Brandon Donnelly

Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

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Can’t, not won’t

We have spoken before, here and here, about so-called “use-it-or-lose-it entitlements”.

The catalyst behind this idea — and it is just an idea at this stage, at least here — is the belief that too many developers are sitting idle on zoned land. And they’re allegedly doing this because they believe it will be worth more tomorrow.

Why bother building anything when you can instead just wait and make money that way?

To counteract this speculative force, some believe that one answer is to just strip land of its zoning entitlements if it’s not used within a certain period of time (right now it lasts forever). I get why this is sometimes proposed, but my response to this has consistently been: it’s a terrible idea.

It is a terrible idea because developers are generally always incentivized to move as quickly as possible. And it is a terrible idea because every now and then a period in the cycle will arrive where, it’s not that developers don’t want to build, it’s that many/most can’t.

And guess what? Right now is one of those times.

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4 responses to “Can’t, not won’t”

  1. Greg Shron Avatar
    Greg Shron

    As a fellow developer, I’m not exactly in the habit of advocating for entitlement restrictions, but are you suggesting that a development approval should last forever, no matter how long the property sits dormant?

    Reply
    1. Brandon Graham Donnelly Avatar
      Brandon Graham Donnelly

      Yes

      Reply
  2. Tbone Avatar
    Tbone

    Just because Slate doesn’t sit on land and approvals doesn’t mean the industry doesn’t generally do this (they do based on land value and market conditions”. If this is making developers uncomfortable it might be a good idea haha

    Reply
  3. scottonthespot Avatar
    scottonthespot

    The Georgist/Land Value Tax advocate counter to this is that land prices reflect future appreciation and that is not what should be valued; buildings and improvements to existing buildings should be instead. So, land should be taxed but not buildings and improvements.
    Yes, this could drive down land prices and for those who already own land, or buildings on top of them where they already paid for the land or owe to a bank, that sounds like a bad idea. But what about all the renters or young people just starting out who can’t afford land? If land prices dropped in response to a higher tax on land, they could buy a place more cheaply, and there would be more land changing hands to avoid the tax too.
    And in fact, that is what 100s of studies show us; as president of a local Georgist land-tax reform chapter, I helped a late founder compile a list of 238 studies that show Land Value Taxes result in higher permits – a measure of future construction – everywhere and always wherever its been applied. The reverse is true too. If taxes are increased on buildings, even on lightly taxed land, you get a slowdown in building, as it becomes cheaper to hold land off the market. We documented this in NYC with several sites that remained parking lots or 1-2 story hovels, even while skyscrapers went up all around them…until the small owners finally decided to cash in. You can see some of these examples here: https://commongroundnyc.org/

    Reply

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