Quote:
Originally Posted by misher
Has this ever been done successfully? And how would government makeup for the giant hole in its income base that development and property sales occupied. A lot of the fees go to services so how will they pay for utility hookups or community centers of modular housing?
And btw developers aren’t any greedier than they were decades ago, the costs on them have risen tremendously which have driven up prices. https://torontorealtyblog.com/blog/cost-construct-condo-2018/
An example from Toronto:
People talk about "greedy" developers yet we don't see the non-profits or the city developing in large swathes despite the higher prices. Why is that? Perhaps, as most in the industry will tell you, its because costs have gone up with prices? |
Your on the right path. Developer and builder margins are on average no different than they were decades ago. There is this myth that developers and builders are riding a wave of huge profit increases because home prices have soared....that isn't true at all, in fact, i'd say it's the opposite. Just about every developer has a home building division so they can compete with ever tightening margins.
Costs have risen du to:
1) land costs. That farmer on the edge of town holding out for a massive pay day with prices close to what serviced land will sell for. Or that run down building prime for multi story redevelopment that costs low 6 figures to buy 30 years ago now trying to sell it for millions. Hold out long enough and somebody will eventually buy it hoping that housing costs will increase to make up for what they overpaid. People overpay and you just get into a vicious cycle of increasing what you overpay.
2) Off site costs. Municipalities keep throwing up more hurdles to get developers to pay for stuff they didn't have to a generation or two ago. The new Municipal Government Act in Alberta gives additional powers to municipalities to force developers to pay for all kinds of shit. We are going to pay for this eventually, either in taxes or upfront with the costs of a new lot. You would expect that new homes have a reduced tax rate to recognize the fact that their infrastructure is funded differently, but that isn't the case.
3) Bureaucracy. Buy a piece of land and your waiting YEARS until you can do something with it. All while spending more and more on it with nothing coming in. Financing costs money, and realistically, your returns are better with other types of investments. Then during that 5 years it takes to get something serviced, rules change and that dirty slough is now recognized as a habitat for some rare frog species and you loose 5% of your net developable land.
4) Buyer expectations. Starter homes decades ago came with linoleum countertops, carpets. Not walk in showers with 30 nozzles spraying you from every direction, you did the landscaping yourself....
5) Servicing requirements. It was a lot cheaper to develop land a generation or two ago. You didn't have to spend millions building storm ponds, material quality and lifespans have increased....and again, buyers of homes in new neighborhoods tax rates don't reflect the huge reduction in maintenance liability compared to mature neighborhoods.
So while these costs only impact new development, the reality is every time you increase the costs of new homes, the market reacts and surprise surprise, the costs of mature homes rise to keep pace.
Want to lower housing prices? Reduce barriers on new product, and when you force developers to now fund something they didn't have to 30 years ago, levy the existing tax base so that they have to compensate for it too.
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