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Residential developer behaviour in British Columbia Ulinder, Daniel Derek 1975

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RESIDENTIAL DEVELOPER BEHAVIOUR IN BRITISH COLUMBIA by DANIEL DEREK ULINDER B.Sc, U n i v e r s i t y of B r i t i s h Columbia, A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN BUSINESS ADMINISTRATION i n the Faculty of Commerce and Business Administration We accept t h i s thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA September, 1975 In presenting t h i s t h e s i s in p a r t i a l f u l f i l m e n t o f the requirements f o r an advanced degree at the U n i v e r s i t y of B r i t i s h Columbia, I agree that the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f or reference and study. I f u r t h e r agree that permission for extensive copying of t h i s t h e s i s f o r s c h o l a r l y purposes may be granted by the Head of my Department or by h i s re p r e s e n t a t i v e s . It i s understood that copying or p u b l i c a t i o n of t h i s t h e s i s f o r f i n a n c i a l gain s h a l l not be allowed without my w r i t t e n permission. Department of Commerce and Business A d m i n i s t r a t i o n The U n i v e r s i t y of B r i t i s h Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5 Date September 15, 1975. i ABSTRACT The form and scale of our urban landscape i s the net r e s u l t of an evolu-tionary process i n which there are countless numbers of p a r t i c i p a n t s . Socie-t a l ambitions and desires are translated subject to a number of constraints, to demands for various q u a l i t i e s and quantities of consumer goods. One of these goods i s housing services - the service rendered by the occupation of, or associated with the ownership of, r e s i d e n t i a l r e a l property. This demand gives impetus to the production sector, the r e s i d e n t i a l development industry, whose members, as entrepreneurs, devote t h e i r time and energy i n an e f f o r t to transform these u n s a t i s f i e d desires into compensation for t h e i r a c t i v i t y . The aggregate response of developers, whether they are catering to residen-t i a l , commercial or r e t a i l r e a l estate markets, taken over a period of time, lays the fundamental framework upon which our urban centers grow. As Kaiser notes; "In s p i t e of the key r o l e played by the r e s i d e n t i a l developer i n the conversion of open land to urban r e s i d e n t i a l use, he has been r e l a t i v e l y ignored by investigators of r e s i d e n t i a l growth i n the urban s p a t i a l structure." (Kaiser, 1968, p. 351.) . It i s hoped that t h i s paper, through a micro l e v e l i n v e s t i g a t i o n of the decision-making process of the suppliers of r e s i d e n t i a l r e a l estate, w i l l lead to an improved understanding of the operation of the r e a l estate market as a whole. Ultimately such research should strengthen the platform upon which housing research and subsequent p o l i c y i s conducted. This report i s based upon information gathered by means of a question-naire administered to 140 r e s i d e n t i a l developers operating i n the province of B r i t i s h Columbia i n the three year period preceeding January 1975. The i i questionnaire was divided into 7 sections designed to gain i n s i g h t i n the following general areas: 1. General c h a r a c t e r i s t i c s of development firms 2. Elements of multiple unit development 3. Elements of s i n g l e unit development 4. The r o l e of land use contracts i n r e s i d e n t i a l development 5. The subdivision process 6. Stages and components of the r e s i d e n t i a l development process 7. The financing of r e s i d e n t i a l development Based on the responses of developers included i n the study and the a n a l y t i c a l framework d e t a i l e d i n Section 2.4 of t h i s report, a number of conclusions were drawn with respect to developer behaviour and the operation of the market. Implications of current trends i n the r e s i d e n t i a l develop-ment industry are discussed and p o l i c y suggestions are made. i i i i TABLE OF CONTENTS Abstract i L i s t of Tables V L i s t of Figures : v i Acknowledgement v i i Chapter I DEVELOPER'S ROLE IN,PROVIDING HOUSING AND IN BUILDING CITIES 1.1 The Supply of New Units ,' • ' 1 1.2 The Developer's Role 3 1.3 Stages i n the Development Process 3 1.4 The Present Study and the Development Process 6 Chapter II THE ECONOMICS OF THE RESIDENTIAL DEVELOPMENT. PROCESS 2.1 Research Avenues i n Re s i d e n t i a l Development 8 2.2 Macroeconomic Research: An Overview 9 2.3 Microeconomic Research: An Overview 10 2.4 Microeconomics of Housing Supply With Respect to the 12 Flow of New Units 2.5 The Re s i d e n t i a l Development Process i n B r i t i s h Columbia 18 Chapter I II A REVIEW OF THE 1972 DEVELOPER SURVEY 3.1 General Description of the Study 23 3.2.1 Industry C h a r a c t e r i s t i c s 24 3.2.2 Location C r i t e r i a 25 3.2.3 Land A c q u i s i t i o n Behaviour 29 3.2.4 Financing of Res i d e n t i a l Development 29 3.2.5 Contacts With Public and Private Agencies 31 3.2.6 Expectations of Future Development Trends 31 3.3 Summary of P r i n c i p a l Findings of the 1972 Study 33 Chapter IV RESIDENTIAL DEVELOPMENT BEHAVIOUR - REVISITED 4.1 Methodology ' J 4.1.1 Sample Selection and Administration 35 4.1.2 Sample C h a r a c t e r i s t i c s 36 4.2 The Results 4.2.1 Factors A f f e c t i n g the Location Decision 45 4.2.2 Land A c q u i s i t i o n Behaviour 50 4.2.3 The Role and Nature of Financing i n Development 55 Decisions 4.2.4 Contacts With Public and Private Agencies 59 4.2.5 Summary of the Princip;ax~Findings 71 XV Chapter V CONCLUSIONS, ;IMPLICATIONS, POLICY SUGGESTIONS AND FUTURE RESEARCH 5.1 The Long and Short (Run) of I t 77 5.2 Implications of Current Trends i n the Supply of New 79 Re s i d e n t i a l Housing 5.3 P o l i c y Suggestions 85 5.4 Future Research 90 Appendix 1 1972 Developer Survey Questionnaire 195 Appendix 2 a) 1975 Developer Survey Questionnaire 109 b) Letter of Introduction to Developers 159 c) Letter of Introduction to Real Estate Boards 16Q Appendix 3 Suggested Changes i n the Present Questionnaire 162 Appendix 4 Background Data on Housing i n B .C. a) Housing s t a r t s , completions and completed/unoccupied 164 (1970-1974) b) Vacancies - Vancouver and V i c t o r i a (1970-1974) 164 BIBLIOGRAPHY 92 V L i s t of Tables Chapter I II Table 72-1 Dwelling Units Completed by Sample (1970-1972) 24 Table 72-2 Developers by Average Number Completions (1970-1972) 25 Table 72-3 Evaluation of Location Factors by a l l Developers 27 Table 72-4 " " " " by Developers of Mu l t i p l e 27 Family Dwellings Table 72-5 Evaluation of Location Factors by Developers of Single 28 Family Dwellings Table 72-6 Evaluation of Location Factors by Subdividers 28 Table 72-7 Land A c q u i s i t i o n Behaviour ( a l l developers) 29 Table 72-8 Financing - Source of Funds 30 Table 72-9 F i n a n c i a l Terms - Relative Importance 31 Table 72-10 Frequency of Contact with Government and Local Agencies 32 by % Respondents Table 72-11 Future Development Trends 32 Chapter IV 4.12 Sample C h a r a c t e r i s t i c s (1) Table 2.10 (1) Size - Developers by Type of Development and Geographical 36 Setting (2) Table 2.10(2) Dwelling Units I n i t i a t e d by Sample (1972-1974) 37 Table 2.11 " " Completed by Sample (1972-1974) 38 (3) Table 2.10(3) Derived Estimate of Dwelling Starts (1972-1974) 39 (4) Table 2.10(4) Developers by Average Number of Completions (1972-1974) 40 (5) Table 2.10(5) Comparative D i s t r i b u t i o n of Developers by Average 42 # Completions (1970-1972; 1972-1974) Table 6.1 Involvement i n the Development Process 44 4.21 Factors A f f e c t i n g the Location Decision Table 6.4(1) Evaluation of Location Factors by Developers of M u l t i 46 Family Units Table 6.4(2) Evaluation of Location Factors by Developers of Single 47 Family Units Table 6.4(3) Evaluation of Location Factors by Subdividers " 48 Table 6.4(4) " " " " by A l l Developers 49 4.22 Land A c q u i s i t i o n Behaviour 53 Table 2.39 Land A c q u i s i t i o n Behaviour 4.23 The Role and Nature of Financing i n Development Decisions Table 6.3(2) Evaluation of the Importance of the A v a i l a b i l i t y of 55 Financing i n the Decision to Proceed by Developers i n Metro and Non-metro Areas by Percentage of Respondents Table 7.3 Length of the Option Period" 58 Table 7.8 Source of Funds by A l l Developers 60 v i 4.24 Contacts With Public and Private Agencies! Table 6. 3(1) Evaluation of Factors A f f e c t i n g the Decision to Proceed by A l l Developers 62 Table 6. 20 Frequency of Contact With Government Agencies by A l l Developers 64 Table 2. 13 Tenure of Completions Expressed as a Percentage of T o t a l Completions (1972-1974) 65 Table 2. 20 : Nature of Unusual D i f f i c u l t i e s With Government (1974) 67 Table 2. 20. Source of D i f f i c u l t y 67 Table 6. 17 Developers' Comment re Approval Procedure 68 Table 4. 6 Operating v i a Land Use Contracts: By A l l Developers Using Land Use Contracts 70 Table 4. 9 S i g n i f i c a n t Changes i n Terms and Conditions of Land Use Contracts 72 Table 2. 11(2) Completed Yet Unoccupied Dwellings at Year End as a Percentage of T o t a l Years' Completions (1972-1974) 76 Appendix 4 Background data on Housing i n B.C. Table A4-1 Starts, Completions, Completed (Unoccupied Units (1970-1974)) 164 Table A4-2 Vacancy Rates i n P r i v a t e l y I n i t i a t e d Apartment Structures of Six Units and Over (1970-1974) 164 L i s t of Figures Chapter II • ' 2.1 Research Avenues i n Re s i d e n t i a l Development Figure 2.1 Research Avenues 2.4 The Microeconomics of Housing Supply With Respect to the Flow of New Units Figure 2.4.1 P r i c e Determination 14 Figure 2.4.2 Short Run Stock-Flow Relationship 15 Figure 2.4.3 Secondary E f f e c t s of the Residual P r i c i n g Mechanism 17 5.2 Implications of Current Trends With Respect to the Supply of New Resi-d e n t i a l Housing Figure 5.2.1 Re s i d e n t i a l Impost Fees and the Flow of New Units 83 ACKNOWLEDGEMENTS v i i Any useful information contained i n t h i s report i s the d i r e c t r e s u l t of the cooperation and assistance lent by a large number of persons. A s p e c i a l note of thanks i s due Dr. Michael A. Goldberg for i n i t i a l l y sparking my i n t e r e s t i n the f i e l d of developer behaviour and for h i s guidance and advice as my thesis advisor. I should l i k e to express my gratitude to those members of the r e s i d e n t i a l development industry who so w i l l i n g l y denoted t h e i r time to submit to a barage of questions r e l a t i n g to t h e i r a c t i v i t y i n the development f i e l d . Appreciation i s extended to the executive members of the non-metropolitan Real Estate Boards throughout the province f o r preparing sample l i s t s and supervising the admin-i s t r a t i o n of the questionnaire i n t h e i r s e rvice areas. I am indebted to the members of the research team that administered the questionnaire i n metropolitan Vanvouver and V i c t o r i a - Brian McKenzie, Greg McPhee, Jim Morrison and Eleanor Olson. Also I should l i k e to thank Kathy Cote for her able assistance i n data preparation and A.L. Ananthanarayanan who tabulated the r e s u l t s . Ms. V a l e r i e McKenzie deserves s p e c i a l mention for her patience and att e n t i o n to d e t a i l i n the typing and preparation of t h i s report and for her assistance i n meeting t i g h t time constraints. The Real Estate I n s t i t u t e of B r i t i s h Columbia also deserves a s p e c i a l note of thanks f o r the f i n a n c i a l support that made the study possible. F i n a l l y I would l i k e to take t h i s opportunity to express my gratitude to Professors Baxter, Hamilton and Goldberg f o r helping to make my program i n Urban Land Economics an i n t e r e s t i n g and valuable experience. 1 Chapter I THE DEVELOPER'S ROLE IN PROVIDING HOUSING AND IN BUILDING CITIES In recent years much controversy has arisen over the cost and a v a i l a -b i l i t y of r e s i d e n t i a l housing. The cost of housing services has r i s e n dramatically, p r i m a r i l y as a r e s u l t of continuing urbanization, demographic 1 2 s h i f t s within the population and increases i n r e a l disposable income. Demand forces have outstripped the rate at which the l e v e l of housing services has been able to increase. In t h i s l i g h t i t seems reasonable that research i n the decision-making process of the suppliers of r e s i -d e n t i a l r e a l estate may prove a valuable aid to an eventual easing of the present s i t u a t i o n . 1.1 The Supply of New Units The form and scale of our urban landscape i s the'net'.result of an evolu-tionary process i n which there are countless numbers of p a r t i c i p a n t s . The ambitions and desires of the public at large are translated, subject to s o c i a l and budgetary constraints, to demand for various quantities and q u a l i t i e s of consumer goods, one of which i s housing services - the service rendered by the occupation of, or associated with the ownership of, r e s i -d e n t i a l r e a l property. This demand gives impetus to the production sector, the r e s i d e n t i a l development industry, whose members, as entrepreneurs, devote t h e i r time and s k i l l i n an e f f o r t to transform these u n s a t i s f i e d desires into compensation f o r t h e i r a c t i v i t y . Being 'price takers' rather than 'price s e t t e r s ' i n both input (land, labour, and materials) and output (the f i n a l good, housing) markets, i n d i v i d u a l developers simply decide whether the pro-bable return from a given project under consideration j u s t i f i e s the e f f o r t 2 3 and expense required to undertake the venture. This decision w i l l be guided by the r e l a t i v e attractiveness of a wide range of alternate invest-ment opportunities.Thus anything that a f f e c t s either the cost of inputs to the production process or the f i n a l p r i c e of the f i n i s h e d good w i l l have an e f f e c t on the i n d i v i d u a l developers' ultimate investment d e c i s i o n . The response of the development industry to the desires expressed i n the marketplace i s tempered by government regulation and r e s t r i c t i o n both of a d i r e c t ( i . e . zoning controls) and i n d i r e c t ( i . e . the provision of public works) nature. Thus while there may be s u f f i c i e n t demand for a p a r t i -cular service i n a given area ( i . e . a new shopping center) t h i s demand may not be s a t i s f i e d due to regulation to the contrary presumably i n the i n t e r e s t of the 'public good'. Regulation of t h i s type stems from an awareness that i n c e r t a i n circumstances the long run i n t e r e s t of the community may best be served by blocking the s a t i s f a c t i o n of a demand that f a i l s to adequately account f o r the long run consequences stemming from i t s immediate g r a t i f i -cation. The aggregate response of developers, whether they, are catering to r e s i d e n t i a l , commercial, or r e t a i l r e a l estate markets, taken over a period of time, lays the fundamental framework upon which our urban centers grow. Th6 decision-making process i s highly decentralized and i t i s only through incremental change brought about by the actions of a wide array of players, each seeking to maximize his own well-being, while at the same time working within the framework of s o c i e t a l pressures, and i n d i v i d u a l values and pre-judices, that the urban form evolves. It i s hoped that t h i s paper w i l l contribute to a higher l e v e l of under-standing of the micro-level d e c i s i o n unit and thereby lead to a better under-3 standing of the operation of the market as a whole. Ultimately such research should strengthen the platform upon which housing analysis and subsequent p o l i c y making i s conducted. 1.2 The Developer's Role The developer i s an entrepreneur. His function i s to: a) supply c a p i t a l b) organize production c) decide on the l e v e l of output 4 d) bear the r i s k involved i n the operation of h i s enterprise Based on the e f f i c i e n c y with which he performs the above functions i n conjunction with the s k i l l with which he a n t i c i p a t e s demand forces present i n the market and c o r r e c t l y matches his production to them, the developer generates a p r o f i t . Developers may serve i n t h i s entrepreneurial r o l e ex-c l u s i v e l y or a l t e r n a t i v e l y ( i n the majority of cases) combine t h i s r o l e with that of land assembler, subdivider, construction firm or r e a l estate broker. Problems associated with the i d e n t i f i c a t i o n of t h i s often low p r o f i l e i n d i -v i d u a l are discussed i n Section 4.1.1 of t h i s report. 1.3 Stages i n the Development Process The process by which r e s i d e n t i a l housing i s created i s usually viewed as being the end r e s u l t of a number of d i s t i n c t decisions. These may be broadly categorized into four c l a s s i f i c a t i o n s : f i r s t l y , the decision of the pre-development (or redevelopment) landowner to a c t i v e l y consider development proposals; secondly, the developer's decision to cotiT 4 s i d e r the parcel i n question for (re)development; t h i r d l y , the d e c i s i o n of the developer to purchase and proceed with development;'and f i n a l l y the housing consumer's de c i s i o n to purchase or otherwise obtain the r i g h t to benefit from the flow of services provided by the developer. The post-ponement of any one of the four decisions w i l l pre-empt the occurrence of the following state u n t i l such time as p o s i t i v e action i s allowed to transpire. STATES AND KEY DECISIONS IN THE RESIDENTIAL LAND CONVERSION PROCESS5 STATE DESCRIPTION DECISION 1 . Urban Interest 2. Active consideration for development 3. Programmed for devel-opment 4 # ;Development 5. Residence the land has development p o t e n t i a l and the exis-r t i n g use has become t r a n s i -t i o n a l '•' developer and landowner have contacted each other regarding the possible sale or purchase of the property b. developer has a d e f i n i t e idea of the timing and character of the development c. developer has begun phys i c a l development of the land d. householder has purchased the r e s i d e n t i a l package of house -;• and l o t decision to con-sider the land for development purposes decision to pur-chase the land decision to develop the land householder's s e l e c t i o n of re-sidence - The outcome of the f i r s t stage, the decision of the pre (or re) devel-opment landowner, i s highly dependent upon the actions of the developer i n con-junction with h i s own estimation of the probable future worth of the pro-perty (discounted to the. present) and h i s own f i n a n c i a l p o s i t i o n and ambitions. 5 Generally he w i l l be w i l l i n g to dispose of h i s property when the net bene-f i t of such action exceeds the expected benefit to be derived from con-tinued holding including h i s estimation of the c a p i t a l i z e d value i n c r e -ment ( i f any) to be gained from continued holding in'.conjunction with an amount that he deems necessary to entice him to undertake the inconvenience of r e l o c a t i o n and reinvestment. The f i n a l stage, that of the consumer decision, goes a long way to temper the decision-making process of the developer,. Thus the developer's decision may be regarded as stemming from the desires of the eventual consumers of h i s product. The developer i s responding to the c o l l e c t i v e desires or demand as expressed by p o t e n t i a l users of the product he provides and i n turn he translates these desires i n the form of an o f f e r to purchase to the holder of developable land. The d o l l a r amount of such an o f f e r i s a r e s i d u a l value based on the developers' expected f i n a l p r i c e f or the p a r t i -cular project. Developers estimate the market value of a given project upon completion, subtract the costs of creating the product, including the de-s i r e d p r o f i t , and a r r i v e at a maximum bid p r i c e f or land. The c o l l e c t i v e actions of a l l developers i n t h i s r e s i d u a l p r i c i n g process sets the market l e v e l of land p r i c e s . An i n d i v i d u a l developer must accept the market deter-mined p r i c e i f he i s to be successful i n h i s attempts to acquire land. If the market p r i c e for land exceeds the amount any p a r t i c u l a r developer can afford to pay and s t i l l r e t a i n an acceptable p r o f i t he w i l l simply refuse to p a r t i c i p a t e u n t i l such time as either the marketability of h i s product improves or the cost of inputs decreases to the point where p r o f i t a b i l i t y of the undertaking i s reinstated. Thus i t i s the c o l l e c t i v e bids of a l l p a r t i c i p a n t s i n the urban land market that sets the l e v e l of prices i n 6 the marketplace rather than the actions of any one i n d i v i d u a l . 1.4 The Present Study and the Development Process The present study represents an attempt to c l a r i f y the decision-making process and behavioural aspects of the suppliers of new r e s i d e n t i a l housing. It i s only through an evolutionary process guided by the i n d i v i d u a l d e c i -sions of countless numbers of developers, as constrained, both d i r e c t l y and i n d i r e c t l y , by public regulation, that the form and scale of our c i t i e s i s molded. "In s p i t e of the key r o l e played by the r e s i d e n t i a l developer i n the conversion of open land to urban r e s i d e n t i a l use, he has been r e l a t i v e l y ignored by investigators of r e s i d e n t i a l growth i n the urban s p a t i a l structure."6 The int e n t i o n of t h i s study i s to investigate r e s i d e n t i a l developer behavioural c h a r a c t e r i s t i c s focusing p r i m a r i l y on the following general areas: a) Industry c h a r a c t e r i s t i c s b) Location c r i t e r i a c) Land a c q u i s i t i o n behaviour d) Financing e) Public regulation In c e r t a i n cases s p e c i f i c aspects w i l l be treated s p a t i a l l y , examining differences with respect to metropolitan area developers versus non-metro-f p o l i t a n area developers. On a second l e v e l , emerging trends w i l l be d i s -cussed by means of l o n g i t u d i n a l analysis made possible by an e a r l i e r study of a s i m i l a r nature conducted i n 1972. The conclusions reached i n t h i s e a r l i e r study are reviewed i n Chapter 3 of t h i s report. 7 Notes and References Chapter One N.H. Lithwick, Urban Canada: Problems and Prospects, (Ottawa: C.M.H.C, -December, 1970), p. 33; p. 181. J.L. Bysse, "Why Did Prices of Homes Go Up So Much?" Real Estate Trends 1973-1974, Vancouver, Real Estate Board of Greater Vancouver, October 1973, p. A-2. S.W. Hamilton and D. Baxter, C a p i t a l Taxes Pertaining to Real Property, Real Estate I n s t i t u t e of B r i t i s h Columbia, May 1975, pp. 4-8. G. Bannock, R.E. Baxter and R. Rees, A Dictionary of Economics, Penguin Books, Middlesex, 1973, p. 141. E.J. Kaiser and S.F. Weiss, "Public P o l i c y and the R e s i d e n t i a l Devel-opment Process", Journal of the American I n s t i t u t e of Planners (36), 1970, pp. 30-37. 6. E.J. Kaiser, "Location Decision Factors i n a Producer Model of Resi-d e n t i a l Development" Land Economics, (44), 1968, p. 351. 8 Chapter II THE ECONOMICS OF THE RESIDENTIAL DEVELOPMENT PROCESS  2.1 Research Avenues i n R e s i d e n t i a l Development The importance of new r e s i d e n t i a l construction to the national econ-omy cannot be understated: New r e s i d e n t i a l construction has played an important r o l e i n the generation of income and employment i n Canada. Between 1950 and 1969 new r e s i d e n t i a l constru-t i o n accounted for 41.1 per cent of t o t a l p r i v a t e new construction expenditure, 25.2 per cent of business gross f i x e d c a p i t a l formation and 4.8 per cent of gross national expenditure, and d i r e c t l y provided employment for approxi-mately 4 per cent of the Canadian c i v i l i a n non-agriculture labour force. Moreover t h i s a c t i v i t y was further enhanced by an estimated 40-50 per cent through the r e s i d e n t i a l ser-v i c e investment i t induces i n the form of e l e c t r i c , gas, telephone sewer and water f a c i l i t i e s , sidewalks, and some portion of schools, h o s p i t a l s , and churches, and by the demand i t generates f or new consumer durables such as r e -f r i g e r a t o r s , stoves, carpets, drapes, and other new f u r -nishings and appliances.^ Because of i t s d i r e c t impact on gross natio n a l expenditure r e s i d e n t i a l construction i s an important factor i n nationa l income determination. As such the flow of new housing units has been the topic of considerable r e -search. T r a d i t i o n a l l y the avenues of i n v e s t i g a t i o n have followed one, and at times several, of the following branches. FIGURE 2.1 RESEARCH AVENUES MACROECONOMIC BEHAVIOUR ANALYSIS MARKET ANALYSIS BEHAVIOUR BEHAVIOUR REAL ESTATE INVESTMENT ANALYSIS STRUCTURAL ANALYSIS As discussed i n Chapter I, the main emphasis of t h i s paper s h a l l rest i n an i n v e s t i g a t i o n of producer behaviour. However to place the topic i n i t s proper context the f i r s t portion of t h i s chapter w i l l be devoted to a b r i e f discussion of both the macro and microeconomic l i t e r a t u r e relevant to the subject. The second portion of t h i s section introduces the ongoing work of Kaiser and Weiss i n the f i e l d of producer/developer behaviour. The f i n a l portion of t h i s chapter summarizes two recent papers concerning the flow of new units onto the market i n the Vancouver area i n order to give a degree of i n s i g h t into the environment i n which the r e s i d e n t i a l development industry operates i n the Province of B r i t i s h Columbia. Chapter 3 reviews a 1972 study by Michael Goldberg conducted i n the Metropolitan Van-couver area that forms the basis for l o n g i t u d i n a l comparisons contained i n Chapter 4 of t h i s report. 2.2 Macr.oeconomlc Research: Ari Overview Prime examples of macroeconomic models of the r e s i d e n t i a l construction industry are those of Maisel i n the United States and L.B. Smith i n Canada. Maisel's model l i n k s the l e v e l of construction a c t i v i t y as measured by the number of dwelling s t a r t s to factors such as: the treasury b i l l rate applicable to new issues the deviation of vacancies at the s t a r t of the quarter from the s t r a i g h t l i n e trend - the rent component of the BLS Consumer Price Index the r e s i d e n t i a l cost component of the GNP i m p l i c i t p r i c e index an estimate of new removals from the stock 2 - net household formation i n the quarter. L.B. Smith d i f f e r e n t i a t e s between sin g l e and multiple family s t a r t s 10 i n an attempt to account for the fa c t that a change i n a given v a r i a b l e , for example the a v a i l a b i l i t y of mortgage c r e d i t , may a f f e c t these submar-kets i n d i f f e r e n t ways. With the exception of the unit p r i c i n g v a r i a b l e s (the p r i c e of housing versus an averaged rent value) the equations for both s t r u c t u r a l types remain s i m i l a r . Variables of prime importance are: - construction costs per square foot (NHA single-detached dwellings) - an index of land, costs (NHA,single detached dwellings) an averaged mortgage i n t e r e s t rate (conventional and NHA) a proxy v a r i a b l e f o r the a v a i l a b i l i t y of pr i v a t e mortgage c r e d i t - a dummy va r i a b l e to account for the winter works housebuilding incentive program 3 - averaged vacancy rates (for both s i n g l e and multiple units) Macroeconomic analysis of the housebuilding industry, as exemplified by the work of Maisel and L.B. Smith, c e r t a i n l y has i t s place i n the study of r e s i d e n t i a l development; however, such i n v e s t i g a t i o n s , by t h e i r very nature cannot account for the l o c a l nature of r e a l property markets. These models, while useful at the n a t i o n a l l e v e l i n the p r e d i c t i o n of future trends given alternate p o l i c y v a r i a t i o n s , cannot shed much l i g h t on the r a t i o n a l e guiding the decision-making processes of those d i r e c t l y responsible for molding the shape and siz e of our urban communities. 2.3 Microeconomic Research: An Overview Research at the microeconomic l e v e l can be broadly assigned to one of two categories; market^and behavioural a n a l y s i s . Market analysis may be further categorized as either r e a l estate investment analysis or s t r u c t u r a l a n a l y s i s . While i t i s beyond the scope of t h i s study to delve into the con-11 siderable body of l i t e r a t u r e centering upon r e a l estate investment analysis, 4 5 interested readers are directed to the works of R a t c l i f f , Maisel, Wendt 6 7 and Cerf, and E i c h l e r and Kaplin. S t r u c t u r a l analysis of the r e s i d e n t i a l 8 9 housing markets, such as that by Herzog and Pric e w i l l be discussed i n Chapter Four of t h i s report where i t w i l l be compared to., the r e s u l t s of the current study. Behavioural analysis relevant to the r e s i d e n t i a l development industry may be again broadly categorized into two subsets; that of consumer behaviour and producer behaviour. On the demand side, notable works such as those by ^ 10 11 12 Rossi, Foote, and Lansing delve into research and analysis of housing consumer behaviour. As pointed out by Goldberg (1972) however, s i m i l a r re-search on the supply side of the market i s l a r g e l y lacking. The p r i n c i p a l body of supply oriented research i s that of Kaiser and Weiss i n North Caro-l i n a . In t h e i r research program Kaiser and Weiss follow s i n g l e family r e s i -d e n t i a l development from the decision-making of the predevelopment landowner through to the decision-making process of the eventual housing consumer. In t h e i r i nvestigations Kaiser and Weiss consider the urbanization of pre-v i o u s l y a g r i c u l t u r a l land from s t a r t to f i n i s h ; from the decision of the predevelopment landowner to consider development proposals to the ultimate purchase d e c i s i o n of the consumer. In a sense, the present study i s an attempt to deal with a much narrower subset of the development process, namely behavioural aspects of the r e s i d e n t i a l developer. However, the d e f i r n i t i o n of ' r e s i d e n t i a l developer' i s considerably broadened i n the present study r e l a t i v e to that employed by the North Carolina group. Rather than concentrating s o l e l y on the s i n g l e family developer involved i n the con-12 v e r s i o n of raw land to r e s i d e n t i a l units the present study represents an attempt to consider the decision-making process of a wider range of r e s i -d e n t i a l developer types including those involved i n new development and redevelopment - metropolitan area and non-metropolitan area development In addition, v a r i a t i o n s i n the decision-making of developers of varying s t r u c t u r a l dwelling types w i l l be considered. Thus within the r e s t r i c -tions imposed by the s i z e of the sample (140 developers were questioned i n d e t a i l ) and where the r e s u l t s warrant i t , b i - v a r i a t e tabulations are given by degree of urbanization and s t r u c t u r a l type. Discussion of the conclusions by Kaiser and Weiss w i l l be postponed u n t i l the fourth chapter of t h i s report where they can be more meaningfully compared to the r e s u l t s of the present study. The remainder of t h i s section consists of f i r s t l y , a discussion of the microeconomics of housing supply, and secondly a review of the major findings and recommendations contained i n two recent papers dealing with the supply and the problems r e l a t i n g to the supply of new r e s i d e n t i a l units i n the Province of B r i t i s h Columbia. Although these papers are more s p e c i f i c a l l y directed at the metropolitan Vancouver area, many of the points made can be applied with equal ' c r e d i b i l i t y | at/the p r o v i n c i a l l e v e l . As such they provide an i n -sight into the environment i n which developers are operating i n the area encompassed by the present study. 2.4 The Microeconomics of Housing Supply With Respect to the Flow of New Units The purpose of th i s subsection i s to discuss the micro economics of 13 housing with respect to the flow of new r e s i d e n t i a l housing u n i t s . To do so, one must f i r s t point to the unique c h a r a c t e r i s t i c s associated with the housing market. By and large the flow of services stemming from r e s i d e n t i a l housing (as opposed to the housing units themselves) i s s i m i l a r to that stemming from most consumer goods: i t s a t i s f i e s a demand and bestows a benefit upon the user. In a number of respects however, the flow of ser- • vices stemming from housing units i s d i s s i m i l a r to most other consumer goods. Because of the d u r a b i l i t y of r e a l property the stock of e x i s t i n g dwel-l i n g units i s very large r e l a t i v e to the annual additions to the stock. Seldom does the flow or the new additions to the stock exceed 3 - 4% of the t o t a l a v a i l a b l e stock. This f a c t , combined with the immobility of r e a l property, has s i g n i f i c a n t implications with respect to the operation of the market. The average l e v e l of p r i c e s relevant at any one: time ( i n a given property market) i s a r e f l e c t i o n of the extent of consumer demand inj^erjictin^^ the q u a l i t y and quantity of the housing stock..-The-tota-l supply of housing services a v a i l a b l e at any one time i s to a c e r t a i n extent, p r i c e e l a s t i c . Increases i n demand, may, through the market adjustment pro-cess, lead to a more intensive u t i l i z a t i o n of the e x i s t i n g stock and con-sequently the magnitude of the l e v e l of services stemming from the stock may increase. The t o t a l supply of housing units i s however almost t o t a l l y p r i c e - i n e l a s t i c i n the short run. Increases i n the p r i c e of housing w i l l not, i n the short run, lead to any s i g n i f i c a n t increases i n the t o t a l supply of housing u n i t s . This r e l a t i o n s h i p i s summarized below i n Figure 2.4.1. 14 Figure 2.4.1  Pr i c e Determination Avail a b l e Supply (Number of Units) The above f i g u r e summarizes the housing market's response to an .in-crease i n the l e v e l of consumer demand and the subsequent short run p r i c e adjustment. The i n i t i a l response i s f o r the average p r i c e per un i t to i n -crease from to P^ as a r e s u l t of the increase i n demand (from D-jD-^  to ^2^2^ ' ^ e - * - n c r e a s e ^ n t n e t o t a l a v a i l a b l e supply over the period i s r e -presented by the righ'twardj s h i f t of the supply curve from to S^. Note that the magnitude of t h i s s h i f t i s very moderate (due to the small propor-t i o n of t o t a l supply represented by the annual flow). As a r e s u l t short -run increments i n supply have l i t t l e e f f e c t on the p r e v a i l i n g l e v e l of pr i c e s . . Figure 2.4.2 expands the previous i l l u s t r a t i o n to consider the r e l a -tionship between the stock of housing u n i t s , the l e v e l of consumer demand and the rate at which new units are added to the market i n the short run." 15 F i g u r e 2,4.2 S h o r t Run Stock-F'low R e l a t i o n s h i p A v a i l a b l e Supply ( 1 0 0 , 0 0 0 ' s of U n i t s ) "1 "2 Flow of New Units per Period _(100's of Units) Figure 2.4.2(a) Figure 2.4.2(b) Figure 2.4.2(c) Once again, an increase i n the l e v e l of consumer demand has been assumed. This increase i s represented by the s h i f t i n the demand curve from D.^ D , T O D 2' D _* ^ e e F i g u r e 2 . 4 . 2 ( a ) ) . A breakdown of the cost of the factors of production (Figure 2 . 4 . 2(b)) i s presented and as i s apparent from the f i g u r e the p r i c e a t t a i n a b l e f o r a dwelling unit i s s i g n i f i c a n t l y larger than the costs of production of that dwelling u n i t . The immediate response of the development industry w i l l be to expand the rate at which new units are added to the market i n an attempt to capture the short run p r o f i t increment. This response i s the r e s u l t of e x i s t i n g producers i n c r e a -sing t h e i r output and new producers a t t r a c t e d to the f i e l d (see Figure 2.4.2(c)). The extent to which new producers are a t t r a c t e d i s a function of the magnitude of the increase i n p r o f i t a t t a i n a b l e . Thus b u i l d e r s or devel-opers who were not currently involved i n the production of new r e s i d e n t i a l dwellings p r i o r to the increase i n p r i c e may, i f the increase i n a t t a i n a b l e 16 p r o f i t exceeds t h e i r opportunity cost, resume or begin development of r e s i -d e n t i a l dwellings. The increase i n developer p r o f i t i s , however, a short l i v e d phenomena. The fact that there i s an increased number of producers, or for that matter, the same number of producers with increased rates of production, places upward pressure on the prices of the factors of production. This i s p a r t i -c u l a r l y true of the land component. As the number of producers increases and a s i e x i s t i n g producers exhaust t h e i r inventories of developable land, competition f o r t h i s component increases. Figure 2.4.3 i l l u s t r a t e s t h i s s i t u a t i o n . The e f f e c t of an increase i n the i n t e n s i t y of competition for the factors of production i s an increase i n the cost of the f a c t o r s . The cost (to the developer) of raw land w i l l increase as competition s t i f f e n s . Increases i n the cost of the factors of production lead to a s h i f t of the industry's marginal cost curve from MC^ to MC^. That i s to say, the indus-try's response to increases i n the cost of land or expressed another way, dec l i n i n g p r o f i t s (while the p r i c e of the f i n i s h e d good remains constant, at i t s new higher l e v e l , P ) i s to reduce t h e i r l e v e l of output. Thus des-p i t e an increase i n demand (from D^D^ to D^D^), the long run e f f e c t i s not, i n the general case, to increase the rate at which new units are added to the e x i s t i n g stock. Only when the increase i n the value of the land r e s i d u a l increases the a v a i l a b i l i t y of developable land i n a market that was pre-v i o u s l y constrained by a l i m i t e d supply of developable land, w i l l increases i n demand lead to anything more than temporary increases i n the rate of new housing units onto the market. Figure 2.4.3 Secondary Effects of the Residual Pricing Mechanism 18 The speed with which the marginal cost curve s h i f t s upward and to the l e f t i s dependent upon lags i n the marketplace. If a l l producers respon-ded to the short run p r o f i t increment by immediately attempting to purchase more developable land, the s h i f t would occur r a p i d l y . However due to imper-fect knowledge and d i f f e r i n g expectations, both on the part of the pro-ducers and owners of the factors of production the : speed with which t h i s s h i f t occurs w i l l be moderated. The industry output occurring i n the period w i l l l i e somewhere between and Q^. The exact l e v e l of production, represented by *Q* i s however, unknown, as i t depends on the r a p i d l y with which the marginal cost curve s h i f t s to the l e f t . Having considered some of the more relevant points with respect to the microeconomics of r e s i d e n t i a l development we s h a l l now turn to a b r i e f i n t r o -duction to the 'environment i n which the industry operates. 2.5 The R e s i d e n t i a l Development Process i n B r i t i s h Columbia As i s the case i n many urban centers i n North America the p r o v i s i o n of r e s i d e n t i a l housing i s a contentious issue i n B r i t i s h Columbia. Demand pressures stemming from a v a r i e t y of sources have increased at a rate greater than the increases i n the l e v e l of a v a i l a b l e housing services. Consequently, i n recent years the market response has been rapid p r i c e escalation. The p r i c e mechanism':s a b i l i t y to e f f e c t i v e l y s i g n a l the need for increased housing services has not been impaired i n the general case, (rent control provisions are l i k e l y responsible for a dampening of tenure s p e c i f i c p r i c e signals) however the development industry's a b i l i t y to respond to these 19 signals has been impaired through a general tendency toward a no-growth philosophy at the l o c a l government l e v e l . Thus, i t i s with the industry's a b i l i t y to respond to demands created i n the marketplace i n mind, that we , now turn to the development industry i n B r i t i s h Columbia and problems, related.to i t . In May of 1973 the Urban Development I n s t i t u t e of B r i t i s h Columbia 13 (U.D.I.) prepared and submitted a b r i e f to the p r o v i n c i a l government o u t l i n i n g i t s p o s i t i o n with respect to the at that time current housing s i t u a t i o n . The U.D.I.'s major contentions were that: a) There was an acute shortage of r e n t a l units b) The l e v e l of new s t a r t s (both owner-occupied and rental) were extremely low c) Federal funds a v a i l a b l e for low cost housing were not being u t i l i z e d d) Rapid p r i c e i n f l a t i o n had decreased the proportion of the population that were capable of purchasing_anew home without sub s i d i z a t i o n e) The amount of land being developed was s u b s t a n t i a l l y below that required to s a t i s f y normal absorption rates. The U.D.I, placed the brunt of the blame for these observations on: 1) The apparent desire of most communities to r e s t r i c t growth, p a r t i c u l a r l y i n the area of multiple dwellings and low income housing 2) Lack of o v e r a l l planning and land use patterns within -.munici-p a l i t i e s 3) Lack of i n v e s t i g a t i o n that could allow the regulation of development on an equitable basis 4) Unreasonable on-site and o f f - s i t e s e r v i c i n g requirements 5) Shortage of community f a c i l i t i e s such as schools and trans-portation In November of 1974 the U.D.I, released an updated version of the e a r l i e r 14 report. This report concluded that many of the problems and issues men-tioned i n the 1973 work were s t i l l unsolved while new problems had ari s e n over the 16 month period separating the two reports. Of primary importance 20 i n the l a t t e r version were: implementation of the A g r i c u l t u r a l Land Reserve (provincial) implementation of rent controls (p r o v i n c i a l ) continued resistance to growth at the municipal l e v e l environmental issues l e g i s l a t i o n issues - p r i m a r i l y the land use and development provisions of the Municipal Act lack of advance planning and* trunk s e r v i c i n g (municipal) adoption of Land Use Contracts (and impost fees) (municipal) - inadequate appeal procedures (municipal) From the above l i s t of 'contentious issues' one can c l e a r l y see that the root complaint i s that of municipal resistance to r e s i d e n t i a l growth with the balance of the above complaints centering on symptoms rather than causes. In the spring of 1974 the Real Estate Board of Greater Vancouver re-leased i t s version of the problems related to the land development process as i t a f f e c t s the supply of new housing within the Greater Vancouver Re-gional District."'""' Again municipal no-growth p o l i c i e s are l a b e l l e d as a root cause of the problems a f f e c t i n g the flow of new u n i t s . The negative at t i t u d e s of councils and planners are as much to blame as the process i t s e l f , and these attitudes may or may not be a r e f l e c t i o n of the wishes of the majority of voters. Usually public opinion does not recognize public needs u n t i l they have reached urgent proportions. Municipal leaders tend to follow a safe distance behind public opinion, merely paraphrasing and repeating what the masses have said. The growth of population within our area, undoubtedly causes some problems for e x i s t i n g residents, and as councils are elected by the voters who already have homes or apart-ments, they n a t u r a l l y tend to think negatively about permitting growth. (Source: Beveridge Report, p. 2) The report emphasized many of the same symptoms recognized by the e a r l i e r U.D.I, report and again concluded that the primary causal factor rested at the municipal l e v e l . Taken together the reports from the U.D.I, and the Real Estate Board of Greater Vancouver may be regarded as being r e -presentative of the f e e l i n g s of the development industry with respect to the problems facing the suppliers of r e s i d e n t i a l r e a l estate. The intent 21 of the balance of t h i s paper i s to investigate how the industry i s responding to t h i s negative environment, secondly to analyze the long run implications of a continued existence of t h i s environment, and f i n a l l y to make p o l i c y recommendations that hopefully w i l l help to ease some of the current pro-blems i n a fashion that i s both acceptable to the l o c a l l e v e l p o l i t i c a l p a r t i c i p a n t and at the same time equitable to the e x i s t i n g residents of communities within the province and to those who w i l l be j o i n i n g us i n the future. 22 Notes and References Chapter Two j 1. L.B. Smith, The Postwar Canadian Housing and Re s i d e n t i a l Mortgage Markets and the Role of Government, Toronto, Un i v e r s i t y of Toronto Press, 1974, p. 3. 2. S.J. Maisel, "A Theory of Fluctuation i n Re s i d e n t i a l Construction Starts", American Economic Review, (53), 1963, pp. 359-383. 3. L.B. Smith, pp. 27-43. 4. R.U. R a t c l i f f , Urban Land Economics, New York, McGraw-Hill, 1949. 5. S.J. Maisel, Financing Real Estate, New York, McGraw-Hill, 1965. 6. P.F. Wendt and A. Cerf, Real Estate Investment Analysis and Taxation, New York, McGraw-Hill, 1968. 7. E. Eichler.and M. Kaplan, The Community Builders, Berkeley, Un i v e r s i t y of C a l i f o r n i a Press, 1967. 8. J.P. Herzog, The Dynamics of Large-Scale Housebuilding, Research Report 22, Berkeley, Center for Real Estate and Urban Economics, 1963. 9. E.V. Pric e , The Housebuilding Industry i n Metropolitan Vancouver, Vancouver, Un i v e r s i t y of B r i t i s h Columbia, Faculty of Commerce and Business Administration, 1970, Unpublished M.B.A. Thesis. 10. P.H. Rossi, Why Families Move: A Study i n the So c i a l Psychology of Urban R e s i d e n t i a l M o b i l i t y , New York, Free Press, 1955. 11. N.N. Foote et. a l . (Eds.), Housing Choices and Housing Constraints, New York, McGraw-Hill Book Company, 1960. 12. J.B. Lansing, R e s i d e n t i a l Location and Urban M o b i l i t y : The Second Ware of Interviews, Ann Arbor, Survey Research Center, University of Michigan,' 1966. 13. Urban Development I n s t i t u t e ( P a c i f i c Region), Bri e f to the P r o v i n c i a l Government, Vancouver, May 1973. Copies of the report are appended to the 1974 Report (see below). 14. U.D.I. ( P a c i f i c Region), Submission to the Province of B r i t i s h Columbia, Vancouver, November 1974. Copies are a v a i l a b l e from the Urban Devel-opment I n s t i t u t e ( P a c i f i c Region), Vancouver, B.C. 15. ICO Real Estate Management Ltd., The Land Development Process as i t A f f e c t s the Supply of New Housing Within the Greater Vancouver  Regional D i s t r i c t , Vancouver, Real Estate Board of Greater Vancouver, May 1974. o 23 CHAPTER III A REVIEW OF THE 1972 DEVELOPER SURVEY In the summer months of 1972 a sample of r e s i d e n t i a l developers opera-t i n g i n the metropolitan Vancouver area was surveyed by a team of researchers from the Un i v e r s i t y of B r i t i s h Columbia. The study was conducted i n con-junction with the development of a regional simulation model "to aid i n understanding developers' behaviour, to allow our society to better pro-vide for shelter"."'" This section, a summary of the 1972 study, i s i n -cluded so that trends present i n the industry may be i d e n t i f i e d and commented upon i n the following section of t h i s report. As such, the remainder of t h i s chapter draws heavily f rom the work of Michael Goldberg and Richard Moore.^ 3.1 A General Description of the 1972 Survey A det a i l e d questionnaire (see Appendix 1) was administered to devel-opers involved i n the creation of r e s i d e n t i a l housing units (including subdividers) i n the Greater Vancouver Regional D i s t r i c t (G.V.R.D.). In a l l 63 developers responded to a wide v a r i e t y of questions concerning t h e i r be-haviour and a c t i v i t i e s . Of the 63 p a r t i c i p a n t s i n the survey 46 were i n -volved i n the development of s i n g l e family u n i t s , 38 were involved i n multiple unit development and 27 responded p o s i t i v e l y to a question r e l a t i n g to a c t i -v i t y i n r e s i d e n t i a l subdivision. Table 72-1 summarizes the composition of the sample. 24 TABLE 72-1 Dwelling Units Completed by Sample Multi p l e Dwelling Single Family T o t a l • : -Units Units Lots Regional Regional Regional Subdivided Sample Total % Sample To t a l % Sample Total % Sample Total 1972 4329 6957 62.2 2132 7451 28.6 6471 14408 44.8 2204 1971 3332 9760 34.1 1373 5216 26.3 4705 14976 31.4 1216 1970 2834 8760 32.4 1035 4365 23.7 3869 13125 29.5 965 From Table 72-1 i t can be seen that the proportion of units completed by developers included i n the sample rose s t e a d i l y over the three study years r e l a t i v e to the regional t o t a l . Thus although the sample contained a minority of the developers a c t i v e at the time the study was conducted (63 out of an estimated t o t a l of over 300) the fa c t that the developers surveyed accounted for a s u b s t a n t i a l proportion of the development a c t i v i t y that transpired at the time allowed Goldberg to make some reasonably strong assertions about the behaviour of r e s i d e n t i a l developers. To provide a structure with which to review the findings of the present study and the e a r l i e r 1972 the findings have been organized under s i x p r i n c i p l e facets of r e s i d e n t i a l developer behaviour; 3.2.1 Industry c h a r a c t e r i s t i c s 3.2.2 Location c r i t e r i a 3.2.3 Land a c q u i s i t i o n c h a r a c t e r i s t i c s 3.2.4 Financing c r i t e r i a 3.2.5 Public regulation c h a r a c t e r i s t i c s 3.2.6 Expectations of future development trends 3.2.1 Industry C h a r a c t e r i s t i c s Table 72-2 displays the sample composition by developer s i z e and by type of u n i t . 25 TABLE 72-2 Developers by Average Number of Completions (1970-1972) Avg. # Single Avg. # M u l t i p l e Avg. // Lots Family Units # Developers Dwelling .Units # Developers Subdivided // Developers Completed over i n s i z e Completed over i n s i z e over i n size-; Class Past 3 Years Past 3 Years 1 - 1 5 16 - 35 36 - 75 76 - 150 over 150 S t a t i s t i c s Unavailable TOTAL class Past 3 Years cl a s s 13 10 8 5 1 46 1 - 5 0 51 - 100 101 - 150 151 - 200 over 200 S t a t i s t i c s Unavailable 11 1 - 1 5 7 3 16 - 35 3 5 36 - 75 4 5 76 - 150 "4 5 over 150 0 9 S t a t i s t i c s Unavailable 9 38 27 It i s apparent from the above table that multiple units tend to be developed .by firms with s u b s t a n t i a l output, while the s i n g l e family housing sector i s t y p i f i e d by r e l a t i v e l y small developers. This phenomena, con-3 4 firmed by P r i c e and CMHC s t a t i s t i c s , i s l i k e l y the r e s u l t of the higher degree of b u i l d i n g technology necessary for involvement i n the multiple f i e l d . In addition, many si n g l e family developers may f i n d that l i m i t e d c a p i t a l resources circumvent t h e i r entry to the multiple f i e l d . This i s not to say that there i s no overlap between s t r u c t u r a l types, the opposite i s closer to the truth. Of the 63 developers surveyed, 60.3% were involved i n the multiple f i e l d , 73.0% were involved i n the s i n g l e family sector and 42.9% were, to a varying extent, involved i n r e s i d e n t i a l subdivision. 3.2.2 Location Factors The questionnaire administered to the 63 developers (see Appendix One) 26 contained a question (II-3) r e l a t i n g to the r e l a t i v e importance of a number of demand and supply v a r i a b l e s . Developers were asked to i n d i c a t e each factor's r e l a t i v e importance on a scale from unimportant to e s s e n t i a l . Tables 72-3, 72-4, 72-5, and 72-6 summarize the r e s u l t s obtained from t h i s query. In each case, i r r e s p e c t i v e of developer type, four factors were considered to be s i g n i f i c a n t l y more important; proper zoning, access to trunk sewer, p r i c e of land and a v a i l a b i l i t y of developable land. In each instance proper zoning was c l e a r l y the most important factor followed c l o s e l y by access to trunk sewer l i n e s . A review of the r e l a t i v e impor-tance attached to the factors l i s t e d i n the l o c a t i o n decision question tends to in d i c a t e that the development industry i s responding p r i m a r i l y to supply considerations rather than demand fa c t o r s . Proper zoning was a necessary condition before development would be considered by a majority of developers included i n the sample (87% of the respondents considered proper zoning as e i t h e r very important or e s s e n t i a l i n t h e i r s i t e s e l e c t i o n d e c i s i o n ) . Access to trunk sewer was regarded as being very important or e s s e n t i a l by 90% of the respondents surveyed. 83% of the respondents regarded the p r i c e of land as being very important or e s s e n t i a l i n the s i t e s e l e c t i o n decision and 72% responded i n a s i m i l a r fashion with respect to the a v a i l a -b i l i t y of developable land. The remaining four factors were of noticeably le s s importance and represent the only other factors out of a l i s t of 13 which were considered as being above average importance. T A B L E 72-3 Evaluation of Location Factors by A l l Developers (63 Respondents) (Percent of Respondents i n Parentheses) 27 Location Factors Proper Zoning Access to Trunk Sever P r i c e of Land A v a i l a b i l i t y of Developable Land Nearness to -Schools Nearness to Major P,oads Nearness to Major Shopping Areas Size of S i t e F a i r l y Average Very Unimportant Important Importance Important (1) (2) (0) 3( 4.8) 3( 4.8) 3( 4.8) 2( 3.2) 6( 9.6) 3(12.9) 0( 0.0) 2( 3.2) 2( 3.2) 5( 8.1) K 1.6) 5( 8.1) 4( 6.4) 11(17.7) 7(11.5) 14(23.0) 8(12.9) 16(25.8) (3) 16(25.8) 26(41.9) 21(33.9) 21(33:9) 29(47.5) 23(37.1) 7(11.5) 8(13.1) 18(29.5) 25(41.0) 10(16.4) 9(14.8) 16(26.2) 19(31.1) E s s e n t i a l (4) 38(61.3) 30(48.4) 31(50.0) 24(38.7) 5( 8.2) 7(11-3) 3( 4.9) 7(11.5) Standard Mean De v i a t i o n 3.39 3.26 3.21 2.98 2.33 2.21 1.00 1.01 1.06 1.06 1.10 1.20 2.15 1.09 2.07 1.26 TABLE 72-4 Evaluation of Location Factors by Developers of M u l t i p l e Family Dwellings (38 Respondents) (Percent of Respondents i n Parentheses) Location Factors F a i r l y Average - Very Unimportant Important Importance Important E s s e n t i a l (0) (1) (2) O) W Mean Standard D e v i a t i o n Proper Zoning K 2. 6) 0( 0.0) 3( 7.9) 11(29.0) 23(60.5) 3.45 .86 Access to Trunk Sewer P r i c e of Land 2( 5. 2( 5. 3) 3) 1( 2.6) 1( 2.6) 0( 0.0) 4(10.5) 14(36.8) 13(34.2) 21(55.3) 18(47.4) 3.34 3.16 1.02 1.08 A v a i l a b i l i t y of Developable Land 1( 2. 6) 3( 7.9) 8(21.0) 9(23.7) 17(44.7) 3.00 1.12 Nearness to Schools 6(16 2) 4(10.8) 9(24.3) 14(37.8) 4(10.8) 2.16 1.26 Nearness to Major Roads 4(10 5) 4(10.5) 9(23.7) 16(42.1) 5(13.2) 2.36 1.17 Nearness to Major Shopping 5(13 5) 5(13.5) 12(32.4) 13(35.2) 2( 5.4) 2.05 1.13 Areas Size of S i t e 3( 7 .9) 5(13.2) 11(29.0) 14(36.8) 5(13.2) 2.34 1.12 28 TABLE 72-5 Evaluation of Location Factors by Developers of Single Family Dwellings (45 Respondents) (Percent of Respondents i n Parentheses) Location Factors F a i r l y Average Very Unimportant Important Importance Important E s s e n t i a l Mean Standard Deviation (0) (1) (2) (3) (4) Proper Zoning 2( 4. 4) 0( 0. 0) 3( 6. 7) 9(20.0) 31(68. 9) 3. 49 0. 97 Access to Trunk Sewer 1( 2. 2) K 2. 2) 1( 2. 2) 23(51.1) 19(42. 2) 3. 29 0.81 P r i c e of Land K 2. 2) 1( 2. 2) 3( 6. 7) 15(33.3) 25(55. 6) 3. 38 0 89 A v a i l a b i l i t y of Developable Land K 2. 2) 3( 6. 7) 9(20. 0) 18(40.0) 14(31. 1) 2. 91 1 00 Nearness to Schools 3( 6 7) 4( 8. 9) 9(20 0) 25(55.6) 4( 8 9) 2. 51 1 01 Nearness to Major Roads 7(15 6) 6(13. 3) 12(26 7) 17(37.8) 3( 6 7) 2 07 1 19 Kaarness to Major Shopping 4( 8 9) 4( 8 9) 14.(31 1) 21(46.7) 2(46 7) 2 29 1 01 Size of S i t e 9(20 5) 7(15 9) 10(22 7) 14(31.8) 4( 9.1) 1 .93 1 .30 TABLE 72-6 • Evaluation of Location Factors by Subdividers (27 Respondents) (Percent of Respondents i n Parentheses) Location Factors F a i r l y Average Very Unimportant Important Importance . Important E s s e n t i a l (0) (1) (2) (3) (4) Standard Mean Deviation Proper Zoning K 3. 7) 6( 0. 0) 2( 7. 4) 6(22. 2) 18(66.7) 3. 48 0. 94 Access to Trunk Sewer K 3 7) 0( 0 0) 0( 0. 0) 13(48. 1) 13(48.1) 3. 37 0. 84 P r i c e of Land 2( 7 4) K 3 7) 2( 7 4) 12(44 4) 10(37.0) 3. 00 1. 44 A v a i l a b i l i t y of Developable Land K 3 7) 2( 7 4) 5(18 5) 6(22 2) 13(48.2) 3. 04 1. 16 Nearness to Schools K 3 7) 4(14 8) 8(29 6) 11(40 7) 3(11.1) 2. 41 1. 01 Nearness to Major Roads 3(11 1) . 4(14 8) 8(29 6) 9(33 3) 3(11.1) 2. 19 1 18 Nearness to Major Shopping Areas Size of S i t e 2( 7 4) 5(18 5) 7(25 9) 11(40 7) 2( 7.4) 2 22 1 09 7(25. 9) 3(11 1) 8(29 6) 6(22 2) 3(11.1) 1 81 1 36 29 3.2.3 Land A c q u i s i t i o n Behaviour Table 72-7 summarizes the responses of developers with respect to t h e i r land a c q u i s i t i o n behaviour. 82% of the respondents acquire land f or t h e i r projects two or le s s years i n advance of need and 86% of the sample developers have inventories s u f f i c i e n t f o r two years or l e s s . TABLE 72-7 Land A c q u i s i t i o n Behaviour ( A l l Developers) Number of Years  0 1 2 3 4 5 over 5 % of Respondents Acquiring Land i n Advance of Need, 26.98 42.86 12.70 11.11 0 1.59 4.76 by # Years i n Advance % of Respondents Holding Land Inventories, by # 31.75 25.40 20.63 4.76 1.59 3.17 12.70 Years of Inventory The figures displayed i n the above table seem to confirm conclusions reached by Hamilton (1971) and Hamilton and R a t c l i f f (1972) who found that the develop-ment industry i s not involved in' land banking or- hoarding to any great' extent. 3.2.4 Financing of Re s i d e n t i a l Development Table 72-8 represents the responses gathered with respect to sources of funds for a l l developers included i n the sample. The importance given to retained earnings and equity financing appeared to be somewhat su r p r i s i n g i n l i g h t of the high leverage requirements of the industry, however these 30 responses are reasonable i n that the question d i d not deal w i t h the amount of equity f i n a n c i n g but r a t h e r only the frequency w i t h which i s was used. TABLE 72-8 Financing - Sources of Funds (63 Respondents) No Some- Standard Source Response times (1) Often (2) Always (3) Never (0) Mean Dev i a t i o n N o n - f i n a n c i a l i n s t i t u t i o n s 3.17 ' 17.46 15.87 3.18 60.32 0.63 0.94 Insurance Cos. 3.14 30.16 28.59 7.94 30.16 1.18 1.00 Banks 1.59 20.63 31.75 29.68 6.35 2.10 0.91 Canadian Federal Gov't. 3.14 28.59 30.16 9.52 25.40 1.28 0.99 Equity 6.35 30.16 6.35 41.27 15.87 1.78 1.19 Mortgage 9.52 25.40 15.87 6.35 42.86 0.86 0.96 Par t n e r s h i p 3.17 31.75 12.70 4.76 47.62 0.75 0.88 Personal Note 4.76 26.98 14.29 3.17 50.79 0.69 0.86 Retained Earnings 3.17 20.63 19.05 28.59 28.57 1.57 1.20 Personal Savings 3.17 17.49 6.35 9.52 63.49 0.62 0.99 Syndicates 22.22 20.63 6.35 3.17 47.63 0.56 0.82 Table 72-9 gives an i n d i c a t i o n of the r e l a t i v e importance of va r i o u s f a c -t o r s r e l a t i n g to f i n a n c i n g arrangements. C l e a r l y the most important f a c t o r was that of loan to value r a t i o , i n d i c a t i n g the importance of leverage i n the development of r e s i d e n t i a l r e a l e s t a t e . The cost of borrowing was rated next, followed by the three other f a c t o r s which ware ranked at equal impor-tance. 31 TABLE 72-9 Item F i n a n c i a l Terms - Relative Importance Average No Impor-Response tance (1) F a i r l y Very Impor- Impor-tant tant (2) (3) Unim-portant Mean (0) Standard Deviation Interest Rate Term of Loan Amortization Period Loan/Value Ration P a r t i c i p a t i o n i n Cash Flow 5.52 11.11 11.11 12.70 23.81 14.29 17.46 14.29 9.52 7.94 31.75 26.98 38.57 26.98 7.94 41.27 38.10 38.10 49.21 3.17 6.35 7.94 1.59 44.44 15.87 2.27 2.13 2.13 2.46 2.11 0.80 0.92 0.94 0.69 1.22 3.2.5 Contacts' With Public and Private Agencies In the course of proceeding with a project and obtaining the necessary development approval, developers come into contact with a large number of government agencies. Table 72-10 lays out the frequency with which various governmental and other i n s t i t u t i o n s were contacted i n the course of the developers' a c t i v i t i e s . The agencies most frequently contacted were that of: permits and lic e n c e s , the planning department and the engineering departments of the various m u n i c i p a l i t i e s i n which the respondents operated. Somewhat more sur-p r i s i n g was the r e l a t i v e l y small degree of contact the respondents had with c i t i z e n groups and parks boards, given that demands for open space and environmental q u a l i t y were beginning to emerge at th i s time. 3.2.6 Expectations of Future Development Trends Developers were asked as to which s t r u c t u r a l types they had been i n -32 TABLE 72-10 Frequency of Contact With Government and Local Agencies by % Respondents (63 Respondents) I n s t i t u t i o n No Response Some-time^ (1) Often Always Never (2) (3) (0) Mean Standard Deviation Health Dept. 88.89 1.59 3. 17 4.76 1.59 2. 00 .91 Planning Dept. 0 7.94 14. 29 71.43 6.35 2. 52 0.91 Permits & Licences 0 4.76 7. 84 85.72 1.59 2. 79 0.63 Cit y Council 0 57.14 19. 05 l l . l l 12.70 1. 29 0.83 Assessor 0 33.33 7. 94 14.29 44.44 0. 94 1.09 School Board 0 39.68 4. 76 1.59 53.97 0. 54 0.67 Parks Board 0 38.10 7. 94 0 53.97 0. 54 0.64 Engineering Dept. 0 17.49 20. 63 57.14 4.76 2. 49 0.84 Ci t i z e n s Groups 1.59 .39.68 4. 76 . 3.17 50.73 0. 60 0.73 Regional Planning Dept. 15.87 31.75 11. 11 7.94 33.33 0. 93 0.96 volved with i n the past and which types they were l i k e l y to develop i n the future. Table 72-11 summarizes the findings of these questions. TABLE 72-11 Housing Type Single family dwellings Garden apartments and/or condominiums Row housing Low r i s e multiple High r i s e multiple Future Development Trends Developed i n Past 80% 38% 28% 45% 30% To be Developed i n Future 68% 66% 34% 32% 29% 33 Development seemed to be swaying away form the t r a d i t i o n a l s t r u c t u r a l types; s i n g l e family dwellings, low-rise and hi g h - r i s e multiples i n favour of row housing and garden apartments. The extremes i n density (single detached versus high density multiples) seemed to be i n the process of being phased out i n favour of more uniform medium (15-45 units/acre) density development. 3.3. Summary of the P r i n c i p a l Findings of the 1972 Survey 1. Developers require adequate supplies of zoned and sewered land before development can be considered. 2. Developers are not engaging i n land hoarding, generally holding land s u f f i c i e n t f o r the normal course of t h e i r development a c t i v i t i e s . 3. There ex i s t s a su b s t a n t i a l number of public and private organi-zations through which the developer must proceed i n order to carry out the operation of t h i s form. 4. Debt financing i s extremely important i n financing r e s i d e n t i a l property development. 5. Developers are tending toward new s t r u c t u r a l forms of r e s i d -d e n t i a l housing that make more e f f i c i e n t use of urban land through higher average d e n s i t i e s . Given t h i s rather b r i e f d e s c r i p t i o n of the 1972 study we s h a l l now turn our attention to the r e s u l t s of the present study and draw comparisons between the two as necessary. 34 Notes and References Chapter Three 1. M.A. Goldberg, R e s i d e n t i a l Developer Behaviour: Some Empirical Findings, Urban Land Economics Report #3, Faculty of Commerce and Business Administration, U n i v e r s i t y of B r i t i s h Columbia, p. 6. 2. R. Moore, A Development P o t e n t i a l Model for the Vancouver Metropolitan Area, Faculty of Commerce and Business Administration, U n i v e r s i t y of B r i t i s h Columbia, 1972. Unpublished M.-B.A. Thesis. 3. E.V. Pr i c e , The .Housebuilding Industry i n Metropolitan Vancouver, Faculty of Commerce and Business Administration, U n i v e r s i t y of B r i t i s h Columbia, 1970. Unpublished M.B.A. Thesis. 4. C.M.H.C. (1971) developer s t a t i s t i c s are as follows. Builder A c t i v i t y by Dwelling Unit Range (Vancouver, 1970) # Single Units (1970) // Builders 1 25 179 26 50 6 51 100 3 Greater than 100 5 This breakdown i n relevant only to units financed by NHA loans to bui l d e r , however the r e s u l t s support conclusions reached i n the present study. 35 CHAPTER IV RESIDENTIAL DEVELOPER BEHAVIOUR - REVISITED (1975) 4.1.1 Sample Selection and Administration This report i s based on information c o l l e c t e d by means of a ques-tionnaire administered to 140 r e s i d e n t i a l developers operating i n the Pro-vince of B r i t i s h Columbia i n the three year period preceeding January 1975. The i d e n t i f i c a t i o n of developers to be included i n the sample was not an easy task as there i s no c e n t r a l r e g i s t r y as i s common i n most i n d u s t r i e s . The i d e n t i f i c a t i o n of developers was by necessity achieved by ad hoc methods.. Membership l i s t s from the Real Estate Boards i n the province, the Housing and Urban Development Association of Canada (HUDAC), and the Urban Development I n s t i t u t e (UDI) were obtained and each member i n the areas serviced by the Greater Vancouver, Westminster County and C a p i t a l Region Boards was sent an introductory l e t t e r explaining the nature of the present study (see Appendix 2). Each of these firms (the t o t a l number of firms was i n excess of 500) was subsequently contacted and t h e i r involvement i n r e s i d e n t i a l development was ascertained. The 'metropolitan' sample as i t came to be known was eventually narrowed down to some 125 developers. By no means does t h i s represent the t o t a l development community. Many develo-pers, p a r t i c u l a r l y those involved i n small scale si n g l e family development, have l i t t l e or no a f f i l i a t i o n with organizations such as Real Estate Boards, the U.D.I, or H.U.D.A.C. There was no convenient manner i n which t h i s pro-blem could be overcome, consequently the sample represents only a portion (although a substantial portion) of the development a c t i v i t y that trans-pired over the study period (see Table 2.10 - Si z e ) . Due to the s i z e and geographical d i v e r s i t y of the province i t was not 36 possible for the Vancouver research team to i d e n t i f y the development com-munity i n a l l areas of the province. In an e f f o r t to overcome t h i s short-coming, l o c a l Real Estate Boards s e r v i c i n g areas other than the Greater Vancouver and C a p i t a l Regional D i s t r i c t s were contacted and t h e i r a s s i s -tance i n d r a f t i n g a sample of developers ac t i v e i n t h e i r areas and adminis-terin g the questionnaire was s o l i c i t e d . In the metropolitan areas surrounding Vancouver and V i c t o r i a ques-tionnaires were, i n the great majority of cases, personally administered by members of the research s t a f f at U.B.C. Of the 125 developers i d e n t i f i e d as operating i n the Vancouver and V i c t o r i a areas the l e v e l of cooperation was very high, i n excess of 80% of those i d e n t i f i e d agreed to be submitted to a barrage of questions r e l a t i n g to t h e i r a c t i v i t i e s . The respondents were very candid i n t h e i r answers and any useful findings flowing from t h i s report are the d i r e c t r e s u l t of t h e i r cooperation. 4.1.2 Sample C h a r a c t e r i s t i c s The composition of the f i n a l sample, comprised of developers ac t i v e i n metropolitan areas and non-metropolitan areas, i s summarized i n Table 1. TABLE 2.10(1) Developers by Type of Development and Geographical Setting Metropolitan Area Mixed Area Non-metro . Developers Developers Area Devel. TOTAL Mul t i p l e Unit £ ? 4 9 40 Developers Single Unit ^ g 1 6 g Developers Res i d e n t i a l Subdividers TOTAL 32 11 20 63 102 21 45 168 37 The fact that the t o t a l number of developers i n the above table (168) does not correspond with the number of respondents (140) simply r e f l e c t s the fact that several developers are involved i n more than one of the above development a c t i v i t i e s . That the responses of the developers included i n the study are repre-sentative of the industry as a whole i s borne out by the s i g n i f i c a n t portion of units constructed and l o t s subdivided by the sample. The 'membership' of the t o t a l development community i n the province l i k e l y numbers i n excess of 1200 i n d i v i d u a l firms, consequently the present study may d i r e c t l y repre-sent some 10-12% of those involved. The developers surveyed, however, accounted for a substantial portion of the r e s i d e n t i a l development that occurred over the three year study period. Tables 2.10 and 2.11 below summarize the percentage of market coverage of the present study r e l a t i v e to the t o t a l p r o v i n c i a l a c t i v i t y . TABLE 2.10(2) Dwelling Units I n i t i a t e d by the Sample M u l t i p l e Unit Starts Single Unit Starts T o t a l Starts Sample Prov. To t a l % Sample Prov. Total I Sample Prov. Total % 1974 5238 12116 43.2 1797 19304 9. 3 7035 31420 22.4 1973 . 3776 15413 24.5 1743 22214 7. 8 5519 37627 14.7 1972 2912 15609 18.7 1449 19708 7. 4 4361 35317 12.3 * Table numbers are keyed to the question numbers i n the survey, thus Table 2.10 l i s t s the responses to question 10 i n Section 2 of the questionnaire. Appendix 2 contains the complete questionnaire. 38 TABLE 2.11  Dwelling Units Completed by Sample Mu l t i p l e Unit Starts Single Unit Starts Total Completions Sample Prov. To t a l % Sample Prov. To t a l 1 Sample Prov. T o t a l % 1974 4452 13541 32.9 1455 20999 6.9 5907 34540 17.1 1973 3443 13719 25.1 1545 22885 6.8 4988 34604 14.4 1972 1752 11883 14.8 1406 19247 7.3 3158 31097 10.2 Lots subdivided by the sample were: 1974 - 6874; 1973 - 6294; 1972 - 3858. Persons or firms involved i n r e s i d e n t i a l subdivision were interviewed with regard to t h e i r subdivision a c t i v i t i e s only i f the product of t h e i r a c t i v i t y was sold to another developer for the subsequent stages of the development process. This eliminates double countings, i . e . l a b e l l i n g a l o t as being subdivided i n the t o t a l i n Table 2.11 as well as counting the dwelling s t a r t (by the same developer) i n Table 2.10. Lots subdivided by a developer and subsequently b u i l t upon by the same developer are not included i n the t o t a l s i n Table 2.11. As a r e s u l t of t h i s method of book-keeping and the r e s u l t s of a separate survey of major subdividers operating i n the province"'" i t became apparent that the great majority of l o t s sub-divided were subsequently purchased and developed by small scale s i n g l e family unit b u i l d e r s . It i s estimated that t h i s occurs i n excess of 60% of the subdivided l o t s made av a i l a b l e by developers i n the sample. Table 2.10(2) incorporates t h i s f i n d i n g and displays a second estimate of the market coverage attained i n the present study. The decision-making of the developers involved i n r e s i d e n t i a l subdivision i s the r e s u l t of a derived demand. They ascertain where the small scale builder desires to b u i l d and act accordingly. In t h i s l i g h t the subdividers' decision-making i s merely 39 a r e f l e c t i o n of the desires of the consumer of his product, the small scale s i n g l e family developer. TABLE 2.10(3) Derived Estimate of Dwelling Starts M u l t i p l e Unit ! Starts Single Unit Starts T o t a l Starts Sample Prov. Total 1 Sample Prov. To t a l % Sample Prov. Total I 1974 5238 12116 43. 2 5921 19304 30. 7 11159 31420 35. 5 1973 3776 15413 24. 5 5519 22214 24. 8 9295 37827 24. 7 1972 2912 15609 18. 7 2314 19708 11. 7 5226 35317 21. 1 With t h i s proxy measure of the decision-making of the small scale builder/developer the market coverage obtained r i s e s from a low of 14.8% i n 1972 to a high of 35.5% i n 1974. Irrespective of whether or not s i n g l e s t a r t s are calculated s t r i c t l y as i n the case of Table 2.10(2) or i n f e r r e d as i n Table 2.10(3) the market coverage i s nevertheless such that some reason-ably strong assertions can be made with regard to developer behaviour. The sample represents a great deal of experience i n the industry. Developers included i n the sample have been involved i n r e a l estate development for 12.9 years on the average. The v a r i a t i o n about the mean i s s u r p r i s i n g l y low: multiple unit developers, 13.1 years; s i n g l e family developers, 12.4 years; and subdividers, 13.2 years. Approximately one-eighth (14.3%) of the developers included i n the sample were s u b s i d i a r i e s of larger firms. Of these firms, 10% of the parent companies were involved i n lumber and wood ** Single unit s t a r t s are calculated u t i l i z i n g a) the actual number of s t a r t s as reported by respondents involved i n s i n g l e unit development and b) 60% of the l o t s subdivided and subsequently resold to another developer spe-c i a l i z i n g i n construction and post-subdivision development. 60% was chosen as i t appears to be a r e l a t i v e l y conservative estimate. i . e . // s i n g l e s t a r t s = actual single starts+ (actual # subdivisions) (.60) 40 products, 45.5% i n r e a l estate, 5.0% i n transportation, 25.0% i n finance and investment and 15.0% i n other endeavours. Table 2.10(4)displays the s i z e d i s t r i b u t i o n of the sample by the average number of units completed (or l o t s subdivided) over the 3 year study period. Note that s i n g l e family dwelling units tend to be developed by firms with a smaller annual output than that of multiple unit developers. Although t h i s phenomena i s apparent from the table i t should be noted that i t i s understated considerably due to the method by which the sample was chosen. Single family dwelling units tend to be developed by small scale b u i l d e r s , generally constructing l e s s than 7 units per annum. These persons or firms are not l i k e l y to be members of organizations such as the various Real Estate Boards or the U.D.I, from which the sample was l a r g e l y chosen. Nevertheless i t seems clear that s i n g l e units are developed p r i m a r i l y by small scale developers even given the samples bias toward t h e i r l a rger scale counter-parts. This i s compatible with the conclusions reached i n e a r l i e r studies by Goldberg (1972) and Price (1970). TABLE 2.10(4) Develop ers by Average Number of Completions (1972-1974) Avg. // Sin- Avg. # Mult. Avg. # Lots gle Units Units Corn- Subdivided Completed Develo- pleted Over , Develo- Over Last Develo-Over Last pers i n Last Three pers i n Three Years pers i n Three Years Class Size Years Class Size Class Size # 1 I % # I 1 - 1 5 36 ..55.4 1 - 15 16 40.0 1 - 15 21 33.3 16 - 35 14 21.5 16 - 35 3 7.5 16 - 35 17 27.0 36 - 75 12 18.5 36 - 75 9 22.5 36 - 75 9 14.3 76 - 150 3 4.6 76 - 150 5 12.5 76 - 150 7 11.1 over 150 0 0.0 over' 150 7 17.5 over 150 9 14.3 TOTAL 65 40 63 Table 2.10(5) compares the frequency with which developers f i t into th various s i z e categories i n the 1972 and present studies. There appears to be a s i g n i f i c a n t s h i f t downward i n average annual output i n both the s i n g l and multiple unit f i e l d s . This trend cannot be explained by any o v e r a l l decreases i n industry output as the opposite has occurred, the average number of completions increased from 29409 i n the 1970-1972 period to 33413 i n the 1972-1974 study period. The explanation for t h i s phenomena appears to be twofold. F i r s t l y , given that the percentage of s i n g l e unit developers with an average output i n excess of 75 completions per annum dropped from 16.2 to 4.6 and s i m i l a r l y the percentage of multiple unit developers with an average output i n excess of 75 units per annum dropped from 60.7 to 30% while, at the same time, the average annual industry output increased by 12%. It would appear that the number of p a r t i c i p a n t s i n the development of r e s i d e n t i a l r e a l estate increased. This i s highly l i k e l y i n view of the market conditions that prevailed up to the tighten-2 ing of mortgage c r e d i t a v a i l a b i l i t y i n the spring of 1974. A second and perhaps equally important explanation of the decrease i n average annual output l i e s i n the transformation that occurred over the study period with respect to s t r u c t u r a l type. As hypothesized by Goldberg i n 1972, 3 garden apartments and row housing have become incr e a s i n g l y more popular at the expense of the more t r a d i t i o n a l single detached house. Given the s i m i l a r b u i l d i n g technology common to single detached and row housing, i t would not be at a l l s u r p r i s i n g to f i n d that a s i g n i f i c a n t portion of developers who previously dealt p r i m a r i l y with the s i n g l e detached sub-market were s h i f t i n g into the multiple submarket. 42 TABLE 2.10(5) Comparative D i s t r i b u t i o n of Developers by Average Number Completions (1970-1972; 1972-1974) Avg. # Units or Lots Com-pleted Over Last Three Years 1 - 1 5 16 - 35 36 - 75 76 - 150 over 150 % of Single Unit Developers i n Class Size 1972 35.1 27.0 21.6 13.5 2.7 1975 55.4 21.5 18.5 4.6 0.0 % of Mult i p l e Unit Developers i n Class Size 1972 17.8 10.7 10.7 25.0 35.7 1975 40.0 7.5 22.5 12.5 17.5 % of Subdi-viders i n Class Size 1972 38.9 16.7 22.2 22.2 0.0 1975 33.3 27.0 14.3 11.1 14.3 This hypothesis seems to be confirmed by the fac t that the frequency of multiple developers with an average annual completion rate below 15 units has more than doubled (from 17.9% to 40.0%). I t i s i n t e r e s t i n g to note that t h i s proportionate increase i n the frequency of small scale multiple developers has occurred at the expense of a l l other s i z e categories and therefore may not represent a decrease i n the absolute number of large-scale developers i n the multiple f i e l d but simply an increase i n the number of small scale developers. The s i z e d i s t r i b u t i o n of subdividers does not appear to have changed s i g n i f i c a n t l y over the period of time separating the two studies with the exception of a few medium sized subdividers who have s h i f t e d into the large scale ( in excess of 75 l o t s per annum) category. The extent to which developers included i n the two studies engage i n the various facets of the r e a l estate development process i s v i r t u a l l y un-changed with the exception of decreased involvement i n construction. LEAF 43 OMITTED IN PAGE NUMBERING. c^^o ^jtfc A^-u-b- 44 TABLE 6.1 Involvement i n the Development Process ( a l l developers) 1972 SURVEY 1975 SURVEY No Involve- Some Involve- No Involve- Some Involve-ment ment ment ment £ I £ £ 1 £ 1 Site Selection 6 9 57 91 7 5 133 95 Land Assembly ** ** ** ** 9 6 131 94 Site Planning & Subdivision Layout 6 9 57 91 21 15 119 85 Construction 16 25.5 47 74.5 56 40 85 60 S e l l i n g & Leasing 5 8 58 92 11 7.9 129 92.1 Property Management 28 44.4 35 55.6 62 44.3 78 55.7 In both studies the most common a c t i v i t i e s undertaken by developers are s i t e s e l e c t i o n , s e l l i n g and leasing , and s i t e planning. In the present study 94% of the developers included i n the sample did at le a s t some of t h e i r own land assembly. Property management was found to be the le a s t common element as i n the 1972 study, i n both studies more than 40% of the sample had no involvement. The balance of t h i s chapter turns from the composition and character-i s t i c s of the sample to consider s p e c i f i c aspects of r e s i d e n t i a l developer behaviour. These areas of consideration have been grouped into four major categories: l o c a t i o n c r i t e r i a , land a c q u i s i t i o n behaviour, financing, and contacts with public and private agencies. 4.2 The Results With t h i s d e s c r i p t i v e information as prologue, we can now move on to explore s p e c i f i c aspects of developer behaviour i n greater d e t a i l . ** This f a c t o r was not included i n the 1972 study. 45 4.2.1 Factors A f f e c t i n g the Location Decision Developers were asked to give an i n d i c a t i o n of the r e l a t i v e importance of a number of factors generally considered important to the s i t e s e l e c -t i o n or l o c a t i o n decision (question 6.4). For each of 14 factors developers assigned a l e v e l of importance, ranging from unimportant (0) to e s s e n t i a l (4). The r e s u l t s of t h i s i n v e s t i g a t i o n have been tabulated by developer type i n Tables 6.4.(1) (multiple unit developers), 6.4.(2) (single unit developers), 6.4.(3) (subdividers) and 6.4.(4) (a composite f o r a l l devel-opers). From a review of these four tables i t becomes clear that four factors are of overriding importance i n the developers' l o c a t i o n d e c i s i o n : Proper zoning, p r i c e of land, access to trunk sewer and a v a i l a b i l i t y of developable land. As i n the 1972 survey, these four f a c t o r s , without exception, were assigned the highest l e v e l of importance by each developer type. The l e v e l of importance ascribed to proper zoning confirms e a r l i e r 3 indi c a t i o n s that developers do not consider the p o t e n t i a l return from r e -zoning worth the time, expense and r i s k involved i n arranging a change i n permitted use. The concern over p r i c e of land indicated by a mean impor-tance of 3.2 ( a l l developers) i s l i k e l y an i n d i c a t i o n of developers' con-cern over increments i n the r e s i d u a l land value that have occurred over the past f i v e years i n most Canadian c i t i e s . 'Shopping' for land appears to be one of the developers' prime areas of cost minimization and as such he ascribes a high l e v e l of importance to the p r i c e of land. Access to trunk sewer l i n e s came next i n o v e r a l l importance and, as noted i n e a r l i e r studies, t h i s would seem i n d i c a t i v e of the fac t that the p r o v i n c i a l government w i l l not allow development i n some areas of the province without connection to TABLE 6.4 (1) Evaluation of Location Factors By Developers of MultiplerFamily Dwellings (Percent of Respondents i n Parentheses) Location Factors Proper Zoning P r i c e of Land Access to T r u n k Sewer A v a i l a b i l i t y of Developable Land Nearness to Schools Size of S i t e • Nearness to. . Major Road Character of Surrounding Area Unimpor-tant (0) 1(2-5) 1( 2.5) 2( 5.0) 2( 5.0) K 2.5) • 2( 5.0) 0( 0.0) 3(7.5) F a i r l y Average Important Impor-tance (1) K 2.5) 2 (5.0) 2( 5.0) 3( 7.5) (2) 4(10.0) 4(10.0) 4(10.0) 8(20.0) 17(42.5) 4(10.0) 10(25.0) 8(20.0) 13(32.5) Ver}' Impor-tance (3) . 15(37.5) 17(42.5) Essen-t i a l (4) 15(37.5) 12(30.0) 6(15.0) 3( 7.5) 16(40.0) 3( 7.5) No Response (9) 4(10.0) 4(10.0) Mean 2(.'5.0) 16(40.0) 14(35.0) 4(10.0) 19(47.5) 8(20.0) 4(10.0) 5(12.5) 5(12.5) 12(30.0) 2( 5.0); 5(12.5) 8(20.0) 6(15.0) 14(35.0) 4(10.0) 5(12.5) 3.17 3.03 3.06 2.78 2.06 2.40 2.23 2.23 Standard Deviation 0.94 0.97 1.09 1.07 0.94 1.01 0.88 1.19 TABLE 6.4 (2) Evaluation of Location Factors By Developers of Single Family Dwellings (Percent of Respondents i n Parentheses) Location Factors Unimpor-' tant F a i r l y Important Average Impor-tance Very Impor-tance Essen-t i a l No Response Mean Standard Deviation (0) CD (2) (3.) (4) (9) Proper Zoning 4( 6. 2) 0( 0.0) 4( 6. 2) 17(26. 2) 35(53. 8) 5( 7. 7) 3. 32 1.08 Pr i c e of Land 3( 4. 6) 0( 0.0) 4( 6. 2) 26(40. 0) 27(41. 5 > 5( 7. 7) 3. 23 0.96 Access to Trunk Sewer 7(10. 8) 2( 3.1) 3( 4. 6) 24(36. 9) 24(36. 9) 5( 7. 7> 2. 93 1.29 A v a i l a b i l i t y of Developable Land 3( 4. 6) 5( 7.7) 5( 7. 7) 36(55. 4) 11(16. 9) 7. 7) 2. 78 1.01 Nearness to Schools 6( 9. 2): .6.2) 14(21. 5) 31(47. 7) 5( 7. 7) 5( 7. 7) 2. 42 1.08 Size of S i t e 13(20. ° > 2( 3.1) 18(27: 7)C 23(35. 4 ) 4 ( 6 . 2) 5( 7. 7) 2. 05 1.25 Nearness to . Major Road 7(10. 8) 11(16.9) 16(24. 6 ) 21(32. 3) 5( 7. 7) 5( 7. 7) 2. 10 1.16 Character of Surrounding Area •7(10. 8) 8(12.3) 19(29. 2) 22(33. 8) 3( 4. 6) 6 ( 9. 2> 2. 10 1.09 TABLE 6.4 (3) Evaluation of Location Factors By Subdividers of Residential Property (Percent of Respondents i n Parentheses) Location Factors Unimpor-. tant (0) F a i r l y Important (1) Average Impor-tance (2) Very . Impor-tance . (3) Essen-t i a l (4) No Response (9) . Mean Standard Deviation Proper Zoning • 1(1.6) 2( 3.2) 7(11.1) 18(28.6) 30(47. 6) 5( 7.9) 3.28 0.93 Pr i c e of Land . 2( 3.2) 1( 1.6) 2( 3.2) 31(49.2) 22(34. 9) 5(7.9) 3.21 0.87 Access to Trunk Sewer • 7(11.1) 4( 6.3) 5( 7.9) 22(34.9) 20(31. 7)- 5( 7.9) 2.76 1,33 A v a i l a b i l i t y of Developable Land 5( 7.9) . 3(4.8) 3( 4.8) 23(36.5) 24(38. 1) 5(7.9) 3.00 1.21 Nearness to Schools Size of S i t e , Nearness to Major Road Character of •Surrounding Area 8(12. 7) 8(12. 7) 21(33. 3) 18(28. 6) 2( 3. 2) 6( 9. 5) 1. 96 10(15. 9) 7(11. 1) 15(23. 8) 23(36. 5) 3( 4. 8 ) 5( 7. 9) 2. 03 8(12. 7) 8(12. 7) 20(31. 7) 17(27. 0) 5( 7. 9) 5( 7. 9) 2. 05 10(15.9) 9(14.3) 16(25.4) 20(31.7) 3( 4.8) 5( 7.9) 1.95 1.09 1.20 1.16 1,19 .Table 6.4(4) _ -Evaluation of Location Factors by A l l Developers (Per cent of Respondents i n Parentheses) Location Factors Unimportant (0) F a i r l y Important (1) Average Importance (2) Very Important (3) No Essential Response (4) (9) Proper Zoning Price of Land A v a i l a b i l i t y of Developable Land Access to Trunk Sewer Size of Site Nearness to Schools Nearness to Major Road Character of Surrounding Area 6( 4.3) 4( 2.9) 14(10.0) 19(13.6) 14(10.0) 14(10.0) 1.6(11.4) 2( 1.4) 2( 1.4) 7( 5.0) 9( 6.4) 5( 3.6) 13( 9.3) 20(14.3) 21(15.0) 20(14.3) 11(7.9) 43(30.7) 67(47.9) 11(7.9) 9(6.4) 63(45.0) 51(36.4) 11(7.9) 8( 5.7) 36(25.7) 42(30.0) 43(30.7) 30(27.1) 53(37.9) 51(36.4) 44(31.4) 41(29.3) 45(32.1) 49(35.0) 11( 7.9) 9( 6.4) 12( 8.6) 7( 5.0) 13( 9.3) . Standard Mean. Deviation 3.26 1.01 3.20 0.88 9( 6.4) 66(47.1) 38(27.1) 1K.7.9) 2.92 1.07 2.91 1.26 2.14 . 1.17 2.08 1.08 9( 6.4) 12( 8.6) 2.08 1.10 8( 5.7) 13(9.3) 2.07 .1.13 VO 50 trunk sewer l i n e s . In addition the imposition of o f f - s i t e s e r v i c i n g charges by many m u n i c i p a l i t i e s i n the province puts the onus on the develo-per to pay for the i n s t a l l a t i o n of sewer l i n e s . This tends to make develo-pers very concerned with the e x i s t i n g l e v e l of services and he w i l l tend to locate i n areas where the e x i s t i n g service i s both adequate and a v a i l a b l e . The remaining four factors contained i n the tables were the only ones that were ascribed an above average l e v e l of importance i n the composite f o r a l l developers. Developers involved i n multiple unit and sing l e unit development were asked i f they planned to change the l o c a t i o n i n which the majority of t h e i r a c t i v i t y took place (questions 2.16 and 3.15). 22.5% of the multiple unit developers and 29.2% of the sing l e unit developers responded p o s i t i v e l y . The factors mentioned most often as being the cause of a change i n l o c a t i o n were the u n a v a i l a b i l i t y of developable land and improved marketability i n a d i f f e r e n t area. 4.2.2 Land A c q u i s i t i o n Behaviour One of the most frequent c r i t i c i s m s of developers r e l a t e s to the supposed speculative gains earned i n the process of developing or redevel-oping land. Proponents of such views point to large increments i n land value and conclude that i t i s the monopoly p r a c t i c e of speculative hoarding of developable land that i s a major contributor i n the p r i c e e s c a l a t i o n of r e s i d e n t i a l housing. For t h i s l i n e of reasoning to stand several conditions must be s a t i s f i e d . F i r s t l y , to have any e f f e c t on p r i c e s , land or housing, developers must hold large quantities of land. Secondly, the land that i s 5 1 held must be d e s i r a b l y located. T h i r d l y , t h i s s u b s t a n t i a l and well located 'bank' of land must be held for a r e l a t i v e l y long period. Let us consider what would happen i f any of the above conditions was v i o l a t e d . The f i r s t case i s very simple; i f the development industry held small quantities of land, i t s a b i l i t y to c o n t r o l prices would be severely hampered, i f not eliminated. Even i f the industry did hold s i g n i f i c a n t quantities of land (which i t does not) the second condition must also be met, a land bank 40 miles north of Nakusp w i l l monopolize l i t t l e anything worth s e l l i n g , since the holdings must be s t r a t e g i c a l l y located or to put i t another way, the holdings must be i n the path of consumer demand. This requirement r a i s e s questions with regard to the a b i l i t y of the industry (which i s notoriously c a p i t a l poor) to finance such c o s t l y undertakings. D i s p e l l i n g the doubts raised by conditions one and two for the moment l e t us now consider the e f f e c t of a v i o l a t i o n of the t h i r d condition. If the above mentioned 'substantial and well-located' bank of land were not held for a considerable period of time (years rather than months), any attempts to drive up the p r i c e of either land or housing would be abortive. C l e a r l y i n the case of durable commodities such as housing, i t i s the extent of consumer demand i n t e r a c t i n g with a supply that i s e s s e n t i a l l y fixed that sets the l e v e l of p r i c e s . The magnitude of the flow of new units does not a f f e c t the p r i c e l e v e l of the stock s i g n i f i c a n t l y i n the short run. Admittedly i n the long run prices would escalate i n response to t h i s hypothetical supply r e s t r i c t i o n , however the long run i n housing i s measured i n years. This implies that speculative hoarders must hold t h e i r 'bank' of land o f f the market f o r a period of years before they can r e a l i z e any increment i n the value of t h e i r holdings due to t h e i r monopolis-t i c a c t i v i t i e s . The opportunity cost of such action does not permit such 52 a c t i v i t i e s to transpire p r o f i t a b l y . This conclusion i s supported by.data pre-sented i n Table 2.39 where i t was shown that a) developers are not holding extensive quantities of land (80% df the respondents had holdings s u f f i c i e n t f or two years of development a c t i v i t y or l e s s ) , b) developers are not h o l -ding land for extensive periods of time (in excess of 80% of the respondents stated that they acquired land 2 years or le s s i n advance of actual need for development). Thus while few would suggest that the development industry i s pur-chasing poorly located land (condition 2) i t would seem that through t h e i r v i o l a t i o n s of the f i r s t and t h i r d conditions necessary for a successful monopolist, the charges of speculative a c t i v i t y a f f e c t i n g the p r i c e l e v e l of either land or housing, may be dismissed. Readers interested i n t h i s topic are directed to Baxter (1975). In an attempt to further investigate the extent of land purchases for 'investment' rather than 'development' purposes developers were asked what percentage of the land they acquired was sold to another developer or inves-tor with no substantial improvements. Two-thirds (66.4%) of the developers surveyed responded that they never engaged i n such a c t i v i t i e s . One-half (47.2%) of those respondents who did engage i n such transactions stated that a l l of t h e i r land sales of t h i s type were the r e s u l t of circumstances unforeseen at the time of a c q u i s i t i o n . Thus 82.25% of the respondents did not engage i n land a c q u i s i t i o n s t r i c t l y f o r 'investment' purposes. Of the 17.75% that were motivated to trade parcels f or investment purposes the majority (63.0%) reported that these transactions accounted for le s s than one-fourth of t h e i r t o t a l land s a l e s . Developers were asked i f they have made changes:'in the s i z e of t h e i r Multiple Unit Developers % of respondents acquiring land in advance of need, by.// of years in advance % of respondents holding land inventories, by # years.of inventory Single Unit Developers % of respondents acquiring land in advance of need, by # of years in advance % of respondents holding land inventories, by // years of inventory Subdividers % of respondents acquiring land in advance of need, by # of years in advance % of respondents holding land inventories, by # years of inventory Total Sample % of respondents acquiring land in advance of need,' by // of years in advance. % of respondents holding land inventories, by // years of inventory TABLE 2.39 Land Acquisition Behaviour Number of Years 1 2 3 4 5 Over 5 47.50 . 25.00 "\ 3.00 0.0 0.0 15.00 37.50 17.50 2.50 5.00 2.50 15.00 33.85 21.54 3.08 3.08 3.09 6.15 41.54 9.23 7.69 1.54 1.54 6.15 25.40 34.92 11.11 3.17 3.17 3.17 25.40 19.05 1.59 1.59 6.35 9.52 33.93 27.38 6.55 2.38 2.38 7.14 34.52 14.88 4.17 2.38 3.57 9.52 54 inventory holdings i n the recent past and i f they foresaw any s i g n i f i c a n t changes i n the future. By and large the number of respondents decreasing (past or future) t h e i r holdings was o f f s e t of by number of respondents expected or having undergone increases. This i s viewed as an i n d i c a t i o n of the normal operation of the market, developers' expectations weighing heavily i n t h e i r decision-making. The f i n a l point to be made i n t h i s section deals with the redevelop-ment of the e x i s t i n g stock. By and large, when r e s i d e n t i a l development occurs i t i s on vacant or a g r i c u l t u r a l land. 23.6% (average of a l l res-pondents involved i n si n g l e and multiple development) reported that i n excess of one-half of t h e i r land purchases were previously occupied by s i n g l e detached housing (37.5% of the multiple unit developers and 18.5% of the si n g l e unit developers) (48.6% of the respondents have not developed on other than a vacant s i t e i n the past three years). Of those who have ca r r i e d out projects on s i t e s that were previously occupied by si n g l e de-tached housing i t was estimated that i n 74.42% of the cases t h i s housing was i n poor condition (18.95% of the condition was stated as being average 4 and i n 6.63%, good). Those cases where development did occur on s i t e s that were previously occupied by s i n g l e detached housing are simply a r e f l e c t i o n of aging of the stock and changes i n the composition of consumer demand that has rendered c e r t a i n portions of the stock economically obsol-escent. Once again, developers are simply responding to demands generated i n the marketplace: demands are such that i n cases of redevelopment the r e s i d u a l value of the property i n question exceeds that c a p i t a l i z e d value of the s i t e i n i t s e x i s t i n g use. Readjustments of t h i s type are only natural as times, tastes and values change. 55 4.2.3 Nature of Financing i n Development Decisions The a v a i l a b i l i t y of financing was regarded by the developers included i n the sample as being the most important factor a f f e c t i n g t h e i r d e c i s i o n to proceed (question 6.3)? While t h i s phenomena was not r e s t r i c t e d to any one geographical area, metropolitan area developers placed more emphasis on the importance than did t h e i r non-metropolitan area counterparts. Table 6.3(2) summarizes the r e l a t i v e importance of financing as i t a f f e c t s the decision to proceed for developers operating i n metropolitan areas and for those operating i n non-metropolitan areas. TABLE 6.3(2) Evaluation of the Importance of the A v a i l a b i l i t y  of Financing i n the Decision to Proceed by Developers  i n Metro and Non-metro Areas by the Percentage of Respondents . F a i r l y Average Very Unim-: Impor- Impor- Impor- Essen- No Standard portant tant ranee tant t i a l Response Mean Deviation Metro Area (°) (D <2) (3) ( 4 ) " , 1.2 5.8 5.8 43.0 40.7 3.5 3.20 0.89 Developers Non-Metro Area ^ 3 5 < 9 3 g 5 ^ ^ Developers A l l Developers* 6.4 5.0 5.0 38.6 39.3 5.7 3.05 1.14 * Includes mixed area developers Although important i n non-metro areas, the a v a i l a b i l i t y of financing i s not viewed as being as c r i t i c a l to the decision to proceed as the a v a i l -a b i l i t y of developable land (mean importance 3.14). This lessened concern with c r e d i t a v a i l a b i l i t y l i k e l y r e s u l t s from C.M.H.C.'s in f u s i o n of mort-gage c r e d i t p r e f e r e n t i a l l y i n non-metro areas ( i e . , areas outside of metro-p o l i t a n V i c t o r i a and Vancouver). This supposition i s reinforced s t r a t i f y i n g 56 the r e s u l t s of question 7.8 (sources of funds) as above. The frequency with which developers u t i l i z e C.M.H.C. funds was s i g n i f i c a n t l y higher i n non-metropolitan areas (a mean frequency of 0.74 compared to 0.49 i n metro-p o l i t a n areas). A second factor l i k e l y playing a part i n the discrepancy between developers operating i n metro and non-metro areas l i e s i n the. heavier degree of i n s t i t u t i o n a l i z a t i o n found i n metropolitan areas. In s p i t e of the fa c t that r e l a t i v e l y high rates of i n t e r e s t , both for producers and consumers, accompanied the decline i n c r e d i t a v a i l a b i l i t y , developers s t i l l regarded loan to value r a t i o n as being the most impor-tant f i n a n c i a l v a r i a b l e when compared to rate of i n t e r e s t , amortization period, term of the loan and degree of p a r t i c i p a t i o n i n cash flow. . The emphasis placed on the importance of loan/value r a t i o s conclusions (as noted by Goldberg)-' again points-to the importance of leverage i n the financing of r e s i d e n t i a l r e a l estate i n conjunction with an awareness of declined a v a i l a b l e c r e d i t reserves. Developers regarded the construction period as being the most c r i t i c a l financing periods, followed by the purchase of land with several of the respondents mentioning d i f f i c u l t i e s they had experienced i n obtaining the necessary financing to cover the construction period. Somewhat more sur-p r i s i n g , e s p e c i a l l y i n l i g h t of increases i n the extent of completed yet unoccupied dwellings both p r o v i n c i a l l y and as represented by developers included i n the sample, was the fa c t that only 8.9% of the respondents r f e l t that the most c r i t i c a l period was the financing of a completed inven-tory of units. The areas of cost minimization most often mentioned by the respondents were that of land costs and land assembly. This may be regarded as being 57 i n d i c a t i v e of the industry's response to a s i t u a t i o n where i t faced increa-sing costs (materials, labour, financing) while the p r i c e of the f i n a l good, housing, remained r e l a t i v e l y constant. The c o l l e c t i v e response of the development industry appears to be to d i r e c t an increased e f f o r t i n 'shopping' for land and consequently apply downward pressure on the land r e s i d u a l . Another cost saving and r i s k lessening device i s the use of options. The use of options for land purchases remained constant r e l a t i v e to the 1972 study; 67% of the respondents reported using options at l e a s t some of the time compared to 70% i n 1972. The use of options does not appear to be greatly affected by geographical l o c a t i o n ; 66% of metropolitan developers, 67% of mixed area developers and 71% of the non-metropolitan area developers reported the use of options. As expected, multiple unit developers had the highest usage of options (80%) while si n g l e family developers had the lowest (60%), a r e f l e c t i o n of the greater degree of un-c e r t a i n t y attached to multiple unit development i n conjunction with higher land values. The option length was almost i n v a r i a b l y greater than 2 months and le s s than a year. Table 7.3 p l o t s the length of the option period by developer type. Multiple unit developers and subdividers tended to have somewhat longer option periods on the average, 145 days compared to 120 days for developers of single family dwellings. Again t h i s i s l i k e l y a r e f l e c t i o n of the increased r i s k involved i n these a c t i v i t i e s r e l a t i v e to the development of si n g l e family dwellings. Three-fourths of the develo-pers reporting the usage of options for land purchases pay for the options i n advance and the option payment was included as part of the f i n a l purchase p r i c e i n almost every case (98.6%). TABLE 7.3  Length of the Option Period Mult. Unit Sing. Unit Sub- T o t a l Developers Developers dividers Sample £ % i % £ 1 £ % No Response 2 6.25 0 0.0 1 2.38 3 2.65 Less than 30 days 0 0.0 0 0.0 0 0.0 0 0.0 31 - 60 days 1 3.13 7 17.95 2 4.76 10 8.85 61 - 90 days 7 21.88 8 20.51 5 11.90 20 17.70 91 - 120 days 4 12.50 4 10.26 10 23.81 18 15.93 121 - 180 days 7 21.88 11 28.21 9 21.43 27 23.89 181 - 270 days 6 18.75 6 15.38 10 23.81 22 19.47 271 - 365 days 3 9.38 2 5.13 3 7.14 8 7.08 Greater than one year 2 6.25 1 2.56 2 4.76 5 4.42 59 Table 7.8 l i s t s the respondents' frequency of u t i l i z a t i o n of various sources of funds. Banks, as i n the 1972 study, are by f a r the most common source of funds, followed by retained earnings and equity funds. Develo-pers' dependence on l i f e insurance companies has declined over the period of time separating the two studies, a r e f l e c t i o n of the decreased a c t i v i t y of t h i s lender i n the r e s i d e n t i a l f i e l d . ^ More s u r p r i s i n g i s the f a c t that the p r o v i n c i a l government was reported as the le a s t common source of funds. 4.2.4 Contacts With Public and Private Agencies As discussed i n the second chapter of t h i s report, the ro l e of the r e s i d e n t i a l developer i s that of an entrepreneur. He responds to the demands of .the marketplace subject to the r e s t r i c t i o n s and regulations im-posed on his a c t i v i t i r e s by various l e v e l s of government and by the actions of c i t i z e n s to proposed projects. Often times h i s decision-making may be swayed by the actions of the residents of the area i n which he plans to develop and l o c a l groups of c i t i z e n s who may have banded together i n order to strengthen t h e i r opposition, or for that matter, to encourage a given type or s i z e of development. Thus the developer i s not free to act s o l e l y i n response to market demands as evidenced by p r i c e , vacancy and other indi c a t o r s but rather to respond to these i n d i c a t o r s i n a fashion that i s acceptable to pa r t i e s other than the eventual consumers of his product. The intent of t h i s section of the report i s to consider factors of t h i s nature (both public and private) that have a bearing on developer d e c i s i o n -making . In response to a question (6.13) as to whether the residents of the area TABLE 7.8 Source of Funds by A l l Developers (Percent of Respondents i n Parentheses) I n s t i t u t i o n s Never Some-times Often Always No Response Mean Deviat I n s t i t u t i o n s Trust Funds, Etc. (0) 76(54.3) (1) 27(19.3) (2) 25(17.9) (3) 90 6.4) (9) 3( 2.1) 0.76 0.97 Insurance Companies 84(60.0) 34(24.3) 15(10.7) 4( 2.9) 3( 2.1) - 0.55 0.80 Banks 10( 7.1) 20(14.3) 55(39.3) 51(36.4) 4( 2.9) 2.09 0.91 CMHC - NHA 86(61.4) 29(20.7) 19(13.6) 2( 1.4) 4( 2.9) 0.56 0.84 Equity- 67(47.9) 28(20.0) i4(10.0) 27(19.3) 4( 2.9) 1.03 1.21 Mortgage Bankders 82(58.6) 23(16.4) 25(17.9) 7( 5.0) 3( 2.1) 0.69 0.95 Partnership Funds 96(68.6) 22(15.7) 15(10.7) 4( 2.9) 3( 2.1) 0.47 0.80 Personal Loans 88(62.9) 26(18.6) 17(12.1) 6( 4.3) 3( 2.1) 0.57 0.87 Retained Earnings 60(42.9) 27(19.3) 20(14.3) 29(20.7) 4( 2.9) 1.15 1.22 Personal Savings 100(71.4) 14(10.0) 13( 9.3) 9( 6.4) 4( 2.9) 0.52 0.96 Syndicated Investors 91(65.0) 23(16.4) 19(13.6) 4( 2.9) 3( 2.1) 0.53 0.84 P r o v i n c i a l Government 117(83.6) 10( 7.1) 6( 4.3) 3( 2.1) 4( 2.9) 0.23 0.63 Other 87(62.1) 0( 0.0) 6( 4.3) 5( 3.6) 42(30.0) 0.28 0.80 61 i n which the developer operates had a bearing on the type of development undertaken, 53% of the respondents answered p o s i t i v e l y . Residents of the immediate area seem to have a greater e f f e c t on multiple developers' d e c i -sion-making (60%) than do residents of the immediate area surrounding si n g l e family projects (46%). This f i n d i n g i s compatible with i n t u i t i o n as m u l t i -ple unit developments would, i n general, be of a larger scale than s i n g l e unit developments and therefore be more v i s a b l e to residents of the area. Also, multiple units are generally developed on assembled land i n populus areas with 'neighbours' a genuine source of concern. A second question of th i s nature confirmed t h i s hypothesis. When asked i f c i t i z e n acceptance of t h e i r projects i s important i n t h e i r decision to proceed over two-thirds of the multiple unit developers responded p o s i t i v e l y compared to 51% of the sin g l e unit developers (question 6.11). The great majority of c i t i z e n input comes i n d i r e c t l y v i a the approval process (87.5%) rather than through d i r e c t discussion with the developer. The growing importance of the a t t i -tudes of the members of the community i s also suggested by the fact that when developers were asked to in d i c a t e the r e l a t i v e importance of a number of factors generally believed to be relevant i n t h e i r decision to proceed, community at t i t u d e toward t h e i r projects ranked as being more important than t r a d i t i o n a l factors such as income and population trends i n the region, rent and vacancy l e v e l s and the l e v e l of competition i n the region (question 6.3). Insofar as the primary expression of the desires of the residents of development areas seems to be through t h e i r input to the approval process i t follows that the focus of attention should now be s h i f t e d to consider the means by which government agencies are having an e f f e c t on developer decision-making and behaviour. „ The importance developers attach to government a t t i t u d e toward t h e i r TABLE 6.3(1) Factors A v a i l a b i l i t y of Financing Rates of Interest Population Trends Regional Income Trends Rent Levels Vacancy Levels A v a i l a b i l i t y of Developable Land Construction Level i n Region Construction Costs Community Attitudes Government Attitudes Other Evaluation of Factors A f f e c t i n g the Decision to Proceed by A l l Developers F a i r l y (Percent of Respondents i n Parentheses) Average Very „ . . . , No Unimnortant ~ J "' ° J E s s e n t i a l F Important Importance Important Response (0) 9( 6.4) 55(39.3) 43(30.7) 6( 4.3) (1) 7( 5.0) (2) 7( 5.0) (3) 54(38.6) (4) 55(39.3) (9) 8( 5.7) 14(10.0) 30(21.4) 44(31.4) 35(25.0) 19(13.6) 26(18.6) 46(32.9) 35(25.0) 17(12.1) 10( 7.1) 8( 5.7) 16(11.4) 33(23.6) 19(13.6) 22(15.7) 38(27.1) 55(39.3) 8( 5.7) 6( 4.3) 9 ( 6.4) 7( 5.0) 44(31.4) 21(15.0) 9 ( 6.4) 8( 5.7) 15(10.7) 21(15.0) 37(26.4) 50(35.7) 9( 6.4) 20(14.3) 19(13.6) 19(13.6) 54(38.6) 20(14.3) Mean 3.05 7( 5.0) 22(15.7) 36(25.7) 54(38.6) 12( 8.6) 9 ( 6.4) 2.32 9( 6.4) 1.95 8( 5.7) 1.87 1.30 1.66 2.93 i( 5.7) 2.13 8( 5.7) 12( 8.6) 26(18.6) 59(42.1) 27(19.3) 8( 5.7) 2.64 8( 5.7) 2.27 18(12.9) 3( 2.1) 16(11.4) 54(38.6) 41(29.3) 8( 5.7) 2.73 58(41.4) 0( 0.0) 3( 2.1) 6( 4.3) 10( 7.1) 63(45.0) 0.83 Standard Deviation 1.14 1.03 1.08 1.10 1.44 1.34 1.06 1.12 1.09 1.31 1.30 1.51 0> rO 63 projects i s indicated i n Table 6:3(1) above. Over two-thirds of the res-pondents regard government a t t i t u d e toward t h e i r projects as being either very important or e s s e n t i a l i n t h e i r decision to proceed. Government att i t u d e placed t h i r d i n importance i n the l i s t of factors contained i n question 6.3, superceded only by the a v a i l a b i l i t y of financing and a v a i l a -b i l i t y of developable land. In gaining the necessary approvals for t h e i r projects, developers come into contact with a wide v a r i e t y of government agencies. Table 6.20 outlines the frequency of some of these contacts. At the fede r a l l e v e l the most contacted agency was C.M.H.C. however contact at the fede r a l l e v e l , including C.M.H.C., was minimal. At the p r o v i n c i a l l e v e l , the Department of Highways and the Land Commission were the most 'popular' agencies, however contact was s t i l l infrequent. The Department of Housing followed the Land Commission i n contact frequency, p r i m a r i l y as a r e s u l t of t h e i r 'tender-call programme'. The great majority of contact came at the l o c a l l e v e l . The most frequently contacted departments were planning, engineering, and permits and licenses followed by c i t y c o u n c i l and the assessment department. Contact with parks and schools was less frequent and; ratepayers associations came at the bottom of the l i s t . Given the current controversy over the r o l e of government i n the r e s i -d e n t i a l development process, developers were asked i f they had experienced any unusual d i f f i c u l t ! e s s i n the course of t h e i r contacts and dealings with the various l e v e l s of government. Over s i x t y per'cent of the respondents (60.7%) f e l t t h i s to be the case. Of those responding p o s i t i v e l y (45% of the multiple unit developers, 44.6% of the singl e unit developers and 87.3% TABLE 6.20 F r e q u e n c y - o f C o n t a c t W i t h Government A g e n c i e s by A l l D e v e l o p e r s ( P e r c e n t of Respondents i n P a r e n t h e s e s ) Never Some-t imes No O f t e n Always Response Mean D e v i a t i o n I n s t i t u t i o n s C . M . H . C . D e p t . o f F i s h e r i e s M i n i s t r y o f T r a n s p o r t D e p t . o f P u b l i c Works N a t i o n a l Harbours Board D e p t . of the Environment Other - F e d e r a l Government P r o v i n c i a l D e p t . o f H o u s i n g D e p t . o f H i g h -ways Land Commission Rentalsman Land Use S e c r e t a r i a t (0) (1) (2) (3) (9) 71(50.7) 42(30.0) 18(12.9) 5( 3.6) 4(2.9) 0.76 0.96 104(74.3) 27(19. 3) 6( 4.3) K 0.7) 2( 1.4) 0.30 0.59 117(83.6) 20(14. 3) K 0.7) 0( 0.0) 2( 1.4) 0.16 0.39 113(80.7) 20(14. 3) 3( 2.1) 2( 1.4) 2( 1.4) 0.23 0.56 125(89.3) 12( 8. 6) K 0.7) 0( 0.0) 2.( 1.4) 0.10 0.33 108(77.1) 22(15. 7) 6( 4.3) 2( 1.4) 2( 1.4) 0.29 0.62 99(70.7) 6( 4. 3) 0( 0.0) 0( 0.0) 35(25.0) 0.06 0.23 86(61.4) 38(27. .1) 10( 7.1) 5( 3.6) K 0.7) 0.53 0.78 50(35.7) 35(25. .0) 29(27.9) 15(10.7) 1( 0.7) 1.14 1.03 66(47.1) 44(31. .4) 21(15.0) 8( 5.7) K 0.7) 0.79 0.90 100(71.4) 25(17, .1) 12( 8.6) 3( 2.1) K 0.7) 0.41 0.74 109(77.9) 19(13 .6) 9( 6.4) 2( 1.4) K 0.7) 0.31 0.66 M u n i c i p a l 93(66. 4) 29(20. 7) 12( 8. 6) 5( 3. 6) 1( 0. 7) 0. 49 0.80 A f f a i r s Other - P r o v . 80(57. 1) 9( 6. 4) 7( 5. 0) 7( 5. 0) 37(26. 4) 0. 43 0.89 Government R e g i o n a l D i s t r i c t 61(43. 6) 20(14. 3) 27(19. 3) 17(12. D 15(10. 7) 1. 00 1.12 C i t y C o u n c i l 37(26. 4) 15(10. 7) 36(25. • 7) 43(30. • 7) 9( 6. 4) 1. 72 1.26 P l a n n i n g D e p t . 4( 2. 9) 5( 3. 6) 22(15. .7) 97(69. 3) 12( 8. 6) 2. 76 0.77 E n g i n e e r i n g D e p t . 7( .5. 0) 5( 3. 6) 22(15. .7) 93(66. •*> 13( 9. 3) 2. 71 0.87 S c h o o l Board 60(42. 9) 49(35. 0) 15(10. .7). 14(10. .0) 2( 1. 4) 0. 90 1.00 P a r k s Board 61(43. .6) 51(36. • 4) 16(11. .4) 11( 7, .9) K 0. 7) 0. ,83 0.92 P u b l i c U t i l i t i e s 36(25. .7) 24(17. 1) 29(20, • 7 > . 45(32, .1) 6( 4. • 3) 1. ,71 1.27 P e r m i t & L i c e n c e 16(11. .4) 11( 7, .9) 38(27, .1) 68(48 .6) 7( 5. • 0) 2. .27 1.07 D e p t . Assessment D e p t . 39(27, .9) 33(23, .6) 29(20, • 7) 36(25 .7) 3( 2. .1) 1. .49 1.19 R a t e p a y e r s 75(53. .6) 40(28, • 6) 14(10 .7) 8( 5 .7) 2( 1, .4) 0, .71 0.93 A s s o c i a t i o n O t h e r - L o c a l 77(55 .0) 2( 1 .4) 3( 2 .9) 3( 2 .1) 54(38, .6) 0, .31 0.89 65 of the subdividers included i n the sample), s i x i n every ten i d e n t i f i e d the/, nature of t h e i r d i f f i c u l t y as ino r d i n a t e l y long delays i n the approval process and/or excessive bureaucracy leading to long delays. Table.2.20 summarizes the developers' responses to these questions. Of p a r t i c u l a r i n t e r e s t i s the f a c t that not one of the respondents made reference to the p r o v i n c i a l government's imposition of rent controls i n response to t h i s question. The reaction of the development industry i s clear however and may be seen from Table 2.13. TABLE 2.13 Tenure of Completions Expressed as a Percentage of Tot a l Completions Mu l t i p l e Units Single Units Rental Strata Co-op Total Rental Owned Total 1974 24.2 74.6 1.2 100.0 4.8 95.2 100.0 1973 42.7 56.5 0.9 100.0 2.1 97.7 100.0 1972 55.8 44.2 0.0 100.0 3.2 96.8 100.0 Average 37.11 62.05 0.84 100.00 3.43 96.57 100.00 Note p a r t i c u l a r l y that the percentage of multiple dwelling units that were under r e n t a l tenure dropped from a high of 55.8% i n 1972 to 42.7% i n 1973 and f i n a l l y to 24.2% i n 1974. From the developers' comments i t appears that the f i r s t drop occurring during 1972 and 1973 i s a r e f l e c t i o n of the industry's uncertainty with regard to the actions of the newly elected N.D.P. government (August 1972) i n conjunction with the e a r l i e r s t i f f e n i n g of landlord tenant regulation by the previous S o c i a l Credit administration. Changes made to the Federal Income Tax act i n 1970 that 66 removed tax shelters seemed to have l e s s of an e f f e c t . The portion of multiple completions that were ulti m a t e l y r e n t a l units displayed an even greater decline i n 1974 r e l a t i v e to 1973. This, according to the majority of developers who commented on the subject, i s a reaction to the imposition of rent controls i n the province. The f a c t that the p r o v i n c i a l government has exempted rentals units coming onto the market for the f i r s t f i v e years of r e n t a l occupancy seems to have l i t t l e bearing on the development i n -dustry's decision-making. Thus while controls of t h i s nature may have l i t t l e e f f e c t on the Overall industry output there i s a s i g n i f i c a n t impact on the tenure composition of the units produced. This i s even more apparent when one considers the fa c t that many of the multiple units i n the 'r e n t a l ' category i n 1974 are the r e s u l t of a poor sales market i n the condominium f i e l d and for that reason not l i k e l y to remain as r e n t a l units f or any s i g n i -f i c a n t period of time. As demand pressures b u i l d the majority of these units w i l l l i k e l y be disposed of to owner-occupiers. Looking now at sources of d i f f i c u l t y with d i f f e r e n t l e v e l s of government (Table 2.20) i t i s apparent that the source of complaint l i e s at the l o c a l l e v e l (82.7%). Toward the end of each interview developers were asked to comment on the l o c a l approval process as i t operated i n the areas i n which they worked. The question was neither p o s i t i v e nor negative, however the responses gathered were far from neutral. Table 6.17 tabulates the responses by developer type. Once again, the overriding concern on the part of developers was the long delays encountered i n the approval process. Over 60% of the developers who responded to the question c i t e d either long delays or a factor contributing to such delays ( i n d e c i s i v e planning objectives, anti-growth p o l i c i e s , excessive bureaucracy, e t c . ) . 7.2% of the developers included i n the study made a 67 TABLE 2.20 Nature of Unusual D i f f i c u l t i e s With Government Mult. Unit Sing. Unit Sub- To t a l Developers Developers d i v i d e r s Sample I I I I i 1 I i • No Response 0 0.0 0 0.0 1 1.82 1 0.98 Long Delay i n Approval Process or i n Issuing 5 27.58 15 51.72 26 47.27 46 45.10 Permits Requirements Change Fre-quently Within Munici- 2 11.11 3 10.34 4 7.27 9 8.82 p a l i t i e s Requirements Vary Widely i n Many M u n i c i p a l i t i e s 2 11.11 0 0.0 0 0.0 2 1.96 A.L.R. - Decreased Amount of Developable Land A v a i l - 0 0.0 2 6.90 3 5.45 5 4.90 able Lack of F L e x i b i l i t y 1 5.56 . 0 0.0 4 7.27 5 4.90 Excessive (Needless) Requirements 0 0.0 2 6.90 2 3.64 4 3.92 16.67 Excessive Bureaucracy 5 2 7 > ? 8 2 I n e f f i c i e n t - Red Tape -Introduction of (Or In-creases in) Impost Fees 1 5.56 0 0.0 3 5.45 4 3.92 Other 2 11.11 5 17.24 2 3.64 9 8.82 Source of D i f f i c u l t y Mult. Unit Sing. Unit Sub-Developers Developers d i v i d e r s // % // % // Federal Government 1 5.26 0 0.0 0 0. 0 P r o v i n c i a l Government 1 5.26 3 10.00 8 14. 55 Regional Government 1 5.26 1 3.33 3 5. 45 Local Government 16 84.21 26 86.67 44 80. 00 Total Sample 1 1 1 1.96 L2 11.54 5 4.81 68 TABLE 6.17 Developers' Comment re Approval Procedure No Response . Long Delay i n Approval Process or i n Issuing Permits Excessive Bureaucracy: Redtape Lack of Uniform • Standards Excessive Requirements Indecisive Planning Objectives Regulations Change Frequently Process Hindered by Vocal S e l f - i n t e r e s t Groups Anti-growth P o l i c i e s I n h i b i t i n g R e s i d e n t i a l Growth Generally Good or Improving Other •Mult. Unit Developers £ 4 4 1 2 3 1 .10.00 Sing. Unit Developers £ % 9 13.85 Sub-d i v i d e r s I 4 % 6.35 15.00 19 29.23 20 31.75 10.00 0 2.5 0 3 10.00 2 10.00 6 10.00 6 5.00 6 7.50 4 3.08 9.23 9.23 T o t a l Sample % 17 10.12 45 26.79 8 20.00 10 15.38 17 26.98 35 20.83 0.0 2 3.17 6 3.57 4.62 0 0.0 4 2.38 6.35 .10 5.95 6.35 14 8.33 3.17 12 7.14 9.23 8 12.70 16 9.52 6.15 2 3.17 9 5.36 69 p o s i t i v e comment with regard to the l o c a l approval procedure, usually that i t was reasonable or improving somewhat. There i s an increasing trend toward the use of Land Use Contracts i n many m u n i c i p a l i t i e s within the province. This i s an a l t e r n a t i v e to more conventional zoning control of land use and consequently represents another form of contact with the l o c a l l e v e l of government through which the developer must f i n d his way. At the time of the present study approximatley one-t h i r d (35.1%) of the respondents had had some experience with Land Use Constracts. Developers appeared to be i n general agreement that operating v i a land use contracts: a) i s more time consuming than conventional rezoning, b) e n t a i l s higher d i r e c t costs than conventional rezoning, (see Table 4.6) c) requires considerable investment p r i o r to approval. To a le s s e r extent they f e l t that land use contracts give r i s e to a greater degree of uncertainty than conventional land use controls. These findings are i n d i r e c t opposition to one of the most commonly stated objec-t i v e s of land use contracts, namely the increase i n the degree of ascertaina-b i l i t y or advance knowledge with which the developer fiaces h i s environment. Respondents tended to disagree with the statement that land use contracts allowed a greater degree of f l e x i b i l i t y , again contradicting one of the supposed advantages of land use contracts. Table 4.9 displays the r e s u l t s of question 4.9 which asked those develo-pers having experience with land use contracts i f there had been any s i g n i -f i c a n t changes i n the terms of conditions contained i n the contracts. Of the 33 developers responding to the question, almost one-third made reference to su b s t a n t i a l increases i n the impost or o f f - s i t e s e r v i c i n g TABLE 4.6 Operating v i a Land Use Contracts: By A l l Developers Using Land Use Contracts (Percent of Respondents i n Parentheses) Strongly Agree (1) Agree (2) I n d i f -ferent (3) Strongly Disagree Disagree (4) (5) No Response (0) Mean Standard Deviation More Time Consumed Higher Direct Costs Greater Uncertainty Considerable Investment Allows More F l e x i b i l i t y 35(68.6) 10(19.6) 2( 3.9) 4( 7.8) 0( 0.0) 0( 0.0) 1.51 0.90 24(47.1) 15(29.4) 7(13.7) 5(9.8) 0(0.0) 0(0.0) 1.86 1.00 22(43.1) 14(27.5) 4( 7.8) 10(19.6) 1( 2.0) 0( 0.0) 2.10 1.22 25(49.0) 13(25.5) 9(17.6) 4( 7.8) 0( 0.0) 0( 0.0) 1.8,4 0.99 7(13.7) 16(31.4) 10(19.6) 11(21.6) 7(13.7) 0( 0.0) 2 . 9 0 1.28 71 charge made. Currently t h i s type of charge ranges upward as high as $2205 g per unit i n one municipality. The second most commonly noted change i n terms and/or conditions was an upgrading of the services and amenities required i n r e s i d e n t i a l developments (24.2%). The imposition of impost fees, increased s e r v i c i n g requirements, donations of land to parks and school boards, the uncertainty involved i n applications f o r rezoning and the lengthy delays encountered i n the approval process a l l have a common e f f e c t on the suppliers of new r e s i d e n t i a l housing. Increases i n the cost of development, whether they stem from d i r e c t charges i n the case of impost or o f f - s i t e s e r v i c i n g charges, or i n d i r e c t l y as i n the case of land dedications or increased financing charges due to long delays w i l l serve to decrease the rate at which new units flow on to the market. 4.2.5 Summary of P r i n c i p a l [ F i n d i n g s The primary objective of t h i s study was to investigate factors a f f e c -t i n g the decision-making process of the suppliers of new r e s i d e n t i a l housing un i t s . The environment i n which developers make t h e i r d a i l y decisions may be regarded as the product of two kinds of input. On the one hand, develo-pers are at the mercy of the marketplace as the p r e v a i l i n g l e v e l of housing pr i c e s (both f o r owner-occupied and r e n t a l units) goes a long way i n the determination of the p r o f i t a b i l i t y of development. Thus a decrease i n demand, a l l other things being equal, w i l l decrease the p r o f i t a b i l i t y of development i n the short run. The economic slowdown that has h i t most of the western world i n the past one and one-half years and the decline i n 72 TABLE 4.9 S i g n i f i c a n t Changes i n Terms and Conditions of Land Use Contracts Mult. Unit Sing. Unit Sub-Developers Developers d i v i d e r s TOTAL £ 1 £ % £ % 1 % Increased Impost Fees 3 37.5 3 27.3 4 28.6 10 30.3 Upgrading Serv. Amen. Required 1 12.5 1 9.1 6 42.9 8 24.2 More R e s t r i c t . Less F l e x i b l e 0 0.0 2 18.2 0 0.0 2 6.1 Longer Delays 0 0.0 2 18.2 0 0.0 2 6.1 Constant Changes 1 12.5 1 9.1 2 14.3 4 12.1 Increased Input Vocal C i t i z e n 1 12.5 0 0.0 1 7.1 2 6.1 Groups Improving Inc. F l e x i b i l i t y 1 12.5 1 9.1 0 0.0 2 6.1 Other 1 12.5 1 9.1 1 7.1 3 9.1 mortgage c r e d i t a v a i l a b i l i t y that accompanied i t , has had i t s e f f e c t on develo-per calculus through i t s impact on the l e v e l of demand for housing services. Given that the factors of production (land, labour, materials, etc.) are 'sticky downwards', the e f f e c t of a decrease i n the l e v e l of market demand i s a decrease i n the p r o f i t a b i l i t y of development and hence a decrease i n 9 the rate of development. At the same time, serious constraints on the a b i l i t y of the develop-ment industry have mounted on the supply side. In contradiction of the f i n d -10 ings of Kaiser and Weiss i n the Greensborough, North Carolina area, develo-pers i n B r i t i s h Columbia appear to regard supply variables as being more c r i t i c a l to t h e i r decision-making than demand determinants. A comparison of the nature of r e a l property markets i n B r i t i s h Columbia and that of 73 Greensborough explains t h i s d i f f e r e n c e i n a t t i t u d e . Greensborough i s characterized by r e l a t i v e l y stable labour and material costs. This environ-ment, i n contrast to that found i n B r i t i s h Columbia, s h i f t s the uncertainty from a concern with input costs (as i n B.C.) to an emphasis on factors a f f e c -ti n g the p r i c e of the f i n a l product. In recent years i n t h i s province the development industry has been reasonably confident that increases i n cost could be 'passed on' the eventual purchaser because the p r i c e l e v e l was r i s i n g s t e a d i l y due to a seemingly unending increase i n the l e v e l of con-sumer demand. Now that t h i s s i t u a t i o n has reversed and demand forces have leveled o f f , developers f i n d that impediments that perviously were l i t t l e more than an annoyance are now s e r i o u s l y hampering the industry's a b i l i t y to respond to market generated demands. In t h i s l i g h t we s h a l l now review the major findings outlined i n d e t a i l e a r l i e r i n t h i s chapter. 1) As noted by Lithwick (1970) and confirmed by Goldberg (1972) and further documented by the present study there i s an increasing shortage of developable urban space. This phenomena i s not r e s t r i c t e d to the larger urban agglomerations but extends even to smaller non-metropolitan areas. For those who take issue with t h i s statement one only has to point to the comparison drawn between the r e l a t i v e importance given factors a f f e c t i n g the decision to proceed. In both metro and non-metro areas the a v a i l a b i l i t y of developable land was viewed as a c r i t i c a l f a ctor, superceded only by the a v a i l a b i l i t y of financing (by developers i n metropolitan areas). Developers require adequately serviced and appropriately zoned land. The a v a i l a b i l i t y of such land goes a long way to temper t h e i r l o c a t i o n d e c i -sion. 2) Developers are p r i m a r i l y involved i n the development of r e s i d e n t i a l property and r e l y on t h i s a c t i v i t y to generate p r o f i t , i n opposition to 74 claims to the contrary that developers are p r i m a r i l y interested i n the a c q u i s i t i o n of land for 'speculative' purposes. The high cost of land i n conjunction with -limited c a p i t a l reserves and high financing costs make land banking an uncertain and high r i s k undertaking. 3) Developers are most concerned with factors a f f e c t i n g t h e i r develop-ment costs and place less emphasis on v a r i a b l e s that a f f e c t the ultimate value of t h e i r product. Of primary importance i n t h i s regard are the r e s i s -tance to growth at the l o c a l government l e v e l as evidenced by stringent s e r v i c i n g requirements - s u b s t a n t i a l o f f - s i t e s e r v i c i n g charges i n some m u n i c i p a l i t i e s long delays i n the approval process - extensive downzoning i n several m u n i c i p a l i t i e s - increased demands for the dedication of land for schools and parks. A l l of the above tend to increase the costs of development and w i l l lead to short run decreases i n the l e v e l of a c t i v i t y i n the r e s i d e n t i a l development sector. Discussion of the long run implications of such trends i s deferred u n t i l Section 5.2 of t h i s report. 4) There has been a marked change i n the tenure composition of the units completed by the sample over the study period. This trend, directed toward the provision of a greater proportion of owned occupied units at the expense of r e n t a l units, became apparent i n 1973 and'Accelerated i n 1974. 75 Notes and References Chapter Four 1. During the administration of the survey i t soon became apparent that the method by which the sample was compiled was biased i n favour of large developers. Due to f i n a n c i a l and time r e s t r i c t i o n s , i t was not possible.to i d e n t i f y and secondly to interview large numbers of small developers. In an e f f o r t to overcome t h i s shortcoming, a second survey was administered to a small sample of subdividers to asce r t a i n the average annual number of dwelling units b u i l t by developers purchasing l o t s from them. I t was found that i n excess of 60% of the l o t s made av a i l a b l e by these subdividers were purchased by small-scale s i n g l e family dwelling developers. Thus the responses of the subdividers to many questions ( i . e . factors a f f e c t i n g the l o c a t i o n decision) may be regarded as an expression of the consumer of the product, the small-scale b u i l d e r . 2. There was a rapid p r i c e e s c a l a t i o n i n r e a l estate markets through the province during the study period. In Vancouver i t i s estimated that average r e a l estate values increased i n excess of 70% during t h i s period. (Real Estate Board of Greater Vancouver, Real Estate Trends 1974-1975, Vancouver, R.E.B.G.V., October 1974, p. A-29. These escalations i n market value l i k e l y represented a strong inducement for e x i s t i n g pro-ducers to expand t h e i r output and for new producers to enter the sector. The primary reaction appears to have been the l a t t e r , an expansion of the number of producers. 7 3. M.A. Goldberg (1972), p. 16. 4. These percentages varied according to s t r u c t u r a l type. Of the s i n g l e -detached units demolished by multiple unit developers, 69.26% was r e -ported i n poor condition; 22.78% i n average condition and 7.96% i n good condition. The corresponding figures for s i n g l e unit demolitions by developers of new s i n g l e unit housing are: 79.39%, poor; 15.25%, average; and 5.36%, good. 5. The responses of the developers included i n the sample i n t h i s section of the report are l i k e l y biased to a c e r t a i n extent by the economic conditions prevalent immediately p r i o r to the administration of the survey. The following quotation summarizes these conditions: Economic growth was v i r t u a l l y zero during both the second and t h i r d quarters of 1974. Year-over-year, the GNP rate of growth i n r e a l terms was 4 per cent. Interest rates rose sharply i n response to o v e r a l l strong demand for funds i n the early part of the year. I n f l a t i o n a r y expectations f u e l l e d by rapid increases i n prices accelerated t h i s upward movement. Monetary p o l i c y was used to restrain:: excessive c r e d i t expansion, instead of tightening c r e d i t 76 conditions severely. The Bank Rate was changed four times during the year. The f i r s t three times, s t a r t i n g i n A p r i l , i t was adjusted upwards, from 7.25 per cent to 9.25 per cent. The narrowly defined money supply (currency and demand de-posits) expanded by about 15 per cent during the f i r s t h a l f of 1974. I t slowed down considerably i n the second hal f when i t expanded only by 5 per cent. Table 2.11(2) below summarizes the p o s i t i o n of the developers included i n the sample with respect to t h e i r inventory holdings of completed yet unoccupied dwellings for the year end of 1974, 1973 and 1972. TABLE 2.11(2) Completed Yet Unoccupied Dwellings at Year End as a Percentage of Tot a l Years' Completions MULTIPLE UNIT SINGLE UNIT DEVELOPERS DEVELOPERS # c/u TOTAL % # c/u TOTAL % // C/U TOTAL % 1974 1092 4452 24.5 255 1455 17. 5 1347 5907 22.8 1973 387 3443 11.2 370 1545 24. 0 757 4988 15.2 1972 242 1752 13.8 42 1406 3. 0 284 3158 9.0 Average 573 3215 17.8 222 1468 15. 1 796 4684 17.0 Note that the prevalence of completed yet unoccupied dwellings at year end more than doubled i n 1974 r e l a t i v e to 1972. One might have expected developers- to have expressed more concern with regard to the financing of a completed inventory of u n i t s , however t h i s does not appear to be of c r i t i c a l concern when compared to the d i f f i c u l -t i e s encountered at the e a r l i e r stages of the development process. 7. The r e s i d e n t i a l mortgage lending a c t i v i t y of L i f e Insurance Companies dropped sharply i n 1974 (from $216,343,000 i n 1973 to $85,921,000 i n 1974, a decrease of 60.2%). Source: CMHC, Canadian Housing S t a t i s t i c s - 1974, p. 31. 8. In March of 1974, impost fees ranged from a low of $300 per unit (single or multiple) i n Port Coquitlam to $1,945 (multiple) and $1,555 -$2,205 (single units) i n the D i s t r i c t M u n i c i p a l i t y of Surrey. Source: G.V.R.D. I n f i l l Study (1974). 9. See Section 5.2, t h i s report. 10. "Our study indicates that ... developer c h a r a c t e r i s t i c s on marketa-b i l i t y and revenue tends to make cost considerations secondary to the developer ... l o c a l public p o l i c y that a f f e c t s revenues tend to have more leverage than p o l i c y that a f f e c t s costs." Kaiser and Weiss (1970). 77 CHAPTER V CONCLUSIONS, IMPLICATIONS, POLICY SUGGESTIONS AND FUTURE RESEARCH  5.1 The Long and Short (run) of I t Throughout t h i s paper a d i s t i n c t i o n has been made between the short run and long run implications of constraining or r e s t r i c t i n g the r e s i -d e n t i a l development industry's a b i l i t y to meet market generated demands. In a broad sense, short run r e s t r i c t i o n s - to the flow of new r e s i d e n t i a l units such as the lengthy delays encountered i n the approval process w i l l be 'ironed out' over a period of time through the market adjustment process. By d e f i n i t i o n , the demand f o r and the supply of, housing services w i l l reach equilibrium i n the long run. Thus i t may seem reasonable to question the concern expressed by many over the r e s t r i c t i o n s currently hampering the industry's a b i l i t y to respond to market pressures. The j u s t i f i c a t i o n for such concern i s two-fold. Although an equilibrium state i s assured i n the long run, the path by which the equilibrium i s reached may be a p a i n f u l one marked by su b s t a n t i a l swings i n the rate of flow. A l t e r n a t i v e l y a more moderate path characterized by incremental change i n an evolutionary process can also be obtained under a d i f f e r e n t set of circumstances. The actions of those involved i n regulating the develop-ment process w i l l have a marked e f f e c t on the nature of the journey to long run equilibrium. An example w i l l prove u s e f u l to i l l u s t r a t e t h i s point. In a mixed economic system, such as that i n Canada and i n the Province of B r i t i s h Columbia, problems a r i s e that would be relevant i n neither a s t r i c t l y 'free' nor a t o t a l l y 'regulated' economy. Consider the e f f e c t of rent con-t r o l s on the decision-making process of the suppliers of r e s i d e n t i a l r e a l 78 estate. Imposing a l i m i t , or f o r that matter, even suggesting the p o s s i -b i l i t y of rent controls can so change expectations as to r e s t r i c t the l e v e l of output of that good. The costs of production may be unaffected. How-ever the p o t e n t i a l return stemming from the development i s made less c e r t a i n . Uncertainty*leads a l l but the t r u l y f o o l i s h to look elsewhere for investment opportunities. The response of the development industry to the threat and eventual imposition of rent controls i n the Province of B.C. i s c l e a r l y indicated by the decreased rate of production of r e n t a l units (see Section: 4.24) and i s consistent with the above reasoning. This reaction would not be possible i n a s t r i c t l y market economy as such controls would never be imposed. In a planned economy, the e f f e c t would not be r e f l e c t e d i n the production sector as a l l output i s the subject of regulation. Controls placed i n one sector would not a f f e c t others as a l l production i s planned i n advance. It i s i n the economic mid-ground that problems a r i s e . The imposition of rent controls has - pushed investors i n the production process away from the provision of r e n t a l u n i t s ; the evidence i s quite c l e a r . I f , at some future date, these controls were to be l i f t e d and subsequent p r i c e adjustments brought t h e ; l e v e l of ! rents i n l i n e with the cost of production of r e n t a l units the flow of new r e n t a l units would return to normal l e v e l s as dictated by the tastes 'and preferences of the time. An alternate and l i k e l y much more reasonable path to have followed to a t t a i n a s i m i l a r end would have been to never have imposed such controls i n the f i r s t place. The end r e s u l t of imposing and removing controls i s much the same end product as never having had imposed the controls i n the f i r s t place. The major differ e n c e being that i n the f i r s t case the production sector i s interrupted by a sharp change * At a given rate of return 79 i n expectations and thus output. In the second case the flow i s of a more orderly nature. A second reason for concern centers on the eventual l e v e l of the long run equilibrium. The l e v e l of housing services a v a i l a b l e i n the long run i s c l e a r l y a function of' short run decisions taken to reach the future. I f , f o r example, r e s t r i c t i o n s were placed on the rate at which new housing units were added to the stock and these r e s t r i c t i o n s were maintained for a considerable period i t i s quite l i k e l y that the ultimate l e v e l of ser-vices at the long run equilibrium supply of housing services would be lower than i t otherwise would have been. Although equilibrium i s assured i n the long run, we have no notion of the q u a l i t a t i v e aspects of that equilibrium; to say that demand w i l l equal supply and leave i t at that i s to ignore the l e v e l of services a v a i l a b l e at that time :ana therefore: s o c i e t a l -welfare. Equilibrium may be achieved at considerably d i f f e r e n t l e v e l s of housing supply and q u a l i t y . 5.2 Implications of Current Trends With Respect to The Supply of New  R e s i d e n t i a l Housing The trend toward increasing impediments to the supply of new housing has serious implications i n both the short and the long run. The deter-minants of the l e v e l of flow or rate at which new units are added to the stock were discussed i n Section 2.3 of t h i s report. It was pointed out that increases i n the costs of development, whether the r e s u l t of increasing s e r v i c i n g charges, delays or dedications of land have a s i m i l a r e f f e c t on the short run p r o f i t a b i l i t y of development. As a r e s u l t the rate at which r e s i d e n t i a l development occurs w i l l decrease u n t i l such time as e i t h e r the 80 cost of one or more of the factors of production has declined or the l e v e l of market demand has increased to r e i n s t a t e the previous l e v e l of p r o f i t a -b i l i t y . For the moment, assume that the l e v e l of consumer demand remained constant over the period of adjustment that followed an increase i n the costs of development. In the case of the i n d i v i d u a l developer, the r e s i d u a l amount l e f t a f t e r he had subtracted the costs of development (labour, materials, financing charges and expected p r o f i t ) from h i s estimate of the value of the completed project would be lower than otherwise would have been the case. I f the decline was such that l i t t l e or no land could be acquired at t h i s newly calculated land r e s i d u a l then the developer would be l e f t with two a l t e r n a t i v e s . F i r s t l y , he could lower h i s p r o f i t expecta-tions and, i f the increase i n development cost did not exceed the amount of p r o f i t he was w i l l i n g to forego, he could carry on i n h i s development a c t i v i t i e s . The r e s i d e n t i a l development industry i s , however, very compe-t i t i v e as evidenced by the large number of participants."'" I t i s not l i k e l y that many developers would be i n a p o s i t i o n to s i g n i f i c a n t l y reduce the expected rate of return as alternate investment opportunities, within the r e a l estate industry or outside i t , would soon become more a t t r a c t i v e . The second a l t e r n a t i v e would be to reduce the maximum bid p r i c e for developable land. However, due to the resistance on the part of land holders to reduce t h e i r expectations, i t i s l i k e l y that l i t t l e or no; land may be immediately forthcoming at the new developers 1 lower bid p r i c e . Thus the immediate e f f e c t s of increases i n the costs of development are r e f l e c t e d i n the rate of production. As time passes the c o l l e c t i v e response of a l l developers affected by 81 the cost Increase w i l l be to put downward pressure oh land prices through lower bids for land. It i s c r i t i c a l to keep i n mind that the r e s i d e n t i a l submarket represents only one of many alternate and competing land uses and investors. Measures that r e s u l t i n cost increases i n the r e s i d e n t i a l sector may not n e c e s s a r i l y be, at the same time, directed at those involved i n u t i l i z i n g scarce urban land for alternate uses. Much of the l e g i s l a t i o n and many of the constraints currently at work i n the marketplace are s p e c i f i c to r e s i d e n t i a l development. As such, they do not hamper the a c t i v i t i e s or maximum bid p r i c e of alternate users of land. Thus any measures that serve to r a i s e the development costs of one s p e c i f i c user of the a v a i l a b l e supply of urban space may act so as to give a competitive edge to users i n other sectors. Consider for the moment the following example. If the costs of devel-opment of new r e s i d e n t i a l r e a l estate are raised through an increase i n the o f f - s i t e s e r v i c i n g charge l e v i e d i n a given property market the immedi-ate e f f e c t w i l l be to lower the developer's maximum bid p r i c e for raw land. As mentioned e a r l i e r , i t i s u n l i k e l y that landlowners w i l l re-evaluate t h e i r expectations i n the short run and as a r e s u l t the short run rate of r e s i -d e n t i a l b u i l d i n g a c t i v i t y w i l l l i k e l y decline from what i t otherwise would have been. In addition, the rate of flow may also be retarded i n the longer run i f t h i s decreased a b i l i t y to pay places the r e s i d e n t i a l developers' maximum bid p r i c e below that of h i s nearest competitor for land. In a s i m i l a r vein, we must recognize that land represents a r e l a - . t i v e l y small portion of the o v e r a l l costs of r e s i d e n t i a l development. It may well come to be that the constraints and charges l e v i e d against the r e s i d e n t i a l development sector w i l l reduce t h e i r a b i l i t y to .pay for raw land to a point where the maximum bid p r i c e i s zero or negative. C l e a r l y 82 increases i n the cost of development stemming from the delays and con-s t r a i n t s directed s p e c i f i c a l l y at the r e s i d e n t i a l sector "(primarily by the l o c a l government l e v e l ) have already s i g n i f i c a n t l y affected the scale and form of the urban landscape. This phenomena i s displayed g r a p h i c a l l y i n Figure 5.2.1. As discussed i n Chapter 2 of t h i s report, the average p r i c e of dwelling units i s set by the i n t e r a c t i o n of consumer demand with a supply (both i n terms of q u a l i t y and quantity) of housing units that i s e s s e n t i a l l y f i x e d 2 i n the short run (Figure 5.2.1(a)). Given t h i s market determined l e v e l of prices and the p r e v a i l i n g cost structure (Figure 5.2.1(b), case (1)), developers respond by adding units to the stock. If however, impost fees are l e v i e d , the cost structure and consequently the rate at which new units are added to the stock, change. Each of the factors of production may be viewed as competing for as large a share as possible of the f i n a l value of the development. Thus the landowner desires to capture as much as he can for his property, labour i s demanding i t s f a i r share, the sup-p l i e r s of b u i l d i n g materials would l i k e to see t h e i r p r o f i t p i c t ure improve and s i m i l a r l y the f i n a n c i a l backers of a given undertaking seek the maxi-mum return possible. The developer estimates the most probable s e l l i n g p r i c e of the units he i s considering developing, and, i f s u f f i c i e n t p r o f i t remains a f t e r the costs of development are subtracted, he w i l l respond by undertaking the project. If however, the costs of development are such that the desired p r o f i t i s 'squeezed' above the p r i c e at which the unit w i l l l i k e l y s e l l by increases i n the costs of development (as i n Figure 2.5.1(b), with the addition of an impost fee) the developer w i l l c u r t a i l or cease production. The aggregate response of a l l developers i s represented Figure 5.2.1 Residential Impost Fees and The Flow of New Units (one period) Average p r i c e per unit p. I — Industry Cost Structure PROFIT PROFIT LABOUR - - I - PROFIT LABOUR MATERIALS-. LABOUR. MATF.RT AT.S FINANCING' MATERIALS FINANCING OVERHEAD FINANCING OVERHEAD IMPOST FEE OVERHEAD LAND LAND IMPOST FEE LAND Avai l a b l e Supply C a s e l Case 2 Case 3 Figure 5.2.1(a) Figure 5.2.1(b) Industry Cost Structure Figure 5.2.1(c) Flow of New Units 84 by the s h i f t of the marginal cost curve i n Figure 5.2.1(c). Thus the e f f e c t of 'squeezing' the developers' p r o f i t with increases i n the cost of development i s to cause the marginal cost curve to s h i f t from MC^ to MC^  and consequently to reduce the rate at which new units are added to the stock (from to Q^). Given that a l l developers i n the affected submarket are facing the same cost increase and subsequent p r o f i t 'squeeze', the r e s u l t w i l l be downward pressure on the land r e s i d u a l . The a b i l i t y to pay i s reduced and the eventual response w i l l be decreased r e s i d e n t i a l land values (Figure 5.2.1(c)). This w i l l i n turn cause the industry's marginal cost curve to s h i f t back from MC^ * i n the d i r e c t i o n of MC^. The flow of new units w i l l tend toward pre-impost l e v e l s . The c r i t i c a l consideration at t h i s point i s changes i n the r e l a t i v e a b i l i t y of competing land users to pay for developable land. If the new l e v e l of the r e s i d e n t i a l use land r e s i d u a l has f a l l e n below that of the next lower alternate use, the r i g h t -ward return of the marginal cost curve w i l l be impeded and production may not, even over a period of time, recover from the imposition of the cost increase. This event i s becoming i n c r e a s i n g l y l i k e l y , p a r t i c u l a r l y i n l i g h t of the present and projected future rate of e s c a l a t i o n of r e s i d u a l a g r i c u l t u r a l land values. A g r i c u l t u r a l uses may, given current cost i n -creases directed s p e c i f i c a l l y at the r e s i d e n t i a l submarket, soon be i n a p o s i t i o n to outbid developers of r e s i d e n t i a l r e a l property for the f i g h t to u t i l i z e land currently considered s u i t a b l e for urban purposes. The extent to which t h i s occurs as a r e s u l t of constraints placed ori the r e s i -d e n t i a l sector by government regulation and not the a l l o c a t i v e function of the market i s a cause f o r concern. It i s the actions of those involved i n the provision of new housing 85 services i n the present that w i l l determine f i r s t l y the ease with which the long run equilibrium state i s achieved and secondly the l e v e l of services a v a i l a b l e at that time. We should devote our attention to r e c t i f y i n g , as far as i s possible, the constraints directed s p e c i f i c a l l y at the r e s i d e n t i a l development sector and the imperfections present i n the market at t h i s time. 3 As Keynes once sai d , 'In the long run we are a l l dead'. 5.3 P o l i c y Suggestions This f i n a l section contains a number of p o l i c y suggestions based on the conclusions drawn e a r l i e r i n t h i s report with respect to the factors a f f e c t i n g the r e s i d e n t i a l developers' decision-making process. It i s hoped that the suggestions included i n the following pages may lead to a d i f f e r -ent sort of regulation of the r e s i d e n t i a l development sector and subse-quently to an improved l e v e l of housing services. Insofar as i s possible, p o l i c y suggestions i n t h i s f i n a l section are a p o l i t i c a l . Emphasis i s placed on procedures that may help to remove some of the market: .imperfections that impede the a b i l i t y of the r e s i d e n t i a l development industry to respond to changing market conditions. At the same time, i t i s recognized that many of the issues touched upon i n t h i s report are of a p o l i t i c a l nature and t h e i r r e s o l u t i o n i s best l e f t i n the p o l i t i -c a l processes. Thus given our current understanding of the r e s i d e n t i a l developer's decision-making process we s h a l l now turn to a consideration of what hopefully represents useful p o l i c y suggestions. 5.3.1 P o l i c y at the Federal and P r o v i n c i a l Level The f e d e r a l government's r o l e i n molding the conditions that a f f e c t 86 r e s i d e n t i a l developer behaviour on a micro-economic l e v e l are not exten-sive. However a few comments seem to be i n order. Federal government agencies are involved i n a s s i s t i n g the s e r v i c i n g of our urban communities. Such assistance should be encouraged and expanded. This w i l l hopefully lead to an expansion of the amount of developable land a v a i l a b l e (munici-p a l i t i e s w i l l i n g ) . This involvement could be extended to include some sort of cost sharing of ongoing expenses (current and maintenance co s t s ) , as well as c a p i t a l expenditures, thus reducing some of the f i n a n c i a l s t r a i n that i s currently placed on local'governments. Of primary importance at the p r o v i n c i a l l e v e l i s a r e v i s i o n of the sections of the Municipal Act pertaining to r e a l property development, with p a r t i c u l a r reference to a standardization of the approval procedure. At present t h i s r e s p o n s i b i l i t y has been delegated to the i n d i v i d u a l muni-c i p a l i t i e s with the r e s u l t that developers encounter widely d i f f e r e n t regu-l a t i o n s and procedures i n d i f f e r e n t m u n i c i p a l i t i e s . Secondly, provision should be made for a common appeal procedure with respect to decisions r e -garding approvals, eliminating the wide range of procedures and f i l l i n g the void i n m u n i c i p a l i t i e s where no such procedures e x i s t . Given the s i g n i -f i c a n t degree of contact that the r e s i d e n t i a l development industry has at the p r o v i n c i a l l e v e l ( p a r t i c u l a r l y with the Department of Highways and the Land Commission) a worthwhile change may be a p r o v i n c i a l approval o f f i c e r ' . This would cut down on the d i v e r s i t y of contacts required f o r the residen-t i a l development process and quite l i k e l y eliminate many of the f r u s t r a t i o n s many developers currently encounter with respect to 'prior' approval ( i . e . two government departments both i n s i s t i n g that the developer obtain the required permission from the other department before considering an approval request i n t h e i r own department). 87 In addition, f i n i t e deadlines for decision regarding both approvals and approval appeals should be established by regulation i n the Municipal Act. Much of the uncertainty the developer faces i s the r e s u l t of long delays during which he finds h i s c a p i t a l and human resources committed yet he i s unable to asc e r t a i n the l i k e l i h o o d of development:permission.j Ques-tions r e l a t i n g to l o c a l autonomy and growth/no growth p o l i c y would be un-changed, but the degree of c e r t a i n t y with which the developer faces the world would be greatly increased. The l a s t points to be made here concern m u n i c i p a l i t i e s ' willingness to accommodate new residents. At the present time many municipalities, i n the province are extracting an impost fee from the r e s i d e n t i a l developer i n order to recover the marginal cost associated with the addition of housing units for i n f r a s t r u c t u r e upgrading and ongoing maintenance. Given the e f f e c t of such measures on the rate of new housing s t a r t s t h i s issue i s p a r t i c u l a r l y important. Much of the controversy surrounding municipal resistence to r e s i d e n t i a l growth could be removed by r e v i s i n g the per capita" grant system employed i n the province. Increases i n the absolute amount of the grant to any one municipality could be t i e d to the marginal cost associated with the projected increase i n population and households i n the following period. Discrepancies a r i s i n g from i n c o r r e c t projections could be accounted for i n the d i s t r i b u t i o n of the grant i n the next period or as ac t u a l data become;- a v a i l a b l e . The implementation of a measure such as t h i s would eliminate many of the problems i n municipalities[which "are " r e s t r i c -t i n g r e s i d e n t i a l growth for f i n a n c i a l reasons. Those m u n i c i p a l i t i e s i n -h i b i t i n g r e s i d e n t i a l growth for reasons other than i n s u f f i c i e n t f i n a n c i a l c a p a b i l i t y would be placed i n a p o s i t i o n where they would have to defend 88 t h e i r d ecision for whatever the cause. Much of the doubt that surrounds the causes of municipal resistance to r e s i d e n t i a l growth would be e l i m i n -ated and as a r e s u l t the p o l i t i c a l decision-making process would be en-hanced with more perfect information upon which r a t i o n a l p o l i t i c a l d e c i -sions could be made. F i n a l l y , the p r o v i n c i a l government should be encouraged to engage i n discussions with both the f e d e r a l and regional l e v e l s of government with regard to cost sharing (both c a p i t a l and ongoing maintenance) associated with the p r o v i s i o n of public works, i n f r a s t r u c t u r e and r e l a t e d transporta-t i o n f a c i l i t i e s . 5.3.2 Housing P o l i c y and the Local Level Government Whatever the nature of the changes that occur at the f e d e r a l and pro-v i n c i a l l e v e l , i t w i l l be the l o c a l l e v e l of government that decides i t s ' future. A l l that can r e a l i s t i c a l l y be done i n a report such as t h i s i s to point to the implications of various p o l i c y alternates. If the p o l i t i c a l process at the l o c a l l e v e l deems i t appropriate that the flow of new housing units flowing on to the market s h a l l be l e s s than what the market would d i c t a t e , i t s h a l l be so. This i s the nature of our democratic system. Independent of p r o v i n c i a l l e g i s l a t i o n , m u n i c i p a l i t i e s w i l l , by and large, be free to determine t h e i r own fates by means of t h e i r degree of stringency with which regulations are interpreted and the nature of the l o c a l regulations they choose to augment the p r o v i n c i a l l e g i s l a t i o n . Thus i f r e s t r i c t i n g the rate of new r e s i d e n t i a l development i n a given l o c a l e represents a v i a b l e p o l i t i c a l a l t e r n a t i v e despite the f a c t that the ultimate r e s u l t w i l l be a decreased a v a i l a b i l i t y and an increased cost of 89 housing services then the future trends i n the approval process are c l e a r . Increasing impost fees, requiring extensive on-site s e r v i c i n g and elabor-ate amenities and s i m i l a r measures appear to be highly successful modifiers of the r e s i d e n t i a l developers' enthusiasm to undertake development. I f , on the other hand, l o c a l governments d e c i d e , i t would be i n t h e i r best i n t e r e s t s (and therefore,in the best i n t e r e s t s of t h e i r constituents) to f a c i l i t a t e the rate at which housing units are added to the e x i s t i n g stock then once again, the road to follow i s c l e a r . Developers require adequate suppliers of appropriately zoned and serviced urban space (t h i s may be accomplished e i t h e r h o r i z o n t a l l y or v e r t i c a l l y ) and a cost s t r u c -ture such that a p r o f i t s u f f i c i e n t to j u s t i f y involvement i s a v a i l a b l e . The simplest manner i n which t h i s can be achieved i s to reduce the l e v e l of uncertainty with which the developer faces h i s environment. Co-opera-t i o n with other municipal and regional l e v e l s of government i n the planning process and growth sharing would go a long way i n t h i s regard. Excessive or u n j u s t i f i e d increases i n the costs of development stemming from a r b i t r a r y regulation should be avoided, p a r t i c u l a r l y where there i s a p o s s i b i l i t y that the r e s i d e n t i a l developer's a b i l i t y to pay for developable space w i l l f a l l below that generated by an alternate use. These s h i f t s should be the r e s u l t of market generated desires rather than unnecessarily i n -f l e x i b l e planning regulation, or regulation aimed s p e c i f i c a l l y at the r e s i d e n t i a l sector. In the f i n a l analysis the fate of the industry i s i n the hands of the a residents of the province. The decisions of the voting public w i l l deter-mine the extent to which development i s permitted to proceed. The best we can hope to do at t h i s time i s to introduce information that w i l l i n -9 0 crease the knowledge with which these decisions are made and ensure that the implications of alternate p o l i c i e s a f f e c t i n g growth and development are made known. 5.4 Future Research Developer decision-making appears to be highly dependent on the conditions prevalent at the time decisions are made. As such, changes i n the environment i n which the developer operates may be over-represented i n t h e i r responses r e l a t i n g to the importance of various factors a f f e c t i n g t h e i r decisions at any given*time. The present study was aided i n t h i s respect by the existence of the 1972 Developer Survey (Goldberg, 1972) i n that continuing trends could be i s o l a t e d from t r a n s i t o r y changes ascribed importance at the time the survey was undertaken. As was noted i n the introduction to t h i s report, i t i s only through an understanding of the decision-making process of the i n d i v i d u a l developer that we can ever hope to understand the complex process by which urban settlements evolve. In order to implement e f f e c t i v e p o l i c y with a minimum of unexpected side e f f e c t s one must f i r s t understand the nature of the underlying mechanisms at work. To the extent that t h i s report has c l a r i -f i e d the l e v e l of understanding with regard to these mechanisms and spurred further i n t e r e s t i n the subject, i t has served i t s purpose. Appendix 3 contains a few notes directed to persons who may at some time .in the future conduct s i m i l a r work and l i s t s suggested changes to the format and content of the questionnaire based on the experience gained as the present study was undertaken. 91 Notes and References Chapter Five 1. Unfortunately (for the purposes of analysis) there i s no record of the number of developers operating i n the province. In preparing the l i s t of developers to be included i n the sample i t soon became apparent that a large number of firms are involved. Total a c t i v i t y i s estimated to be greater than 1200 i n d i v i d u a l firms and l i k e l y considerably higher. 2. S t r i c t l y speaking, the supply curve i n Figure 5.2.1(a) should r e f l e c t the 'flow' that occurs over the period under consideration i n addition to the 'stock' at the beginning of the period. See Section 2.4. 3. As quoted i n G. Bannock et. a l . , A Dictionary of Economics, Harmonds-worth, Middlesex, 1973, p. 261. 92 BIBLIOGRAPHY Baxter, David, Speculation in Land, Urban Land Economics Report No. 7, Vancouver, Faculty of Commerce and Business Administration, University of British Columbia, 1974. Clawson, Marion, Surburban Land Conversion in the United States: An Econo-mic and Governmental Process, Baltimore, John Hopkins Press, 1971 -Dale-Johnson, David, Housing Policy, Tenure Choice, and the Demand for Housing in Greater Vancouver, Unpublished M.Sc. Thesis, Vancouver, Faculty of Commerce and Business Administration, University of British Columbia, January 1975. Eichler, E.and Kaplan, M. , The Community Builders, Berkeley, University of California Press, 1967. Foote, N.N., ec. al.. (Eds.) Housing Choices and Housing Constraints, New York, McGraw-Hill Book Company, 1960. . 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Smith, W.F., Housing: The S o c i a l and Economic Elements, Berkeley and Los Angeles, U n i v e r s i t y of C a l i f o r n i a Press, 1970. Urban Development I n s t i t u t e , Submission to the Province of B r i t i s h Columbia, Vancouver, Urban Development I n s t i t u t e , P a c i f i c Region, November 1974. Weimer, A., .Hittoyt, R. and Bloom, G. , P.eal Estate, 6th ed., New York, Ronald Press Company, 1972. Wendt, P.F. ana Cerf, A., Real Estate Investment A n a l y s i s and Taxation, New York, McGraw-Hill.Book Company, 1968. Wyatt, G.L. and Winger, A.R., "R e s i d e n t i a l Construction, Mover O r i g i n and Urban Farm:, Regional Studies, (5), 1971, pp. 95-99. Young, G.A., The Municipal Subdivision Process i n Metropolitan Vancouver, Unpublished M.Sc. Thesis, Vancouver, Faculty of Commerce and Business Administration, U n i v e r s i t y of B r i t i s h Columbia, A p r i l 1974. Appendix 1 - The 1972 Developer Survey 96 Housing Developer Questionnaire We are currently engaged in a large scale study of housing in the Greater Vancouver Region. We are seeking information from developers in order to establish housing development patterns. Your help i s greatly appreciated and your answers w i l l be kept s t r i c t l y confidential. 1-4 How long has your company been involved in real estate development? (number of years) Is i t a subsidiary of a larger company? (1) Yes 20.6 (2) No '79.4 If so, what industry i s the parent company associated with? 5-6 (1) Lumber and Wood Products 15.5% 8 (2) Construction 15.5% (3) Real Estate 31% (4) Transportation x 0 (5) Agriculture and Fisheries 0 (6) Other (please specify) (Finance and Investment) 38% 4 . How many inside employees do you have? (management, office staff, secretarial help etc.) 9-11 5. How many outside employees do you have? (salesmen, construction workers, etc.) 6. Which facets of development do you engage in? 12-14 A. Site Selection (1) Yes 91% B. Site Planning (2) No 9% (1) Yes 91% Construction (2) No 9% C. (1) Yes 74.5% D. Selling and Leasing (2) No 25.5% (1) Yes 92% Property Management (2) No 8% E . (1) Yes 54% (2) No 44% 15 16 17 18 19 Do you do subdivisions alone without constructing housins yourself? 5 ( 1 ) Yes 4 3 % ( 2 ) No 5 7 % 20 Do you buy l o t s from subdividers? (1) Yes 47.5 (2) No 52.5 Do you construct housing yourself? (1) Yes 65% (2) No 35% If so, do you also do contract building? (0) 15.7 (1) Yes 44.5 (2) No 39.8 How much i n advance of construction do you usually acquire land? (number of years) How many years inventory of land do you o r d i n a r i l y hold at one time? How many multiple family housing units w i l l your company make av a i l a b l e by the end of 1972? How many were made av a i l a b l e i n 1971? . How many i n 19 70? In which municipality did you locate the majority of these multiple family units. i n 1972 i n 1971 i n 1970 ( w r i t e In name t o be coded l a t e r ) How many s i n g l e f a m i l y u n i t s w i l l y our companv make a v a i l a b l e i n 1972? " How many were made a v a i l a b l e i n 19 71? How many i n 1970? 20. 21. i n 19 72 i n 1971 ~ 49* i n 1970 50 51 ( w r i t e i n name to be coded l a t e r ) (This q u e stion i s a p p l i c a b l e to those who are i n sub-d i v i s i o n o n l y ) . How many l o t s w i l l you make a v a i l a b l e by the end of-.1972? 52-54 How many were made a v a i l a b l e i n 19 71? . 55-57 How many i n 1970? In which m u n i c i p a l i t y were most of these l o t s l o c a t e d i n 1972 58-60 i n 1971 • \. 6T 62 i n 19 70 ; 63 ( w r i t e i n name to be coded l a t e r ) I I . The next set of questions deal w i t h the development process and the l o c a t i o n d e c i s i o n . 1. ( I n t e r v i e w e r : hand respondent card B and record response) This i s a l i s t of va r i o u s stages i n the development process. Would you please p l a c e the stages i n the order you t h i n k .appropriate. A. Arranging Financing 64 B. Choosing type of development 65 C. Choosing s i z e of development _66 D. Choosing a s i t e 67 E. Choosing a c o n t r a c t o r . . . . 68 F. Choosing a neighborhood _ 6 9 G. G e t t i n g zoning changed ( i f needed) 70 H. G e t t i n g b u i l d i n g permit. 71 I . Other (please s p e c i f y ) 99 I w i l l read you a l i s t of f a c t o r s which r e l a t e d to your d e c i s i o n of whether or not to b u i l d . Would you please f e l l me f o r each f a c t o r whether i t i s (0) Unimportant (1) F a i r l y important (2) of average Importance (3) Very Important o r (4) E s s e n t i a l ( I n t e r v i e w e r : please i n d i c a t e response) 1-4 A. A v a i l a b i l i t y of f i n a n c i n g 5 B. I n t e r e s t r a t e 6 C. P o p u l a t i o n trends 7 Income trends In the region ' 8 E. Rent l e v e l s - 9 F. Vacancy rates : 10 G. A v a i l a b i l i t y of developable land _J-1 H. L e v e l of C o n s t r u c t i o n i n the region 12 I. C o n s t r u c t i o n Costs D M Do you u s u a l l y plan a p r o j e c t and then search f o r a s i t e w i t h q u a l i t i e s s u i t a b l e f o r that p r o j e c t (1) OR do you 27 u s u a l l y j u s t look f o r a "good buy" and p l a n a p r o j e c t f o r that s i t e (2)? ( I n t e r v i e w e r : i n d i c a t e response as e i t h e r 1 or 2). 1) 34.94 2) 53.97 . 3) (1 & 2) 7.94 4) Blank 3.17 13 I w i l l now read you a l i s t of f a c t o r s g e n e r a l l y considered important i n the l o c a t i o n or s i t e s e l e c t i o n d e c i s i o n . Would you i n d i c a t e r e l a t i v e importance of each i n the same manner as before A. A v a i l a b i l i t y of developable land 14 B. Room f o r expansion 15 C. P r i c e of land . . 16 D. S i z e of s i t e ...' 17 E. Nearness to major roads 18 F. Nearness to bus routes 19 G. Nearness to major shopping areas . 20. H. Nearness to schools • 21 I. Nearness to employment 22 J . Slope of s i t e 23 K. H o l d i n g q u a l i t i e s of the s o i l 24 L. Access to trunk sewer _25 Proper zoning 26 1 0 0 7. Do you u s u a l l y choose s i t e s w i t h a p a r t i c u l a r economic or s o c i a l group i n mind? Does the s i t e u s u a l l y d i c t a t e the p r i c e range of the housing? Do you u s u a l l y l o c a t e near (1) or avoid l o c a t i n g near (2) other new housing developments? ( I n t e r v i e w e r : i n d i c a t e (1) yes, (2) no) 2. Which of these types do you p r e f e r ? ' ;•. (1) S i n g l e f a m i l y houses (2) Garden apartments and/or•condominiums (3) Row housing (4) Low-rise m u l t i p l e (5) H i g h - r i s e m u l t i p l e 3. Which types are you l i k e l y to b u i l d i n the f u t u r e (1) S i n g l e family houses (2) Garden apartment and/or condominiums (3) Row housing (4) Low-rise m u l t i p l e ( I n t e r v i e w e r : i n d i c a t e ( 1 ) yes, (2) no) Have you found any m u n i c i p a l or l e g a l c o n s t r a i n t s against the type of housing you have b u i l t i n the past? ( 1 ) yes 3 6 . 5 1 (2) no 5 5 . 5 6 (0) 7.94 28 29 30 8. Do you u s u a l l y l e a d or f o l l o w other developments i n making housing a v a i l a b l e i n new areas? (0) Blank 6.35 31 (1) le a d 47.62 (2) f o l l o w 44.44 (3) 1 & 2 1.59 I I I . The s e c t i o n deals w i t h the type of housing constructed. 1. Which housing types has your company developed? A. S i n g l e f a m i l y houses B. Garden Apartments and/or Condominiums C. Row housing D. Low-rise m u l t i p l e 32 "33 34 E. H i g h - r i s e m u l t i p l e * — 3 5 36 37 38 ~39 40 ( 5 ) H i g h - r i s e m u l t i p l e • 42 43 101 5. If yes, please specify (a) type of constraint 44 (1) b u i l d i n g code r e s t r i c t i o n s ( 2 ) d i f f i c u l t y i n obtaining b u i l d i n g permit (3) zoning r e s t r i c t i o n s (4) other (please specify) (b) type of housing 45 (1) Single family houses (2) Garden Apartment and/or Condominiums (3) Row housing (4) Low-rise multiple (5) High-rise multiple (c) municipality '  (to be coded l a t e r ) 46 6.. If yes, has t h i s been a deterent to b u i l d i n g more of these units i n the future? . \ 47 (1) Yes 36.51 ( 2 ) No 55.56 ( 0 ) 7.94 7. (Interviewer: hand respondent Card A) Would you please t e l l me the Income group that you aimed your multiple family-housing to, by giving me the , appropriate l e t t e r code? 48 8. and for s i n g l e family housing? 49 9. Which of the following factors determine the number of. bedrooms i n the housing units you build? (1) P r e v a i l i n g s t y l e i n surrounding areas 5Q ( 2 ) Family structure i n surrounding areas 51 (3) Age structure of population 52 (4) Construction costs 53 (5) Other (please specify) • ~~54 (Interviewer: i n d i c a t e (1) yes, ( 2 ) no) - ~ Which of the following factors determine the spaciousness of your housing units? (1) P r e v a i l i n g s t y l e i n surrounding areas (2) Income information on regional population (3) Age structure of regional population ( 4 ) Construction costs (5) Land costs (6) Other please s p e c i f y '  Which of the following factors determine the i n c l u s i o n of such amenities as underground wiring, c u l de sacs, paved lanes, play areas, or formal gardens. (1) P r e v a i l i n g s t y l e i n surrounding areas (2) Zoning regulations (3) Other b u i l d i n g or municipal codes (4) other (please specify) Which of the following factors determine the i n c l u s i o n of such amenities as f i n i s h e d basements, extra family rooms, laundry rooms, or drapes and carpets? (1) P r e v a i l i n g s t y l e i n surrounding areas (2) Income information on regional population (3) Age structure of regional population ( 4 ) . Family structure of regional population (5) Construction Costs (6) Upon request only (7) Other (please specify) Do you plan f o r families with c h i l d r e n , f a m i l i e s without ch i l d r e n and for s i n g l e i n d i v i d u a l s i n developments of (1) Single family houses (2) Garden Apartments and/or Condominiums (3) Row housing ( 4 ) Low-rise multiple (5) High-rise multiple (Interviewer: i n d i c a t e (0) (1) (2) don't do t h i s type of housing Yes No 103 IV This section deals with aspects of renewal and redevelopment. 1-4 Have you found i t necessary i n most cases to acquire more than one p a r c e l of land f or developments of (0) No (1) Single family housing (2) Mu l t i p l e family housing (Interviewer: i n d i c a t e (1) yes (2) no). Of the parcels that you acquire f o r s i n g l e family housing, what percentage are (1) vacant (2) occupied by s i n g l e family housing 6-8 9-11 Of the parcels that you acquire for multiple family housing, what percentage are (1) vacant (2) s i n g l e family housing 12-14 15-17 What percentage of the s i n g l e f amily, housing i s i n (1) poor condition (2) average condition (3) good condition 18-20 21-23 24-26 Has any project of yours been discontinued because of d i f f i c u l t i e s (1) i n assembling land? (2) i n obtaining the proper zoning? (Interviewer: i n d i c a t e ( 1 ) yes, (2) no). 27 ~28 This next section deals with the effectiveness of government controls. . I w i l l . r e a d you a l i s t of government and p u b l i c organizations involved i n planning and c o n t r o l l i n g land use. . Would you t e l l me please how often you are involved with them by responding (0) never ( 1 ) sometimes ( 2 ) often (3) Always 104 A. Planning Department 29 B. Permit and License Department 30 C. City council 31 D. Assessor 32 E. . School Board 33 F. Parks Board 34 G. Ratepayer's Associations 35 H. Engineering Department 36 I. Regional Planning Board 37 J. Other (please specify) 38 2. Is c i t i z e n acceptance of your proposal an important element i n your decision to proceed? (1) yes 39 (2) no \-3. Do residents of the immediate surrounding area s i g n i f i c a n t l y a f f e c t the character and type of development you w i l l build? 40 (1) yes (2) no 4. Do you follow a s p e c i f i c l i s t of steps i n gaining governmental approval of your development? (1) yes 41 ( 2 ) no 5. If you do follow such a procedure, could you please s p e c i f y the steps in. the order In which you follow them. STEP VI This f i n a l area of concern, deals, with financing. 1. Do you usually use options for land purchases? 42 (1) yes 6 5 . 0 8 (2) no 2 8 . 5 7 (0) 1.59 (.3) Sometimes 4 . 7 6 How long i s the option period t y p i c a l l y ? (1) lender 30 days 28. .57 (2) 31-60 days 1 (3) 60-90 days 15. ,87 (4) 91-120 days 17. ,46 (5) 121-180 days 9. ,52 (6) 181-2 70 days 15. ,87 (7) 2 71-365 days 4. .76 (8) greater than 1 year 7. ,94 Do you often pay for options i n advance? (1; yes 60.32 (2) no 15.87 (3) Sometimes 3.17 Do you usually include the option as an element i n the purchase p r i c e should you exercise the option - (0) 22.22 (1) yes 74.60 (2) no 3.17 Which i s the most c r i t i c a l period for financing a housing development? (0) 12.70 (1) purchase of land-.. 31.75 (2) construction financing 31.75 (3) financing inventory of completed units 20. (4) other (please specify) 3.17 In which area do you place most e f f o r t i n order to reduce your costs? (1) Land cost and land assembly (2) Servicing (3) Construction-Labor (4) Construction-materials (5) Sales (6) Financing I w i l l read you a l i s t of f i n a n c i a l sources. Would you please t e l l responding . for each how (0) never (1) sometimes (2) often (3) always (Interviewer: record number of response) A. I n s t i t u t i o n s (Pensions, Trusts, etc) B. Insurance Companies C. Banks D . CMHC-NHA E. Equity F. Mortgage Bankers G. Partnership funds H. Personal loans I. Retained earnings J. Personal Savings K. Syndicated investors L. Other (please specify) With respect to the d e t a i l s of financing could you please t e l l me the degree of importance of the following factors by responding (0) unimportant (1) f a i r l y important (2) average importance . (3) very important A. Rate of Interest B. Term of Loan C. Amortization period D . Loan to Value r a t i o E. Degree of p a r t i c i p a t i o n i n cash flow by lender F. other (please s p e c i f y ) Thank you for your help. The information you have provided has been very h e l p f u l and w i l l be kept i n s t r i c t confidence. Would you l i k e a copy of the survey results? (1) yes . (2) no Interviewer: be sure to record the name and address. Name and Address "CARD A" I W C O M ^ R ^ E S J ) F PROSPECTIVE P i rcraA_Q g P c UNDER $2,001-to $7,001 to $8,001 to $16,001 to OVER $2,000 per year $7,000 per year $8,000 per year $16,000 per year $25,000 per year $25,000 per year 108 RANK "CARD B" STAGES IN THE DEVELOPMENT PROCESS A. ARRANGING FOR FINANCING B. CHOOSING TYPE OF DEVELOPMENT •C. CHOOSING SIZE OF DEVELOPMENT D. • CHOOSING A SITE FOR THE DEVELOPMENT E. CHOOSING A NEIGHBOURHOOS FOR THE DEVELOPMENT F. CHOOSING A CONTRACTOR G. GETTING ZONING CHANGED (IF NEEDED) H. GETTING BUILDING PERMIT I. OTHER STAGES - PLEASE SPECIFY • Appendix 2(a) The 1975 Developer Questionnaire 110 HOUSING DEVELOPER. QUESTIONNAIRE Your help i s greatly appreciated and your answers w i l l be kept s t r i c t l y c o n f i d e n t i a l . This f i r s t s ection deals with the general structure and organi- zation of your firm. 1-4 1.1. How long has your company been involved i n r e a l estate development? (number of years) -^^ 2 89 years) 6-7 1.2. Is your fi r m a subsidiary of a la r g e r company? (1) Yes (2) No (14.29%) (85.71%) If yes to question 1.2., continue; i f ho, proceed to question 1.4. 1.3. What type of industry i s the parent company associated with? (1) Lumber and wood products ( 2 ) Construction (3) Real estate (4) Transportation (5) A g r i c u l t u r e and f i s h e r i e s (6) Finance & investment (7) Other (please s p e c i f y (10%) (0.0%) (45.0%) (5.0%) (0.0%) (25.0%) (15.0%) 1.4. Where i s the head, o f f i c e of your firm located? Interviewer: please s p e c i f y below, to be coded at a l a t e r date. 10-15 Interviewer: hand respondent card A 1.5. For each function l i s t e d on card A, could you t e l l me f i r s t l y , the number of employees you have in the cate-gory and secondly, the approximate percentage of each group that would be members of a union? i - 1 ~ A. Management (3.04) B. Professional ( a r c h i -tects, engineers, etc.) (0, .46) C. O f f i c e s t a f f (5. .53) D. Sales s t a f f (6. * 03) E. Construction/devel-opment (4. 53) 16-22 23-29 30-36 37-43 44-50 Excludes 5 firms that engage p r i m a r i l y i n r e a l estate sales rather than development. C 1 u w n : i . This section deals with M u l t i p l e R e s i d e n t i a l Units for the years  1974, 1973 and 1972. 1-4 2.1. Have you, i n the past 3 years, constructed any mul t i p l e unit r e s i d e n t i a l structures? - by the term multiple u n i t r e s i d e n t i a l structure we mean garden apartments, low-r i s e and h i - r i s e r e s i d e n t i a l structures excluding s i n g l e detached, semi detached, duplex, and row housing s t r u c -tures. (1) Yes (28.57%) (2) No (71.43%) Interviewer: i f yes to above question, continue; i f no, proceed to question 3.1. Interviewer: hand respondent card B 2.2. From the l i s t of responses on card B, please choose the one that most c l o s e l y i n d i c a t e s the r e l a t i v e importance of the following f a c t o r s i n the determination of the average number of bedrooms i n the mul t i p l e r e s i d e n t i a l units you b u i l d . (A) P r e v a i l i n g s t y l e i n surrounding areas (1.84) (B) Family s i z e i n surrounding areas (1.84) (C) Family income of p o t e n t i a l users (2.54) (D) Age structure of population (2.11) (E) Construction costs (2.50) (F) Other (please s p e c i f y (1-71) ) (0) unimportant (1) f a i r l y important (2) of average importance (3) very important (4) essential 2.3. S i m i l a r i l y , could you indicate the r e l a t i v e importance of the following factors i n the determination of the average f l o o r -space per unit for your multiple r e s i d e n t i a l structures? (A) Prevailing style in surrounding areas (1.79) (B) Income information on regional population (2,18) (C) Age structure of regional population (1.65) 10 12 - 3 -113 (D) Family s i z e of regional population (E) Construction costs (F) Land costs (G) Municipal or other regulations (H) Other (please s p e c i f y "  (1-91) (2.68) (2.94) (3.36) (0.90) (0) unimportant (1) f a i r l y important (2) of average importance (3) very important (4) e s s e n t i a l 2.4. S i m i l a r l y , how important are the following f a c t o r s i n determining the i n c l u s i o n of amenities such as under-ground wiring, c u l de sacs, paved lanes, play areas, paved lanes i n your multiple r e s i d e n t i a l projects? 15 16 17 18 19 (A) P r e v a i l i n g s t y l e i n surrounding areas (1. 87) (B) Family income of p o t e n t i a l users (2. 08) (C) Zoning regulations (3. 46)" (D) Other b u i l d i n g or municipal codes (3. 33) (E) Other (please specify (0. 79) ) (0) unimportant (1) f a i r l y important (2) of average importance (3) very important (4) e s s e n t i a l 20 21 22 23 24 2.5. Again, how important are the. following factors i n deter- . mining as to whether or not amenities such as extra family rooms, dens, laundry room, drapes, or carpets are included in" your multiple r e s i d e n t i a l structures? (A) P r e v a i l i n g s t y l e i n surrounding areas (1. 89) 25 (B) Income information on regional population (2. 26) 26 (C) Age structure of regional population (1. 74) 27 (D) Family s i z e of regional population (1- 80) 28 (E) Construction costs (2. 91) 29 (F) Upon request only (1. 00) 30 (G) Other (please s p e c i f y (0. 88) ) 31 (0) unimportant (1) f a i r l y important (2) of average importance (3) very important (4) essential 2 . 6 . Has the reduction in the federal building materials tax had any measurable effect on your construction costs? 32. (1) Yes . • (17.5'"=') (2) No ( 8 2 . 5 ; 0 Interviewer: i f yes to question 2.6., continue; i f no, proceed to question 2.8. 114 2.7. How has t h i s reduction i n construction costs a f f e c t e d your multiple r e s i d e n t i a l b u i l d i n g a c t i v i t i e s ? Interviewer: please record response below 33 Interviewer: hand respondent card C 2.8. Would you please t e l l me the income group that you aimed your multiple family housing to, by g i v i n g me the appropriate number code? 34 2.9. How often does your firm purchase land from subdividers or land assemblers for your m u l t i p l e projects? (1) never (2) seldom (3) often (4) always (1.97) 35 2.10. How many multiple r e s i d e n t i a l u n i t s did your f i r m : (A) Start i n 1974? (See Table 2.10) (B) Complete in 1974? (See Table 2.11) Interviewer: i f 2.10.B = 0, proceed to question 2.21. 36-39 40-43 2.11. How many multiple r e s i d e n t i a l units did your f i r m have completed but unoccupied at the year end of 1974? Interviewer: hand respondent card D (See Table 2.11) 44-46 - 5 -115 2.12. Could you give me a breakdown of the t o t a l number of completions in 1974 according to the s t r u c t u r a l types l i s t e d on Card D? (A) Garden apartments (B) Low-rise multiples (C) H i - r i s e multiples 47-50 51-54 55-58 2.13. For each mu l t i p l e type on card D could you give me the approximate percentage d i s t r i b u t i o n of those disposed of under r e n t a l tenure, s t r a t a - t i t l e , and co-operative tenure? Interviewer: complete table below. 1-4 TENURE Rental Strata Co-op Garden Apartment T • Y Low-rise P M u l t i p l e E : • j • High-rise M u l t i p l e (24.7%) (74.6%) (1.2%) 2.14. Please s p e c i f y the area(s) i n which the majority of these projects took place. A) Organized area(s) =100% 5-13 =100% _ _ _ _ _ 14-22 =100% 23-31 Interviewer: please s p e c i f y the name(s) of the munici-p a l i t y , c i t y , town or v i l l a g e 1st ; ' 32-37 ' 2nd ; [ 38-43 B) Unorganized area(s) Interviewer: please record the name of A) the Regional Dis t r i c t , B) the area, and C) the nearest incorporated area. - 6 -116 44-49 50-55 1st 2nd Interviewer: hand respondent card E 1-4 2.15. From the l i s t of structure types on card E could you t e l l me f i r s t l y which type your f i r m i s l i k e l y to b u i l d i n the future. Interviewer: record response i n column II) (1) Yes (2) No and secondly, the approximate percentage each s t r u c t u r a l type w i l l account for with respect to your future projects? Interviewer: record percentage i n column I Column I A) Single detached B) Semi detached C) Duplex D) Row housing E) Garden apartments F) Low-rise mu l t i p l e G) H i - r i s e multiple % "% % % % "% "% Column II 32% 4% 8% 44% 34% 76% 42% 5-8 9-12 13-16 17-20 21-24 25-28 29-32 2.16. W i l l the location of your future multiple units be in the same area(s) as i t has been i n the past? 33 (1) Yes (77.50%) (2) No (22.50%) Interviewer: i f ho to above, continue; otherwise proceed to question 2.19. _ 7 _ 117 2.17. What area(s) w i l l the majority of your multiple u n i t s be located i n the future? A) Organized area(s) Interviewer: name(s) of municipality, c i t y , town, or v i l l a g e . 34-39 B) Unorganized area(s) Interviewer: name of regional d i s t r i c t , area, nearest incorporated area. 40-45 2.18. What was the p r i n c i p a l reason for the change i n lo c a t i o n ? 46 Interviewer: please s p e c i f y below, to be coded at a l a t e r date. 2.19. Did your firm experience any unusual d i f f i c u l t i e s i n dealing with government with regard to your mu l t i p l e r e s i d e n t i a l projects i n 1974? (1) Yes (47.5%) (2) No (52.5%) 47 Interviewer: i f yes to 2.19., continue; i f no, proceed to question 2.21. Interviewer: hand respondent card F. - 8 -118 . 2.20. As l a i d out i n card F, could you please s p e c i f y : A) The nature of the d i f f i c u l t y 48 Interviewer: please spec i f y below. (See Table 2.20) B) What was the predominate s t r u c t u r a l type? • 49 (0) No predominate s t r u c t u r a l type (26.3%) (1) Garden apartments (21.1%) (2) Low-rise m u l t i p l e (36.8%) (3) High-rise m u l t i p l e (15.8%) C) What was the predominate tenure? 50 (0) No predominate tenure (21.1%) (1) Rental (10.5%) (2) Strata (68.4%) (3) Co-op (0.0%) D) In what l o c a t i o n or area were the majority of these d i f f i c u l t i e s encountered? i ) Organized areas i i ) Unorganized areas 51-56 57-62 E) What l e v e l of government was the source of these d i f f i c u l t i e s ? ' 63 (1) Federal ( 5.3%) (2) P r o v i n c i a l (5.3%) . (3) Regional (5.3%) (4) Local (84.1%) F) W i l l t h i s be a deterent to b u i l d i n g In t h i s area i n the future? • 64 (1) Yes (47.4%) (2) No (52.6%) - 9 -119 G) W i l l t h i s be a deterent to b u i l d i n g t h i s type of u n i t i n the future? (1) Yes (47.4%) (2) No (52.6%) 65 2.21. How many multiple r e s i d e n t i a l units did your firm (A) Start i n 1973? (See Table 2.10.) (B) Complete i n 1973? (See Table 2.11) 1-4 Interviewer: i f none to 'B', proceed to question 2.28. 2.22. How many multiple r e s i d e n t i a l units did your f i r m have completed but unoccupied at the year end of 1973? (See Table 2.12) 13-15 2.23. Again, could you give me a breakdown of the t o t a l number of completions i n 1973 according to the s t r u c t u r a l categories l i s t e d on card D. (A) Garden apartments (B) Low-rise multiple (C) H i - r i s e m u l t i p l e 16-19 20-23 24-27 2.24. For each multiple type on card D could you give me the approximate percentage d i s t r i b u t i o n of those completed, by tenure? . ( r e n t a l , s t r a t a , co-op) Interviewer: please f i l l i n table below TENURE  Rental Strata Garden Apartment Low-rise Multiple .' Hi-rise Multiple (42.7%) (56.5%) =100% : _. , 28-36 =100%. 37-45 =100% _ _ _ _ _ _ _ 46-54 (0.9%) 120 2.25. Please specify the area(s) i n which the majority of these projects took place. A) Organized areas Interviewer: s p e c i f y name of municipality, c i t y , town, or v i l l a g e . 1st 2nd OR B) Unorganized areas Interviewer: please s p e i c f y name of the Regional D i s t r i c t , the area, and the nearest incorporated area. 1st 67-72 55-60 61-66 2nd 73-80 2.2'6. Did your firm experience any unusual d i f f i c u l t i e s i n dealing with government with regard to your m u l t i p l e r e s i d e n t i a l p rojects i n 1973? 1-4 (1) Yes (2) No (25.0%) (75.0%) Interviewer: i f yes to 2.2 6 . , continue; i f no, proceed to question 2.28. Interviewer: hand respondent card F. - 11 -121 2.27. As l a i d out i n card F, could you please s p e c i f y : A) The nature of the d i f f i c u l t y ? Interviewer: please specify below. B) What was the predominate s t r u c t u r a l type? (0) No predominate s t r u c t u r a l type (20.0%) (1) Garden apartments (30.0%) (2) Low-rise multiples (40.0%) (3) H i - r i s e m u ltiples (10.0%) C) What was the predomninate tenure? 8 (0) No predominate tenure (30.0%) (1) Rental (20.0%) (2) Strata (50.0%) (3) Co-op (0.0%) D) In what l o c a t i o n or area were the majority of these d i f f i c u l t i e s encountered? i ) Organized areas i i ) Unorganized areas 9-14 15-20 E) What l e v e l of government was the source of these d i f f i c u l t i e s ? (1) Federal ( 0.0%) (2) P r o v i n c i a l (10.0%) (3) Regional ( 0.0%) (4) Local (90.0%) 122 2.28. How many mult i p l e r e s i d e n t i a l structures did your f i r m : (A) Start i n 1972? (B) Complete i n 1972? (See Table 2.10) (See Table 2.11) 22-25 26-29 Interviewer: i f answer to 2.28 .B = 0, proceed to question 2.33. ; i f greater than 0, please continue. 2.29. How many multiple r e s i d e n t i a l units did your firm have completed but unoccupied at the year end of 1972? (See Table 2.12) Interviewer: hand respondent card D. 30-32 2.30. Could you give me a breakdown of the t o t a l number of completions i n 1972 according to the categories on card D? (A) Garden apartments (B) Low-rise multiples (C) H i - r i s e multiples 33-36 37-40 41-44 2.31. Again, for each multiple type on card D could you give me the approximate percentage d i s t r i b u t i o n of those u n i t s disposed of under r e n t a l tenure, s t r a t a - t i t l e , and co-operative tenure? Interviewer: please f i l l out table below. Rental TENURE Strata Co-op Garden Apartment Low-rise M u l t i p l e H i - r i s e . M u l t i p l e (55.8%) (44.2%) ( 0.0%) =100% =100% =100% 2.32.. Please specify the area(s) i n which the majority of these projects took place. A) Organized areas (name of m u n i c i p a l i t y , c i t y , town, o r . v i l l a g e ) . 1st \ 2nd - . 45-53 54-62 63-71 1-4 5-10 11-16 - 13 -123 B) Unorganized areas (name of Regional D i s t r i c t , area, and nearest incorporated area) 1st choice .. 17-22 2nd choice ' 23-28 2.33. Do you usually assemble or acquire the land f o r your m u l t i p l e family projects rather than purchasing from a land developer? ( 8.33%) (86.11%) (2) N o ( 5.56%) 29 No Response Yes No Interviewer: i f yes to above, continue; i f no, proceed to question 3.1. ^ ^ ^ ^ 2.34.: How frequently do you acquire property already zoned to the desired use for your multiple family projects? 30 (1) never (2) seldom (3) often (4) always (2.69%) 2.35. Have you found i t necessary i n most cases to acquire more than one parc e l of land for your mul t i p l e r e s i d e n t i a l developments? (0) No Response (10.00%) ( 1 ) Y e s (72.50%) (2) No (17.50%) 31 2.36. Of the parcels that you acquire for multiple family p r o j e c t s , approximately,what percentage are: (A) Vacant? (B) Occupied by single detached housing? ( C ) Occupied by structure or uses other than single detached housing? (please specify use for C 32-34 35-37 38-40 Interviewer: if.response to 'B' above i s greater than continue; i f not, proceed to question 2.38. lero. 2.37. Of chose s i n g l e family units demolished for new p r o j e c t s , approximately what percentage i s : (A) In poor condition? 41-43 (B) In average condition? . 44-46 (C) In good condition? 47-49 2.38. Has any m u l t i p l e r e s i d e n t i a l project of yours been d i s -continued because of d i f f i c u l t i e s : (A) In financing? (28.95%) _ _ _ _ _ _ 50 (B) Engineering problems? ( 2.63%) ^_ 51 (C) In assembling land? (28.95%) 52 (D) In obtaining the proper zoning? (55.26%) 53 (E) Other (please specify (22.22%) ) 54 (1) Yes (2) No 2.39. On the average, how many years i n advance of construction do you acquire land? 55—56 (See Table 2.39) Interviewer: record number of years. 2.40. How many years inventory of land do you o r d i n a r i l y hold at one time? (See Table 2.39) 2.41. Has the s i z e of your inventory holdings changed s i g n i f i -cantly i n the past two years? 57-58 59 (1) Yes (2) No (42.5%) (57.5%) Interviewer: i f yes to above, continue; i f no, proceed to question 2.43. 2.42. What was the p r i n c i p a l reason for the change i n the s i z e of your inventory holdings? Interviewer: state response below. 60 - 15 -125 2.43. Do you expect the s i z e of your inventory holdings to change i n the future? 61 (1) Yes (2) No (42.5%) (57.5%) Interviewer: i f yes to above, continue; i f no, proceed to question 2.45. 2.44. What i s the p r i n c i p a l reason f o r the change? 62 Interviewer: record response below. 2.45.. Approximately what percentage of the land you. acquire i s resold to another developer or investor with no sub-s t a n t i a l improvements added by your firm? (See Land A c q u i s i t i o n Section) Interviewer: i f response to,2.45. i s greater than zero, continue; otherwise proceed to question 2.48. 2.46. What i s the approximate percentage of these transactions where your i n t e n t i o n , at the time of a c q u i s i t i o n , was to r e s e l l with no s u b s t a n t i a l improvements? 66-68 (See Land A c q u i s i t i o n Section) 2.47. Approximately what percentage of these transactions were the r e s u l t of circumstances unforeseen at the time of a c q u i s i t i o n ? 69-71 (See Land A c q u i s i t i o n Section) 2.48. How often does your firm do contract building of multiple units?' 7 2 (1). never . (2) seldom ^ ^Q-/) • . (3) often ' . (4) always - 16 -126 I I I . This section deals with Single R e s i d e n t i a l Units for the years 1974, 1973 and 1972. 3.1. Have you, i n the past 3 years, constructed any s i n g l e r e s i d e n t i a l units? By the term 'single r e s i d e n t i a l u n i t s ' we mean sing l e detached u n i t s , semi detached u n i t s , du-plexes, and row housing. 1-4 (1) Yes (2) No (46.43%) (53.57%) Interviewer: i f yes to 3.1., continue; i f no, proceed to question 4.1. Interviewer: hand respondent card B. 3.2. From the l i s t of responses on card B, please choose the one that best describes the r e l a t i v e importance of the following f a c t o r s i n the determination of the average number of bedrooms i n the s i n g l e detached housing u n i t s you b u i l d ? (A) P r e v a i l i n g s t y l e i n surrounding areas (2.13%) ' 6 (B) Family s i z e i n surrounding areas (1.98%) . 7 (C) Family income of p o t e n t i a l users (2.46%) . ^_ 8 (D) Age structure of population . (1.67%) 9 (E) Construction costs (2.55%) 10 (F) Other (please s p e c i f y (0.96%) ) 11 (0) unimportant (1) f a i r l y important (2) of average importance (3) very important (4) e s s e n t i a l 3.3. S i m i l a r l y , could you i n d i c a t e the r e l a t i v e importance of the following f a c t o r s i n determining the per unit f l o o r space of your s i n g l e r e s i d e n t i a l housing units? (A) P r e v a i l i n g s t y l e i n surrounding areas (2. 02%) 12 (B) Income information of regional population (2. 03%) 13 (C) Family s i z e of regional population (1. 76%) 14 (D) Age structure of r e g i o n a l population (1. 65%) 15 (E) Construction costs (2. 81%) 16 (F) Land costs (3. 05%) 17 (G) Municipal or other regulations (1. 97%) 18 (H) Other (0. 74%) 19 (0) unimportant (1) f a i r l y important (2) of average importance (3) very important (4) essential. - 17 -127 3.4. S i m i l a r l y , how important are the following f a c t o r s i n determining the i n c l u s i o n of amenities such as underground wiring, c u l de sacs, paved lanes, play areas, or formal gardens i n your s i n g l e r e s i d e n t i a l housing units? (A) P r e v a i l i n g s t y l e i n surrounding areas (1.40%) ' 20 (B) Family income of p o t e n t i a l users (1.71%) 21 (C) Zoning regulations (3.25%) ~~ 22 (D) Other b u i l d i n g or municipal codes (2.87%) 23 (E) Other (please specify (1.13%) ~ ' 24 (0) unimportant (1) f a i r l y important (2) of average importance (3) very important (4) e s s e n t i a l 3.5. Again, how important are the following f a c t o r s i n deter-mining the i n c l u s i o n of amenities such as extra family rooms, dens, laundry rooms, drapes or carpets i n your s i n g l e r e s i d e n t i a l housing units? (A) P r e v a i l i n g s t y l e i n surrounding areas (1.69%) ___ 25 (B) Income information on r e g i o n a l population (1.93%) ___ 26 (C) Age structure of r e g i o n a l population (1.52%) 27 (D) Family structure of r e g i o n a l population (1.83%) 28 (E) Construction costs (2.41%) 29 (F) Upon request only (1.88%) 30 (G) Other (please s p e c i f y (0.75%,) 31 (0) unimportant (1) . f a i r l y important (2) of average importance (3) very important (4) e s s e n t i a l 3.6. Has the reduction i n the f e d e r a l b u i l d i n g materials tax had any measurable e f f e c t on your construction costs with respect to s i n g l e r e s i d e n t i a l units? 32 (1) Yes (2) No (21.54%) (78.46%) Interviewer: i f yes to 3.6., continue; i f no, proceed to question 3.7. 3.6.A. How has t h i s reduction i n construction costs a f f e c t e d your sing l e r e s i d e n t i a l b u i l d i n g a c t i v i t i e s ? Interviewer: please record response below. 33 - 18 -128 Interviewer: hand respondent card C 3.7. Would you please t e l l me the income group that you aim your s i n g l e r e s i d e n t i a l housing to, by giving me the appropriate number code? 34 3.8. How often do you buy l o t s from subdividers f o r your s i n g l e family projects? 35 (1) never (2) seldom (3) often (4) always (2.20%) 3.9. How many s i n g l e r e s i d e n t i a l u n i t s did your f i r m : (A) Start i n 1974? (B) Complete i n 1974? (See Table 2.10) (See Table 2.11) 36-39 40-43 Interviewer: i f 3.9.B. = 0, proceed to question 3.20, otherwise continue. 3.10. How many si n g l e r e s i d e n t i a l u n i t s did your f i r m have completed but unoccupied at the year end of 1974? (See Table 2.12) 3.11. Of the s i n g l e r e s i d e n t i a l units your fi r m completed i n 1974 approximately what percentages would f a l l i nto the following categories: s i n g l e detached, semi detached, duplexes, and row housing. 44-46 (A) Single detached (B) Semi detached (C) Duplexes (D) Row housing 47-50 51-54 55-58 59-62 3.12. Approximately what percentage of the s i n g l e r e s i d e n t i a l u n i t s completed by your firm i n 1974 were u t i l i z e d by other than owner occupiers? . , ' (4.8%) Interviewer: i f answer to 3.12. i s greater than zero, continue, otherwise proceed to question 3.14. 63-65 Interviewer: hand respondent card G - 19 -3.13. For each s t r u c t u r a l type on card G, could you give me the approximate percentage that were u l t i m a t e l y owner-occupied and u l t i m a t e l y r e n t a l . Interviewer: please f i l l i n table below. TENURE '129 1-4 Rental Single detached Semi detached Duplex Row housing (4.8%) (95.2%) =100% =100% =100% =100% 3.14. Please s p e c i f y the area(s) i n which the majority of these developments took place. A) Organized area(s) (Municipality, c i t y , town, or v i l l a g e ) 1st choice . 2nd choice 5-10 11-16 17-22 23-28 29-34 35-40 B) Unorganized area(s) (name of Regional D i s t r i c t , the : . area, and the nearest incorporated area) 1st choice 41-46 2nd choice ~ 47-52 W i l l the location of your future single family units be in the same area(s) (as 3.14 above)? (1) Yes (69.35%) (2) No (30.65%) Interviewer: i f no to above, continue; i f yes, proceed to Question 3.18. i ,  ' - 2.0 -3.16. What was the p r i n c i p a l reason for the change i n location? 54 Interviewer: please specify, below. 3.17. In what area(s) w i l l the majority of your s i n g l e r e s i d e n t i a l u n i t s be located i n the future? Interviewer: please s p e c i f y below. A) Organized area(s) (Municipality, c i t y , town, or v i l l a g e ) 1st choice 55-60 2nd choice 61-66 B) Unorganized areas (name of Regional D i s t r i c t , the area, and the nearest incorporated area) 1st choice 67-72 2nd choice '  73-78 1-4 3.18. Did your firm experience any unusual d i f f i c u l t i e s i n dealing with government with regard to your s i n g l e r e s i -d e n t i a l projects i n 1974? (1) Yes (2) No (44.62%) (55.38%) Interviewer: i f yes to 3.18, continue; i f . n o , proceed to question 3.20.  Interviewer: hand respondent card H. - 21 -3.19. As l a i d out i n card H, could you please s p e c i f y : A) The nature of the d i f f i c u l t y 131 Interviewer: please specify below. (See Table 2.20) B) What was the predominate s t r u c t u r a l type? (0) No predominate s t r u c t u r a l type (20. 0%) (1) Single detached (30. 0%) (2) semi detached (40. 0%) (3) duplexes (10. 0%) (4) Row housing ( o. 0%) C) What was the predominate tenure? (0) No predominate tenure (30.0%) (1) Rental (20.0%) (2) Ownership (50.0%) D) In what l o c a t i o n or area were the majority of these d i f f i c u l t i e s encountered? i ) Organized areas . i i ) Unorganized areas 9-14 15-20 E) What l e v e l of government was the source of these d i f f i c u l t i e s ? (1) Federal (2) P r o v i n c i a l (3) Regional (4) Local ( 0.00%) (10.00%) ( 0.00%) (90.00%) 3.20. How many single residential units did your firm: (A) Start in 1973? (B) Complete in 1973? (See Table 2.10) (See Table 2.11) Interviewer: i f response to question 3.20.B = 0, proceed to question 3.28., otherwise continue. 21 22-25 26-29 - 22 -132 3.21. How many si n g l e r e s i d e n t i a l units did your firm have com- pleted but unoccupied at the year end of 1973? (See Table 2.12) 3.22. Of the s i n g l e r e s i d e n t i a l u n i t s your firm completed i n 1973 approximately what percentages would f a l l into the following categories: s i n g l e detached, semi detached, duplexes and row housing. (A) Single detached (B) Semi detached (C) Duplexes (D) Row housing 3.23. Approximately what percentage of the si n g l e r e s i d e n t i a l u n i t s completed by your firm i n 1973 were u t i l i z e d by other than owner occupiers? (2.1%) Interviewer: i f answer to 3.23 i s greater than zero, continue, otherwise proceed to question 3.25. Interviewer: hand respondent card G. 3.24. For each s t r u c t u r a l type on card G, could you give me the approximate percentage that were u l t i m a t e l y owner-occupied, and u l t i m a t e l y r e n t a l . Interviewer: please f i l l i n table below. TENURE Owner-occupied Rental Single detached Semi detached Duplex Row housing (97.7%) (2.1%) 3.25. Please s p e c i f y the area(s) i n which the majority of these, developments took place. A) Organized area(s) (Municipality, c i t y , town, or v i l l a g e ) 1st choice 2nd choice 52-57 58-63 64-69 70-75 1-4 5-10 11-16 - 23 -133 B) Unorganized area(s) (name of Regional D i s t r i c t , the area, and the nearest incorporated area) 1st choice 17-22 2nd choice 23-28 3.26. Did your firm experience any unusual d i f f i c u l t i e s i n dealing with government with regard to your s i n g l e r e s i -d e n t i a l projects i n 1973? (1) Yes (2) No Interviewer: i f yes to 3.26., continue; i f no, proceed to question 3.28. I n t e r v i e w e r : hand r e s p o n d e n t c a r d H 3.27. As l a i d out i n card H, could you please s p e c i f y : A) The nature of the d i f f i c u l t y Interviewer: please s p e c i f y below. B) What was t h e p r e d o m i n a t e s t r u c t u r a l t y p e ? 31 (0) No p r e d o m i n a t e t y p e (1) S i n g l e d e t a c h e d (2) semi d e t a c h e d (3) D u p l e x e s (4) Row h o u s i n g C) What was the p r e d o m i n a t e t e n u r e ? 32 (0) No p r e d o m i n a t e t e n u r e (1) R e n t a l (2) Ownership - 24 -•13k D) In what l o c a t i o n or area were the majority of these d i f f i c u l t i e s encountered? i ) Organized areas 33-38 i i ) Unorganized areas . . ' 39-44 E) What l e v e l of government was the source of these d i f f i c u l t i e s ? 45 (1) Federal (2) P r o v i n c i a l (3) Regional (4) Local 3.28. How many si n g l e r e s i d e n t i a l u n i t s did your f i r m (A) Start i n 1972? (B) Complete i n 1972? (See Table 2.10) (See Table 2.11).. 46-49 50-53 Interviewer: i f response to question 3.28.B = 0, proceed to question 3.34; otherwise, continue. 3.29. How many si n g l e r e s i d e n t i a l u n i t s did your fi r m have com- pleted but unoccupied at the year end of 1972? (See Table 2.12) 3.30. Of the s i n g l e r e s i d e n t i a l u n i t s your fi r m completed i n 1972 approximately what percentages would f a l l i n t o the following categories: s i n g l e detached, semi detached, duplex, row housing. (A) Single detached (B) Semi detached (C) Duplex (D) Row housing 3.31. Approximately what percentage of the s i n g l e r e s i d e n t i a l . units completed by your firm i n 1972 were u t i l i z e d by other than owner occupiers? (3.2%) - 25 -- O P Interviewer: i f answer to question 3.31. i s greater than zero, continue; otherwise proceed to question 3.33. Interviewer: hand respondent card G. | 1-4 3.32. For each s t r u c t u r a l type on card G, could you give me the approximate percentage that were ul t i m a t e l y owner-occupied and u l t i m a t e l y rental? Interviewer: please f i l l i n table below. TENURE . Owner-occupied Rental  Single detached : . 5-10 Semi detached . ~ 11-16 Duplex . . __ • 17-22 Row housing ' ; 1 23-28 (26.8%) (3.2%) 3.33. Please s p e c i f y the area(s) i n which, the majority of these projects took place. A) Organized area(s) (Municipality, c i t y , town, or v i l l a g e ) 1st choice '  29-34 2nd choice ' 35-40 B) Unorganized area(s) (the name of the Regional D i s t r i c t , the area, and the nearest incorporated area) 1st choice 41-46 2nd choice . 47-52 - 26 -136 3.34. Do you usually assemble or acquire the land f o r your s i n g l e r e s i d e n t i a l projects rather than purchasing from a land developer? (0) No Response (1) Yes (2) No (53.13%) (18.75%) (28.12%). 53 Interviewer: i f yes to above, continue; i f no, proceed to question-3.39. 3.35. How often do you acquire property already zoned to the desired use for your s i n g l e family projects? 3.36. 3.37. (1) never (2) seldom (3) often (4) always (2.94%) Have you found i t necessary i n most cases to acquire more than one parcel of land for your s i n g l e r e s i d e n t i a l projects? (0) No Response (23.08%) (1) Yes (40.00%) (2) No (36.92%) . Of the parcels that you acquire f o r single r e s i d e n t i a l pro-j e c t s , what percentage are: (A) (B) (C) Vacant Occupied by sing l e detached housing? Occupied by structure or uses other than s i n g l e detached housing? (please s p e c i f y (See Table 2.36) Interviewer: i f response to 'B' above i s greater than zero, continue; i f not, proceed to question 3.39. 54 55 56-58 59-61 62-64 3.38. Of those s i n g l e detached units demolished f o r new p r o j e c t s , what percentage i s : (A) In poor condition? (B) In average condition? (C) In good condition? (See Table 2.36) 65-67 68-70 71-73 3.39. Has any si n g l e r e s i d e n t i a l project.of yours been dis-continued because of d i f f i c u l t i e s : (A) In financing? (B) Engineering problems? (C) In assembling land? (D) In obtaining proper zoning? (E) Other (please spe c i f y "• (1) Yes (2) No . (23.44%) ( 6.15%) (29.23%) (30.77%) (10.00%) 74 75 76 77 78 - 27 -JUT 3.40. On the average, how many years i n advance of construction do you acquire land? (See Table 2.39) Interviewer: record number of years. 1-4 5-6 3.41. How many years inventory of land do you o r d i n a r i l y hold at one time? (See Table 2.39) 3.42. Has the s i z e of your inventory holdings changed s i g n i f i -c antly i n the past two years? 7-8 (1) Yes (32.31%) (2) No (67.69%) Interviewer: i f yes to above, continue; i f no, proceed to question 3.44.  3.43. What was the p r i n c i p a l reason for the change i n the s i z e of your inventory holdings? 10 Interviewer: state response below. 3.44. Do you expect the s i z e of your inventory holdings to change in the future? 11 (1) Yes (2) No (50.77%) (49.23%) Interviewer: i f yes to above, continue; i f no, proceed to question 3.46.  3 . 4 5 . What i s the p r i n c i p a l reason for the change? 12 Interviewer: record response below. - 28 -130 3.46. Approximately what percentage of the land you acquire i s res o l d to another developer or investor with no s u b s t a n t i a l improvements added by your firm? (See Land A c q u i s i t i o n Section) Interviewer: i f response to 3.46. i s greater than zero, continue; otherwise proceed to question 3.49. 13-15 3.47. 3.48, 3.49, What i s the approximate percentage of these transactions where your i n t e n t i o n , at the time of a c q u i s i t i o n , was to r e s e l l with no s u b s t a n i t a l improvements? (See Land A c q u i s i t i o n Section) Approximately what percentage of these transactions were the r e s u l t of circumstances unforeseen at the time of a c q u i s i t i o n ? (See Land A c q u i s i t i o n Section) How often does your f i r m do contract b u i l d i n g with regard to s i n g l e r e s i d e n t i a l units? 16-18 19-21 22 (1) never (2) seldom (3) often (4) always (2.02%) 4.1. Have any of your projects proceeded v i a a Land Use Con-tract? (1) Yes (2) No (35.12%) (64.88%) Interviewer: i f yes to above, continue; i f no, proceed to question 5.1.  V. This section deals with land use contracts. 1-4 4.2. What percentage of your projects over the past year have proceeded v i a Land Use Contracts? 6-8 Inverviewer: hand respondent card E. 4.3. From the l i s t on card E, could you t e l l me the approximate percentage for each s t r u c t u r a l type c a r r i e d out, under Land Use Contracts? Interviewer: enter percentage or N/A for s t r u c t u r a l types not c a r r i e d out by the respondent. ' Single - detached 9-11 Single - semi detached ; 12-14 Single - duplex 15-17 Single - row housing . 18-20 M u l t i p l e - garden apts. 21-23 M u l t i p l e - low-rise • 24-26 M u l t i p l e - h i - r i s e . 27-29 4.4. What percentage of these projects would be: (A) Fee simple % 30-32 (B) Strata t i t l e . % . 32-35 (C) Rental % 36-38 (D) Co-op % . 39-41 4.5. . To the best of your knowledge, do rental projects receive p r e f e r e n t i a l treatment r e l a t i v e to strata t i t l e develop-ments in the terms of the Land Use Contract? 42 (1) Yes (13.56%) (2) No (86.44%) - 30 -lUo 4.6. In what area did the majority of these projects occur? A) Organized areas (the name of the muni c i p a l i t y , c i t y , town, or v i l l a g e ) 43-48 B) Unorganized areas (the name of the Regional D i s t r i c t , the area, and the nearest incorporated area) 49-54 Interviewer: hand respondent card I 4.7. Please pick the response from card I that most c l o s e l y r e f l e c t s your f e e l i n g s with respect to the following s t a t e -ments : Operating v i a Land Use Contracts A) Is more time consuming than conventional rezoning (1. 51%) 55 B) Requires higher d i r e c t costs ( i . e . ignoring oppor-tunity or time costs) than conventional rezoning (1. 86%) 56 C) Gives r i s e to a greater degree of uncertainty than conventional rezoning (2. 17%) 57 D) Requires considerable investment p r i o r to approval (1 . 58 E) Allows a greater degree of f l e x i b i l i t y than conventional zoning controls (2. 90%) 59 (1) strongly agree (2) agree (3) i n d i f f e r e n t (4) disagree (5) strongly disagree 4.8. Have there been any s i g n i f i c a n t changes i n the terms or conditions relevant to Land Use Contracts i n your area i n the past year? 60 (1) (2) Yes No (55.93%). (44.07%) Interviewer: i f yes to above, continue; i f no, proceed to question 4.10. - 3 1 -4.9. Please specify the nature of the change(s). lkl _______ 61 Interviewer: please record response below, to be coded l a t e r . (See Table 4.9) 4.10. Are you charged a per unit impost fee' (1) Yes (2) No (86.44%) (13.56%) 62 Interviewer: i f yes to question 4.10., continue; i f no, proceed to question 5.1. 4.11. What i s the amount of the per unit impost fee for (A) Single r e s i d e n t i a l structures? (B) M u l t i p l e unit structures? 4.12. Does the impost charge vary with the tenure of the housing? 71 (1) Yes (2) No (20.34%) (79.66%) - 32- -This section considers the subdivision process. 1-4 5.1. Does your firm involve i t s e l f s o l e l y with subdivision and s e l l i t s product to others for the subsequent stages of the development process? (1) Yes (2) No (45%) (55%) Interviewer: i f yes to above, continue; i f no, proceed to question 6.1.  5.2. On the average, how many yeares i n advance of construction do you acquire land? (See Table 2.39) Interviewer: record number of years. 6-7 5.3. How many years inventory of land do you o r d i n a r i l y hold at one time? (See Table 2.39) 5.4. Has the size of your inventory holdings changed s i g n i f i - ^ c antly i n the past two years? 8-9 10 (1) Yes (57.14%) (2) No (42.86%) Interviewer: i f yes to above, continue; i f no, proceed to question 5.6. 5.5. What was the p r i n c i p a l reason for the change i n the s i z e of your inventory holdings? 11 Interviewer: state response b e l ow. 5.6. Do you expect the size of your inventory holdings to change, in the future? • • (1) .Yes (41.27%) ' • • (2) No (58.73%) 12 - 33 -11+3 Interviewer: i f yes to above, continue; i f no, proceed _________ to question 5.8. 5.7. What i s the p r i n c i p a l reason for the change? 13 Interviewer: record response below. 5.8. How has the change i n the f e d e r a l income tax act r e l a t i n g to tax w r i t e - o f f s on land a f f e c t e d your firm? 14 Interviewer: record response below. 5.9. Has the reduction i n the f e d e r a l b u i l d i n g materials tax had any measurable e f f e c t on your development costs?. (1) Yes (2) No ( 4.76%) (95.24%) 15 Interviewer: i f yes to question 5.9., continue; i f no, proceed to question 5.11. 5.10. How has t h i s reduction i n development costs affected, your subdivision a c t i v i t i e s ? 16 Interviewer: record response below. Interviewer: hand resDondent card 3. - 34 -144 5.11. From the l i s t of responses on card B, please choose the one that most c l o s e l y i n d i c a t e s the r e l a t i v e importance of the following f a c t o r s i n determining the average l o t s i z e of your subdivisions. (A) P r e v a i l i n g s t y l e i n surrounding areas (1.55%) 17 (B) Income information on regional population (1.45%) 18 (C) Age structure of regional population (0.85%) 19 (D) Land costs (2.69%) 20 (E) Zoning regulations (3.25%) 21 (F) Other (please specify )(1.18%) 22 (0) unimportant (1) f a i r l y important (2) of average importance (3) very important (4) e s s e n t i a l 5.12. 5.13. 5.14. 5.15. 5.16. S i m i l a r l y , could you in d i c a t e the r e l a t i v e importance of the following f a c t o r s i n determining the i n c l u s i o n of such amenities as underground wiring, c u l de sacs, paved lanes, play areas, or formal gardens. (A) P r e v a i l i n g s t y l e i n surrounding areas (B) Family income i n surrounding areas (C) Zoning regulations (D) Other b u i l d i n g or municipal codes (E) Other (please specify (1.46%__ (1.31%__ (3.41%__ (3.28%J_ ______ 50%_ (0) unimportant (1) f a i r l y important (2) of average importance (3) very important (4) e s s e n t i a l How many l o t s were completed by your fi r m i n 1974? How many were completed i n 1973? (See Table 2.11) How many were completed i n 1972? What area(s) were the majority of these l o t s located: (A) In 1974? i ) Organized areas (Municipality, c i t y , town, or v i l l a g e ) 23 24 25 26 27 28-31 32-35 36-39 40-43 44-49 - 35 -1U5 i i ) Unorganized areas (name of the Regional D i s t r i c t , the area, and the nearest incorporated area) 50-55 B) In 1973? i ) Organized areas 56-61 i i ) Unorganized areas 62-67 C) In 1972? i ) Organized areas i i ) Unorganized areas 68-73 74-79 5.16. In what area(s) w i l l the majority of your projects take place i n the future? 1-4 A) Organized areas 5-10 B) Unorganized areas 11-16 5.17. How frequently do you acquire properties zoned to the desired use f o r your sin g l e residence subdivisions? 17 18 never seldom (2.95%) often • always 5.18. Has any project of yours been discontinued because of d i f f i c u l t i e s : (A) In financing? (11.29%) 19 (B) Engineering problems? (19.35%) 20 (C) In assembling land? (45.16%) 21 (D) In obtaining proper zoning? (46.77%) 22 (E) Other (please specify (26.67%) ) 23 Interviewer: i f yes to 'D' above, continue; i f no, proceed to question 5.20. (1) (2) (3) (4) 5.19. Was t h i s project (1) s i n g l e r e s i d e n t i a l or (2) .multiple r e s i d e n t i a l ? 24 5.20. Did your firm experience any unusual d i f f i c u l t i e s i n dealing with government with regard to your r e s i d e n t i a l •'. projects? (1) Yes (2) No (93.22%) ( 6.78%) 25 Interviewer: i f yes to 5.20., continue; i f no, proceed to question 6.1. 5.21. Could you please s p e c i f y : (A) The nature of the d i f f i c u l t y 26 Interviewer: please specify below. (See Table 2.20) - 3 7 -. . . Ih'f (B) What was the predominate s t r u c t u r a l type? 27 (0) No predominate s t r u c t u r a l type (1) Single detached (2) Semi detached (3) Duplex (4) . Row housing (5) Garden apartments (6) Low-rise multiples (7) H i - r i s e multiples (C) What was the predominate tenure? 28 (0) No predominate tenure (1) Rental (2) Strata (3) Co-op (D) In what l o c a t i o n or area were the majority of these d i f f i c u l t i e s encountered? i ) Organized areas 29-34 i i ) Unorganized areas 35-40 •(E) What l e v e l of government was the source of these d i f f i c u l t i e s . .. 41 (1) Federal ( 0.00%) (2) P r o v i n c i a l (14.55%) (3) Regional ( 5 (4) Local (80.00%) - 38 -The next set of questions deals with the development process. 1-4 6.1. To what extent does your firm engage in the following facets of the development process? (A) S i t e s e l e c t i o n (3. 39) (B) Land assembly (2. 90) (C) S i t e planning & subdivision layout (2. 65) (D) Construction (1. 72) (E) S e l l i n g & leasing (3. 23) (F) Property management (1. 52) 7 8 9 10 (0) never (1) seldom (2) as often as not (3) often (4) always Interviewer: hand respondent card J and record order of response.  6.2. This i s a l i s t of various stages i n the development process. Would you please place the stages i n the order you think appropriate. (A) Arranging financing 11 (B) Choosing type of development. - . 12 (C) Choosing s i z e of development 13 (D) Choosing a s i t e , ' . 14 (E) Choosing a contractor 15 (F) Choosing a neighbourhood 16 (G) Getting zoning changed ( i f needed) 17 (H) Getting b u i l d i n g permit 18 (I) Other (please specify - ) 19 Interviewer: hand respondent card B and record- response. 6.3. I w i l l read a l i s t of factors that may be r e l a t e d to your d e c i s i o n as to whether or not you w i l l proceed with a pro-j e c t . Would you please t e l l me, f o r each f a c t o r , which r e s -1 ponse on card B best describes i t s r e l a t i v e importance. (A) A v a i l a b i l i t y of. financing (3 05) 20 (B) Interest rate (2 32) 21 (C) Population trends (1 95) 22 (D) Income trends in the .region (1 87) 23 (E) Rent l e v e l s (1 30) 24 - 39 -ihg. (?) Vacancy rates (1.66) 25 (G) A v a i l a b i l i t y of developable land (2.93) 26 (H) Level of construction i n the region (2.13) ___ 27 (I) Construction costs (2.64) 28 (J) Community a t t i t u d e to your developments (2.27) . 29 (K) Government a t t i t u d e to your developments (2.73) 30 (L) Other (please specify ) . 3 l (0.83) (0) unimportant (1) f a i r l y important (2) of average importance (3) very important (4) e s s e n t i a l 6.4. I w i l l now read you a l i s t of f a c t o r s generally considered important i n the l o c a t i o n or s i t e s e l e c t i o n d e c i s i o n . Would you i n d i c a t e r e l a t i v e importance of each i n the same manner as before. (A) A v a i l a b i l i t y of developable land (2.92) 32 (B) Room for expansion (1.30) 33 (C) P r i c e of land (3.20) 34 (D) Size of s i t e (2.14) 35 (E) Nearness to major roads (2.08) 36 (F) Nearness to bus routes (1.65) 37 (G) Nearness to major shopping.areas (1.94) 38 (H) Nearness to schools . (2.08) 39 (I) Nearness to employment (1.54) 40 (J) Slope of s i t e (1.80) 41 (K) Holding q u a l i t i e s of the s o i l (1.71) 42 (L) Access to trunk sewer (2.91) 43 (M) Proper zoning (3.26) 44 (N). Character ( e x i s t i n g & p o t e n t i a l ) of the surrounding area . (2.07) 45 (0) Other (please specify (0.64) ) 46 (0) unimportant (1) f a i r l y important (2) . of average importance (3) very important (4) e s s e n t i a l 6.5. Do you usually plan a project and then search f o r a s i t e with q u a l i t i e s s u i t a b l e for that project (1) OR do you usually j u s t look f or a "good buy" and plan a project f o r that s i t e (2)? (1) (2) (19.05%) (80.95%) 47 Interviewer:, indicate response as either 1,2, or 3 = 1 and 2. 4 0 -150 6.6. Do you us u a l l y choose s i t e s with a p a r t i c u l a r economic or s o c i a l group i n mind? 48 (1) Yes (49.40%) (2) No .(50.60%) -6.7. Does the s i t e u s u a l l y d i c t a t e the p r i c e range of the housing? (1) Yes (91.07%) (2) No (8.93%) 49 6.8. Do you usually locate near (1), or avoid l o c a t i n g near (2), other new housing developments? (1) (42.86%) (2) (57.14%) 6.9. Do you us u a l l y lead or follow other developments i n making housing a v a i l a b l e i n new areas? (1) Lead (41.07%) (2) Follow (58.93%) 50 51 6.10. Does the surrounding area usually d i c t a t e the p r i c e range of the housing? 52 (1) Yes (2) No . (86.90%) (13.10%) 6.11. Is c i t i z e n acceptance of your proposal an important element i n your d e c i s i o n to proceed? 53 (1) Yes (2) No (57.14%) (42.86%) Interviewer: i f yes to above, continue; i f no, proceed to question 6.13. 6.12. Do the d e s i r e s of c i t i z e n s (1) a f f e c t your project as a r e s u l t of d i r e c t input or (2) i n d i r e c t l y , as a r e s u l t of t h e i r input to the approval process? 54 Interviewer: 3 = 1 and 2. (1) (12.5%) (2) (87.5%) 6.13. Do residents of the immediate surrounding area s i g n i f i -cantly a f f e c t the character and type of development you w i l l build? . 5 5 (1) Yes (2) No (52.98%) (47.02%) 151 6.14. Apart from Land Use Contracts are you required to pay any unusual l e v i e s to the aut h o r i t i e s ? , 56 (1) Yes (52.98%) (2) No (47.02%) Interviewer: i f yes to 6.14., continue; i f no, proceed to question 6.17. ______ 6.15. To whom are these fees or l e v i e s paid? 57 Interviewer: record response below. 6.16. What are the nature of these.fees of lev i e s ? 58 Interviewer: record response below. 6.17. Would you please comment on the l o c a l approval pro-cedure? . . . 59 Interviewer: please record response below. (See Table 6.17) 6.18. Do you follow a specific l i s t of steps in gaining govern-ment approval of your developments? (1) Yes , (55.95%) (2) No (44.05%) Interviewer: i f yes to 6.18., continue; i f no, proceed to question 6.20. - 42 -o. i y . Lould you please speciry trie steps i n trie order m wmcn you follow them. STEP 61 62 63 64 65 66 67 68 69 70 71 72 6.20. In the course of a ' t y p i c a l ' development how often does your f i r m have contact with the following government bodies: Interviewer: code response: i ) Federal (0) (1) (2) (3) 1-4 never seldom often always (See Table 2.20) i i ) A) C.M.H.C. (0.76) 5 B) Dept. of F i s h e r i e s (0.30) 6 C) M i n i s t r y of Transport (0.16) 7 D) Dept. of Public Works (0.23) 8 E) National Harbours Board (0.10) 9 F) Dept. of the Environment (0.29) 10 G) Other (please specify (0.06) ) 11 P r o v i n c i a l A) Dept. of Housing (0.53) 12 B) Dept. of Highways (1.14) 13 C) Land Commission (0.79) 14 D) Rentalsman (0.41) 15 E) Land Use Secr e t a r i a t (0.31) 16 F) Municipal A f f a i r s (0.49) 17 G) Other (please s p e c i f y (0.43) ) 18 (1.00) Regional D i s t r i c t 19 Local A) City Council . (1.72) 20 B) Planning Dept. (2.76) 21 C) E n g i n e e r i n g Dept. (2.71) 22 D) S c h o o l Board. (0.90) 23 E) P a r k s Board (0.83) 24 F) Public U t i l i t i e s (1.71) 25 G) P e r m i t & L i c e n c e Dept. (2.27) 26 H) Assessment Dept. . (1-49) 27 I ) R a t e p a y e r ' s A s s o c i a t i o n (0.71) 28 J ) O ther ( p l e a s e s p e c i f y (0.3.1) ) 29 - 43 -VII. This f i n a l area of concern deals with financing. 7.1. Do you use options f o r land purchases? (1) Yes (2) No (67.3%) (32.7%) 1-4 Interviewer: i f yes to 7.1., continue; i f no, proceed to question 7.6. 7.2. 7.5. Expressed as a percentage, how often would you estimate you use options f o r land purchases? 6-8 7.3. How long i s the option period t y p i c a l l y ? (0) No Response. ( 2. 65%) (1) Less than 30 days ( 0. 00%) (2) 31-60 days ( 8. 85%) (3) 61-90 days (17. 70%) (4) 91-120 days (15. 93%) (5) 121-180 days .' (23. 89%) (6) 181-270 days (19. 47%) (7) 271-365 days ( 7. 08%) (8) Greater than 1 year ( 4. 42%) 7.4. Do you usually pay for options i n advance? 10. (0) . No Response (1) Yes (2) No ( 1.41%) (74.65%) (23.94%) Is the option usually included as part of the purchase p r i c e should you exercise the option? 11 (0) No Response (1) Yes (2) No ( 0 . 0 0 % ) (98.5 %) ( 1.41%) 7.6. Which i s the most c r i t i c a l period f o r financing a housing development? 12 (0) No Response (1) Purchase of land (2) Construction financing (20.35%) (27.43%) (34.51%) (3) Financing inventory of completed units (8.85%) (4) Other (please specify ) (8.85%) 7.7. In which area do you place most e f f o r t i n order to reduce your costs? (0) no response (11. 50%) (1) land costs and land assembly (40. 71%) (2) s e r v i c i n g • ( 7. 96%) (3) construction - labour .'( 8. 85%) (4) construction - materials ( 9 . 73%) (5) sales ( 1. 77%) (6) financing ( 2. 65%) (7) other (please s p e c i f y (16. 81%) Would you please by responding (0) never (1) sometimes (2) often (3) always 7.8. I w i l l read you a l i s t of f i n a n c i a l sources. t e l l me for each how often you use the source Interviewer: record number of response. (A) I n s i t i u t i o n s (Pensions, t r u s t s , etc.) (0.76) 14 (B) Insurance companies (0.55) 15 (C) Banks (2.09) 16 (D) CMHC-NHA (0.56) 17 (E) Equity (1.03) 18 (F) Mortgage bankers (0.69) 19 (G) Partnership funds (0.47) 20 (H) Personal loans (0.57) 21 (I) Retained earnings (1.15) 22 (J) Personal savings (0.52) 23 (K) Syndicated investors (0.53) 24 (L) P r o v i n c i a l government (please s p e c i f y 25 dept. (0.23) ,) (M) Other (please s p e c i f y (0.28) ) 26 Interviewer: hand respondent card B. 7.9. I w i l l read you.a l i s t of details relating to.financing; could you please t e l l me the degree of importance of the following factors by responding with the choice from card B that most closely reflects their relative importance: (A) Rate of interest (B) Term of loan (C) Amortization period (D) Loan to value ratio (2.64) (2.30) (2.10) (2.73) 27 28 29 30 - 4 5 -(E) Degree of p a r t i c i p a t i o n i n cash (2.50) _ _ _ _ _ _ _ _ 31 (F) Other (please specify ; (0.59) ) 32 (0) unimportant (1) f a i r l y important (2) of average importance (3) very important (4) e s e n t i a l Thank you for your help. The information you have provided has been very h e l p f u l and w i l l be kept i n s t r i c t confidence. Would you l i k e a copy of the survey r e s u l t s ? (1) Yes (2) No 33 Interviewer: be sure to record the name and address. •lame, of respondent: \ 0-20 34 •lame of firm: 21-42 street address of firm: 43-63 >Lty, town, or v i l l a g e : 64-80 - 46 -Card A A. Management B. Pro f e s s i o n a l (Architects, Engineers) C. O f f i c e s t a f f D. Sales s t a f f E. Construction/development Card B 0) unimportant 1) f a i r l y important 2) of average importance 3) very important 4) e s s e n t i a l Card C 0) under $ 2,999 per year 1) $ 3,000 to . $ 4,999 per year 2) $ 5,000 to $ .6,999 per year 3) $ 7,000 to. $ 9,999 per year 4) $10,000 to $14,999 per year 5) $15,000 to $19,999 per year 6) $20,000 to $24,999 per year 7) $25,000 to $29,999 per year 8) $30,000 and over Card D A) Garden apartments B) Low-rise multiples C) H i - r i s e multiples - 47 -Card E A) Single detached B) Semi detached C) Duplex D) Row housing E) Garden apartments F) Low-rise multiples' G) H i - r i s e multiples Card F What was the nature of the d i f f i c u l t y ? What was the predominate st r u c t u r a l type? ( 0 ) no predominate s t r u c t u r a l type ( 1 ) garden apartments ( 2 ) low-rise multiple ( 3 ) h i - r i s e multiple What was the predominate tenure? ( 0 ) no predominate tenure ( 1 ) r e n t a l ( 2 ) strata ( 3 ) co-op D) In what location or area were the majority of thes d i f f i c u l t i e s encountered? E) What l e v e l of government was the source of these d i f f i c u l t i e s ? (A) Federal (B) P r o v i n c i a l (C) Regional (D) Local Card G A) Single detached B) Semi detached C) Duplex D) Row housing 158 Card H A) What was the nature of the difficu l t y ? B) . What was the predominate structural type? (0) no predominate structural type (1) single detached (2) semi detached (3) duplexes (4) row housing C) What was the predominate tenure? (0) no predominate tenure (1) rental (2) ownership D) In what location or area were the majority of these d i f f i c u l t i e s encountered? • . E) What level of government was the source of these d i f f i c u l t i e s ? (A) . . Federal (B) Provincial (C) Regional • (D) Local Card I (1) strongly agree (2) agree (3) indifferent (4) disagree (5) strongly disagree Card J A. Arranging financing B. Choosing type of development C. Choosing size, of development D. Choosing a site E . Choosing a contractor F. Choosing a neighbourhood G. Getting zoning changed (if needed) H. Getting building permit I. Other (plaase specify) - 49 -Appendix 2(b) T H E U N I V E R S I T Y O F B R I T I S H C O L U M B I A V A N C O U V E R 8,' C A N A D A 159 FACULTY OH C O M M E R C E A * D BUSINESS ADMINISTRATION The Urban Land Economics D i v i s i o n of the Faculty of Commerce and Business .dministration at U.B.C. has rec e n t l y received a research grant of $41,000 from the eal Estate I n s t i t u t e of B r i t i s h Columbia to conduct a study of housing needs i n • r i t i s h Columbia. The study has as i t s goal the development of. a set of p o l i c i e s hat w i l l ease the current housing problem and promote the f a i r and equitable func-ioning of housing markets i n a l l of the regions of the province. The report and ecommendations are expected to be completed and a v a i l a b l e f or p u b l i c d i s c u s s i o n iy early F a l l . As a c r i t i c a l part of t h i s work we are attempting to sample expert opinion from :he r e a l estate industry on the decision-making process of housing and land developers. Sy understanding the elements that go into decisions to proceed on t h e i r developments re can also i d e n t i f y current problems in- the development process that are retarding :he orderly flow of new housing and serviced land to the consumer. Interviews with developers are the prime source of information f o r the study >f how supply decisions are taken. Of p a r t i c u l a r i n t e r e s t are the choice of l o c a t i o n md. the type and cost of the housing to be developed. The i n s t i t u t i o n a l and community :onsiderations that are involved i n planning and implementing a development are al s o extremely important. Information obtained w i l l be kept i n the s t r i c t e s t confidence >y the f a c u l t y and used only f o r the purpose of averaging with other data to determine .ndustry c h a r a c t e r i s t i c s . The r e s u l t s of t h i s study w i l l , of course, be r e a d i l y i v a i l a b l e to you upon completion of the study. A s i m i l a r study was completed three ?ears ago and i t s r e s u l t s have been widely disseminated and very w e l l received. You ire most welcome to have a copy of that study as well, should you wish. In gathering data on developer decision-making we hope to be able to contact a l l levelopers i n the province. Accordingly, we would l i k e to have one of our graduate, research a s s i s t a n t s telephone you shor t l y to arrange a one-hour interview at your ;onvenience. If you have any questions about our work please contact me at 228-)r Professor Stanley Hamilton at 228- . . Thank you f o r your cooperation. Sincerely, Michael A. Goldberg Associate Professor Urban Land Economics •LAG/vm appendix z(,cj 160 THE UNIVERSITY OF BRITISH COLUMBIA 2075 Wi'.SBROOK PLACL VANCOUVER, B.C., CANADA V6T 1W5 F A C U L T Y O F C O M M E R C E A N D BUSINESS A D M I N I S T R A T I O N The Urban Land Economics Division of the Faculty of Commerce and Business Administration at U.B.C. has recently received a research grant of $41,000 from the Real Estate Institute of British Columbia to conduct a study of housing needs in British Columbia. The study has as i t s goal the development of a set of policies that w i l l ease the current housing problem and promote the f a i r and equitable functioning of housing markets in a l l of the regions of the province. The report and recommendations are expected to be completed and available for public discussion by early F a l l . As a c r i t i c a l part of this work we are attempting to sample expert opinion from the real industry on the decision-making process of housing and land develo-pers. By understanding the elements that go into decisions to proceed on their developments we can also identify current problems in the development process that are retarding the orderly flow of new housing and serviced land to the con-sumer.. Interviews with developers are the prime source of information for the study of how supply decisions are taken. Of particular interest are the choice of loca-tion and the type and cost of the housing to be developed. The institutional and community considerations that are involved in planning obtained w i l l be kept in the strictest confidence by the faculty and used only for the purpose of averaging with other data to determine industry characteristics. The results of this study w i l l , of course, be readily available to you upon completion of the. study. A similar study was completed three years ago and i t s results have been widely disseminated and very well received. Due to the size and geographic diversity of our province, i t i s impossible for us to adequately study the real estate development process in a l l regions of the province. We much prefer to rely on the local expertise that your board can provide about local conditions in housing and land development. Accordingly, we very much hope that you w i l l be able to assist us in gathering information on development practices and policies in your area. Your.help in administering the questionnaire is most c r i t i c a l to the success of our project and we hope that i t is possible for you to cooperate with us in this matter. We have gone to great lengths to prepare the questionnaire (a copy of which i s enclosed for your infor-mation) and to make i t as straightforward as possible to administer. We w i l l be most happy to send you as many questionnaires as you might require to survey the. 2 / 161 - ? -developers i n the s e r v i c e area covered by your board. We have a l s o prepared an i n s t r u c t i o n a l cover l e t t e r which we s h a l l forward at the same time. In a d d i t i o n to the present q u e s t i o n n a i r e we are sending along to you a copy of the e a r l i e r q u e s t i o n n a i r e and the f i n d i n g s based upon i t . The present ques-t i o n n a i r e has been r e v i s e d to take i n account recent changes i n the r e a l develop-ment p r a c t i c e (eg. land use c o n t r a c t s , rent c o n t r o l , impost charges and i n c r e a -s i n g m u n i c i p a l and r e g i o n a l c o n t r o l of the development process) . The present q u e s t i o n n a i r e c o n s i s t s of 7 s e c t i o n s ( d e t a i l e d below). Our experience has shown us that i t should t y p i c a l l y take between 30-45 minutes t o administer. While the q u e s t i o n n a i r e i n c l u d e s a l a r g e number of questions i t i s h i g h l y u n l i k e l y that a l l s e c t i o n s w i l l apply to any one respondent. Respondents w i l l only be answering a r e l a t i v e l y s m a ll p o r t i o n of the q u e s t i o n n a i r e . As a r e s u l t the time needed to administer the q u e s t i o n n a i r e i s kept to a minimum. The 7 s e c t i o n s are designed to provide i n f o r m a t i o n on the f o l l o w i n g : 1. General C h a r a c t e r i s t i c s of Development Firms 2. Elements of M u l t i p l e R e s i d e n t i a l Unit Development 3 . Elements of S i n g l e R e s i d e n t i a l U n i t Development 4 . The Role of Land Use Contracts i n R e s i d e n t i a l Development • 5 . The S u b d i v i s i o n Process 6. . Stages and Components of the R e s i d e n t i a l Development Process 7. The Financing of R e s i d e n t i a l Development As the Real E s t a t e I n s t i t u t e of B r i t i s h Columbia i s most eager to have our f i n a l r e p o r t , of which t h i s study i s an important component, by the end of t h i s summer (eg. August, 1975) your e a r l i e s t cooperation i n t h i s matter i s most appre-c i a t e d . On the assumption that i t i s p o s s i b l e f o r you to a s s i s t us i n t h i s survey we would l i k e to ask that i n your s e l e c t i o n of respondents from your area that you t r y to i n c l u d e both l a r g e and small developers. However, f o r purposes of s t a t i s t i c a l r e l i a b i l i t y i t i s most important that the g r e a t e s t e f f o r t be aimed at g e t t i n g accurate responses from those developers that account f o r the bulk of development a c t i v i t y i n your s e r v i c e area. Please keep i n mind that by development a c t i v i t y we are i n c l u d i n g both land s u b d i v i s i o n and s e r v i c i n g and housing con-s t r u c t i o n . If you have any questions on any of the above, or i f we can be of any f u r t h e r assistance i n answering questions on other phases of our work,, please c a l l me (at 228- ) or P r o f e s s o r Stanley Hamilton (at 228- ), c o l l e c t . We look forward to your response as soon as your time allows. F i n a l l y , and most i m p o r t a n t l y , we very much hope that you f i n d i t possible to provide us and your Real Estate I n s t i -tute with the a s s i s t a n c e we need to complete this very d i f f i c u l t task within the time available. Thank you very much i n advance for your c o n s i d e r a t i o n of t h i s request. Yours sincerely, Michael A. Goldberg Associate Professor Urban Land Economics MAG/Id E n d . ' 162 Appendix 3 Although the questionnaire was prepared with c a r e . i t became apparent that a number of changes would have been desi r a b l e . These a l t e r a t i o n s are of two types, those directed at obtaining more complete informa-t i o n and those that would allow for a more s i m p l i f i e d method of a n a l y s i s . Recommended changes of the f i r s t type, that i s d i r e c t e d at obtaining more perfect information, are as follows. 1. Each developer type should be queried as to the type of un i t b u i l t i n the past and the type(s) he i s l i k e l y to develop i n the future. This i s a convenient manner i n which emerging trends can be i d e n t i f i e d . 2. Developers could be asked to i d e n t i f y the reaonss f o r eit h e r increased or decreased annual production r e l a t i v e to t h e i r expectations at the beginning of the year. This would allow f o r an i d e n t i f i c a t i o n of problem areas as well as giving an i n d i c a t i o n of the success of various p o l i c y measures directed at the r e s i d e n t i a l development se c t i o n . 3 . In the present study no d i r e c t mention was made to rent c o n t r o l . This was done i n t e n t i o n a l l y i n an attempt to i s o l a t e opinions unbiased by interviewer/respondent i n t e r a c t i o n or the phrasing of questions i n the survey. While t h i s approach was valuable i n that developers often made reference to the subject, the responses were non-quantifiable. In future studies of t h i s type we recommend that the questionnaire include reference to a l l the areas considered relevant at the time.. Recommended changes of the second type, that i s changes directed at: improving, or s i m p l i f y i n g the manner i n which the data may be treated, are as follows. 163 1. In the present study developers were asked to s p e c i f y the l o c a t i o n , of t h e i r projects i n a number of contexts throughout the questionnaire. This r e p e t i t i o u s questionning appears to be unnecessary i n that disaggre-gation by geographical area was not possible (beyond a macro type of metro-non/metro c l a s s i f i c a t i o n ) due to i n s u f f i c i e n t sample s i z e . For the pur-poses of i n v e s t i g a t i o n s such as the developer survey, geographical i d e n t i -f i c a t i o n may be reduced to a s i n g l e question r e l a t i n g to areas i n which the developer has operated during the study period. This a l t e r a t i o n would eliminate much of the unnecessary bulk contained i n the questionnaire. 2. This next comment applies to the method of analysis rather than the questionnaire i t s e l f . Rather than w r i t i n g i n d i v i d u a l f o r t r a n programmes to generate information with respect to each subject of i n v e s t i g a t i o n (as was done i n the preparation of t h i s r e p o r t ) , data processing would be much s i m p l i f i e d by the usage of 'canned' s t a t i s t i c a l packages such as S.P.S.S. or M.V.Tab. .16 u Appendix 4  Background Data on Housing i n B.C. TABLE A4-1 Start s , Completions, Completed/Unoccupied Units (1970-1974) Starts Completions New Completed/Unoccupied B.C. Vancouver V i c t o r i a B.C. Vancouver V i c t o r i a Vancouver Vic 1974 31420 14452 2630 34540 155814 4000 1631 97 1973 27627 17334 4013 34604 15580 3406 404 5 1972 35317 16210 4192 31097 14044 3390 551 424 1971 34765 15553 3102 30478 14984 2836 335 167 1970 27316 13437 2559 26652 13488 3184 429 144 *. Includes Vancouver CM.A. and V i c t o r i a CM.A. ** Fourth Quarter Source: C.M.H.C Canadian Housing S t a t i s t i c s , 1974. TABLE A4-2 Vacancy Rates i n P r i v a t e l y I n i t i a t e d Apartment Structures of (Six Units and Over (1970-1974) 1974 (December) 1974 (June) 1973 1972 1971 1970 Vancouver CMA 0.1 0.3 1.0 2.4 4.1 2.7 V i c t o r i a CMA 0.1 0.5 1.4 3.2 4.1 5.3 Source: CMHC, Canadian Housing S t a t i s t i c s , .1974. 

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