comments 2

Uncreative and greedy

There’s a narrative out there that all developers are uncreative and greedy, and if only they would start being more creative and generous, we could solve the housing affordability problem that is plaguing many (if not all) global cities. In other words, the solution to increasing the supply of low and middle incoming housing is simply a psychological reframing on the part of developers.

The problem with this mental model is that it ignores reality. Development happens on the margin. The market is competitive. It’s difficult to find developable sites. And it’s a challenge to make projects work. More often than not, you have to say no as a developer. No I can’t buy this land. No I can’t build housing here. And no the market will not support new office space here. Sorry, but no. (See cost-plus pricing.)

Development needs to give back. On the blog we usually call this city building. And that’s because it implies a greater sense of civic responsibility. Developers aren’t just building one-off buildings, they’re building a city. I believe wholeheartedly in this. But the belief that projects can be saddled with an endless array of government fees and civic contributions is a problematic one. There are limits — because markets have limits.

If only city building were that easy.

2 Comments

  1. Timothy Gray

    It does not help the credibility of developers when they support run third party campaigns like Ontario Proud during elections in support of a political party that then wins and dismantles progressive land-use and city building policy for the benefit of those developers. People are not stupid. We can see what is going on.

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  2. Scott Baker

    Both Developers and local authorities have to be willing to be more creative.
    Our project would span the East River of New York City. Details & video here: http://bit.ly/Riverarch
    It would provide 7,630 units (apx. 20m sf) + 50 commercial opportunities (1m sf), or it could be a more office/commercial mix with still 1,000s of units.
    For a $20.4b investment (@ $877psf hard/soft/finance costs, est.), we can get back $28.1b, for a $7.7b profit, before $434m/year in commercial leases is accounted for. This includes 30.14% MIH at half price – $1,000psf vs. $2,000psf market rate.
    Engineering and ROI are not the problems.
    The #1 problem,according to all the developers I’ve spoken to and partnered with is: Will we get permission to build over the East River?
    So far our lawyer says we need a zoning text amendment, but he is afraid to file for it because it is multi-jurisdictional and he is afraid it will fail. Our Dept. of City Planning won’t let us submit for pre-approval due to lack of standing, and the local EDC won’t meet with us to even discuss the issue unless we have larger developers behind the project (see: Developer Objection, above).
    And so, a project that would provide 21,000 people a place to live or work goes undone, even though it would displace no existing residents (it’s all new or zoned manufacturing land), new public space (300,000sf) would be provided, new transportation options (over the river) would be created, new school for 900 students, etc. would be created.

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