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Land development in the 1970’s Peterson, William Scott 1973

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e l LAND DEVELOPMENT  IN THE 1970'3  by WILLIAM SCOTT PETERSON B. S., UNIVERSITY OP COLORADO,  1971  A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE  REQUIREMENTS FOR THE DEGREE OF MASTER  OF SCIENCE  In t h e Department of COMMERCE AND BUSINESS ADMINISTRATION  We a c c e p t t h i s t h e s i s required standard  THE  as c o n f o r m i n g  t o the  UNIVERSITY OF BRITISH COLUMBIA DECEMBER,  1973  In p r e s e n t i n g  t h i s t h e s i s i n p a r t i a l f u l f i l m e n t of the requirements f o r  an advanced degree a t t h e U n i v e r s i t y , o f B r i t i s h Columbia, I agree t h a t 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 o r r e f e r e n c e and s t u d y .  I f u r t h e r agree t h a t p e r m i s s i o n f o r e x t e n s i v e  copying o f t h i s  thesis  f o r s c h o l a r l y purposes may be g r a n t e d by t h e Head o f my Department o r by h i s r e p r e s e n t a t i v e s .  I t 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 g a i n s h a l l n o t be a l l o w e d w i t h o u t my written permission.  Department o f  CMM*^<^ ILteC  The U n i v e r s i t y o f B r i t i s h Columbia Vancouver 8 , Canada  D a t  e  Qut~J*V  j?  t  i  ABSTRACT Land use c o n t r o l , and consequently the process of land development, have undergone major modifications within the last few years.  Conventional land use controls,,  such as zoning by-laws and subdivision regulations, have been reformed f o r various "observable"  and "non-observable"  reasons to include such devices as comprehensive planned unit developments and land use contracts. r e s u l t , land developers have had to adjust their  zoning, As a operational  responsibilities, In this paper, we a re primarily concerned with the possible reasons f o r the recent shifts evident within contemporary land use l e g i s l a t i o n ; and the subsequential reactions by land  developers.  A review of the l i t e r a t u r e concerned with contemporary land use controls and their impacts w i l l be u t i l i z e d . t i o n a l land economic theory w i l l supplement these  Tradi-  observations.  It i s hoped that this study w i l l encourage further examination of the land development environment observed i n this present  impirical analysis.  The main objectives might  hopefully be to stimulate thought, provoke discussion and encourage further work i n the f i e l d .  ii  TABLE OF CONTENTS  ABS TRACT  i  CHAPTER  1  Introduction  1  CHAPTER  2  Background  7  CHAPTER  3  Real Property and Land Development  14  CHAPTER  4  Land Models  20  CHAPTER  5  Conventional Land Use Controls  32  CHAPTER  6  Why Conventional Land Use Controls Changed  38  CHAPTER  7  Reformed Land Use Controls  51  CHAPTER  8  Conclusion  67  BIBLIOGRAPHY  75  APPENDIX  81  BIOGRAPHICAL INFORMATION  83;  1  Chapter 1 - Introduction It i s the purpose of this paper to I l l u s t r a t e the working environment  of the modern land developer.  In  reaching a better understanding of the forces which interreact i n t h i s environment, we, as a society, may become more e f f i c i e n t i n establishing and maintaining these p a r t i c u l a r amenities considered essential f o r a s a t i s f a c t o r y q u a l i t y of l i f e . It i s becoming increasingly important f o r those individuals who assemble the land and buildings f o r our homes, o f f i c e s and factories to know why  their business  a c t i v i t i e s are subject to growing government c o n t r o l . Land developers must be aware of the r i s k s which inhere with control and regulation.  Those who dismiss such control as  being indicative of a passing phase must prepare  themselves  to be discouraged. 1.1  Characteristics of Land The economic c h a r a c t e r i s t i c s of land are i n part  determined by i t s physical c h a r a c t e r i s t i c s .  Certainly the  physical attributes of any commodity are faotors of great weight i n determining the processes of production or development, the d i s t r i b u t i o n a l channels, and the nature of i t s use or consumption. The commodity traded when dealing with land i s space and area.  Land primarily derives i t s value from use, and  the shape of the space i s important i n determining the  2  uses to which i t can be put.  Space cannot be depleted,  therefore land i s i n d e s t r u c t i b l e , while i t s value  may  be affected by changing external conditions. The immobility of land requires that i t must be used where i t i s found and cannot be moved to a more favorable market.  Land l i e s h e l p l e s s l y vulnerable to  external s o c i a l and economic forces which determine i t s use and influence i t s value. Since no two building lots are oriented i d e n t i c a l l y with respect t o any other l o t or to a l l lots  (geologically  or geometrically) land!a heterogeneity often weighs heavily i n the determination of value.  This heterogeneity  may  be further i l l u s t r a t e d by the scattered ownership patterns e x i s t i n g within the land market. F i n a l l y , the f i x e d nature of s e r v i c i n g and the other components of the urban infrastructure may possibly hinder future changes i n land use.  For t h i s reason, adaptability  to new uses may be l i m i t e d . 1.2  Nature of Land Market Adam Smith, whose Wealth of Nations  (1776) i s a  germinal book of modern economics or p o l i t i c a l economy, was  t h r i l l e d by the recognition of an order i n the economic  system.  Smith proclaimed the p r i n c i p l e of the " I n v i s i b l e  Hand"; every i n d i v i d u a l , i n pursuing only his own good, was  selfish  l e d , as i f by an i n v i s i b l e hand, to achieve the  best good f o r a l l .  Interference with free competition by  3  government was almost c e r t a i n to be i n j u r i o u s . While Smith did recognize some of the r e a l i s t i c l i m i t a t i o n s on t h i s theory, i t was not u n t i l l a t e r that economists discovered t h i s t r u t h :  The virtues claimed f o r free  enterprise are f u l l y r e a l i z e d only when complete checks and balances of "perfect competition" Perfect competition  are present.  i n terms of the land market  exists only i n the case where no farmer, businessman, or laborer Is a b i g enough part of the t o t a l market to have any personal influence on market p r i c e . not been the case.  C l e a r l y this has  Because of land's unique physical  q u a l i t i e s , namely i t s Immobility, d u r a b i l i t y and l i m i t e d supply, I t has t r a d i t i o n a l l y been subject t o non-market constraints and other e x t e r n a l i t i e s . 1.3  Controls on Land The process of creating land values has been t r a d i -  t i o n a l l y constrained by such techniques as aoning by-laws and subdivision regulations.  Hence, with such constraints,  the land market ?>has been to varying degrees  imperfect  (where a farmer, businessman or laborer i s a b i g enough part of the whole land market t o exert influences upon the ultimate market p r i c e ) . Imperfection,  When t a l k i n g about a market's  i t i s imperative t© review some basic p r i n c i -  ples of p r i c e s . In an exchange economy prices a r e established by competitive  exchange.  These prices perform the s o c i a l  4  function of product and resource a l l o c a t i o n .  And  do so without the conscious personal intent of any  they one  firm or household, any group of firms or households, any c e n t r a l s o c i a l agency.  or  Within the l i m i t s set by law  and custom, consumers spend t h e i r income on the things they want.  Naturally, they w i l l o f f e r higher prices f o r  the goods and services they desire greatly and prices f o r those they desire l e s s .  lower  Owners of resource  services are free to s e l l t h e i r services to the f i r m of t h e i r choie©.  They are Inclined to s e l l where the price  offered is most a t t r a c t i v e , given certain other considerations.  Entrepreneurs devote t h e i r efforts to producing  things that bring the highest r e t u r n .  The consequent  interaction of households and firms determine market p r i c e s . Considered from this point of view, prices serve two major purposes i n an exchange economy: formation, and  ( l ) They tramsmit i n -  (2) they provide incentives for economic  units to be guided by this information. The price mechanism imparts information and provides incentives to reallocate resources according to the wants of consumers. 1.4  New  Land Controls  The land developer today must consider new land controls (such as planned unit developments, land use contracts and comprehensive zoning) when he assembles a development project.  These devises have been forced upon  an already Imperfect land market.  There are countless  5  reasons f o r the advent of such "reformed" land use controls. Many of these reasons w i l l be discussed i n subsequent sections; but regardless of the reasons, land control i n North America has passed a s i g n i f i c a n t milestone with i t s new reforms.  With such a s h i f t towards more interference  and control i n the land development process, the land market has become more Imperfect. The new land control l e g i s l a t i o n increases land developer's costs i n two ways.  F i r s t , the developer may  be required to provide c e r t a i n public services which were not required under the conventional controls of zoning by-laws and subdivision regulations.  These public services  may be both on-site and o f f - s i t e , depending upon the p a r t i cular arrangement made between the land developer and l o c a l planning a u t h o r i t i e s .  The second type of cost may be r e -  ferred t o as the "costs of planning".  Delays inherent i n a  long approval proeess w i l l increase the costs of development because of the time factor of c a p i t a l cost.  These costs of  planning are borne by the land developer i n the short run, and are eventually passed-off  Into the ultimate price to  the consumer. Reformed land use controls have substantially i n creased the developer's r e s p o n s i b i l i t i e s and c a p i t a l requirements, and thereby Increased ment.  the costs of land develop-  Some land developers may be forced t o exit the land  market because of t h e i r i n a b i l i t y to accumulate s u f f i c i e n t c a p i t a l to "carry" these new costs  (capital Improvement of  6  public services and the costs of planning) throughout the development c y c l e .  These developers who remain i n the  market may be segmented by their operational philosophies. Some w i l l f i g h t the moves of government f o r more land eontrol, while others w i l l learn how to operate under the new constraints.  It i s foreseeable that many developers  w i l l adopt a p o l i c y of "wait and see" by temporarily e x i t i n g the market. 1.5  Purpose If land developers are t o respond to the increasing  demands of our society f o r land and Improvements, they must confront these Issues of t h e i r existence under a controlled, imperfect market.  Objectives and operating procedures may  be s i g n i f i c a n t l y a l t e r e d . F l e x i b i l i t y and r e s p o n s i b i l i t y of land developers must be ilbunded on a basic understanding of the m u l t i p l i c i t y of s o c i a l and economic forces c o n t r o l l i n g the land development process.  The purpose of this research i s t o  both explore the ways i n which land use controls have changed and how land developers must adjust to these new costs brought f o r t h by the new land use c o n t r o l s .  7  Chapter 2 - Background As a point of temporary departure i n the study of government r e s t r i c t i o n s on land development, i t seems reasonable to review some of the t r a d i t i o n s ! thoughts on the i n d i v i d u a l and his r e l a t i o n s h i p to the s t a t e . The question of proper balance of power between the individual and the state Is a topic preponderously complex, yet sadly misunderstood..  It has undoubtedly been one of  the most Important factors of influence In the process of s o c i a l and philosophical development. philosophical questions  owe  Many s o c i a l and  t h e i r existence, to some extent,  to the basic issue of central versus i n d i v i d u a l decisiontaking authority. 2.1  Real  Property  Real property consists of land and those structures or q u a l i t i e s permanently a f f i x e d to that land (as d i s t i n g u i shed from personal property).  Because of r e a l  property's  nature, i . e . immobility, d u r a b i l i t y and heterogeneity, i t has become a s u i t a b l e medium through which the issues of decision-taking authority (that i s , the i n d i v i d u a l versus the state) have come to the attention of those not usually conversant with p o l i t i c a l philosophies.  Land - Its control  and use - has become a t e s t i n g ground i n the evolution of politico-economic  philosophies.  Land use and control is  not, however, the only medium through which p o l i t i c o economic philosophies are weighed and  evaluated.  8  Most production processes (processes  involving the  development of raw materials into a f i n i s h e d good) are controlled or regulated by the state, at various i n the name of the health, safety or welfare 2.2  stages,  of the p u b l i c .  Economic-Political Philosophy There appears t o be a strong relationship between the  Idealogies of an economic system and p o l i t i c a l  philosophy.  Economic systems could be characterized by degree of competitiveness, ranging from perfect competition  (many p r i c e -  taking buyers and s e l l e r s of a homogeneous product or service) to monopolies (a single buyer and s e l l e r who have the power to set price and output).  Likewise, p o l i t i c a l  philosophies  may be characterized by the balance of decision-taking authority that exists between the Individual and the s t a t e . The polar cases - l a i s s e z f a i r e and t o t a l i t a r i a n d i c t a t o r ship of production  - dramatize economic p r i n c i p l e s .  "Laissez  f a i r e " as a p o l i c y , however, has never implied no state i n t e r vention.  Given the propensity to act monopolistically,  government must always act p o s i t i v e l y to preserve  competition.  The prime reason f o r the strong semblenee between economic systems and p o l i t i c a l philosophies consists i n the manner i n which decisions are made.  It seems that i f dec-  isions are made on an Individual or decentralized basis, a competitive  market economy (laissez f a i r e ) based on rules of  law and coupled with government development i n areas where there Is no alternative to c o l l e c t i v e choice, i s p e r f e c t l y  9  feasible.  Conversely, the conditions and effects of  centralized decisionmaking promote and strengthen p o s i tions of monopoly advantage i n the economy. Under a competitive  or market economy, p r i c e s , not  the state, are responsible f o r the a l l o c a t i o n of the scarce resources of the country among Its various uses.  Some f e e l  a system of this nature may r e f l e c t human needs i n r e l a t i o n to natural forces and resources more adequately or e f f i c i e n t l y than a state a l l o c a t i o n system."*" A state controlled or central decision-taking economy is often contrasted with the shortcomings of the price mechanism (as a resource a l l o c a t i n g or income-distributing device) i n a competitive  economy.  It is believed that  unfortunate distortions or misallocations of resources or incomes may occur because prices - the a l l o c a t i v e t o o l of the competitive  market economy - may not adequately r e f l e c t  f u l l s o c i a l costs and benefits attaching to decisions and 2 resource use.  If individuals were unfettered  decision-taking, instances  In t h e i r  could occur where the s o c i a l  net product of a decision was negative even though i t s 3  private net product was p o s i t i v e .  Despite the costs and  effects of government intervention, public action i n such circumstances may improve the s o c i a l product. But public intervention cannot always be regarded as y i e l d i n g a net benefit In t h i s way.  I t may i t s e l f generate  s p i l l o v e r costs; moreover, state action may raise problems  10  concerning the a l l o c a t i o n a l or d i s t r i b u t i o n a l phases of any state sponsored economic a c t i v i t y . ^  In other words,  how can the state f a i r l y allocate among the people costs and benefits generated by i t s programs?  High costs of  administering state sponsored programs, losses of overall e f f i c i e n c y and I n a b i l i t y of production  to r e f l e c t the  preferences of individuals may be f a i r observations  of an  5  economy dominated by centralized decision-taking. 2.3  Dual Economic System The contemporary "dual economic system", v i s i b l e  in the United States and Canada, i s one i n which the state is allowed by law to function within the market economy. The degree to which the state becomes involved i n economic matters varies among the states and provinces,  according  to the p a r t i c u l a r needs of the people. The precise nature of state p a r t i c i p a t i o n within the economy i s a topic of constant debate and l e g i s l a t i o n . However, i t Is generally held that the state should be involved i n economic matters only i n such cases and at such times as the competitive  market economy has been unable to  prjoduoe desirable net s o c i a l b e n e f i t s .  Guidelines as to  where the state should operate include:  Areas In which  "inadequate" expenditures may be undertaken by the private sector (e.g. education and national defense); areas i n which i n which the state could purchase goods or services at a cheaper cost to society as a whole; and, f i n a l l y , areas i n  11  which an expenditure by the public sector would be of "great importance to the genral Interest and welfare." This c r i t e r i o n i s suspect as an operational rule because what i s "of great Importance to the geneualiinterest and welfare" varies not only among i n d i v i d u a l s , but may  vary  i n one person's mind from time to time. 2.4  Safeguards In order to insure the high operational q u a l i t y of  a dual-economic system, two primary safeguards must be protected. F i r s t of a l l , elections mu3t remain a viable t o o l i n upholding the w i l l of the populace.  If society i s to be  serious about having a s t a t e body responsible and  account-  able f o r i t s a c t i v i t i e s , individuals must press f o r v a l i d elections and then must vote f o r the candidate (or r e f e r endum) of t h e i r choice - at a l l l e v e l s of government. Secondly, the j u d i c i a l branch of government must be protected and encouraged.  Laws must be both f a i r and  expedient i n preserving the competitive nature of the market economy.  The courts must uphold the basic "dual-economic"  p r i n c i p l e that planning (and other state a c t i v i t i e s i n the economy) and c ompetition can be combined only by planning f o r competition, but not planning against competition. If s o c i e t y , a s we know i t today In North America, i s to function with a minimum of negative net s o c i a l product,  12  the dual economic system must be preserved.  The system  must be allowed to react to changes i n s o c i a l needs promptly and i n sequence.  Namely, after the state recognizes  a s i g n i f i c a n t change i n s o c i a l needs, i t s duty should be to help s h i f t  (or create) effective demand.  By a l t e r i n g demand,  the market economy should be encouraged t o s a t i s f y that need Q  with available resources. Now, with a basic understanding of the present "dual economic" system, we may d i r e c t our attention to the land market and i t s behavior within that system.  13  CHAPTER 2  FOOTNOTES  1  John Jewkes, Public and Private Enterprise (London: Routledge and Kegan Paul, 1965), p.88-89.  2  P h i l i p H. White, "Urban Redevelopment P o l i c i e s " (London: The Chartered Surveyors Annual Conference, 1961),p.7.  3  Paul C. Johnson, "The Changing Rural Community and Need f o r Modern Land Policy," Modern Land Policy (University of I l l i n o i s , Land Edonomics I n s t i t u t e , 1960), p.167.  4  K. H. Parsons, "The Place of Land Reform i n a Developmental Agriculture Policy," Ibid, p.302.  5  Jewkes, op c i t , p.8-26.  6  Jewkes, op c i t , p.27-28.  7  F. A. Hayek, The Road to Surfdom (Chicago: University of Chicago Pre3s, 1944),p.42.  8  N. Jacoby and F. G. Pennanc©, "The P o l l u t e r s : or Government?," (London: Institute of Economic A f f a i r s , 1972),p.28.  Industry  14  CHAPTER 3  REAL PROPERTY AND  LAND DEVELOPMENT  Land and the structures b u i l t upon i t d i f f e r very l i t t l e from other consumer goods.  But, as mentioned  previously, r e a l property i s somewhat a l i e n to other consumer goods. 5.1  Immobility and D u r a b i l i t y The Immobility of real property implies that the  services rendered by the existing stock (of r e a l property) must be consumed on s i t e .  It follows that the c a p i t a l  value of any structure vis-a-vis others w i l l be determined by i t s p a r t i c u l a r character and l o c a t i o n .  Because of lands  1  Immobility, property values r e f l e c t , to a large degree, the e x t e r n a l i t i e s of that area.  Hence, improvements, whether  public or private, r e f l e c t i n the value of any given s i t e . Because structures are durable, the standing stock of r e a l property i s very large i n relation, to any flow of additional new  supply coming on the market i n any one year.  What this means i s that at any given time, the average price of structures w i l l be determined by the extent of tdemand f o r , and the quantity and quality of, the standing stock. In contrast f o r most other consumer goods, existing stocks are of minor importance:  f o r price determination, what  is e s s e n t i a l i s the cost of new  supplies and therefore the  rate at which they are flowing on to the market r e l a t i v e to the rate at which demand and consumption i s taking them off.  15  Important consequences follow from t h i s  simple  d i s t i n c t i o n which deserve attention i n l i g h t of land development. 3.2  Consequences F i r s t , neither b u i l d e r s ' costs nor the price or  a v a i l a b i l i t y of building land can materially a f f e c t the current average l e v e l of r e a l property values. developers  Land  look to the e x i s t i n g l e v e l of r e a l property  prices and i n l i g h t of current construction and development costs simply decide whether they can p r o f i t a b l y develop at the land price they must pay f o r b u i l d i n g s i t e s in a particular location.  Only slowly over time, as  buildings gradually changes the size of the standing i n r e l a t i o n to demand, w i l l the l e v e l of r e a l  new stock  property  values be a f f e c t e d . Second, although i n d i v i d u a l developers  may be checked  by p a r t i c u l a r land prices they think are too high to  support  profitable development at the going l e v e l of r e a l property prices, i t Is none the less the c o l l e c t i v e bids of  developers  that sets the tone of the market f o r undeveloped lands influence land owners expectations.  and  Land prices are deter-  mined by house prices rather than the other way  around.  Hence, the costs of land are a function of new b u i l d i n g values, which i n turn are determined, i n the main, by the price of e x i s t i n g buildings.  To carry the analogy one  step  back, the price of unserviced land becomes a function of the price of f i n i s h e d l o t s .  Only i n the long run, a f t e r the  16  stock has changed r e l a t i v e to demand^ w i l l prices change, Changing consumer preferences are apt to negate any possible price declines t o be achieved through increased production.^" A r e f u s a l by some landowners t o part with land at the going l e v e l of prices offered by developers doesn't date this analogy.  invali-  Owners expectations of future r e a l  property values may be such that they expect t o gain by holding back now and s e l l i n g at a l a t e r date.  I f the costs  of withholding (opportunity costs and out-of-pocket costs) are less than the expected  increase i n land p r i c e , land  owners w i l l continue to withhold.  And so, land owners  encourage a transfer of b u i l d i n g operations from the present to the future when demand pressure Is expected t o be coven 2 stronger than now. 5.3  Stock-Flow The theory of resource p r i c i n g (land Input), l i k e  the theory of f i n i s h e d product p r i c i n g (land and Improvements) has focused upon the price of a flow v a r i a b l e .  For instance,  a wage rate i s the price of a flow of labor services (dollars per hour of labor services employed).  A raw material price  i s quoted by existing land owners as dollars per quantity (dollars per acre of a fee simple s a l e ) . A related question ©enters upon the value of ®. saitock. What is the value of a l o t i t s e l f i n contrast t o the services per time period rendered by that l o t ?  These services can be  viewed conveniently as asstock embodied i n the land and  17  released i n the form of flow as the l o t i s used ( i n production).  Therefore stock-flow analysis of land i s  the value of land i t s e l f versus the value of i t s use (the monthly or annual r e n t a l p r i c e ) . The decision of a firm to invest In a new development project Is a p r o f i t maximization decision. the return expected from the project. two aspects.  I t hinges i n  But this return has  F i r s t , since r e a l property w i l l have a useful  l i f e stretching over many years, i t i s an expected return accruing to the land developer over several years i n the future.  Second, investment decisions e n t a i l a choice among  alternatives,  Thus return i s a comparative return, con-  sidering alternative uses to which funds can be a l l o c a t e d . 3.5  Summary A l l "economic" p r o f i t s and rents  (that i s , "surplus"  p r o f i t s and r e n t s , or p r o f i t s and rents earned above "normal" economic returns) that can be competed away - w i l l be. Competing away economic p r o f i t s and rents may occur by either market entry of new firms or capacity expansion of e x i s t i n g firms.  Likewise, when firms operate at an economic l o s s ,  either negative economic p r o f i t s or r e n t s , there w i l l be a tendency to l i m i t production or e x i t the market and seek alternative Investments. If economic p r o f i t s can accrue to a land developer, the present value of the flow (expected Income stream) i s  18  substantially  greater than the cost of the s tock and costs  of production, additional stocks of r e a l property w i l l be brought onto the market.  The economic p r o f i t s w i l l / a c t as  an Incentive f o r market entry by p r o f i t minded land development firms.  As the stock increases r e l a t i v e income flows,  economic p r o f i t s that can be w i l l be competed away and the incentive f o r market entry w i l l diminish.  If the stock,  r e l a t i v e t o flow, produces economic p r o f i t s lower than those that could be earned i n alternative  investments, firms w i l l  be encouraged t o exit the land market.  CHAPTER 3  FOOTNOTES  1  S. W. Hamilton, "Public Land Banking-Real or Illusionary Benefits" (Vancouver, The University of B r i t i s h Columbia, October 1973), p.6-8.  2  F i r s t , rents are the p r o f i t s earned on c a p i t a l . Second, "Can be" infers to Instances of mergers of competing firms, cooperative agreements or c o l l u s i o n , governments by f i a t " " f a i r price" l e g i s l a t i o n , e t c .  20  CHAPTER 4  LAND MODELS  It i s the function of land developers  to convert  underutilized or unused land to a higher use, hopefully the highest and best use.  Maximum r e s i d u a l land value  (market value of f i n i s h e d product less development costs and p r o f i t ) denotes highest and best use.  The process of  conversion, however, unlike other production  processes  because of the unique nature of r e a l property and the length of time required f o r the development, is very costly i n terms of the f i n i s h e d 4.1  product.  Model Number One In order to explicate this production process,  may  we  I l l u s t r a t e what happens to a piece of r e a l property  In Its conversion to i t s highest use. The market f o r undeveloped land i s a derived market dependent upon the market for s h e l t e r .  The return from  ownership of undeveloped land is not primarily income but rather c a p i t a l appreciation.  E s s e n t i a l l y the market f o r  undeveloped land i s a storage or holding market.  The land,  i f i t i s productive, produces less thantoptimal output since the owners foresee a change i n land use and are reluctant to commit c a p i t a l to the e x i s t i n g a g r i c u l t u r a l use.^" undeveloped land i s subject to three sets of buyers. One set, whose buyers f o r a g r i c u l t u r a l use e s t a b l i s h a minimum p r i c e .  The other two sets of buyers may  defined as developers and  Investors.  be loosely  21  A developer w i l l purchase undeveloped  land providing  he can develop the property and r e s e l l at a p r o f i t .  Due  to the nature of the land market, the developer acts a3 a price-taker f o r both the land and the f i n a l development. The t h i r d set of purchasers operating i n the undeveloped land market are investors and land speculators. Their role i s to withhold land from development pending resale at a higher p r i c e . Assume a land developer decides that the optimal structure to be b u i l t i s a house, s e l l i n g f o r $40,000. Before the process of conversion i s i n i t i a t e d , the developer estimates building costs at $30,000, while the developer expects a p r o f i t (or wage) of $1000.  Therefore  the developer can afford to bid up to $9,000 f o r the acreage l o t , which i s assumed to be s u f f i c i e n t t o acquire the quantity of lots desired. Even i f the developer managed to acquire the lots f o r less than $9,000, he would have no incentive to s e l l the house f o r less than i t s current market value ($40,000).  The savings on the a c q u i s i t i o n  price of the l o t s would merely increase developer's p r o f i t . Assume that by the second year the prices of homes have increased by 10 percent to $44,000, while building costs have increased by 5 percent to $32,500.  In t h i s year  the developer can afford to pay $11,500 maximum bid price f o r the l o t , but this represents a 28 percent increase i n raw land values.  22  Yr. 1  Yr. 2  Sales price  #40,000  $44 ,000  Development cost and profit  ($31.000)  ($32,500)  Max. l o t bid price  9.000  % Change  $11.500  i  5%  4 28$  As may be seen from the above i l l u s t r a t i o n ,  landpprices  do change proportionately more than the sales price of the house, given the leverage created by a smaller change i n development costs.  Only i n the case when development costs  increased at the same rate as the sales prices of the homes, a l l factors assumed constant, would land prices increase by the same amount.^ 4.2  Model Number Two In this market process, i n d i v i d u a l land owners may  a l t e r t h e i r expectations as t o future changes i n house prices and elect to withdraw more land from the market. to withhold  factor inputs  The decision  (such as raw land i n this case) w i l l  depend, i n part, on the land owner's opportunity  costs of a l t e r -  native investments and his personal "out-of-pocket" costs. It should be pointed out that a decrease In house prices, or stable house prices and an increase i n development costs  23  w i l l combine to c o l l e c t i v e l y decrease the b i d prices f o r land by a l l developers.  Sales Price  Yr. 1  Yr. 2  $40,000  $40,000  I Change -  0 -  Development costs and profit  4- 5%  Max. l o t bid price  -17%"  The results of increasing development costs under a stable market of house prices may also be i l l u s t r a t e d by stock analys i s . Figure 1 exemplifies i n graphic terms the i n t e r a c t i o n of housing stock supply and demand as seen by the land development industry.  House prices are set i n the industry at P,  at a quantity of Q,j.  With increases i n development costs,  the supply of lots w i l l be reduced from S| to S j - as firms 4  f i n d i t more d i f f i c u l t to cover costs i n a stable market. With t h i s stable price l e v e l of P|, a decrease i n the supply of building lots w i l l reduce the quantity of lots demanded, from Q( to Qa i n Figure 2.  As a f i n a l step, the decrease i n  the quantity of b u i l d i n g l o t s demanded by a i l developers w i l l reduce the bid price by the i n d i v i d u a l f i r m from P, to P  A  i n Figure 3.  24  Pig. 1  Fig. 2 "Decrease i n S, due to increased development costs as seen by a l l firms."  " Indus tr; Stock'I  -  Fig. 3  "Building l o t s as seen by a firm."  Di-  > 4.3  P i <p.  Model Summary To summarize the two basic models mentioned, we must  remember that land prices are^determined by house prices rather than the other way around.  Therefore, neither development cost  nor the price or a v a i l a b i l i t y of building land ©an materially a f f e c t the current general l e v e l of house prices but they do a f f e c t supply of New Houses.  Increasing development costs can  only be accounted by decreasing bid prices f o r usable raw land or by s a c r i f i c i n g developer's p r o f i t . Sales Price (Fixed by Market) - Development Costs (Fixed) Gross Revenue (Fixed) -"Costs of Planning" (Variable) - Profit (Variable) Maximum Land Bid Price (Variable)  25  4.4  Development Obstacles A very c r i t i c a l phase of the development process occurs  between the time the land i s purchased by the speculating land developer and the time i t i s eventually sold as r e s i d e n t i a l lots.  This production process consists i n finding the right  combinations  of land, labor, c a p i t a l and managerial ability.'.  However, imposed obstacles of government control and regulat i o n and t h e i r costs i n terms of the value of the f i n i s h e d 5  product increases with increases i n such controls.  Before  the developer gets too concerned with these imposed obs t a c l e s , he must e s t a b l i s h whether expected demand s u f f i c i e n t l y warrants h i s production.  He should acquaint himself with  marketing f e a s i b i l i t y studies, analyses of vacancy rates or trends i n building permits within the general area of his s i t e i n ascertaining housing demand. 4.5  Site Selection Site selection is the f i r s t step s i g n i f y i n g commitment  in the conversion process.  The developer should study e x i s t i n g  zoning requirements, l o t access p o s s i b i l i t i e s and available public services, while investigating any possible use ion  peculiar to the s i t e .  restrict-  Enquiry into the t i t l e , possible  easements, r e s t r i c t i o n s or covenants can usually be made at the l o c a l government o f f i c e . The a c q u i s i t i o n of the desired s i t e w i l l occur i f the f l o o r price of the land owner d i f f e r s from ( i s less than) the developer's c e i l i n g price by a margin s u f f i c i e n t to  26  compensate f o r the r i s k s inherent i n the development process. In an attempt to make these risks e x p l i c i t to the vendor rather than leave them i m p l i c i t i n an offer p r i c e , an offer to purchase or an option to purchase are the most popular means of land transaction. In an offer t o purchase, the developer may enter subjective clauses of conditional precedence i n the d r a f t i n g of the purchase o f f e r .  Common conditions would include a  purchase subject to zoning approvals  or v a r i a t i o n , a c q u i s i t -  ion of a l l parcels within a development, or attainment of access and b u i l d i n g permits. A l t e r n a t i v e l y , the land developer may desire to u t i l i z e an option t o purchase, I f he would l i k e an exclusive right to purchase within a s p e c i f i e d length of time and i s w i l l i n g to pay s u f f i c i e n t consideration f o r such a r i g h t . The option would then be registered against the t i t l e , including such Items as the amount of consideration paid, the term dates of the option, and extension or assignment clauses 4.6  Financing Financing of the development i s primarily dependent  upon the favoured technique of the p a r t i c u l a r developer. any case, many developers  In  require a mortgage commitment by  a f i n a n c i a l i n s t i t u t i o n before the land a c q u i s i t i o n . Techniques of financing development projects, which  27  are largely beyond the scope of t h i s paper, are usually contingent upon the developing companyiSs h i s t o r y , s i z e , assets and preferences.  It appears as i f a r a t i o n a l land  developer w i l l s t r i v e to minimize exposure of his own c a p i t a l to the risks of an uncertain market.  This objective may be  accomplished to some degree by u t i l i z i n g the p r i n c i p l e s of leverage  (high loan to value r a t i o ) i n a conventional debt  instrument  such as a mortgage.  Sale-lease-backs  may a l s o  minimize r i s k s , but can seriously c u r t a i l return on the investment.  In this ease, the developer s e l l s the owner-  ship rights of the land and Improvements to the vendee i n return f o r a long term lease, i n which the o r i g i n a l equity and investment proceeds are returned t o the developer.  A  joint venture i s another popular f i n a n c i a l vehicle which groups the p a r t i c u l a r parties together i n a prearranged contract.  It appears that i n many cases developers  can min-  imize risks by exposing only the costs of t h e i r own expertise, while the other partners usually contribute various combinations of both debt and equity c a p i t a l . These aforementioned techniques  are not meant to be  a l l inclusive; but only meant to present some of the basic flexibilities  of modern developmental financing.  These tools  are relevant f o r this discussion i n that they can provide room f o r s i g n i f i c a n t erosion of developmental return to occur from increased development costs without a f f e c t i n g proportionately the amount of development.  The f l e x i b i l i t y afforded by  the various mixtures of debt financing and equity p a r t i c i p a t i o n  28  appear t o f u l f i l l some important, i f unintended or l a t e n t , functions within developmental economy.  This f l e x i b i l i t y  or "slack" (surplus over s u f f i c i e n c y required to finance a project i n a stable market) permits firms to "ride-out" 7 adverse market conditions or other s i m i l a r developments. 4.7 Costs The d i f f e r e n t costs involved i n the development project constitute a c r i t i c a l area of c o n t r o l .  These developmental  costs may include mortgage interest, legal fees, s e r v i c i n g , professional-technical fees (e.g. f o r architects or engineers), r e a l property taxes, labour and materials  ( i f development i n -  cludes construction of b u i l d i n g s ) , construction or interim loan i n t e r e s t , and any leasing or l e t t i n g fees. The land developer,  l i k e any other producer of economic  goods i n the private sector, i s motivated by p r o f i t .  He w i l l  produce projects i f the market value of the f i n i s h e d product, less development costs are s u f f i c i e n t to pay f o r the raw land and y i e l d a reasonable  profit.  He w i l l operate under govern5  ment constraints and market demands.  However, government  constraints and market demands are perpetually i n a state of uncertainty and change.  The developer may be unsuccessful  on occasion i f he appraises the current state of the market i n c o r r e c t l y (over-estimates development costs.  f i n a l demand) or underestimates  Risks are abundant i n the land development  29  process; however, the infusion on governmental constraints and controls affects r i s k s i n an amusing manner* 4.8  Uncertainty In theory zoning and other e x p l i c i t land use controls  would reduce uncertainty i n the long run. learn how  Certain  developers  to operate under a controlled market and are able to  raise s u f f i c i e n t c a p i t a l to finance those expenditures  inherent  i n providing required public services, as w e l l as financing the s o c i a l costs of planning  (costs accruing upon the developer  because of delays within the approving process). developers who  For these  are capable of a t t r a c t i n g s u f f i c i e n t c a p i t a l ,  non-market constraints, such as zoning by-laws and subdivision regulations, have e f f e c t i v e l y minimized uncertainty by eliminating those competing developers  who  either are not capable  of a t t r a c t i n g s u f f i c i e n t c a p i t a l necessary under a controlled market or who  became i l l i q u i d a f t e r purchasing g  raw land at an  excessive p r i c e . An excessive price i n this regard means that the developer unsuccessfully speculated, i . e . either market values had not reached anticipated high levels or developmental costs unexpectedly increased to a l e v e l which made the a c q u i s i t i o n price too expensive i n l i g h t of e x i s t i n g or future market values.  Generally speaking, then, a controlled market  can be quite b e n e f i c i a l f o r those firms w i l l i n g and capable of providing the necessary f i n a n c i a l resources.  Those firms not  w i l l i n g or able to do the same w i l l be forced to exit the market, e i t h e r temporarily or permenently (depending, of course,  30  upon t h e i r desire to stay i n competition). 4.8  Resource Risks A r e l a t i v e l y new  area of r i s k i n the land development  process, which has become apparent i n most regions of the United States, is attributable to shortages resources.  of natural  With these shortages, the element of resource  r i s k compounds the risks prevalent i n the market.  Developers  can e a s i l y be forced from a profitable job by shortages i n s t e e l , lumber, cement and e s p e c i a l l y petroleum. As prices of limited supplies are bidded upward, i t i s hoped that comparable substitutes w i l l be permitted to enter the market.  If t h i s happens, b u i l d i n g a u t h o r i t i e s must be  f l e x i b l e and p r a c t i c a l i n accepting innovations and substitutes - r e f e r r i n g to the form of b u i l d i n g regulations ( i . e . "Performance Standards"  versus "Absolute Standards").  If such  regulations remain insensitive to change i n the market, the price of f i n a l products must r i s e .  31  CHAPTER 4  FOOTNOTES  1  This market of "undeveloped" land i s considered a "latent" land use i n Chapter Three of "Price Movements i n Undeveloped Land Facing Urbanization: A Micro Study," Dissertation'^ by S.W. Hamilton (Berkeley, Center of Real Estate and Urban Development, 1969), p.44-76.  2  The absolute figures used i n these exemplary models are not intended to r e f l e c t any p a r t i c u l a r s i t u a t i o n .  3  Market models were abstracted from S.W. Hamilton, "Public Land Banking - Real or Illusionary Benefits, op c i t , p.8,9.  4  But, suppliers of undeveloped land may see the s h i f t as temporary; hence, supply curves may s h i f t .  5  John J. Gunther, "The Federal-Local Partnership i n Urban Renewal,"' Real Property i n the Urban Society - A Compilation [University of V i r g i n i a ; V i r g i n i a Law Weekly, 1965-1966), p.117.  6  David E. Gillanders, B a r r i s t e r and S o l i c i t o r , "The Real Estate Development Process," (University of B.C.* Executive Programmes, A p r i l 16,1973).  7  Albert 0. Hirschman, E x i t , Voice and Loyalty (Cambridge, Mass.: Harvard University Press, 1970), p.14.  8=  This analysis assumes a r i g i d system of zoning c o n t r o l s However, under a weaker system where control may perhaps he less systematically applied, a p o s i t i v e change (more controls) may i n e f f e c t increase uncertainty.  4  y  32  CHAPTER 5  CONVENTIONAL LAND USE CONTROLS  Land use controls w i l l be classed as "conventional" or "reformed" f o r the purposes of t h i s paper. of "conventional"  Discussion  land use controls w i l l be limited to zoning  by-laws and subdivision regulations.  The two p a r t i c u l a r land  use techniques are i n wide usage i n most areas of North America today, but they were conceived and put into practice before the Depression i n some major urban areas. 5.1  History The f i r s t zoning ordinances were a direct extension of  the police powers of l o c a l government to protect the c i t i z e n s ' health, safety and welfare.  These o r i g i n a l by-laws were  controls upon the use of property, as opposed to controls upon the development of r e a l property b u i l d i n g "specs").  (changes i n zoning,  Ey 1920, l o c a l governments were authorized  to draw up d i s t r i c t s on a c i t y map to separate r e s i d e n t i a l areas from "noxious" no-residential areas.  Local authorities  extended the o r i g i n a l powers of zoning to l i m i t b u i l d i n g heights and densities.^" The objectives of these by-laws and regulations were to protect property values by requiring uniformity within each zoning d i s t r i c t .  Homogeneity of uses was essential In order  to exclude undesirable  operations  p o t e n t i a l l y r u i n the values  or land uses which could  of nearby properties.  Building  33  heights and density l i m i t a t i o n s were an attempt to prevent over-exploitation.  Moreover, i t was  f e l t that i f the major  development a c t i v i t i e s of the c i t y were ^controlled, public services could be planned and operated more e f f i c i e n t l y than they could i f l e f t to uncontrolled development. 5.2  Authority The zoning powers vested i n l o c a l governments came  t y p i c a l l y from state and p r o v i n c i a l enabling regulations. Therefore, these powers were delegated  and were subject to  review by the state or p r o v i n c i a l government.  It was  felt  that zoning could give <£ity planners the force to Implement t h e i r plans.  Local planning administrators  l e g a l l y had  limited discretionary powers and were subject to j u d i c i a l review i f they exceeded the boundaries of t h e i r power (possibly u t i l i z i n g common remedies such as an appeal to a t r i b u n a l , mandamus, and writs of p r o h i b i t i o n or c e r t i o r a r i ) . The extend to which land development can be c ontrolled by the state i s dependent, quite generally, i n part on what the public w i l l accept, i h part on Its delegated  authority,  and i n part on what the courts w i l l uphold as a reasonable o  exercise of that delegated  authority.  Within the three-tiered system of government i n both the United States and Canada, l o c a l government has had primary r e s p o n s i b i l i t y i n land c o n t r o l .  Local  zoning  the  34  administrators have created, over the years, an assortment of zoning ordinances  and by-laws, subdivision regulations,  master plans and s p e c i a l d i s t r i c t s .  The state or province:.-!  intervened only to a l t e r l o c a l control powers, to e s t a b l i s h s p e c i a l commissions, to raise funds f o r p a r t i c u l a r programs, or to condemn property f o r the municipality under i t s eminant 3 domain or confiscatory authority. U n t i l the adoption of the National Land Use L e g i s l a t i o n i n 1973,  the only r o l e the United States federal government  had i n land control was  through Its various housing programs,.  Guaranteed and insured mortgage loans and housing grants offered by federal a geneies (Veterans Administration  and  Federal Housing Administration) were t r a d i t i o n a l l y only mechanisms of land use p o l i c y of the federal government. 5.5  Market Intervention The history of land use controls has been a h i s t o r y of  government intervention i n the land market. degrees of intervention.  Market manipulation  There are varying or d i r e c t i o n  and outright public ownership may be forms of implementation of government control.^  The "carrot approach" (as opposed  to " s t i c k " approaches such as b u i l d i n g and subdivision regulations) of inducement and incentive may  involve o f f e r i n g  loans, tax exemptions, aids i n land a c q u i s i t i o n , d i r e c t subsidy payments and loss guarantees to land developers,  In  35  return f o r  production."  Conventional land use controls are w r i t t e i i , Statute laws enacted to l i m i t the "bundle of r i g h t s " of land ownership and use.  Land c o n t r o l l e g i s l a t i o n i s not founded upon  Common Law p r i n c i p l e s of land use because i t seemed that community conveniences were ignored when i t was the prerogative of every i n d i v i d u a l to b u i l d upon h i s land as he g saw f i t .  Conventional land U3e controls evolved from a  r e a l i z a t i o n that the value and usefulness  of each parcel,  not only to the owner but t o the community, i s v i t a l l y affected by the use made of the adjoining p a r c e l . If Common Law p r i n c i p l e s upheld a system i n which the rights of the i n d i v i d u a l were unlimited, there would be no rights remaining t o be required.  In order that corrective  measures such as land use controls do not produce more harm than good, there must be a proper balance between government interference and i n d i v i d u a l r i g h t s . As" a rule f o r many years, conventional  land use controls  and land developers co-existed and operated "hand i n hand." Many developers were able t o operate p r o f i t a b l y because they learned how to operate within the l i m i t a t i o n s of land use control.  Those entrepreneurs who remained i n the controlled  market of land development, needed nothing more than operational experience and the a b i l i t y to r a i s e required c a p i t a l .  Under  a s t r i c t and r i g i d system of zoning controls, costs of zoning  36  (costs of variances, approvals and delays) are evenly d i s t r i b u t e d among a l l development projects, including the marginal l o t brought into use.  It appears, however, that  zoning controls, not so r i g i d l y enforced, may create advantages in market value f o r those who receive "favorable" treatment. Thus, zoning can create value f o r those who know the control system's weaknesses. Over time i t appeared as many problems arose within the urban environment concerning urban growth.  A national  movement to improve the q u a l i t y of land, a i r and water began to spread across the land i n the late 1960's.  Land develop-  ment, as i t was known then, became a l i k e l y target f o r increased government control.  37  CHAPTER 7  FOOTNOTES  1  William J. Doebele, "Key Issues In Land Use Controls," Urban Land Use Policy: The Central C i t y, ed. Richard B. Andrews INew York: The Free Press, 1972), p.1-9.  2  H. W. Hannah and N.G.P. Krause, "The Role of Law In the Development of Land Resources," Modern Land Policy, op c i t , p.326.  3  Marshal Kaplan, Urban Planning i n the 1960's - A Design for Irrelevancy (New York; Praeger Publishers, 1973) p.87-89.  4  White, op c i t , p.5.  5  John W. Reps, "Pomeroy Memorial Lecture: Requiem f o r Zoning," Urban Land Use Policy: The Central C i t y, op c i t , p.10,11.  6  c f . Toronto  7  R. H. Coase, "The Problem of S o c i a l Cost, " The Journal of Law and Economics, ed. Claron Director (Chicago; The University of Chicago School of Law, 1960), p.43,44.  King ('23) 54 O.L.R. 100 at 102.  38  CHAPTER 6  WHY  CONVENTIONAL LAND USE CONTROLS CHANGED  "Conventional" zoning before 1920  attempted to f r u s t r a t e  the use of automobiles by placing housing d i s t r i c t s near public transportation f a c i l i t i e s .  Commercially zoned d i s t r i c t s  evolved near the c i t y centers as well as along a r t e r i a l roadways.  These examples i l l u s t r a t e how  conventional  zoning  followed the market, and the market then being dependent on public transportation 6.1  facilities.  Mobility The o r i g i n a l concepts of c o n t r o l l i n g d i s t r i c t s  t h e i r s u i t a b i l i t y to e x i s t i n g public transportation ties was  considered  worthwhile at that time.  with t h e i r increasing incomes, chose to own ever-Increasing  numbers.  This new  and facili-  But the c i t i z e n s ,  automobiles i n  "mobility" frustrated these  early objectives, aimed at c o n t r o l l i n g urban movements Old zoning ordinances, created t o control mobility, were observed to be . . . replete with i l l e g i b l e maps, preposterously small scales, incomprehensive texts, contradictory d e f i n i t i o n s and provisions, chaotic organization and jungle growths of amendments and bad administration . . . By creating zoning d i s t r i c t s within an urban region, conventional  zoning by-laws had  s i g n i f i c a n t adverse affects  upon the structure and nature of the c i t y .  These adverse  affects appeared to have been due to the inherent weaknesses of zoning rather than i t s a p p l i c a t i o n .  In some cases, people  39  were separated by great distances from t h e i r places of employment.  Of those people who desired to l i v e i n single-  family dwelling units i n the suburbs, commuting to the central business d i s t r i c t often overburdened ation system.  the transport-  Baumol suggests that the transportations!,  f a c i l i t i e s were a l s o overburdened  by those lower income  workers who  l i v e d near the c i t y centers and had to commute 2 to surrounding, urban fringe areas to t h e i r jobs, 612  Urban Design Conventional subdivision regulations showed t h e i r  ill  effects primarily In the monotonous lay-out and design of housing subdivisions.  Minimum b u i l d i n g requirements, forced  lower income, single-detached housing structures to be of a ";minimum standard".  When minimum standards of b u i l d i n g and  l o t requirements were established, many members of society were, i n e f f e c t , excluded from the new housing market. Aside from t h i s exclusionary nature, conventional land use controls became h i g h l y i n f l e x i b l e i n that continuing change of i n d i v i d u a l preferences and market (business) patterns 3 may  often contradict e x i s t i n g zoning by-laws.  After time,  however, i t has been shown that zoning adjusts to changes i n the market v i a zoning v a r i a t i o n s .  However, t h i s i n f l e x i b i l i t y  is further compounded by the negative nature of settingea code of minimum building standards or by l i m i t i n g height and density. In either case, some suggest that innovation and imagination may be discouraged when development is constrained by i n f l e x 4  i b l e and negative conventional land use controls.  40  6:«3  Urban Finance Within such guidelines, zoning lent i t s e l f to the  creation of positions of advantage and p r o f i t , f o r either the landowners or developers or both. good'" became synonymous. spoke the same language."  " P r o f i t s and^doing  The developer and the planner C a p i t a l gains accrued i f a  landowner or developer could get a zoning variance that would permit his land to be put to a higher valued  use.  Since land i s e s s e n t i a l l y a function of what i s allowed to be constructed  on the land, zoning decisions, i n e f f e c t ,  became "the power to create money." There i s evidence to suggest that revenue considerations have tempered the use of zoning controls: . . . i t is quite c l e a r that f i s c a l considerations frequently discourage good planning and encourage a self-centered autonomous ^ development of l o c a l communities ... Thus, zoning has been applied to exclude from an area people of less substantial economic means. was  This exclusionary e f f e c t  based, i t seemed, on the premise that municipal revenues  could be better enhanced by large Industrial-estate  aSSeSS-  CS  ments.  However, with the experience of hindsight, some t-:  municipalities have begun to r e a l i z e that zoning, with a l l i t s p o l i t i c a l influences and implications, represents an ient f i n a n c i a l t o o l .  ineffic-  41  As a negative device, zoning has c u r t a i l e d development, construction a c t i v i t y , business, and employment, and has thereby served to reduce r e a l estate and other tax c o l l e c t i o n s . When l o c a l governments erect exclusionary walls, they do not only exclude people 9 and things, they a l s o exclude tax r e c e i p t s . As the demand f o r more and better public services increased with increasing populations and incomes, tax revenues had to keep i n pace.  I f , under conventional zoning trends,  density, b u i l d i n g heights and land use are a l l controlled, this means that the a b i l i t y of municipalities to raise additional taxing revenues i s reduced, assuming no Increases In the m i l l rate; and the a v a i l a b i l i t y of funds needed to pay for increasing public services i s reduced rather than enhanced by conventional land controls.  As long as property  taxes are a d i r e c t function of the market value of the land and improvements, a decrease i n land density and use, on an aggregate  l e v e l , w i l l cause a decrease i n the amount of taxes  forthcoming.  We can i l l u s t r a t e this with an example of  highest and best use sites which havebeen subjected to density controls (and lowered values), and where the loss In value i s not offset by the increase i n value elsewhere where zoning i s more loosely applied or not at a l l .  42  A transportation model would r e v e a l :  Where SV(A)a s i t e value of A where controls were enacted t » transportation distance (cost) SV(B)= s i t e value of B, were controls were less stringent Therefore, SV(A) > SV(B) by t If,  SV(A) i s decreased by control r e s t r i c t i o n s w i l l SV(B) increase p a r i passu? If so, municipal revenues do not s u f f e r . (Unless SV(B) i s i n another municipality)  But, SV(B) Increases less than the amount SV(A) decreases because B sites are less desirable than A s i t e s . So, unless none of B sites are developed, the aggregate of a l l s i t e values must d e c l i n e . 6.4  The Changing City Some authorities note the c i t y of today d i f f e r s quite  substantially from the c i t y of years back when the conventional land use controls were f i r s t enacted. Doebele suggests that todays central c i t y i s no longer an integral puplic unit capable of annexing or incorporating other surrounding areas at i t s pleasure. may now be symbolized as conglomerates  Metropolitan areas  of individual c i t i e s ,  43  each a c t i n g within the guidelines of the metropolitan framework of l o c a l government.  Each i n d i v i d u a l c i t y must consider  the ramifications of i t s land controls upon neighboring municipalities.  Secondly, whereas c i t i e s of old were considered  "melting pots", where individuals of d i f f e r e n t backgrounds could l i v e , work, and compete harmoniously, urban populations appear fragmented today, more than ever before, into d i f f e r e n t s o c i a l and economic groups.  For this f a c t , land use controls  have taken on a strong p o l i t i c a l backing by those various groups.  F i n a l l y , there has been a general trend over the  years toward more state and f e d e r a l government Intervention in the a f f a i r s of the c i t y , which was not so at the time when conventional land use controls were f i r s t put into e f f e c t . ^ From Doebele's suggestions, however, i t i s d i f f i c u l t to ascertain i f controls were the cause of the e f f e c t of these changing urban c h a r a c t e r i s t i c s . Conventional land use controls have been forced to change, not only because of the changing nature of the c i t y ' s structure (and size) and the f inaneial i n a b i l i t y of l o c a l governments to provide public services, but now  also because  of the attitudes of homeowners i n the face of changing tax, price and quality of public s e r v i c e s .  Increasing demands by  some homeowners f o r public services are matched by attempts by those homeowners who can do so to move to other tax j u r i s dictions where either the quality or quantity of benefits per tax d o l l a r i s higher or the t ax b i l l Is lower.  Shifts of t h i s  44  kind has  generated much t a l k of the impending "bankruptcy"  of some l o c a l m u n i c i p a l i t i e s .  One  e f f e c t of this r e a l i z a t i o n  that current tax dollars are not s u f f i c i e n t to meet current demands f o r more or improved public services (having the cake and eating It too?) has been t o propel the conventional developer Into an acceptance of new  responsibilities.  land Con-  temporary l o c a l governments, with t h e i r power to control land development and t h e i r apparent reluctance to Increase taxes, have transferred many of t h e i r own  s o c i a l functions  r e s p o n s i b i l i t i e s to the land developments process. development, under some new  and  Land  "reformed" land use controls (which  w i l l be analyzed i n a subsequent section), is not only a process of creating and producing shelter, but has also become the e n t i t y responsible f o r providing e s s e n t i a l public services. There appears to be some subliminal implications f o r this s h i f t In the r e s p o n s i b i l i t y f o r providing the e s s e n t i a l public services.  Why  should buyers of new  developments have  to meet the costs of public services (included, i n most cases in the purchase price of the finished unit) which were previously borne by the community as a whole? why  Is there a reason  communities are having a more d i f f i c u l t time i n passing  c a p i t a l improvement bonds by a popular vote?  The economic  , impacts of increasing the r e s p o n s i b i l i t i e s of land developers to provide these basic public services appear to be s h i f t e d back onto the price of the. land input.  Landowners, i t appears,  w i l l be offered lower bid prices by land developers,  45  e s p e c i a l l y i f the market prices of homes i s stable or advancing very slowly.  However, as discussed l a t e r , i n the  long run, a l l increased development costs w i l l be borne by the ultimate user of the stock.  Of course, the faster the  market values of the e x i s t i n g stock increases, the faster new  stock purchasers (newcomers) pay f o r the f u l l costs  r e s u l t i n g from the land developers being required to provide public s e r v i c e s . 6.5  P o l i t i c s of Land Use  Controls  Land planning consists i n the intervention of the public sector into the process of land tenure and Conventional land use controls represent  use.  land planning with  a l l i t s side e f f e c t s . Weaknesses i n p r e v a i l i n g land controls, states Marc Regan, from t h e i r l i m i t e d coverage and from flaws and inconsistencies i n certain component parts.  Instead  of  a d e f i n i t e and u n i f i e d land program, we have an uncoordinated assortment of selected a c t i v i t i e s I t these "inconsistencies" may of land use c o n t r o l .  i s l i k e l y that some of  perhaps be some of the consequences  In practice, the operation of land use  controls becomes open to p o l i t i c a l manipulation.  Zoning c o n t r o l ,  in t h i s context, effects l i t t l e more than the exclusion of those people not considered  f i n a n c i a l l y or s o c i a l l y desirable  from a Municipal point of view.  In this way,  some believe  that conventional land use c o n t r o l becomes a simple l e g a l r a t i f i c a t i o n of the  46  savage and complex p o l i t i c a l struggles, involving pressures from large numbers of organized interest groups, the needs and e l e c t o r a l fortunes of c i t y l e g i s l a t o r s and the Increasingly c y n i c a l delaying t a c t i c s of the c i t y planners. 12 C o n f l i c t s of interest among the planning  bureaucracy  i t s e l f make conventional land use controls very d i f f i c u l t to administer.  It becomes almost impossible to develop  administrative procedures  to reconcile these c o n f l i c t s of  interest and bring about a mutually acceptable s o l u t i o n . Along the same l i n e s , conventional land planning becomes subject to conditions of i n e r t i a .  Procedures and  politics,  once established, often become frozen, temporarily If not 13 permanently. Conventional land use controls, being exclusionary and p o l i t i c a l by nature, has had various repercussions i n the land market as a whole. A t y p i c a l "chain reaction" to conventional zoning might be i n i t i a t e d when the supply of land to be produced f o r urban use i s r e s t r i c t e d .  Given a r e s t r i c t e d supply of land, and  given normal increases i n income and population, e x i s t i n g r e a l estate prices are competed upward.  Our previously  discussed analysis stated Increasing stock demand causes an upward push on prices of e x i s t i n g stock, which leads to higher bid prices for building land.  Land use controls, however,  increase developer's direct costs, and other things being equal, w i l l lower bid prices f o r development land.  Therefore, unless  47  lower bid prices for development land so affects  expectations  of landowners that bid prices f o r that land r i s e s f a s t e r than otherwise, we may  have to conclude that decreased bid prices 14 f o r raw land is a l i k e l y r e s u l t . A d d i t i o n a l l y , witn increasing r e a l estate values under such a strong market, mortgages would have to increase for both the land developer (acquisition of raw land, construction and other development costs) and the ultimate user (purchase mortgage and any seconds).  Some suggest that higher mortgages  would therefore incur higher interest charges and thereby would expand the need f o r casualty insurance.  Under this type  of chain reaction, i t i s f e l t i n f l a t i o n (cost push) becomes 1c  inevitable,  "1  even though others may argue to the  c  contrary.  Regardless of the i n f l a t i o n a r y or deflationary consequences of this chain reaction attributable to land use controls, Broadway notes that a modern economy such as ours is an immensely complicated  mechanism and interference at any  one  point can cause a chain of reaction f a r beyond those anticipated. Intervention, such as conventional  land use controls, can  s i m i l a r l y bring not only the effects expected, but a host of side e f f e c t s which may  or may  not be welcome.  Economic matters  are further complicated  by the fact that they produce psych17 ©logical and emotional reactions. Another possible reason f o r the downfall of  conventional  land use controls might be, as>Makielski o f f e r s , a basic lack of understanding of these e f f e c t s .  Realtors, for example,  48  may be unsure i f zoning a c t u a l l y helps them i n t h e i r business, while homeowners may be unsure what upzoning i n the neighborhood would mean i n terms of congestion and residential.land values.  Business-men desiring general growth and expansion  may not be sure I f zoning i s an a i d or a hindrance.  This  author concludes that c i v i c interests know very l i t t l e  about  the consequences of land use controls as they apply on a local 6;6  level.  1 8  Reform Because of this basic misunderstanding and the counter-  productive chain reactional effects of conventional land use control, society, as a voting Interest, demanded reform. "Reform" became a catchword as an Ecology Movement swept the country. reform.  Land use control was engulfed i n the tide f o r  Citizens became more aware of t h e i r surroundings,  and consequently demanded laws to protect those natural amenities.  The causes of increased environmental awareness  are d i f f i c u l t to assess, but the f a c t remains that land use became prey to "protection-minded" c i t i z e n s . This reform movement appears to have gained momentum a l l across North America.  The alleged f a i l u r e s of conventional  land use controls, along with the observed f a i l u r e of some municipalities to provide public services under sluggishly increasing tax revenues, have a i l primed the pump of reform.  49  CHAPTER 6  FOOTNOTES  1  Stephen Sussna, Land Control - More E f f e c t i v e Approaches Washington: The Urban Land I n s t i t u t e , 1970), p.20.  2  William Baumol, "Macroeconomics of Unbalanced Growth " (American Economic Review, 1967), p.415-417.  3  Bernard H. Siegan, Land Use Without Zoning (Lexington, Mass.: Lexington Books, 1972), p.78-79.  4  Arthur G. Foster, "Design of the Urban Landscape," Real Property i n Urban Society - A Compilation, op c i t , p.13.  5  S . J . Makielski, "Zoning and P o l i t i c s , " Real Property i n Urban Society - A Compilation. opcit,p,18.  6  H a l l Leiren, "How Zoning Makes M i l l i o n s f o r a Fortunate Few," Vancouver Sun (Jan.25,1973) p.6.  7  Jerome P. Pickard, "Property Taxes - Their Relation to Land Uses," Real Property i n Urban Society - A Compilation, op c i t , p.41,42.  8  Siegan, op c i t , p.124 and The Columbian (Thurs, Feb.1,1973) p. 11.: Municipal D i s t r i c t of Surrey i s considering the relocation of 640 households i n "Bridgeview" f o r conversion to l i g h t - I n d u s t r i a l estates f o r the purposes of generating additional taxing revenues.  9  This i s presumably a "cost of planning."  Quoted from  Siegan, op c i t , p.127. 10  Doebele, op c i t , p.4.  11  Marc Regan, "Implementing Land Resources," Modern Land P o l i c y , op c i t , p.270. "Drive to Curb Growth i n the U.S. - Its Impact," U.S. News and World Report (January 15th, 1973).p.&t~.  12 13  Charles M. Haa?din. " P o l i t i c a l Planning: Possibilities, Limitations, Modern Land Policy, op c i t , p.261.  50  14  Further discussion of t h i s topic i s enclosed i n the Appendix - Chapter 6.  15  "*Home, Sweet Home - Price Is Going Out of Sight," U. S. New3 and World Report (July 30, 1973), p.55-56.  16  Professor F. G. Pennance of the University of B. C. f e e l s increases In r e a l property prices perhaps have the e f f e c t of being deflationary because both savings and consumption are decreased by such a large outlay f o r r e a l property a c q u i s i t i o n s .  17  F. Broadway, State Intervention i n B r i t i s h Industry 1964 to 1968 (London? Kaye and Ward, 1969), p.12,13.  18  Makielski, op c i t , p.16-20  1  51  CHAPTER 7  REFORMED IAND USE CONTROLS  Reformed land use controls are apparently founded upon many of the principles that lay beneath the inception of conventional land use controls of the 1930's.  In f a c t , many  proponents of government control i n the land market today argue f o r even more c onventional szoning.  Regan, for example,  agrees that the potentials of zoning as a direct measure or t o o l of public land use p o l i c y are promising.  Further,  Zoning can encourage the conservation of resources, promote the orderly development of urban expansion, protect various major a g r i c u l t u r a l uses against encroachment against other uses, preserve wilderness and scenic areas, and reduce flood and drought hazards• 1 Jaaoby further encourages the continuance  of such a " c u r e - a l l "  philosophy vested i n conventional land planning, zoning and building regulations. He feels these t r a d i t i o n a l tools are • . • powerful instruments f o r improving the amenities of space, privacy, recreation, housing, transport and beauty i n our c i t i e s . If c i t i e s are to offer ample amenities f o r l i v i n g , much stronger.cgovernment ... w i l l be necessary. 2 In l i g h t of the doubtful achievements of conventional land use controls, i t i s not apparent why further series of the same controls should be considered desirable.  Although  52  reformed land use controls w i l l proudly bear new  names and  t i t l e s , i t i s possible that t h e i r effects w i l l match, or even surpass some of the undesirable cursors.  consequences of t h e i r pre-  A l t e r n a t i v e l y , some have concluded that i t i s  conceivable  that there i s no way  ment of c i t i e s .  of c o n t r o l l i n g the develop-  However,  It i s clear . . • that t h i s i s a p o s s i b i l i t y that we are so f a r unwilling to face. The costs are too great to allow evolution to take i t s course without some e f f o r t at control and d i r e c t i o n . 3  This basic fear of leaving the c i t y without government controls means that although It he s o c i a l costs of e a r l i e r controls may  have f a r exceeded s o c i a l benefits, we  presently beginning a new  are  stage i n the evolution of c i t i e s  by the support f o r reformed land use c o n t r o l s .  The popular  theory seems to be that "public regulation of our land, despite i t s present shortcomings, i s an important part of our system of government. it 4  It must be saved, regenerated-  and reformed. 7.1  Examples The reformed land use controls may  include such devices  as Land Use Contracts, Planned Unit Developments, Spot Zoning and Comprehensive.  The various devices are grouped  together  as "reformed land use controls" f o r i l l u s t r a t i v e s i m p l i c i t y , and are not meant to be a l l inclusive of reformed c o n t r o l s .  53  As a group, the intention seems to be that these devices w i l l unify control within each development project.  In this  way, control i s "ongoing" iii that i t w i l l pertain to i n d i v i 5 dual projects only.  Each development project w i l l not be  bound by uniform requirements and regulations as had been the c a s e w i t h t r a d i t i o n a l c o n t r o l s . For our analysis, we s h a l l l i m i t our description of this group of reformed controls to Land Use Contracts.  The  devices appear to i l l u s t r a t e i n the most positive manner the nature and meaning of these reformed land use c o n t r o l s . Prior to 1968 i t had become apparent to l o c a l governments here i n B r i t i s h Columbia that the r e s t r i c t i v e nature of zoning controls d i d not allow municipalities enough f l e x i b i l i t y . Mr. Lane, Chairman of the B. C. Land Commission, suggests that conventional  land use controls could not foresee a l l the  l i k e l y demands of land users (applicants f o r b u i l d i n g approvals). He suggests that planning i n advance, being  the r e s t r i c t i v e  nature of conventional controls, was fine u n t i l design l i m i t ations (such as water fronts, h i l l s i d e lots and set-backs) made conventional  controls p r a c t i c a l l y inoperable.  Land  Use Contracts and other reformed, more f l e x i b l e control devices, gave l o c a l municipalities the authority to t a l l e r controls to a p a r t i c u l a r s i t e by a process of negotiations 6 and concessions. Besides this new f l e x i b i l i t y inherent  In Land Use  contracts, they became a v i a b l e means of a t t r a c t i n g municipal  54  revenues.  M u n i c i p a l i t i e s u t i l i z e d the Land Use Control as  a tool to get concessions and donations f o r public works (both on-site and o f f - s i t e ) and the general treasury account (by impost charges).' One l o c a l developer feels the o r i g i n a l objectives of Land Use Contracts  ( f l e x i b i l i t y andbeing legitimate source  of municipal revenue f o r smaller municipalities) have changed over i t s short l i f e .  Now,  i t i s f e l t , Land Use  Contracts  can be used as an e f f e c t i v e device to l i m i t growth within 7 a region. The p a r t i c u l a r l e g i s l a t i o n giving the l o c a l governments such authority rests i n the "Municipal Act" of the of B r i t i s h Columbia. Section 702  Under "Community Planning"  Province  (Part XXI),  ("Development Areas"), the Council:  702 (A) (2) . . . may,fcby by-law, amend the zoning by-law to designate areas of land within a zone as development areas • . . 702 (A) (3) . . . Upon a p p l i c a t i o n of an owner of land within the development area . . . may .. . enter into a land use contract containing such terms and conditions f o r the use and development of the land as may be mutually agreed upon . . • and  702 (A) (1) . . . s h a l l have due regard to the following considerations In addition to those referred to in 702 (A) (2): (a) (b) (c) (d) (e)  The development of areas to promote greater e f f i c i e n c y and q u a l i t y : The Impact of development on present and future public costs: The betterment of the environment: The f u l f i l l m e n t of community goals: and The provision of necessary public space.  55  With such an array of control weapons, municipalities can dictate thew ays in which land assembly and development proceeds.  If the developer's work does not meet the standards  agreed upon i n the control device, the developer may  forfeit  o  his  right to complete the p r o j e c t .  0  The standards agreed upon between the developer and the municipality of course varies among the municipalities according to their needs, but the general trend has been to require the developer to include within the development project such items as: 1. donations of land or equivalent amounts i n cash for parks, school s i t e s , public space, playgrounds or other recreational f a c i l i t i e s , 2.  o f f - s t r e e t parking and loading spaces,  3.  a l l landscaping, surface treatments , :'fences and screens,  4.  a l l u t i l i t i e s , including water, sewer, gas, telephone and e l e c t r i c i t y (both on and o f f s ite provis ions),  5.  a l l highways, bridges, c u l v e r t s , lanes and walkways, including drainage, surfacing curbs, gutters, storm sewers, sidewalks, street l i g h t i n g , boulevards and street s igns,  6.  performance, guarantee and security bonds (without i n t e r e s t ) ,  7.  c e r t a i n other ownership conditions, indemnification of the municipality, and payment of a i l accrued taxes and inspection fees.  If such conditions as these, contracted within the Land Use Contract, are not met as s p e c i f i e d , the developer w i l l f a i l  56  to obtain the necessary "occupancy permit" needed f o r project f i n a l i z a t i o n before s a l e . 7.2  Bargaining It i s apparent t o some that these "saved, regenerated  and reformed" land use controls are no more than an extension of e a r l i e r controls.  The only apparently  significant d i f f e r -  ence concerns land developers and the new r e s p o n s i b i l i t i e s required of them. Land developers currently operating under reformed land use controls become l e g a l l y bound t o a development project. Some developers are, i n e f f e c t , "scared away" from such a controlled market because they f e e l uneasy In being so strongly tied to a project.^  -0  The standards of performance  are not automatically fixed by the municipality.  There i s  room for bargaining before the Land Use Contract  i s consum-  mated.  It i s true that these reformed land use controls, are,  i f nothing e l s e , more f l e x i b l e than conventional  controls.  It i s quite possible, under these new controls, f o r a land developer t o negotiate the amount of land he must donate f o r schools i n return f o r a density concession per acre).  (dwelling units  As a r e s u l t of the Implementation of these new  devices, "bargaining between government and property owners is now a v a l i d and acceptable  zoning practice."  Some developers, however, question the s o c i a l merit of these reformed controls.  Does society benefit from these new  57  f l e x i b l e controls?  In other words, are the s o c i a l costs  less under these new, reformed land use controls? The benefits of Increased f l e x i b i l i t y and e f f i c i e n c y i n supplementing  municipal tax revenues are questioned i n  l i g h t of the costs of such new c o n t r o l s .  These costs are 12  referred t o by others as society's "costs of planning." These costs s p e c i f i c a l l y r e f e r to the time i t takes to conclude pre-contract negotiations and the time i t takes to g e t municipal approvals.  These time elements can delay  a well-conceived project many months. Siegan summarizes t h i s point when he states that land developers must recognize i n his negotiations that a l l these c o n t r o l l i n g devices give the c i t y authority over almost a l l aspects of a p a r t i c u l a r land use except that out of which they can be t a l k e d or bargained.  The l o c a l government, as  a r e s u l t , i s now i n a position to control elements of construction, architecture, and planning concepts  over which  i t would have no power i f the property were zoned f o r the use  intended.  7.3  Motives In discussing the purposes or motives involved i n the  development of reformed  land use controls, we s h a l l examine  both "observable" and "non-observable"  motives.  The observable motives f o r reformed  land use controls  were primarily reviewed i n the previous chapter, "Why Convent i o n a l Land Use Controls Changes."  58  The non-observable causes f o r the changing nature of land use controls r e f e r t o those causes which are r a r e l y s p e c i f i e d but are none the less important.  They are d i f f i c u l t t o ascer-  t a i n , but an understanding of them i s important to the land developer. If the land developer can "have a f e e l " forifchose non-observable attitudes of l o c a l i t i e s i n terms of land use controls, he w i l l benefit i n ^several respects.  If the developer  has a reasonable estimate of the attitudes of l o c a l governments and t h e i r constituencies, he can better prepare his negotia tions with the municipality f o r the provisions i n the land control device.  S i m i l a r l y , the land developer may be able to  assess risks due t o l o c a l neighborhood opposition to new land development schemes.  Cognizance of public attitudes and 14  dispositions i s imperative  for successful project development.  Observable motives f o r the move to reformed land use controls relate primarily to the fears of the undesirable effects and chain reactions r e s u l t i n g from conventional use controls, fears of inadequate municipal and perhaps fears of overpopulation.  side  land  taxing revenues,  In 1972, over 3 m i l l i o n  acres of land were converted to "human" uses within the continental United States.  "Human" uses include such Items as  urban spread, vacation land development, and the construction of highways and open p i t mines.  Time magazine reports that  citizens have f i n a l l y rebelled against the growing despoliation of the countryside, and the s o c i a l and economic i l l s that i t creates.  "They have launched what amounts t o an inchoate,  59  national crusade to get better ways of using land no matter what the c o s t . " ^ 1  Because increasing populations  have  exerted a greater demand upon a f ixed supply of usuable urban land, says Paul Gross, citizens have emerged i n an 16 almost p a t r i o t i c sense to protect t h e i r l o c a l Another popular news magazine, U.S.  amenities.  News and World Report,  relates the development of a "strong, often relentless opposit i o n to any kind of growth - whether i t be new industry or even new  houses,  new  people."17  These "non-observable" motives f o r continuing control of the land development process are apparently i n the heart of voting residents.  deeply rooted  These motives may  be  based on fear - fear of the market, fear of income loss and fear of p r o f i t s , speculators and land developers.  Land use  legis-  l a t i o n , such as the Land Use Contract example, i s created p o l i t i c i a n s who citizens.  represent  by  the sentiments of their l o c a l  Growing public awareness of the problems e x i s t i n g  within the land market forces l o c a l governments to enact laws to control what are considered  undesirable  activities.  These laws are an extension i t seems of the basic fear of an uncontrolled market.  Land use controls protract an  e x i s t i n g system of land uses much longer than the price 18 mechanism would have allowed.  Everywhere i n society, we  an e f f o r t to guard against "the b i t e of the market."  see  Control  has made what might otherwise have been an uneconomic a c t i v i t y (of t r a d i t i o n a l single-family homeownership) supportable  for  60  many people by treating them k i n d l y . ^ x  7-S4  Wealth D i s t r i b u t i o n s A second general area of "non-observable" motives  behind the development of reformed land use controls involves the d i s t r i b u t i o n and protection of wealth.  Let us assume,  for the sake of s i m p l i c i t y , that any given population i s composed of three socio-economic lower.  groups:  upper, middle and  Further, with the United States In mind, l e t us assume  that the upper class may be characterized as conservative and 20  the lower class as l i b e r a l .  With these assumptions i n mind,  i t seems appropriate to explore some of the motives and means of class d i f f e r e n c e s . Paul Y l i r s a k e r , a professor of urban studies at Harvard, suggests  i n a recent Time a r t i c l e that i t used to be the  l i b e r a l s were f o r land control and the conservatives against it.  He states now  the s i t u a t i o n has reversed i t s e l f causing  almost a conspiracy to use land c o n t r o l against the poor and the blacks  (liberals).  2 1  Since poor people, minorities and new home buyers are seldom represented on c i t y councils, we f i n d that land developers are perhaps the only group representing the rights of these people to equal housing opportunities.  Those groups  which a re able to organize themselves (in most cases, the p r i v i l e g e d white), "can, i n f a c t , b u i l d a wall around their c u l t u r a l standards and s o c i a l class mores by u t i l i z i n g economic barriers of b u i l d i n g costs, occupancy standards,  61  •rfcax rates and commuting costs." ^  It appears i f our l o c a l  governments accelerate control of land development, we end up improving the environment f o r thosejpeople 23 high income brackets.  Some s o c i a l planners and  may-  i n the observers  agree that the non-observable motives behind a l l the desires to reform land use controls, "however deeply hidden", are to keep the unwanted low income people out of the "community."24 Responsibility f o r the growth of reformed land use controls does not l i e e n t i r e l y within the apparent d i s c r i m i n ation against lower socio-economic classes and newcomers to a community. There have been few, i f any, complaints about these "excessively" exclusive land controls from anyone' oth^r than 25 land developers.  The fact i s , however, that those groups  being excluded because of Increasing costs of housing, not only lack i n t e r n a l representation at the l o c a l government l e v e l , but also tend to f e e l that they are beeing benefited by the newer, more r e s t r i c t i v e c o n t r o l s . The ways i n which lower socio-economic groups apparently f e e l they are being benefited by the new  controls are based  upon t h e i r ideas of the wealth d i s t r i b u t i o n within their society. Their argument - an argument less well-organized  than the  arguments by upper class groups to protect the status quo from the idea of expanding populations area.  - stems  within a fixed urban  The increasing demands f o r urban space by an expanding  populationsareiteepresented land rents.  i n economic terms as increasing  In other words, with the increasing pressures  of  62  population growth, land and property rents are enhanced. With a given amount of wealth i n an area, increasing land values and rents can only reduce r e a l wages.  The people  generally excluded by land controls, states K.H.  Parsons,  believe that these controls only serve to eliminate p r o f i t s from land developers and land owners.  In this sense, those  excluded f e e l that the r e a l incomes of their labor are being protected.  Consequently, i t i s believed that government,  i n developing  redistributing 7.5  reforms within the land market, are  essentially 26  incomes toward labor and away from rents.  Summary Social attitudes are changing and laws are being  constructed  as r e f l e c t i o n s of these changes.  P r o f i t s , big  business and environmental despoliation are now publicfcriticism and reform.  Land developers,  objects of  to be  sure,  have not escaped this c r i t i c i s m . M. C. Paulson i n his book The Great Land Hustle (1972) heavily c r i t i c i s e s major land developers f o r "premature subdivision" (leap frog development) and urban s p r e a d .  27  The c r i t i c i s m i s s t i f f , but i s i s hardly imaginable that  one  group of businessmen i n society can be blamed for urban spread. Changing s o c i a l attitudes have fostered reform i n the land development industry.  The primary reasons f o r this  movement l i e within the framework of our p o l i t i c a l system. As long as the system accepts change, society w i l l have to  adjust to f a i l u r e s of past land use c o n t r o l s , accept socioeconomic power struggles, and accept the p r o f i t motives of business e n t i t i e s  (and individuals ).  CHAPTER 7  FOOTNOTES  1  Regan, op c i t , p.275.  2  Jacoby, op c i t ,  3  Makielskl, op c i t ,  4  Sussna, op c i t ,  p.20.  5  Sussna, op c i t ,  p.20.  p.26. p.18.  Land Use Contracts permits d e t a i l planning on s i t e , versus zoning which i s more generally applied. A problem appears to exist when a marginal or small development project must bear the f u l l servicing costs (streets surrounding the s i t e or sewer trunk l i n e s , f o r example) while a much larger project contributes proportionately IAless toward the payment of public services. Interview with W. T. Lane, Chairman of the B r i t i s h Columbia Land Commission, Vancouver, (December 3, 1973). In the D i s t r i c t of Surrey, B. C., developers are required not only to provide on-site and o f f - s i t e public services (waters, sewers, s t r e e t s , schools and parks) but ariet; required i n most cases to donate a per suite or per unit "Impost Charge" (ranging from $1,300 to $2,300 per s u i t e ) . Interviews with A l v i n Poettcker, Laing Development Vancouver (December 3, 1973) and Paul Preston, Tonnison Development, Burnaby (December 5, 1973) See Section 8 (A), 15, 16 (C) - concerning performance and guarantee bond provisions. See Land Use Contract, The D i s t r i c t of Surrey, B. C. A. Poet taker:/ f e e l s that one of the f i r s t results of the wide use of Land Use Contracts was to "scare away" developers who were not sure of the consequences and cost required under such a device. 11  Siegan, op c i t , p.154.  65  The s o c i a l costs may be even more dear i n l i g h t of l o c a l governments non-accountability of theae s o c i a l costs of planning. For example, i f a l o c a l planner wants pink windows i n a p a r t i c u l a r project under a Land Use Contract, society does not hold him accountable f o r such t r i v i a l nonsense. See S.W. Hamilton, "Public Land Banking. . .," op c i t , p.11,18,19. Siegan, op c i t , p.155. One author suggests that builders are w i l l i n g to pay a premium f o r land which w i l l not arouse l o c a l resistance f o r i t s development. See Marshal Kaplan, op c i t , p.87. "The New American Land Rush," Time (Oct. 1, 1973), p.72. ". . . no matter what the cost. . ." i s an adequate estimate of that a t t i t u d e . It i s however, unreasonable t o assume that society w i l l pay whatever the cost f o r planning i n terms of the benefit received. te  Paul Gross, "Changing the Ground Rules i n the Raw Land Game,8 Real Estate Review (Winter, 1972), p.30. "Drive to Curb Growth i n the U. S. - Its Impact," op c i t , p.30. White, op c i t , p.3. Hardin, op c i t , p. 265. This r e c a l l s the story of the man who chose to cut o f f his dog's t a i l an inch at a time because he could not bear to do It a l l at once. This ddist'inction has been noted to be opposite i n Canada. "The New American Land Rush," op c i t , p.72. John W. Dyckman, "Control of Land Development and Urbanization i n C a l i f o r n i a , " Housing i n C a l i f o r n i a (San Francisco, Governor's Advisory Commission), p.310. Control with these exclusionary and cost effects can be j u s t i f i e d from a s o c i a l standpoint, i t seems, only i f incomes and wealth are redistributed downward by an equal amount. Parsons, op c i t ? p.303.  66  25  Those developers who e i t h e r were unable to a t t r a c t additional c a p i t a l to finance the a d d i t i o n a l costs required under most reformed land use devices; or were unable to "pass o f f " those a d d i t i o n a l costs onto the maximum b i d proce f o r raw land (caught speculating); or were unable to pass the new costs off onto the price of the f i n i s h e d product because of weak market conditions.  26  Parsons, op c i t , p.303, This view i s f a l s e because the a d d i t i o n a l costs inherent i n reformed land use controls are borne by the comsumer i n the long run.  27  M. 0. Paulson, The Great Land Hustle (Chicago: H. Regnery Co., 1972), Chp.l.  67  CHAPTER 8  CONCLUSIONS  North America appears recently to have passed a milestone i n land use c o n t r o l . By supporting a program of 1  reformed land use controls, urban society has elected to impose upon an already naturally constrained market of land development additional controls i n the name of public health, safety and welfare.  By doing so, i t has  e s s e n t i a l l y deprived  the p r i c e - a l l o c a t i o n market economy of the opportunity  to  a l l e v i a t e some of the problems of urban l i f e . Probably the greatest defender of the market mechanism, P. A. Hayek, says: W  We must not overlook the f a c t that the market has, on the whole, guided the evolution of the c i t y more successfully, though imperfectly, than i s commonly r e a l i z e d and that most of the proposals to improve upon t h i s , not by making It work better, but by superimposing a system of central d i r e c t i o n , show l i t t l e awareness of what such a system would have to accomplish even to equal the market In effec tIvenes s. Hayek's defense of the market economy can be  substantiated  by the argument that production i s not automatic.  Proponents  of market controls, such as land use controls, often act as though the problems of production have a l l been solved. Perhaps they f e e l that i f p r o f i t s were removed, prices would f a l l and supply would be s u f f i c i e n t .  P r o f i t s , rents, prices  and interest rates are set by consumer demand, and when they  68  are controlled, It i s the consumer who  finds himself at  the end of the line of r e s t r i c t e d a c t i v i t i e s .  Production  is d i s t o r t e d , i n a sense, because the outcome i s i n f e r i o r so f a r as net s o c i a l product i s concerned, to what was achieved  under less c o n t r o l l e d conditions.  By imposing more reformed land use controls, we have precluded the opportunity function.  to allow the market mechanism to  With properly enforced a n t i - t r u s t and  of-trade l e g i s l a t i o n , the market mechanism may  restraint-  have been our  only viable s o c i a l a l t e r n a t i v e . 8.1  Re-evalution? In Houston, Texas, the market has been permitted  generate land uses.  The only controls on land are  to  restrict-  ive covenants i n i t i a t e d and upheld by Individuals within t h e i r neighborhoods. Siegan asserts that the e f f e c t on the land market i n Houston has been threefold.  F i r s t , production by a l l land  developers is at a maximum.  Second, :as the supply of r e a l  property has  increased without government controls, prices  to consumers have decreased (or r i s e n less than they otherwise would have).  Third, as competition  among land developers  s t i f f e n , some less e f f i c i e n t producers are forced from the. market.  The immediate effect w i l l be prices increases;  but  as p r o f i t s mount, incentives f o r market entry w i l l become attractive.  With increasing market "re-entry" prices w i l l  69  be competed downward.**  These r e s u l t s may  suggest that land  development, without government c o n t r o l , may  indeed produce  more positive s o c i a l new benefits than development  constrained  by controls. Some authorities on land c o n t r o l have expressed the opinion that conventional  land use controls should have  been replaced, not by more reformed land use controls, but rather by fewer controls.  In the ease of the c i t y of Houston,  Siegan c a l l s f o r an a l l - o u t abandonment of land c o n t r o l s . Others c a l l f o r the establishment  of a common market of land,  where t r a d i t i o n a l land use controls would be  scrapped i n a  5  series of evolutionary steps.  I f , as suggested, the government  gradually or " a l l a t once" abandoned i t s land market controls i t should be responsible to the market by providing  information  (education and price news services) and using inducements, and incentives (tax credits and exemptions, loans, guarantees, subsidies, etc.) to direct the market Into d e f i c i e n t market areas. Contrary  to these views, l o c a l governments have instead  enacted more reformed land use controls i n the b e l i e f that for reasons generally unstated,  these new  or more e f f i c i e n t than conventional d i f f i c u l t to see how  these new  controls are^better  land use c o n t r o l s .  It i s  reformed land use controls can  be more e f f i c i e n t than t h e i r predecessors when both are "cut from the same cloth"? represents  The advent of reformed land use controls  a c l a s s i c example of the triumph of hope over  70  experience.  We seem to have entered a phase of s o c i a l  development i n which the dogma persists that i f zoning doesn't work, t r y more of ItJ  Doebele adds that zoning  and a l l the police powers based on controls, no matter how refined with "new  gadgets and accessories," cannot come  to grips with these problems (municipal fragmentation and bankruptcy, exclusionary nature of zoning and minority pressures); and indeed, sometimes operate to aggravate rather than assuage them. j  Land use controls cannot help to a l l e v i a t e the "serious"  problems of our modern c i t i e s : injustice.  ignorance, poverty and s o c i a l  Rather, as Banfield admits, land control laws  and similar public programs (urban renewal and transportation) serve only to enhance the personal comfort, convenience, ¥ business advantage and amenities f o r the privileged groups within an urban area.' It becomes clear that our politico-socio-economic systems i n North Amerlcancondone the doctrine of l a i s s e z f a i r e only i n so f a r as the passage of laws c o n t r o l l i n g land use i s concerned.  Siegan concludes that the proposals  for major reform at the l o c a l l e v e l are analogous to buying expensive new t i r e s f o r a racing car instead of replacing i t s f a u l t y engine. "The objectives and motivations at the l o c a l levels of government are inconsistant with the needs and requirements of society and any meaningful reform requires removal of t h e i r zoning powers.  71  8.2  Effects Reformed land use c o n t r o l s , such as the Land Use  Contract, increase the costs of development.  These  additional costs may be viewed either as a d d i t i o n a l business expenses or as a tax on the economic a c t i v i t y i n the creation of r e a l estate. land developers  Costs development are increased because are required to perform many new functions.  Not only must the land developer assume the responsib i l i t y of providing public services, he must confront a lengthy and complex process development.  of approvals  The approval process  i n the course of  i n many areas i s uni-  d i r e c t i o n a l and " a l l checks and no balances."^ occasioned  Delays  by checking decisions of this nature have added  special dimensions t o c o s t .  In normal business  operations,  a wrong decision may often be r e c t i f i e d at l i t t l e cost as soon as the error becomes evident.  However, whatever the  s o c i a l benefit ( i f any) the private cost of a delayed decision - of the men and c a p i t a l that stand idle awaiting the decision - cannot be r e t r i e v e d . 8.3  The Impacts of Reformed Land Use Controls on the Land Developer The increasing costs of development w i l l be borne by the  developer.  In the short run, however, under a stable market,  the increasing costs of development w i l l produce lower b i d p prices f o r raw land.  If the developer i s holding a large  stock of raw land and the costs of development increase during  72  this holding period, then developer's  p r o f i t s w i l l s u f f e r by  an amount equal to the increased development costs.  As the  market f o r f i n i s h e d products advances with increases i n populations and incomes, prices of the finished w i l l increase.  product  Therefore, i n the long run, a l l increases  in development costs w i l l be borne by the ultimate consumer ,'in the form of Increased p r i c e s . It appears that firms who are e i t h e r "caught" speculating  (holding land f o r p r o f i t but are instead fa ced by ;  increasing development costs) or unable^to raise a d d i t i o n a l c a p i t a l to finance the new development requirements w i l l be unable to operate within such a constrained market.  Signi-  f i c a n t barriers to market entry have been, i n e f f e c t , errected by the growth of development c o n t r o l s . The condition of the market w i l l be of an o l i g o p o l i s t i c nature.  Some charge that such a market w i l l produce  undesirable s o c i a l products  (tacit or e x p l i c i t attempts by  those o l i g o p o l i s t i c firms to agree on a price f o r a standard unit of s h e l t e r ) .  Developers capable of market entry and  operation w i l l be able to charge higher prices, offer poorer services or avoid completely or r e h a b i l i t a t i o n .  1 0  the undertaking  of improvements  And so, i t appears when competition i s  eliminated, the undesirable effects which ensue may well be worse than the problems which existed before controls were reformed.  73  Land developers must e s t a b l i s h t h e i r p o s i t i o n i n l i g h t of recent trends towards more land use controls.  The  and easiest alternative available Is to exit the land ment process, either temporarily or permanently.  first develop-  Secondly,  some w i l l remain i n the land development business as long as possible and w i l l r e s i s t to the best of their a b i l i t y the onset of more land use controls.  Controls can be resisted by  l e g i s l a t i v e lobbying; although true change can only be brought about i f c i t i z e n s understand the s o c i a l costs and consequences and thereby desire change.  F i n a l l y , some land developers  simply enjoy their o l i g o p o l i s t i c powers and thereby l e g i s l a t i o n for s t r i c t e r land use control.  will  support  74  CHAPTER 8  FOOTNOTES  1  The trends toward more reformed land use controls a appear to be strong not only i n B r i t i s h Columbia but i n the rest of the states and provinces. See Paul Gross, "Changing the Ground Rules i n the Raw Land Game," Real Estate Review (Winter, 1972).  2  F. A. Hayek, The Constitution of Liberty (Chicago: Universlty of Chicago Press; 1960), p.342.  3  As competition decreases, some firms w i l l a t t a i n the power to f i x prices and output and thereby enhance p r o f i t s .  4  Siegan, op c i t , p.136.  5  Doebele, op c i t , p.8,9.  6  Doebele, op c i t , p.8.  7  E. C. Banfield, The Unheavenly C i t y : The Nature of our Urban C r i s i s (Boston: L i t t l e , Brown and Co., 1968), p.10,11.  8  Siegan, op c i t , p.152,158.  9  Which raises the question of l o c a l government's "nonaccountability" to the public as f a r as these "costs of planning" are concerned.  10  Siegan, op c i t , p.135.  75  BIBLIOGRAPHY Banfield, E. C , The Unheavenly C i t y : The Nature and Future of an Urban C r i s i s , L i t t l e , Brown and Co., Boston, 1968. Batten, C. R., "Boulder's Muddle," The Gazette Telegraph, Colorado Springs, Colo., June 25, 1973. Brennan, Michael J., Theory of Economic S t a t i c s , Prentice-Hall, Inc., Englewood C l i f f s , N.Y., 2nd ed.,1970. "Bridgeview Report'J* The Columbian. Thurs. Feb. 1973, p.11. Broadway, Frank, State Intervention i n B r i t i s h Industry 1964-1968, Kaye and Ward, London. 1969. ^Buying a Home? What You Face Now," U.S. News and World Report, Jan. 1, 1973, p.24-25. Coase, R.H., "The Problem of S o c i a l Cost," The Journal of Law and Economics, ed. Claron Director. University of Chicago Law School, Vol.111. 1960. "Crowding of Houses a "must"," Canadian Press, Vancouver Province, October 15, 1973. de Leeuw, Frank, "The Housing Allowance Approach," The Urban I n s t i t u t e , Washington, D.C. Draft 2100-3,1971. Derkowski, A., "Residential Land Development i n Ontaro," Urban Development Institute, Nov. 1972. Doxiadis, C.A., Urban Renewal and the American City,, National Association of Housing and Redevelopment O f f i c i a l s , Chicago, 1966. "Drive t o Curb Growth i n the U.S. - Its Impact," U.S. News and World Report, Jan. 15,1973. Dyckman, John W,, "Control of Land Development and Urbanization i n C a l i f o r n i a , " Housing i n C a l i f o r n i a , Governor's Advisory.Commission on Housing Problems, San Francisco, 1973.  76  Enzer, Selwyn., Some Housing Prospects f o r Residential Housing by 1985, Institute f o r the Future, Middletown, Conn., Jan. 1971, Report R-13. "Florida's Superboom - People, Prosperity, and Problems," U.S. News and World Report, June 11, 1973. Frankel, Sara A., "Rising Land Costs Are Burying the Home Builder," Real Estate Review, Winter, 1972. Gauss, Gordon, and Carl H i l l i a r d , Associated Press Writers, "Land B i l l Dies, Assembly Quits," The Denver Post, June 30, 1973. Gibbons, James E., President Jackman G i l l i l a n d Corp., "Investment Potentials, P i t f a l l s , " National Real Estate Investor, March, 1973. Gillanders, David E., B a r r i s t e r and S o l i c i t o r , "The Real Estate Development Process," Executive Programmes, University of B r i t i s h Columbia, A p r i l 16, 1973. Grenby, Mike., Sun Business Writer, The Vancouver Sun, November 14,~T9"73 p.36. Gross, Paul, "Changing the Ground Rules i n the Raw Land Game," Real Estate Review. Winter, 1972. Hamilton, S. W., "Price Movements i n Undeveloped Land Facing Urbanization: A Micro Study," Dissertation, Berkeley, Center of Real Estate and Urban Development, 1969. Hamilton, S.W,, "Public Land Banking - Real or Illusionary Benefits, "Research Report Prepared f o r the Urban Development Institute of Ontario, Oct., 1973. Hanford, Lloyd D., CPM, "Environmental L i f e or Death," Journal of Property Management, March-April 1970. Harris, Senator Fred, and John Lindsay, The State of the C i t i e s , Report of the Commission on C i t i e s i n the 1979's, Praeger Publishers, New York C i t y , 1972.  77  Hayek, P. A., The Constitution of Liberty, University of Chicago Press, 1960. Hayek, P. A., The Road to Surfdom, University of Chicago Press, Chicago, 1944. "'Home, Sweet Home' - Price i s Going Out of Sight," U.S. News and World Report. July 30, 1973. "Home Building Boom Hits Snags i n Suburbs," U.S. News and World Report. Oct. 16, 1972. Hirschman, Albert 0., E x i t , Voice and Loyalty, Harvard University Press, Cambridge, Mass, 1970. Inner C i t y Housing and Private Enterprise, ed. Frederick Case, University of C a l i f o r n i a , Los Angeles Housing, Real Estate and Urban Land Studies Program Series, Praeger Publishers, New York C i t y , 1972. Jacoby, N e i l , and P. G. Pennance, "The Polluters: or Government?" Occasional Paper 36, Institute of Economic A f f a i r s , London, 1972.  Industry  Jewkes, John, Public and Private Enterprise, Routledge and Kegan Paul, University of Keele, London, 1965. Kaplan, Marshal, Urban Planning i n the 1960's - A Design f o r Irrelevancy, A Praeger Special Studies i n the U. Economics, S o c i a l and P o l i t i c a l Issues, Praeger Publishers, New York C i t y , 1973. "Land Use Contract," The Corporation D i s t r i c t of Surrey, 1972  of the  Lane, W. T., Chairman, B. C. Land Commission, Dec. 3, 1973. Leiren, H a l l , "How Zoning Makes M i l l i o n s For A Fortunate Pew," Vancouver Sun, Jan. 25, 1973. Milgram, Grace, The City Expands.Institute Environmental Studies, University of Pennsylvania, Philadelphia, 1971.  for  Modern Land Policy, Papers of the Land Economics Institute University of I l l i n o i s , University of I l l i n o i s . P r e s s , Urbana, 1960. Muth, Richard P., C i t i e s and Housing, University of Chicago Press, 1964. "National Land Use Planning B i l l Approved by Senate 64-21, "Washington Post, Associated Press, June 21, 1973. Paulson, M. C , The Great Land Hustle, H. Regnery Co. Chicago, 1972. Pennance, P. G., "Supply, demand, and homes," The Daily Telegraph,(December 7, 1972.) Pickard, Jerome P. "Property Taxes - Their Relation to Land Uses," Real Property in Urban Society - A Compilation, Published by the V i r g i n i a Law Weekly, University of V i r g i n i a Law School, 1965-66. Poettcker, A l v i n . Lang Development, (Dec. 3, 1973)  Interview,  "Population Slowdown - What It Means to the U. S.," U. S. News and World Report. Dec. 25, 1972. Preston, Paul, Tonnison Development, (Dec. 5, 1973)  Interview,  "Procedure f o r Subdividing Land Within Municipalities W. T. Lane, S o l i c i t o r General of the Municipality of Richmond, 1973. "Proper Land Planning - W i l l We Learn at Last?" Better Homes and Gardens, September, 1969. Province of B r i t i s h Columbia, "Municipal Act," July 1, 1971. R a t c l i f f , Richard U., Urban Land Economics. Analysis, McGraw H i l l Book Co., N. Y. 7 ed, 1967.  79  Real Property In the Urban Society - A Compilation, Published by the V i r g i n i a Law Weekly, University of V i r g i n i a Law School, 1965-66. Samuelson, Paul A., Economics - An Introductory Analysis, McGraw H i l l Book Co., N.Y. 7 ed, 1967. Schmid, A. A l l a n . , Converting Land From Rural to Urban Uses, Resources f o r the Future, Inc., John Hopkins Press, Washington, 1968. "School, Park Land Dedication Meet Set," The Gazette Telegraph. Colorado Springs, Colo., July 15, 1973. Siegan, Bernard H., Land Use Without Zoning, Lexington Books, Lexington, Mass, 1972. "• Six Men Who Share Our Concern About The Problems i n Housing Today," Better Homes and Gardens, September, 1969 Smith, W. F. Principles of Urban Development, University of B r i t i s h Columbia, draft manuscript, 1972. f  "Staff Comments on the Land Commission B i l l , " Greater Vancouver Regional D i s t r i c t Planning Committee, Feb. 28, 1973 Stupich, David D., Hon. Minister of Agriculture, B i l l Number 42, The "Land Commission A c t / The Province of B r i t i s h Columbia, 1973. 1  Sussna, Stephen, Land Use Control - More E f f e c t i v e Approaches, Research Monograph 17, The Urban Land I n s t i t u t e , Washington, D. C. 1970 Sverdlik, Jerome S., "How to Buy Raw Land," Real Estate Review, Winter, 1972. "Ten Problems, The Building Industry Must Face up to," Better Homes and Gardens, Sept. 1969.  80  "The Mayors' Story: Money S t i l l No. 1 Headache," U. News & World Report, July 2, 1973. " The New American Land Rush," Special Section Time. Oct. 1,1973. Urban Land Use Policy: The Central C i t y , ed. Richard B. Andrews, The Free Press, New York City, 1972. Vilander, Kathleen, "Outer C i t y : Suburbia Seeks New Solutions," Real Estate Review. Winter, 1972 Ways, Max., "Land: The Boom that Really Hurts," Fortune. July 1973. "What Can Be Done to Save Big C i t i e s , " Interview with James T. Lynn, Secretary of H.U.D., U. S, News and World Report. June 18, 1973 White, P h i l l i p H., "Urban Redevelopment P o l i c i e s , " The Chartered Surveyors Annual Conference, London, 1961. " W i l l the Housing Boom F i z z l e , " The International Operating Engineer. A.F.L. -C.I.O., A n 1973. p  r  Wynkdop, Steve, " V a i l Area Facing Urbanized Future," Denver Post S t a f f Report, July 15, 1973  81  APPENDIX CHAPTER 6 The "chain reaction", however, may of reasoning advanced i n chapter s i x .  go beyond the type To achieve uniformity  of assessment i n the Province of B r i t i s h Columbia, the government passed i n 1953 the "Assessment E q u i l i z a t i o n Act," which came into effect i n 1955.  The purpose of t h i s Met  was  to e s t a b l i s h a relationship between assessed value and actual value (later defined as market value).  The l a t e s t ammendment  is the rule of the 5 and 10 percent increase l i m i t f o r school assessment purpose.  Broadly speaking, the t o t a l assessed  value of a l l property In a school d i s t r i c t should not exceed by more than 5 percent the t o t a l assessed value of the previous year i n the school d i s t r i c t .  Each property of an i n d i v i d u a l  owner i n a school d i s t r i c t should not exceed by more than 10 percent the assessed value of the previous year (except f o r instances of land improvement).  These 5 and 10 percent rates  apply only to the school assessment rules and not to the general tax provisions. What we have here-appears to be a unique taxing s i t u a t i o n which again emphasizes the discriminatory nature of land controls. Under strong market conditions where the market values of e x i s t ing stocks increase, l e t us assume, more than 10 percent per year, t h i s "5 and 10 percent" rule appears to generate Inequities i n the share of assessments between new and e x i s t i n g  82  stocks.  New Houses are priced, sold and assessed a t the  current market rate, while e x i s t i n g structures are protected/from assessment increases over 5 and 10 percent. This inequity w i l l remain a s long as the demand f o r e x i s t ing stocks (which sets the price, so to speak, f o r new stocks) increase faster than 10 percent per year.  

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