vancouver, Toronto and Saskatoon, have been involved to a varying extent and for a variety of reasons in residential development. Information in this section was obtained from various officials in each City.
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Table 5 indicates the objectives of Vancouver, Toronto and Saskatoon. As noted in Table 5, the objectives and activities of Vancouver and Toronto were similar. In both cases, the objectives of their involvement were to reduce land costs and to provide land for various social needs not met by private enterprise. (Objectives 1 and 3 discussed in Section 2). Both Vancouver and Toronto undertook major projects during the 1970's which proposed to redevelop large tracts of land within their inner cities. Mixed-use residential districts replaced acres of industrial land in Vancouver (False Creek) and obsolete industrial land in Toronto (St. Lawrence). In these projects, most of the assembled land was sold back to developers with specific development conditions attached and after comprehensive development intentions and land use plans had been prepared. About 25)6 of the land was designated for social housing. Both cities chose to retain ownership of some of the land, although the extent or percentage of ownership varied from project to project. None of the land assembled for these projects was acquired through expropriation. The land was either bought at market value or had already been in the cities' ownership through tax defaults. The financing of these projects also differed. Generally, however, the acquisitions were financed through the use of Federal money. The construction of housing was financed through conventional sources. Officials of the cities contacted feel that the projects were successful in that their stated objectives were met. These projects were successful in providing a variety of housing types in desirable locations within the city. Neither City has any major projects underway at the present because there are no desirable and affordable tracts of land available. The cities, however, continue to assemble some land to be held for the short-term to facilitate social housing. The City of Saskatoon's involvement in the residential land development process represents perhaps the best Canadian example of a city with a large scale comprehensive landbanking program. Saskatoon has been operating a land assembly program for nearly 30 years. The use of "tax title" revenue provided the critical financial base for land acquisitions on the urban fringe. No money has ever been borrowed to finance this program. The land operation is completely self-financing and has never created a municipal debt. When a lot is sold there are two basic charges: land and prepaid -29-
TABLE 5 OBJECTIVES OF THE THREE CITIES WHICH ARE OR HAVE BEEN INVOLVED IN THE RESIDENTIAL LAND DEVELOPMENT PROCESS OBJECTIVES To Provide
City
To Control
Land for
To Generate
To Provide Land
To Reduce
Urban
Various Social
Net Revenue
For Direct
Land Costs
Expansion
Needs
(Profit)
Municipal Requirements
X
X
Vancouver
X
Saskatoon
X
Toronto
X
X X X
services. Monies collected from the sale of land are used exclusively for further land acquisition, while funds collected for prepaid services pay for the capital costs of the services. The City of Saskatoon's objectives fulfill four of the five stated objectives: to reduce land prices; to control urban spatial expansion in support of planning goals; to generate net revenue and to provide land for municipal purposes. (The City staff contends that the profit generated is more of a pleasant benefit than an actual objective.) The development activities of Saskatoon appear to be successful. As an indicator, the City's average selling price of a residential lot, all services paid, is $17,000, compared to the private sector's selling price of $25,000 to $60,000. Approximately 35% to 40% of all residential lots are sold to individuals. The remainder are sold conditionally to contractors in batches of about six. Based on the success of their program, the indications are that the City of Saskatoon intends to continue to acquire land for residential development. However, civic officials recognize that there are several factors which could undermine the future of land assembly and development by the City: -
failure to project accurately future land requirements;
-
failure to adjust to market prices and demands;
-
failure to fill appropriate market;
-
failure to perform development work in a professional manner, in keeping with market considerations and expectations.
City officials express confidence that awareness of these factors will ensure that potential pitfalls are avoided.
-31-
7.
FUTURE OF PRIVATE LAND DEVELOPMENT AND IMPLICATIONS FOR CITY LAND ASSEMBLY AND DEVELOPMENT
In the previous sections of this Phase 1 Progress Report, several features of the policy context for City land assembly and development were discussed to provide a background for examining alternative City policies in Phase 2. The previous sections examined general objectives, past and proposed City land development activities and present City policies. In this section, the factors leading up to the present local economic conditions and the possible effects of these conditions on the private land development industry are discussed to highlight implications for the City's role in land development, particularly in the 1 to 2 year term. These implications are important for the evaluation of alternative City roles in Phase 2 of the study. Factors Influencing the Present Edmonton Housing Market
Several important factors have combined to significantly influence present housing market conditions in Edmonton: 1.
During the post War years, and especially in the 1960's and early 1970's, the Federal government played a leading role in the provision of housing. More recently, and particularly in Alberta, the Provincial government has become the significant force. For example, the Province of Alberta expects in 1982 to finance, through its numerous housing programs, approximately 24,000 housing starts.1
2.
The Alberta economy, spurred on by a resource boom, created a heavy demand for housing in Alberta between 1975-80. This demand occurred at a time when other parts of the national house building industry were having severe problems. The brisk demand for residential lots, as well as rising prices, gave little sign of abating until recently. This demand encouraged a continued high level of residential development and land assembly by the housing industry.
1
Speech by the Hon. T. Chambers, Minister of Housing and Public Works, 1982 06 17, to Shelter Crisis Conference, Calgary. -32-
3.
However, the sudden conjuncture of several major events changed the situation dramatically. The cancellation of Alsands, postponement of the Cold Lake project, the fall in world oil prices, the decline in the oil industry, the effects of high interest rates, inflation and unemployment have all combined to bring the private housing industry to a virtual standstill. The duration of this standstill is uncertain at the present time.
4.
Finally, affordability and uncertainty among potential home buyers has created major problems for the industry, as buyers stay out of the market.
In this climate/environment of instability, uncertainty and transition, the housing development industry is faced with the need to take corrective action. Responses could vary, with for example, some land development companies having been reported as attempting to sell off assets, including land, to reduce debt and interest costs'. The potential implications of the changes to the private sector are discussed below. Short Term Emerging Future If high interest rates persist and the present economic uncertainty continues, there may
be a substantial restructuring of the private land development industry. Possible features of the future private development sector could include: -
fewer but bigger companies as the smaller companies merge or are bought out; more cautious industry where there is a desire to avoid risk and a reluctance to maintain an inventory of lots because of high carrying charges; smaller projects where risks are lower and uncertainties are reduced;
-
success for those companies with financing and capital availability for land acquisition and servicing;
-
dependence on government housing programs which influence the level of development and construction activity.
-
joint venture projects rather than single firm activity;
-
less interest in residential development as companies concentrate on more profitable industrial and commercial projects.
1
Financial Post, 1982 06 26 Edmonton Journal, 1982 06 26 -33-
TABLE 6 FUTURE PRIVATE LAND DEVELOPMENT AND IMPLICATIONS FOR CITY INVOLVEMENT Possible Features of Private Development Industry
1.
2.
Fewer but bigger land development companies
More cautious industry
Implications for City Involvement in Residential Land Development
-
Increased ability to develop an area more comprehensively, resulting in higher standards of development and living quality.
-
Potential for supply restrictions on new lots; may result in higher prices in periods of growing demand and pressure on the City to supply lots.
-
Developers may maintain smaller inventory of lots to reduce risks.
-
Less capacity to respond to increased demand, leading to more price volatilty in market. City may need to ensure increased inventory of lots to meet demand fluctuations.
-
Less innovation in providing new housing forms. More internal staging by developers in ASP and NSP areas to reduce uncertainty and carrying costs.
3.
Smaller projects
-
Need for improved City monitoring of status of land available for development.
-
Increased requirement for City to coordinate the planning for a number of areas.
-
There may be key projects in strategic areas which have to develop first to allow larger areas to develop; however, projects may be too small to develop "key" areas as first priority. City may have to stimulate the "key" projects to encourage their development.
4.
5.
Success for those companies with financing and capital availability
-
The companies or agencies with the best capital access will be able to proceed with projects.
-
Increased volatility as interest rates fluctuate.
-
The leverage feature in land development will decline.
-
City may have better access to financing than some developers, giving the City an edge on projects.
Dependence on government training programs
Increased volatility in activity as government policies (such as MURB) are changed, making certain housing types more attractive investments. Increased difficulty in projecting housing demands as policies change unexpectedly. -
Need to maintain higher inventories of vacant subdivided land to accommodate higher demands stimulated by government programs. City may need to ensure higher inventories are provided if private developers are reluctant to carry costs.
6.
Joint venture projects
-
City could participate as an equity investor.
7.
Less interest in residential development
-
Residential land development may become relatively less profitable, resulting in less production of lots by the private sector; more City production of lots may be required to meet demands.
Perhaps the two most important elements facing the industry are uncertainty in terms of future housing demands, interest rates and government policy and the importance of access to capital as the land development process becomes more capital intensive. Implications for City Involvement in the Land Development Process As the private land development sector evolves in response to changed economic conditions, there are several implications for City involvement as a land developer. Table 6 provides a summary listing of potential implications for the City. There are two significant inferences that can be drawn from Table 6: -
Instability in the residential land development process appears to he increasing as the private development industry enters a state of transition.
-
There are conflicting implications for the City's role as a land developer. Some implications suggest more direct involvement by the City, especially to ensure an adequate inventory of lots, while other features point to less involvement as bigger land development companies have more capability to build comprehensive projects themselves.
This information will be used in Phase 2 of the study to assist in identifying and evaluating alternative land development roles for the City.
-36-
APPENDIX I
-37-
DEVELOPERS OF SINGLE FAMILY LOTS IN EDMONTON 1979 Developer Nu-West and Wimpey Consor and Others Belvedere and Integrated Forest Glenn Genstar Alberta Land Development Company' and Others Integrated Triple Five Abbey Glenn, Green Glenn, Greenway and Carma Abbey Glenn and Melcor Alldritt Homestead Letourneau and Alldritt Wimpey Western Birkholz Other Total
No. of Lots
96 of Total
Cumulative Percentage
828
23.3
23.3
277
7.8
31.1
276 217 213
7.8 6.1 6.0
38.9 45.0 51.0
211 210 207
6.0 5.9 5.9
57.0 62.9 68.8
202
5.7
4.5
192 161 161
5.4 4.5 4.5
79.9 84.4 88.9
160 143 91 1
4.5 4.0 2.6
93.4 97.4 100.0
3550
100.0
1 The Alberta Land Development Company is partially owned by Genstar (Canadian Newspaper Services International Limited, 1979).
Source: LeBourgeois, IP., "The Effects of the Mill Woods Land Bank on Land and Housing Prices in Edmonton", M.A.Thesis, University of Alberta, March 1981.
-38-
DEVELOPERS OF SINGLE FAMILY LOTS IN EDMONTON 1978 No. of Lots
96 of Total
Cumulative Percentage
Genstar
555
20.2
20.2
Carma
362
13.2
33.4
Carma and Qualico
336
12.3
45.7
Qualico
330
12.3
45.7
Qualico
330
12.0
57.7
Beaumaris
271
9.9
67.6
Multiple Ownership
221
8.1
75.7
Sobolewski
115
4.2
79.9
Alkiritt
98
3.6
83.5
Kowl Holdings
90
3.3
86.8
Grosvenor Imperial
79
2.9
89.7
Triple Five and Others
78
2.8
92.5
Costain
70
2.6
95.1
Triple Five
66
2.4
97.5
Others
71
2.5
100.0
Total
2742
100.0
Developer
-39-
DEVELOPERS OF SINGLE FAMILY LOTS IN EDMONTON 1977 No. of Lots
% of Total
Cumulative Percentage
Carma and Abbey Glenn
495
24.9
24.9
Gold Bar
271
13.7
38.6
Forest Glenn
204
10.3
48.9
B.A.C.M.1
203
10.2
59.1
L'Association Canadienne Francais de L'Alberta
168
8.5
67.6
Qualico
92
4.6
72.2
Triple Five
80
4.0
76.2
Abbey Glenn, Green Glenn and Carma
75
3.8
80.0
Alldritt
53
2.6
82.6
Podloznuik
50
2.5
85.1
Others
294
14.9
100.0
Total
1985
100.0
Developer
1 B.A.C.M.'s parent company is Genstar (Who Owns Whom, 1976/1977. Genstar also acquired Abbey Glenn in 1976 (Financial Times, July 19, 1976).
-40-
DEVELOPERS OF SINGLE FAMILY LOTS IN EDMONTON 1976 Developer
No. of Lots
q6 of Total
Cumulative Percentage
B.A.C.M.
440
17.1
17.1
Carma and Abbey Glenn
328
12.7
29.8
Wimpey Western
300
11.7
41.5
Shell Canada
270
10.5
52.0
Costain
235
9.1
61.1
Integrated and B.A.C.M.
210
8.2
69.3
Green Glenn
189
7.3
76.6
Qualico
179
7.0
83.6
Nu-West
124
4.8
88.4
Domad
101
3.9
92.3
Benson and Equinox
96
3.7
96.0
Carma
83
3.2
99.2
Others
20
0.8
100.0
272 1
100.0
Total
-41-
DEVELOPERS OF SINGLE FAMILY LOTS IN EDMONTON 1975 Developer
No. of Lots
% of Total
Cumulative Percentage
B.A.C.M.
448
18.0
18.0
Alldritt, Value and Peers
391
15.7
33.7
Carma
388
15.6
49.3
Belvedere, Abbey Glenn, Laxford and Integrated
383
15.4
64.7
Lamb
329
13.2
77.9
Forest Glenn
145
5.8
83.7
Wimpey Western
132
5.3
89.0
Green Glenn
114
4.6
93.6
B.A.C.M., Meza and Mijon
100
4.0
97.6
61
2.4
100.0
2491
100.0
Abbey Glennl Total
lAbbey Glenn is the parent company of Lamb Holdings (Who Owns Whom, 1975/76).
-42-
DEVELOPERS OF SINGLE FAMILY LOTS IN EDMONTON 1974 Developer
No. of Lots
% of Total
Cumulative Percentage
B.A.C.M.
591
20.7
20.7
Abbey Glenn
394
13.8
34.4
Integrated and Belvedere
348
12.2
46.7
Carma
321
11.2
57.9
Alldritt
274
9.6
67.5
Gold Bar
262
9.1
76.6
Riviera Hotel
222
7.8
84.4
Forest Glenn
160
5.6
90.0
Meza & Mijon
149
5.9
95.2
Nu-West'
138
4.8
100.0
Total
2859
100.0
I Nu-West is the parent company of Carma (Who Owns Whom, 1974).
-43-
DEVELOPERS OF SINGLE FAMILY LOTS IN EDMONTON 1973 Developer
No. of Lots
96 of Total
Cumulative Percentage
B.A.C.M. and Lamb
317
20.8
20.8
B.A.C.M.
283
18.6
39.4
Carma
268
17.6
57.0
Lamb
237
15.6
72.6
Gold Bar
188
12.4
85.0
Alldritt
131
8.7
93.7
Western Realtyl
97
6.3
100.0
1521
100.0
Total
I Western Realty is the parent company of Lamb Holdings (Who Owns Whom, 1973).
-44-
THE ROLE OF THE CITY OF EDMONTON IN RESIDENTIAL LAND DEVELOPMENT
PROGRESS REPORT PHASE 2 - POLICY ALTERNATIVES AND EVALUATION
CITY OF EDMONTON PLANNING DEPARTMENT
1982 09 08
-45-
CONTENTS
SUMMARY 1.
Introduction
2.
Alternative Roles for City Land Development
3.
Evaluation Criteria
4.
Comparative Evaluation of Alternative Roles
-46-
SUMMARY
This Phase 2 Progress Report provides information on and an evaluation of alternative policy roles for the City. A Final Report, due on 1982 09 23, will make recommendations on the future role of the City as a residential land developer. ALTERNATIVE ROLES FOR CITY LAND DEVELOPMENT
This report presents five distinct roles for the City: Role 1:
Profit-Oriented Developer: major land assembly and development to generate profit.
Role 2:
Complement the Private Sector: major land assembly and development primarily to complement private sector activity by ensuring an adequate inventory of serviced and unserviced lots.
Role 3:
Continuation of Present Activity: a continuation of the type of land banking and development currently undertaken by the City.
Role 4:
Wind Down of Activities: withdrawal from the residential land development process except for future municipal services and facilitating social housing.
Role 5:
Development for Municipal Purposes: land banking and development of future municipal purposes only.
EVALUATION CRITERIA
A set of eleven criteria grouped into four subject groups are identified for the evaluation of the alternative roles: Factor
Evaluation Criteria
A. Cost/Efficiency
1. Make a profit.
-47-
7.
Avoidance of Risk.
3.
Flexibility of investment.
4.
AV dance of internal conflicts within activities.
5.
Availability of land for municipal purposes:
6.
Efficient use of existing Cityowned subdivided land inventory.
B.
Housing Provision
1.
Moderate rate of housing price increases.
2.
Provision of land for social housing.
3.
Responsiveness to future housing demands.
C.
Relationship in the Private Sector
1.
Supportive of private sector land development activities.
D.
Planning/Development Concerns
1.
Achievement of GMP Growth Strategy.
COMPARATIVE EVALUATION OF ALTERNATIVE ROLES
Role 1, the City as a profit-oriented developer, was determined to have the greatest profit potential and to also have the highest financial risk and the least flexibility of investment. This role would place the City in direct competition with the private sector. However, the objective of the role, to obtain profit, would be clearly identified. Role 2, the City maintaining an inventory of lots to supplement private sector activity, was determined to have moderate profit potential, moderate to high financial risks and moderate flexibility of investment. This role Viuld place the City in a complementary position to the private sector and would not conflict with General Municipal Plan policies. The objective, complementing the private sector, is not as narrow as the objective of the first role but would be supported by integrated acquisition, servicing and marketing policies. The role assumes reduced capability by the private land development sector. Role 3, the City continuing to act according to existing plans and policies, was determined to have moderate profit potential, moderate to high financial risks and moderate flexibility of investment. This role would maintain the City in its present relationship with the private sector and would not conflict with existing policies. However, the objectives of the present role are unclear and there is a lack of integrated acquisition, servicing and marketing policies. Role 4, The City withdrawing from the residential land market in an orderly manner, was determined to have low profit potential, low financial risks and little flexibility of investment. In this role, the City would compete with the private sector while disposing of
-48-
land, but in the long term would be neither competitive with nor supportive of the private sector. This role would require a major change in City residential policies however, the objective, to withdraw except for provision of municipal services and facilitation of social housing, is clear. Role 5, the City maintaining land for municipal purposes only, was determined to have no profit potential, low financial risks and little flexibility of investment. In this role the City would not conflict with private sector activity and would necessitate a major change in City residential policies. While this role could not be assumed until existing inventories are depleted, the objective is clear. CONCLUSIONS OF THE COMPARATIVE EVALUATION
Roles 1, 4 and 5 are considered to be unacceptable for several reasons including difficulties for their successful implementation in the short term (Role 1), their lack of specific direction for the use of the existing inventory (Role 5) and ignoring the charging nature and capability of the private land development sector (Role 4). Role 3 suffers from ambiguity of direction and is considered to be inappropriate. Role 2, complementing the private sector, stresses efficient utilization of the existing inventory and is generally consistent with private sector objectives and City residential policies. This role is consistent with future reduced private sector productive capacity. It does not require major new financial commitments by the City and recognizes the changing nature of private land development. Role 2 is considered the most acceptable role for the City as a residential land developer. This comparative evaluation will be used in Phase 3, the Final Report, to assist in identifying the final conclusions and recommendations of this study.
-49-
1. INTRODUCTION This Progress Report contains the results of the work-to-date in Phase 2 of the Study on the role of the City of Edmonton in residential land development. Phase 2 concentrates on the identification and evaluation of a range of alternative policy roles which the City of Edmonton could adopt as a residential land developer. Included in this phase are: -
The presentation of five distinct alternative policy roles which span a spectrum from intense involvement to a very reduced involvement in residential land development. Also described are the significant activities and rationale associated with each of these roles.
-
The presentation and rationale for a set of criteria used to evaluate the five alternative policy roles.
-
An evaluation of the alternative policy roles, based on a comparative analysis in which each role is examined in relation to the selected criteria.
Conclusions and recommendations will be proposed in Phase 3 based on the material and analysis presented in Phases 1 and 2. The Phase 3 report is scheduled for completion by 1982 0923.
-50-
2.
ALTERNATIVE ROLES FOR CITY LAND DEVELOPMENT
In the Phase 1 Progress Report-Policy Context, several features were discussed to provide background information on the City as a residential land developer.1 Existing City activities and policies for land development as well as possible changes in the private land development industry resulting from the present economic conditions and depressed housing market were high-lighted. These discussions will be used in Phase 2 to assist in identifying and evaluating alternative roles for the City as a residential land developer.
Alternative Roles There are a number of alternative roles the City could adopt with respect to residential land development. These potential roles span a spectrum from intensive involvement as a profit-maximizing developer to a basic involvement to ensure adequate land for future municipal purposes.
The following are the five distinct roles which this report evaluates:
Role 1:
Major land assembly and development to generate profit.
Role 2:
Major land assembly and development primarily to complement or top-off private sector activity by ensuring an adequate inventory of serviced and unserviced lots.
Role 3:
A continuation of the type of landbanking and development currently undertaken by the City.
Role 4:
Withdrawal from the residential land development process.
Role 5:
Landbanking and development for future municipal purposes only.
The description and rationale for these roles, described in greater detail below, are intended to present a range of alternatives which will assist in the selection of a policy most appropriate for the City of Edmonton. Table 1 summarizes the main features of each Role.
1.
The "land developer" role of the City was defined in Phase 1 as involving the City in acquiring land, preparing plans for its future use, obtaining the necessary approvals, undertaking servicing and marketing of the lots.
-51-
Role 1: Profit-Oriented Developer The City would operate a major landbanking and development program with the intent of making a profit. The activities associated with this role would include: -
the on-going acquisition and development of 15-2096 of all land in new Area Structure Plan areas;
-
the acquisition of land and redevelopment of properties in inner-city areas where anticipated to be profitable;
-
with profits realized from the above activities, selective land assembly for the short-term to facilitate social housing;
-
the transfer of a portion of the profits to general municipal revenues;
-
the acquisition of land for future municipal purposes such as district parks and utility installations;
-
the above may include land which is suitable for immediate development or land which may be held for long-range growth and development.
Rationale for Role 1: Considerable profit could accrue from the operation of a major landbanking and development program. -
The profits could be used not only to reinvest in further profitable landbanking and development activities but could also finance activities related to the provision of land to facilitate social housing and land for municipal purposes.
-
The profits could be used as general municipal revenue and could therefore be used for other purposes (i.e., to reduce taxes).
-
By playing a major role in the land development industry, the City would be able to influence the pattern and development of future growth.
Role 2: Complement Private Sector The City would operate a major landbanking and development program. The primary objective would be to provide an adequate inventory of serviced and unserviced lots should the private sector fail to maintain an appropriate inventory. The activities associated with this role would include: -52-
TABLE I ALTERNATIVE ROLES AND THEIR ASSOCIATED SIGNIFICANT ACTIVITIES
ROLE 1
ROLE 2
ROLE 3
ROLE 4
ROLE 5
PROFIT-ORIENTED DEVELOPER
COMPLEMENT PRIVATE SECTOR
CONTINUATION OF PRESENT ACTIVITY
WIND DOWN OF ACTIVITIES
MUNICIPAL LAND DEVELOPMENT
Acquisition and development of 15-20% of land in ASP areas.
Acquisition and development of varying amounts of land in ASP areas to complement areas and inventory levels not met by the private sector.
Acquisition of l0-l56 of land in ASP areas; development of 300 s.f. and 475 m.f. units annually over the next 6 years. I
Acquisition of land and redevelopment of properties in inner-city areas (where deemed profitable).
Acquisition of land and redevelopment of properties in inner-city areas.
Acquisition of land and redevelopment of properties in inner- city areas. Development of previously acquired land, with the intent of depleting the existing inventory.
Development of previously acquired land, with the intent of depleting the existing inventory.
(with profits from above) Selective land assembly for the short-term to facilitate social housing.
Selective land assembly for the short-term to facilitate social housing.
Selective land assembly for the short-term to facilitate social housing.
Selective land assembly for the short-term to facilitate social housing.
Acquisition of land for future municipal purposes.
Acquisition of land for future municipal purposes.
Acquisition of land for future municipal purposes.
Acquisition of land for future municipal purposes.
Tentative development plans based on information received from the Real Estate and Housing Department, 1982 07 28.
Acquisition of land for future municipal purposes.
-
The acquisition and development of a varying percentage of land in new Area Structure Plan areas, depending upon the level of private sector activity;
-
The acquisition of land in inner-city areas to facilitate the achievement of development goals; No future land purchases or servicing activity until the present City inventory of subdivided land is reduced to a two year inventory.
-
Selective land assembly to facilitate social housing;
-
The acquisition of land for future municipal purposes; The above would include both profit and non-profit activities.
Rationale for Role 2: -
If the private sector reduces its involvement in residential land development as it becomes relatively less profitable, based on present and predicted future economic conditions, the City would need to be actively involved to maintain an adequate supply of serviced and unserviced lots to meet housing demands. In effect, the City assumes a top-up role.
-
The role would not require further substantial City land acquisitions for several years. The emphasis would be placed on marketing the existing inventory. (The City already has a large inventory of subdivided lots totalling over 8,000 potential dwelling units.) This role would redirect the use of the existing inventory, as well as servicing requirements over the next few years, rather than focusing on continued land purchases or continued servicing activity contemplated.
-
As a result of maintaining a reasonable supply of serviced and unserviced lots the City would, to some extent, help to moderate the rate of housing price increases.
-
—10
By playing a ... rrLt:c jz ... r1 311 . . in the land development industry, the City would be able to influence the pattern and direction of future growth.
-
The City's responsibility would also be to make land available to facilitate social housing. The City would ensure that land would be acquired for future municipal purposes. Once the present large inventory is reduced, a decision could be taken on future land acquisitions consistent with activity by the private sector.
Role 3: Continuation of Present Activity The City would continue to undertake the type of residential landbanking and development activities in which they are currently involved. The mandate to undertake these activities is generally based on City Policy C140. -54-
The ac:ti4ities associated with this role would include: -
The acquisition of 10-15% of land in new Area Structure Plan areas;
-
The development of approximately 300 single family units and 475 multi-family units annually over the next six years (based on "Proposed Residential Land Development, 1983-1988" figures provided by the Department of Real Estate and Housing on 1982 07 28. It should be noted that these development proposals may be subject to change. These figures are discussed in Phase 1.)
-
The acquisition of land in inner-city areas to facilitate the achievement of development goals;
-
Selective land assembly for the short-term to facilitate social housing;
-
The acquisition of land for future municipal purposes.
Rationale for Role 3: -
The role represents the continuation of present activities under the current policy.
-
This degree of involvement, on the part of the City, would permit it some influence over the design and developing of major new development areas.
-
If the private sector fails to meet the demand for serviced lots, the City would be able to assist in the supply of serviced lots to individuals and builders, but this would not be the prime objective.
-
The City's responsibility would be to make land available to facilitate social housing.
-
The City would ensure that land would be acquired for future municipal purposes.
Role 4: Wind Down of Activities The City would undertake an orderly withdrawal from the residential land development industry. Existing surplus holdings would be sold over time at market value rather than in a rapid "fire sale" disposal. Active acquisition and development of land would be undertaken only to ensure adequate land to facilitate social housing and for future municipal purposes. The activities associated with this role would include: -
The development of land previously acquired, with the intention of depleting the existing inventory;
-
Selective land assembly as required for the short-term to facilitate social housing; The acquisition of land for future municipal purposes. -55-
Rationale 'for Role 4: -
The role represents a "wind down" of present City residential land development activities over approximately the next five to eight years.
-
The existing inventory of land would be depleted over a number of years in a manner which would not noticeably affect the land market and which would ensure that no loss on the sale of land would be experienced by the City. The present City inventory of potential dwelling units in ASP areas (approximately 8,000 potential dwelling units) is too large for the City to sell quickly in present market conditions.
-
The actions would be undertaken because the private sector can operate more efficiently to provide land for residential development and should continue to do so. Land development is a high risk activity and there is potential for losses from high costs in holding land.
-
The City's responsiblity would be to make land available to facilitate the provision of social housing.
-
The City would ensure that land would be acquired for future municipal purposes.
Role 5: Municipal Land Development The City would acquire only the amount of land necessary for its own use. The activities asociated with this role would include: -
the development of land previously acquired, with the intent of depleting the existing inventory;
-
the future acquisition of land only for future municipal purposes.
Rationale for Role 5: -
It would not be the City's role to be involved in the residential land development process. The private sector adequately and efficiently provides land for residential development and should continue to do so.
-
The existing inventory of land should be depleted over a number of years in a manner which would not noticeably affect the land market and which would ensure also that no loss on the sale of land would be experienced by the City. Housing would not be the responsibility of the City. Therefore, the provision of land to facilitate social housing would be left to the Provincial and Federal Governments.
-
The only reason the City would actively acquire land would be for future municipal purposes. -56-
3.
EVALUATION CRITERIA
In this section, criteria to evaluate the five alternative roles for the City in residential land development are identified. A rationale or justification for each criterion is also provided. Evaluation Criteria
A total of eleven criteria have been identified for the evaluation of the alternative roles discussed in Section 2 above. The criteria are grouped into four factors or subject areas of interest: FACTOR
A. Cost/Efficiency
EVALUATION CRITERIA
I.
Make a Profit.
2.
Avoidance of risk.
3.
Flexibility of Investment.
4.
Avoidance of internal conflicts within activities.
5.
Availability of land for municipal purposes.
6.
Efficient use of existing City-owned subdivided land inventory.
I.
Moderate rate of housing price increases.
2.
Provision of land for social housing.
3.
Responsiveness to future housing demands.
C. Relationship with the Private Sector
1.
Supportive of private sector land development activities.
D. Planning/Development Concerns
1.
Achievement of GMP Growth Strategy.
B. Housing Provision
Table 2 provides a listing of the evaluative criteria and a rationale for including each criterion.
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TAIDLE 2 EVALUATION CRITERIA
FACTORS A.
B.
Cost/efficiency
Housing provision
EVALUATION CRITERIA
RATIONALE
1.
Make a profit.
Profits permit on-going land development activity and could also be available for other municipal uses.
2.
Avoidance of risk.
Given the periodic nature of the land development business, there is potential to lose money.
3.
Flexibility of investment.
A major land portfolio can be difficult to dispose of.
4.
Avoidance of internal conflicts within activities.
If objectives and priorities are in conflict, an agency has difficulty functioning, i.e., achieving any objectives.
5.
Availability of land for municipal purposes.
Land is required in residential areas to service development.
6.
Reduction of existing City-owned subdivided land inventory.
Present inventory is large (over 8,000 potential dwelling units and should be reduced to lower holding costs).
1.
Moderate rate of housing price increases.
An adequate supply of serviced land could help to moderate the rate of housing price increase.
2.
Provision of land for social housing.
A municipality has a responsibility to provide land for social housing.
3.
Responsiveness to future housing demands.
If the private sector is unable to provide an adequate lot inventory, there may he a need for the City to intervene.
C.
Relationship with the private sector
I.
Supportive of private sector land development activities.
The private sector is better able to provide land for residential development.
D.
Planning/development concerns
I.
Achievement of GMP growth strategy.
The GMP is a statement of City Policy and should be followed by the City.
The criteria in Table 2 are not ranged in any order of importance, nor have they been assigned any weighting as part of the evaluation. In this study, all the criteria are assumed to be of equal importance. The criteria have not been weighted as to their relative importance because the existing City policy for selective land assembly is not sufficiently precise, in terms of the objectives of land assembly, to order the criteria. In addition, the use of a weighting procedure introduces a two level form of evaluation involving both the criteria and the alternative roles. A more appropriate approach minimizes the extent of evaluation and therefore the potential for subjective interpretations.
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4.
COMPARATIVE EVALUATION OF ALTERNATIVE ROLES
This section evaluates the five alternative roles for City land development, identified in Section 2, against the criteria outlined in Section 3. The evaluation involves both a tabular summary (Table 3) of the findings and a more detailed discussion and elaboration in the text of the report.
Comparative Evaluation The evaluation discusses the comparative performance of each alternative in terms of the criteria. A concluding section highlights the overall results of the evaluation.
Role 1: Profit-Oriented Developer In the first role, the major objective of the City's activity as a land developer would be to make a profit. Although the resulting profits could be used to reinvest in additional land purchases, surplus funds would also be available for general municipal revenues. In terms of the four cost/efficiency criteria, this role is usually at the extremes in comparative performance. For example, the activities associated with Role 1 would have the greatest profit potential, but they would also have the highest risks and least flexibility of investment. The risks involved in this Role appear relatively high given the present uncertainty of economic conditions and the need to maintain an inventory of land and lots which can be drawn upon. Although profits would be expected from the land development activity, it is important to recognize that participation in the role could initially be quite costly. Assuming the City tried to maintain a 20% involvement in supplying new lots in ASP areas, a total capital investment of perhaps $5-8 million per year could be required.1 Although much of this funding would be borrowed,?with the City's equity position at a relatively low level,
-substantial risks could still be anticipated if housing demand levels (and prices) were to fluctuate. 1.
This figure was obtained assuming approximately 260 hectares of suburban land are subdivided per year and land costs an average of $100,000 per hectare. -60-
TABLE 3 COMPARATIVE EVALUATION OF ALTERNATIVE ROLES
Criteria
Objectives
Cost/efficiency I. To make a concerns. profit.
2. Avoidance of risk.
Role 1: Profit oriented developer.
Role?: Maintain adequate lot inventory.
The profit potential is highest in this role.
There is good potential in this role.
Risk is highest because inventory is required. ,
Risk is high because the City has to retain large lot inventory.
Role 3: Continuation of existing City policies for land assembly and development.
Role 4: City winds down its land assembly and development activities.
There is profit potential but there is also potential for conflicts between nonprofit activities.
There is less profit potential because it would be widely known that the City is a seller. There is also potential for conflict between profit and non-profit activities.
Risk is high because the City may have to retain existing lot inventory until economic recovery.
Risk is slightly reduced because existing inventory is, by definition, adequate and efforts directed towards its reduction.
Role 5: Municipal land development.
Profit is very unlikely. In any event, profit is not a consideration.
Risk is minimal in this role.
Th
/
Cost/efficiency 3. Flexibility of investment. concerns
In the short-term this role has the least flexibility because the major part of the portfolio would be in land.
There is some flexibility, but necessary large lot inventory reduces opportunities to respond in other areas.
There is some flexibility but the existing serviced lot inventory reduces opportunities to respond in new areas.
Flexibility is further reduced because the City would be a known seller.
Not applicable.
Cost/efficiency 4. Avoid internal conflicts within concerns, activities.
No potential for conflict because only one objective is being pursued.
Less potential for conflict than Role 3 because a specific objective - maintaining a serviced lot inventory - is explicit.
There is a high potential for conflict because objectives of City's land development activities are not clear.
There is less potential for conflict than in Role 3 because the profit orientation is being eliminated.
No potential for conflict.
Cost/efficiency 5. Availability of land for concerns, municipal purposes.
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There would be no problem here since profits could lower costs.
There would be no problem here since profits would cover costs.
There would be no problem here in the short term, anyway. Cash flow could cover costs.
All city-owned land would be available for these purposes.
difficulties here since profits would cover costs.
Housing provision concerns
6. Reduction of existing city-. owned subdivided, serviced lot inventory.
Not applicable
There is a good potential to reduce existing inventory to a more cost efficient level.
There is a high potential for problems here in a sluggish economy.
There is a high potential for problems here in a sluggish economy.
Not applicable.
1. Moderate rate of housing price increases.
Conflict highly probable here because organization would be purely profit oriented.
Conflict is possible. At any rate, City's activities in this role unlikely to have significant effect on housing prices.
Conflict is possible although some lots are sold below market. Effect unlikely to be significant.
Conflict unlikely. Similarly, unlikely to have moderating effect in house prices.
Not applicable.
2.
This is a possible outcome.
There is a good potential.
There is good potential.
There is good potential.
Potential is highest.
Potential highest in this role because of profit maximizing orientation.
There is some potential because role has profit as well as non-profit aspect.
There is some potential because of profit orientation.
There is less potential than in Roles 2 and 3 because City is winding down its development activities.
There is little or no possibility of responding in this role.
Provision of land for social housing.
3. Responsiveness to future housing demands.
Relationship with private sector.
1. Supportive of private sector land development activities.
Planning/develop- 1. ment concerns.
Achievement of GMP growth strategy.
In Role I, the City would be in direct competition with the private sector.
Being both a non-profit and a profit oriented developer, in this role, the City would be both supportive and competitive.
As a land developer, the City is in direct competition with private sector. But as a developer of nonprofit housing it is supportive.
The City would be very supportive of private sector activities.
The City's role would complement the private sector.
There is high potential for conflicts especially in staging policies.
There is some potential for conflict but less than in Role I.
There is some potential for conflict but reduced for Role I because scale of operations is reduced.
This role is complementary to GMP staging policies.
This role is complementary to GMP staging policies.
In evaluating the role of profit-oriented developer against the housing provision concerns, several conflicts appear. The activities associated with this role imply a high degree of responsiveness to future housing demands (i.e., marketing analysis to project future requirements and sales techniques to move the housing product quickly) aimed at ensuring that profits are realized. However, a conflict would arise in terms of moderating house price inflation because developer benefits from house price increase through rising inventory and land prices. Clearly, if the City were to act as a profit-oriented developer, it would be in competition with the private sector companies. However, as noted in the Phase 1 Pregress Report, there may be a trend in the future to increase4 'joint ventures on land development, with the potential for the City to become a partner on projects with private sector firms. Finally, the activities associated with this Role could potentially conflict with the GMP growth strategy as one department within the City strives to obtain a profit from a particular development which may be inconsistent with the GMP growth strategy. Role 2: Complement Private Sector
In the second role, the key objective of the City's involvement as a land developer would be to maintain an adequate supply of serviced and unserviced lots to meet housing demands in housing types not met by the private sector. Role 2 is based on the assumption that many of the present private residential land developers may withdraw from the residential land development industry as it becomes relatively less profitable compared to other land development activities, as suggested in Phase 1. Presently, there are conflicting indications as to the extent of future involvement by the private sector in residential land development. Therefore, there is a need to evaluate an alternative in which the City may consciously choose to become an active developer in anticipation of the possible decline of the private sector activity. In evaluating Role 2 against cost/efficiency criteria, it is apparent that the results differ significantly from the other itlee. The potential to generate a profit would likely be lower than Role 1. Yet, there would still be substantial risks (although somewhat different from those in the other roles), as the objective for this Role would be the maintenance of an adequate inventory. Such activity could be costly if too large an inventory of serviced land were provided. The Role would be relatively free of internal conflicts as its major objective is clearly identified.
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rne Role would give direction on the marketing importance to reduce the present large inventory of City-owned land in ASP areas, but balancing inventory reduction with a recognition that an inventory of subdivided land to accommodate approximately 2 years projected demand would be necessary. In terms of housing provision concerns, the degree of activity associated with this Role could place the City in a significant position to influence the rate of house price increase, as the City would ensure that an ample supply of lots is available. Land would also be provided for social housing. In this role, the City would be responsive to future housing demands because of the need to project demands and to maintain the balance between the extremes of too little or too great an inventory, keeping profits up and avoiding risks. However, in the short term, responsiveness would be limited by the size and composition of the existing inventory of City-owned land. The activities in Role 2 would be supportive of private sector land activities. The basis for the role would be that the private sector would not be able to meet all the housing demand and that City activity would therefore function in a complementary fashion, by contributing to the supply. Role 2 would also be consistent with the GM? growth strategy. Role 3: Continuation of Present Activity
In Role 3, the existing City land development activities and policies would remain unchanged. For the cost/efficiency criteria, Role 3 has several significant features. Profit would be less of a factor than in Role 1 because the City would not be profit maximizing; profit would possibly be comparable to Role 2. The present large inventory of subdivided City land in ASP areas would still have to be carried, which would reduce the flexibility of investment. The proposed development plan for City-owned land in ASP areas, noted in Section 2 above, would not reduce the existing inventory of potential multi-family units unless a significant increase in sales of these types of lots was experienced. The activities in Role 3 present the greatest potential for internal policy conflicts. The objectives of the present City activities are not clearly specified, leading to potential conflicts on issues of acquisition, servicing, and marketing. In comparison, the other four roles have clearly defined objectives which give direction for specific operating policies.
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In terms of the housing provision criteria, the impact of Role 3 on moderating house price increases is likely less than Role 2 as a result of less emphasis on the significance of the inventory management. In this case, the degree of responsiveness to future housing demands would be comparable to that in Role 2, but less than in Role 1. The activities associated with Role 3 would not generally be supportive of private land development activities because the City would remain as a competitor. However, as noted in the evaluation of Role 1, there may be the prospect of joint ventures between private companies and the City as firms attempt to share the risk and obtain capital. Role 3 would be consistent with the GMP growth strategy. Role 4: Wind-Down of Activities
Role 4 would involve the gradual selling off of City land as part of a planned withdrawal from land development activity. The withdrawal would be orderly, with no lands sold at distress prices. The length of time taken to dispose of the land would be influenced by market conditions. At the end of this period, the City would concentrate on obtaining land for municipal purposes and for social housing. For the cost/efficiency criteria, Role 4 performs poorly in terms of profit, risk and flexibility. There would be potential for reduced profits as it would be known that the City had made a major policy shift and had become a seller. Were the City to attempt to match its offerings of land to demand conditions, the liquidation period would be prolonged, carrying costs would rise and the profit margin would be reduced or eliminated. The size of the present inventory of lots and raw land holdings, combined with the present poor market conditions, would create substantial risks for this role. There would be little flexibility to respond to investment opportunities because the City would be committed to getting out of the business and changes would require time consuming policy decisions. Role 4 would have limited influence on house price moderation, although the substantial sale of lots could help to hold down price increases for as long as sales continued. There would be very little responsiveness to future housing demands. The initial sales of City land involved in Role 4 would initially increase competition with private sector, but at the end of the sell-off period the City would no longer be in competion with private industry. Implementation of the GMP growth strategy would therefore have to be achieved through the regulatory role of the City (approval of ASPs and subdivisions) rather than through active land development. -67-
Role 5: Municipal Land Development
In this Role, the City would have disposed of its serviced and unserviced land inventory and would be out of the land development business except to obtain land for municipal purposes. In Role 5, most of the financial risks and attendant potential for profit would disappear. As well, most of the potential inconsistency within City policies in residential land would have similarly disappeared. The City would have no influence on housing price increases, except to allow, through the approval of ASP areas and subdivisions, sufficient land for private sector development. The City would have no capability to respond to future housing demands and would be limited to monitoring the activity of the private sector. There would be no competition with the private land development sector and the City would use its regulatory powers to encourage the private sector in a manner consistent with achieving the GMP growth strategy. Conclusions on the Comparative Evaluation Several conclusions can be drawn from the comparative evaluation. 1.
The acceptability of Role 1, Profit-Oriented Developer, depends on the view taken on the appropriate role of a municipality. If there is a desire that the City should make a profit from residential land development, then Role 1 is highly acceptable. However, two issues should be noted. First, the dollars spent by the City in land development have an "opportunity cost". That is, by spending dollars in one activity, some other activity receives no or fewer dollars. Another part of the opportunity cost concept is that the City might be able to make more profit on some other activity, particularly in the short term because of depressed market conditions and the holding costs of the existing City inventory. A second issue is the view that public bodies should not be directed by the profit motive because this conflicts with the role of the private sector. On the basis of these considerations, Role 1 appears inappropriate because it will be difficult to achieve in the short term and because of its direct conflicts with the role of the private sector.
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2.
Role 5, Municipal Land Development only, also appears to be an unacceptable solution. The key problem with Role 5 is that it fails to account as a primary objective for the use of the existing large inventory of presently subdivided and serviced City land. In effect, Role 5 jumps ahead to a future date when the existing inventory is basically depleted, but provides no direction on how to best move towards its achievement.
3.
Role 4, Wind Down of Activities, appears to be an unacceptable solution. At first glance, Role 4 is atractive on the basis that the City should leave residential land development to the private industry and the best way to achieve this is for the City to sell off its holdings in a systematic way, avoiding a "fire-sale" process. However, the problem with Role 4 centres on the changing nature of the private land development industry. Present economic conditions, a depressed housing market and high interest rates are causing major difficulties for the land developers. Many are selling land holdings to reduce debt and they may be in a weakened financial condition for several years. Some companies may decide to concentrate on commercial and industrial projects where a more steady cash flow can be maintained. Role 4 basically assumes that the private companies will recover and be able to continue their past land development practices. As noted, the validity of this assumption is suspect, at least for the next several years. In these circumstances, a role which ignores the changing nature and capability of the private land development is considered inappropriate.
4.
Role 3, Continuation of Present Activity, suffers from ambiguity of direction and for this reason is also considered inappropriate. Present City policies, particularly Policy C140, do not indicate the ultimate objectives of City residential land assembly. As a result, there is insufficient guidance to determine which lands, in what location, for what uses and in what amounts should be purchased. Also as a consequence, often overly specific operating policies, such as the use of price lists are used, with a result of reduced -69-
flexibility to respond to market circumstances. As a final consequence, the lack of direction in City policies can lead to less than efficient utilization of the existing City inventory because the basic issues of appropriate uses, marketing strategies and the rationale for additional land purchases are not defined. 5.
Role 2, complement Private Sector, is considered the most acceptable general role for the City in residential land development in the immediate future (say the next 5 years). The reasons for this conclusion are that several advantages are inherent in Role 2: -
A clear, specific objective for the City in residential land development is identified. The objective deals with the short term by proposing that the existing City inventory should be reduced and the longer term role of the City by proposing that the City maintain lot inventories for a top-off role where the private sector is unable to meet housing demands.
-
The role stresses the most efficient utilization of the present large inventory of serviced City owned land consistent with the need to maintain an appropriate inventory for future development. The role is consistent with a future private land development industry which may be reduced in scale and which has less productive capability compared to the present.
-
Action can be taken to implement the role without immediate rapid changes in overall City lands holdings. If the private land development sector is able to recover from its present difficulties, then the need for a City inventory of lots can be reduced.
Although there are advantages to Role 2, there are two important features influencing its achievement. First, the Role is based on the assumption that there will be a reduction in the productive capability of the private residential land development sector as a result of the present difficult economic times. Even though there are conflicting indications on the correcness of this assumption, the role can be implemented and the status of the private sector monitores to determine if the assumption proves valid. Second, and perhaps most importantly, the role requires a more complete linking, than at present, of the existing City inventory with -70-
projected housing demands to ensure the extent of City land purchased is appropriate and to ensure the City development activity tops-off or complements those housing types where the private sector is unable ---__ to meet housing demands.
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THE ROLE OF THE CITY OF EDMONTON IN RESIDENTIAL LAND DEVELOPMENT
PROGRESS REPORT PHASE 3 - CONCLUSIONS AND RECOMMENDATIONS
CITY OF EDMONTON PLANNING DEPARTMENT
1982 09 08
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.
CONTENTS
1.
Introduction
2.
Conclusions
3.
Recommendations
I.
INTRODUCTION
Phases I and 2 of the study examined, respectively, background information on the City's land development activities and alternative policy roles for the City. In Phase 3, final conclusions and recommended policies and specific actions are provided. As a general observation, this report has attempted to examine the role of the City as a residential land developer in the context of the evolving nature of the private land development industry. Such an orientation is useful because the private land development industry has been particularly hard hit by a combination of high interest rates and reduced housing demand. The industry appears to be entering a time of transition where the- lc vious techniques of land. development may be modified to reduce the risks and carrying costs inherent in the traditional acquisition and development process. Concurrent with these changes in the private sector, the Alberta Government has undertaken a major role in housing through its nurnbrous financing programs and the recently
o
d_
mortgage interest rate reduction program.
VbIccOe The recent events serve to emphasize the r=e-I-air,:lity cf the-cfontext within which land development decisions are taken. A premium must be placed on policies which encourage responsiveness to market conditions and which provide specific objectives for City actions as a residential land developer.
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2. CONCLUSIONS
The major study conclusions have been identified under four topic headings.
City Land Assembly and Development - Inventory/Intentions
1.
The City is a major residential land developer, with potential dwelling units on City lands accounting for overall 23% of all potential units in ASP areas. In effect, it would be possible over the next several years for 1 housing unit in 4 in the ASP areas to be constructed on City-owned land.
2.
The inventory of City-owned vacant subdivided land, especially for multifaTnily units, is excessive relative to present market conditions.
There is a potential for 8,077 dwelling units (2,126 single family, 5,591 multifamily units) on City lands in ASP areas. Approximately 96% of the City subdivided lots (with a potential for over 7,600 units) are serviced.
At the average selling rate over 1979-81 (which must be considered high relative to the immediate future), it will take 3.1 years to sell all the existing serviced City land in ASP areas for single family units and 9.1 years for multifamily units, assuming no additional City land is subdivided and serviced.
Although a variety of assumptions can be made regarding projected sales rates and servicing schedules for City land, the efficient utilization of the existing substantial inventory of serviced City land must be a priority consideration.
Continued servicing of multi-family sites, unless undertaken for reasons related to an anticipated failure by the private sector to provide lots for this type of housing, will result in a large ongoing inventory of serviced City lots, carried at high cost.
Present City Policies for Land Assembly
1.
City Policy,CI40 is inadequate because it does not clearly indicate the objec- _ tives of City residential land assembly.
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The lack of objectives in Policy C140 results in insufficient guidance to determine which lands, for what residential use and in what amounts, should be purchased. The lack of direction can also result in the underutilization of the existing inventory because specific objectives for inventory levels are not given. Future Private Sector Land Development Activities 1.
The present Edmonton housing market has been influenced by several significant events including substantial Provincial activity in housing, a sudden downturn in the economy, high interest rates and unemployment. Affordability problems and uncertainty among home buyers have created major problems for the private land development industry. Instability in the private residential land development process appears to be increasing as the industry attempts to respond to the present economic uncertainties.
2.
Although there are conflicting implications for City activity as a land developer as a result of changes in the private sector,(City policies must be based on the awareness that in the future the private land development industry may have both a reduced production capacity and/or a reduced interest in residential land development.
Role of the City in Residential Land Development 1.
Five alternative roles for the City as a residential land developer were examined.
On the basis of cost/efficiency, housing provision, relationship with the private sector and planning/development criteria,the most_ acceptable_rale_for the City is suggested as a complimentary action to the private sector.
In this role, the primary objective would be to provide an adequate inventory of serviced and unserviced lots, should the private sector land development industry fail to maintain an appropriate inventory.
The activities associated with this role would generally involve:
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the acquisition and de&-eilzpme-at of a varying percentage of land in new Area?
-
Structure Plan areas, depending t.1;p:on he level of :private sector activity; , The acquisition of lard .7in Inner-city areas to facilliitate the achievement of development goals;
-
Selective land assembly to facilitate social housing;
-
The acquisition of land for futui-e Tnunicipal purpwses;
-
The above would inchude . both profit :and non-profit activities.
-
No future land purch:as:es or servicing activity until -the present City inventory is reduced to a two year inventory.
3.
RECOMMENDATIONS
On the basis of the conclusions provided in Section 2, the following actions are recommended: 1.
City Policy C140 be reworded with the following: That the City pursue a policy of landbanking of residential land in concert with the Provincial Government.. (Unchanged from C140). 2.
That major land for industrial purposes be undertaken by the City (Unchanged from C140). Selective land assembly for residential development be undertaken by
3.
the City with the primary objective of providing an adequate inventory of serviced and unserviced lots in those areas and for those housing types where the private sector
la unable to maintain an appropriate inventory.
Lower priority objectives are to influence urban spatial expansion in terms of location and housing in support of the City growth strategy and to provide land for direct municipal requirements to service residential development (New Policy). Residential land development in the City should generally be run on a
4.
break-even basis; however, subsidy activity to provide land for housing
7 5.
not met by the private sector may be required (New Policy). \, That selective land assembly be undertaken by the City with a view to maintaining a land ownership position in each major industrial structure a+. plan area (Revised Policy).
6.
That the acquisition of sites in developed parts of the City be undertaken to facilitate the achievement of certain development goals (Unchanged policy)."
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2.
The Real Estate and Housing Department be directed to maintain a marketing programt\witkemphasizes a reduction in the existing inventory of subdivided serviced City land.
3.
No further land purchases or ยงervicing activity be undertaken until the present knot City inventory of subdivided be reduced to a 2 year inventory for potential single-family units and 5 year inventory of multi-family units except if a potential shortage of dwellings type is anticipated in a specific sector of the City.
4.
The Real Estate and Housing and Planning Departments be directed to prepare a joint annual housing demand forecast. The forecast will identify anticipated housing demands throughout the City for the next 2 years by type of dwelling and identify projected demands for dwellings on City land.
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