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Problem of private investment in urban redevelopment Chang, Ian Wellesley 1968

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THE PROBLEM OF PRIVATE INVESTMENT IN URBAN REDEVELOPMENT  Part of a Group Study "The Nodular Metropolitan Concept"  by Ian Wellesley Chang B. Com., University of British Columbia, 1963  A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS  in the School of Community and Regional Planning  We accept this thesis as conforming to the required standard  THE UNIVERSITY OF BRITISH COLUMBIA April,  1968  In p r e s e n t i n g t h i s t h e s i s  in p a r t i a l  f u l f i l m e n t of the  requirements  f o r an advanced degree at the U n i v e r s i t y of B r i t i s h Columbia,  that  the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r  Study.  I further  I agree  r e f e r e n c e and  agree that p e r m i s s i o n f o r e x t e n s i v e  copying of  this  t h e s i s f o r s c h o l a r l y purposes may be g r a n t e d by the Head of my  Department or by h.iis r e p r e s e n t a t i v e s .  or p u b l i c a t i o n of t h i s  w i t h o u t my w r i t t e n  It  i s understood t h a t  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 not be a l l o w e d  permission.  School  Q l H ^ f f l S t t t of  Community and R e g i o n a l  The U n i v e r s i t y of B r i t i s h Vancouver 8, Canada Date  M  ^  3  >  1  9  6  8  copying  Columbia  Planning  i  ABSTRACT  This study is divided into two sections.  The f i r s t consists of  a group study in which the Nodular Metropolitan Concept is introduced. The second consists of an individual research project in which the problem of private investment in urban redevelopment is  investigated.  One of the objectives of the federal urban renewal program in Canada is the achievement of an efficient pattern of urban land uses.  This  is done by encouraging and facilitating the redevelopment of slums and blighted areas of the city to accommodate the highest and best use of the land.  To accomplish this, much reliance is put on the role of p r i -  vate enterprise.  In order to attract the interest of private developers,  public assistance is called upon to provide cleared land at a price that makes i t feasible for profitable private redevelopment. In this regard, the Federal Government provides a program of financial assistance to municipalities wishing to undertake urban redevelopment.  Under Section 23B of the National Housing Act, the Federal  Government may contribute up to one-half the cost of acquiring and clearing land for redevelopment, installing public works and services, and relocating dispossessed persons.  The balance of the costs are shared  by the Provincial and Municipal governments. Recorded experience has shown however, that the above objective  has not always been satisfactorily achieved.  Anticipated private re-  development has not always materialized, with the result that public expenditures to encourage and facilitate private participation has yielded l i t t l e or no returns.  In many cases, the failure may have been due to  the lack of understanding of the local real estate market and the objectives of private investors. The problem to which this study is directed is private investment in urban redevelopment.  It is proposed to examine the factors af-  fecting the extent of private participation in government sponsored urban renewal.  Specifically, the study undertakes to test the hypo-  thesis that the extent of private investment in publicly initiated urban redevelopment is influenced by such factors as:  (1) project location,  (2) size of disposition unit, (3) re-use plan, (4) method of sale,  (5)  timing of sale, (6) pricing of land, and (7) investment uncertainty. The focus is on the disposal phase of urban redevelopment. The point of view taken is that government, through its policies and plans, can influence the outcome of its redevelopment program. Rigourous testing of the hypothesis was precluded by the limitations of time and resources.  Consequently, the analysis has been con-  fined to the City of Vancouver's urban redevelopment program.  A sample  survey was conducted in which selected investors in two Vancouver redevelopment projects were interviewed.  Each interviewee was asked i f  the seven items hypothesized to influence private participation in urban redevelopment was a factor in his investment decision.  Secondly, to  iii determine the r e l a t i v e importance of each of these, the interviewees were asked to rank the three most important f a c t o r s i n t h e i r investment a n a l y s i s . The survey r e s u l t s showed that the seven hypothesized f a c t o r s were considered i n the investment d e c i s i o n making process.  Of these, pro-  j e c t l o c a t i o n , p r i c e of land, and s i z e of d i s p o s i t i o n u n i t were the most important. The hypothesis was f u r t h e r tested against the a c t u a l experience of Vancouver Redevelopment P r o j e c t Nos. 1 and 2.  The evidence of these  two case studies provided an a d d i t i o n a l basis f o r accepting the hypothesis. Based on the research f i n d i n g s , i t was concluded that the extent of p r i v a t e investment i n urban redevelopment areas i s conditioned by the seven f a c t o r s l i s t e d e a r l i e r .  Some of these appear to be more  important .than others, but t h i s i s l i k e l y to vary from one s i t u a t i o n to another.  However, since the study was n e c e s s a r i l y r e s t r i c t e d i n scope,  i t was suggested that f u r t h e r t e s t i n g be done.  This would not only serve  to t e s t the general a p p l i c a b i l i t y of the hypothesis, but might uncover other f a c e t s of the general problem of p r i v a t e investment i n urban r e development.  iv  TABLE OF CONTENTS  ABSTRACT LIST OF APPENDICES LIST OF ILLUSTRATIONS ACKNOWLEDGEMENTS  SECTION I GROUP STUDY THE NODULAR METROPOLITAN CONCEPT  Chapter 1.  GROUP STUDY B a s i s of Study Approach The P r o b l e m Urban Growth Urban Form and S t r u c t u r e S o c i a l and S p a t i a l System Group H y p o t h e s i s I n d i v i d u a l Topics SECTION I I  (I)  THE PROBLEM OF PRIVATE INVESTMENT URBAN REDEVELOPMENT Chapter 1.  INTRODUCTION  IN  V  II.  ECONOMIC ASPECTS OF THE FEDERAL URBAN RENEWAL PROGRAM  page 1.10  Development of Urban Renewal Legislation in Canada Meaning of Slums and Blight Economic Consequences of Slums and Blight Role of Public Policy Program Objectives Redevelopment as a Strategy III.  EFFICIENCY IN GOVERNMENT URBAN RENEWAL EXPENDITURES  1.22  Growth of the Public Urban Renewal Program in Canada The need for efficiency and the criterion problem Role of the Economist IV.  INVESTOR OBJECTIVES AND THE IMPACT OF GOVERNMENT  1.32  Role of the Private Investor Investor Objectives Investors Productivity Analysis Investment Criteria Impact of Local Government Project Location Size of Disposition Unit Timing of Sale Re-use Plan Method of Sale Pricing Problems Uncertainty V.  CASE BACKGROUND The F i r s t Step Redevelopment Project No. 1 Redevelopment Project No. 2  1.51  vi page VI.  ANALYSIS . . .  1.59  Summary of Findings Problems of the Survey The Survey as a Method of Hypothesis Testing Case Analysis of Redevelopment Projects 1 and 2 Redevelopment Project No. 1 Redevelopment Project No. 2 Implications of the Case Analyses VII.  SUMMARY AND CONCLUSIONS  1.76  Basis for Study Research Conclusions Suggestions for Future Research APPENDICES  1.80  BIBLIOGRAPHY  1.92  vii  ' LIST OF APPENDICES  Appendix  Page  A.  Map showing Vancouver Redevelopment projects...  1.80  B.  Summary of Acquisition and Clearance Costs . . . .  1.81  C.  Land Disposition Data  1.83  D.  Survey Method  1.85  E.  Summary of Survey Results  1.87  F.  Application of Kendalls Test  1.89  viii  LIST OF ILLUSTRATIONS  Figure  Page  1.  Urban Matrix Variables  2.  Nodular Metropolitan Concept  3.  Framework for Evaluating Economic Policy  3  23  1.26 A  ix  ACKNOWLEDGEMENT  The author wishes to express his gratitude to Dr. Robert W. Collier for his efforts in guiding this study through to its completion;  and to Professor R.U. Ratcliff who provided the inspiration for  the study.  Secondly, the author is very appreciative of the generosity  of the Central Mortgage and Housing Corporation, whose Planning Fellowships made the last two years at U.B.C. financially possible.  Finally,  thanks are due to my wife, Sylvia, who has laboured long, and with patience, over the typing of the seemingly endless manuscripts.  SECTION I  GROUP STUDY  THE NODULAR METROPOLITAN CONCEPT  1  A.  B a s i s of  Study  A r e v i e w of the f o l l o w i n g l i t e r a t u r e emphasises the uncoordinated  s t a t e of c i t y development.  anticipate  I f i t i s p o s s i b l e f o r mankind to  ( p l a n f o r ) the f u t u r e , i t i s important to d i s c o v e r  of changes t h a t may underlying  occur.  The  v a r i a b l e s t h a t are  s p e c i f i c a l l y to e x p l o r e i n the c i t y  today.  purpose of t h i s study i s to  shaping urban s o c i e t y and  and  From t h i s a n a l y s i s i t i s apparent t h a t  analysed.  structure.  B.  Approach The  ary.  can  form  been i n t e r and  Because of the  Regional  co-ordinated  been made to c o n s t r u c t a  A more complete i d e n t i f i c a t i o n and  multi-disciplin-  t h a t Community and  framework.  preliminary  l i m i t a t i o n s of time  o n l y s e l e c t e d components of the c o n c e p t u a l  model are  and  explored.  a n a l y s i s of a l l the model's compo-  nents would r e s u l t i n a b e t t e r u n d e r s t a n d i n g of the The  be  then be r e i n f o r c e d to shape f u t u r e  I n view of t h i s , an attempt has  u r b a n growth p r o c e s s .  urban system.  i n the c i t y can  must operate w i t h i n a comprehensive and  personnel,  specific  that  of t h i s r e s e a r c h  model (see m a t r i x , f i g u r e 1).  evident  this analysis, i t i s believed  approach to t h i s study has  I t i s a postulate  Planning  growth trends  Based on  the most d e s i r a b l e trends and  identify  a form of development which i s becoming  T h i s study assumes t h a t p r e s e n t  kinds  structure;  f u n c t i o n a l nodes have formed n a t u r a l l y w i t h i n the p r e s e n t  recognized  the  larger  t o p i c s of i n d i v i d u a l s t u d i e s are  continuing arbitrarily  2 selected on the basis of individual researcher's experience and interest. It is only on this basis that a significant contribution to the theory and practice of Community and Regional Planning can be made. C.  The Problem By the year 2000, the urban population of the United States is  expected to double.  -  Moreover, people are expected to be more affluent 2  as their personal income in constant dollars increases by fifty percent. While these anticipated changes have not yet been realized, the capacities of our cities are fast reaching their limits.  For example, transporta3  tion f a c i l i t i e s are already congested in the large metropolitan areas. Conveniently located land for housing is becoming scarce, and costs o f providing public services and u t i l i t i e s are becoming prohibitive. The crucial problem arising out of this is how to plan our metropolitan areas so that they can accommodate the anticipated growth and change. It is estimated that by the 1980's or at least by the year 2000, we w i l l have to rebuild our cities to accommodate the anticipated population increase and to satisfy the preferences of a more affluent society.  By the year 2000, more urban homes, places of business, and  public f a c i l i t i e s w i l l have to be built than have been built since the f i r s t towns were started in North America.  At least half of todays  "Outdoor Recreation Resources Review Commission, Projections to Years 1976 and 2000: Economic Growth, Population, Labour Force, Leisure and Transportation, (Washington, D . C . : U.S. Government Printing Office, 1962), p.9. 2 Lowdon Wingo, J r . , Cities and Space, (Baltimore: Johns Hopkins Press, 1963), p. 11. 3 Wilfred Owen, The Metropolitan Transportation Problem, (New York: Doubleday & Company Inc., 1966), p. 1.  3  (J  FIGURE 1  u  C o  OH •Tit*  am  o  «^3  E  CUM IH  . o  >H  ca u d  u  St"  oo Political  2S s +>  e -3 r-H  <M  •p  C  •H  £>  §  1—  Science  political public  -.ID  M  INCEPQIDa'T VARIABLES  •H  +>  -H  a  H +3 G  0  D*S  "H fl +» C O O «H fl •4 •*» «  -P  £ 1  d  o a EQ  rH  a o a)  •B g  3  &3  ©  bp d  o <H  *X  5 : tO  (  theory  administration •  political parties l e a d e r s h i p £: decision-nuking power &  influence  Sociology social  behavior  social  structure  •  Econonics Monetary & .fiscal policy Income price  A  distribution theory  economic  growth  Business Adminlstratior marketing  A A  finance, policy &  estate  management  public  rejations  "  accounting ^Jrban F o r m architecture landscape civic  design  lend use  X  & zoning  Lav •ninicipal  lav  land & maritime  lav  constitutional  lav  "torts  A  corporation  lav  Eneineering utilities systems  & services _ analysis  "transportation  "  f  -  -  • —1-- . -  -  *  g  communication structural  design  Urban Geography urban  systems  urban  processes  f  Social PsvcholoET  r  t  Statistics  URBAN  MATRIX  VARIABLES  CHANG COW IE' "LINDEMANMAPJN SHAHANI  X T  1  4 urban dwellings w i l l probably require replacing because they w i l l no 4 longer serve the needs of families.  In addition, half of todays urban  business and industrial buildings w i l l require replacing because they w i l l no longer serve changing production and distribution methods."* It is likely that our cities w i l l have to be restructured accommodate radically new means of transportation.  to  High density cities  like New York have already found the cost of automobile travel to the city core prohibitive.  In low density cities, such as Los Angeles, the  cost in money, time and space of relying solely on the automobile is equally prohibitive.  For example, two thirds of Los Angeles' downtown  is given over to the automobile,, about one-half of this to parking lots and garages and the rest to roadways and highways. cities have grown with l i t t l e planning.  Most of todays  Although they urgently need  rebuilding and restructuring, they have neither the money nor the authority.  Our larger cities are beset.with problems of slums, traffic  congestion, sprawl, ugliness, housing;  with the provision of inadequate  open space; with air and water pollution; administration and taxation.  with  outmoded forms of public  In addition, most cities have enormous  problems with education, poverty and racial segregation. Outdated, inflexible p o l i t i c a l boundaries have helped to encourage people and industry into the lower tax suburbs and to make planning extremely d i f f i c u l t .  The wealthier families have escaped to the  7  "What Kind of Cities Do We Want", Nations Cities, (Vol. 5, No. 4, April,1967), p. 18. Ibid. 5  ^Los Angeles City Planning Department, "Major Issues for Los Angeles" May 2, 1966, p. 4.  5 suburbs leaving the central city to deteriorate.  Our cities continue  to use a tax system that penalizes improvements and subsidizes o.bsolescence, which inevitably leads to blight, sprawl and spread of slums.^ In spite of a l l these problems, which vary in degree across North America, our metropolitan areas continue to grow and cry out for imaginative solutions to making our urban environment more livable. Planners like William Wheaton and Victor Gruen believe that the essence of urbanism is variety, and that only a vibrant night-andday "downtown" (city core) can support the variety of shopping, services, contact, job opportunities, culture and recreation f a c i l i t i e s needed to 8 make a city an attraction.  Any viable city core needs people living  within and adjacent to the area - not just daytime commutors. The provision, through urban renewal, of a functional and livable habitat for these central city dwellers is the focus of the group research effort described in this thesis. D. Urban Growth 1. Metropolitanization Before discussing the central core area of the city, i t is important to mention the general forces which have contributed to the growth of our metropolitan areas. Peter Hall described these forces in 9 his book, The World Cities.  The f i r s t is that total population has  increased at a rapid rate and threatens to go on increasing.  The second  ^W.R. Thompson, A Preface to Urban Economics, (Baltimore: Johns Hopkins Press, 1965), p. 320. g Nations Cities, Op. c i t . , pp. 26-27; and Victor Gruen, The Heart of our Cities, (New York: Simon and Schuster, 1964), pp.292-339. Peter Hall, The World Cities, (New York: McGraw-Hill, 1967). 9  6 factor was the shift off the land into industrial and service occupations in the c i t i e s .  This, however, is no longer a major factor since  over two-thirds of North Americans now live in urban areas.  The third  factor is that a large part of the urban growth is being concentrated in the already large metropolitan areas.  This concentration probably  is a reflection of the more diverse economic and social opportunities available in the large centres. Metropolitan areas have grown faster than the rest of North America in every decade since the turn of the century, except for the depression years 1930-1940.  By 1960 almost two thirds of the population  of the United States lived in the Standard Metropolitan Statistical Areas delineated by the census.  In Canada 87.5 percent were classi-  fied as urban (non-farm) population. from 1921-1961.  This is a 109 percent increase  10  Growth within the metropolitan areas has not been distributed evenly.  The central areas of cities have grown relatively l i t t l e , while  the suburban rings have grown at a much higher rate.  In some of the  larger cities, central areas have actually lost population during the last decade.  Some of the many reasons for the loss of population i n -  clude lack of available space for further building, the obsolescense of housing and industrial plants in the core areas, and the unavailability of rapid, cheap methods of communication and transportation.  •^Economic Council of Canada, Toward Sustained & Balanced Economic Growth: 2nd Annual Review, (Ottawa: Queen's Printer, 1965), p.110.  7  The  losses of population  i n the c e n t r a l a r e a s do n o t n e c e s s a r -  i l y r e f l e c t economic d e c l i n e b u t r a t h e r t i o n and i n s t i t u t i o n s t o t h e suburbs.  the d e c e n t r a l i z a t i o n o f populaH i s t o r i c a l l y the n a t u r a l c l u s t e r i n g  of c o m m e r c i a l , i n d u s t r i a l and r e s i d e n t i a l a c t i v i t i e s was due i n p a r t t o the absence o f a w e l l developed t r a n s p o r t a t i o n system.  M o b i l i t y was  l i m i t e d s i n c e few people had a p e r s o n a l mode o f t r a n s p o r t .  When mass  p r o d u c t i o n and ownership o f a u t o m o b i l e s became a r e a l i t y , t h e f o r m o f the c i t y began t o change. distances  S i n c e people were now a b l e t o t r a v e l l o n g e r  i n a s h o r t e r p e r i o d o f t i m e , they began t o move t o the o u t e r  f r i n g e s o f the c e n t r a l c i t y .  D e c e n t r a l i z a t i o n o f the residence a l s o  b r o u g h t w i t h i t many r e t a i l and s e r v i c e e n t e r p r i s e s . has  been a t r e n d  In addition,  there  towards the d e c e n t r a l i z a t i o n o f m a n u f a c t u r i n g and whole-  s a l i n g f i r m s s e e k i n g t o escape the c o n g e s t i o n o f t h e c e n t r a l c o r e . ^  An-  o t h e r f a c t o r w h i c h has encouraged r e s i d e n t i a l d e c e n t r a l i z a t i o n i s the 12 i n t e r v e n t i o n o f government i n t h e h o u s i n g market. and  Canadian H o u s i n g A c t s ,  Through t h e U.S.  l o n g term, low i n t e r e s t l o a n s made s i n g l e  f a m i l y home ownership p o s s i b l e on a l a r g e r s c a l e and encouraged t h e development o f suburban  subdivisions.  I t appears t h a t the p r i m a r y i m p l i c a t i o n s o f i n c r e a s e d and  mobility  government h o u s i n g p o l i c y on u r b a n f o r m i s a d i s p e r s i o n o f a c t i v i t i e s .  But w h i l e  t h e c i t y i s becoming more d i s p e r s e d ,  a r e a s appear t o be d e v e l o p i n g .  Press,  specialized functional  The d e c e n t r a l i z a t i o n o f r e t a i l i n g , whole-  R. Vernon, M e t r o p o l i s , 1960), pp. 116-120.  1985, (Cambridge:  ^•^W.R. Thompson, O p . c i t . , p. 355.  Harvard U n i v e r s i t y  8 saling and industry has altered the function of the urban core.  The  core is evolving from a central business district to a central i n t e l l i 13 gence d i s t r i c t .  That is to say, tertiary and quarternary economic  activities are becoming the predominate land uses. ministrative offices,  Financial and ad-  research and consultative firms, entertainment  and cultural f a c i l i t i e s are increasing in the core areas of c i t i e s . Those r e t a i l firms which remain downtown are becoming increasingly oriented to the daytime working population and to those people who live in 14 or adjacent to downtown. Within the core itself, specialized functional districts can be identified.  For example, a financial d i s t r i c t , a high order goods  shopping d i s t r i c t , and an entertainment strip may be easily observed. This clustering of like activities reflects the desire for face to face interaction or, as in the latter cases, the desire for consumers for 15 comparisons. Urbanism Perhaps the f i r s t thing that strikes an observer of our cities is the tremendous change of rural to urban population during the last few decades.  Though change is constant i t is the accelerating rate of  change in the age of automation which has wrought havoc with the "good old times". Changing l i f e styles are part and parcel of rapidly growing 13 Interview with Dr. Edward Higb.ee;. Vancouver, B . C . , November, 1967. 14 Interview with Dr. Walter Hardwick, Vancouver, B.C. A p r i l , 1967. •^Walter Hardwick, The Vancouver Sun, July 8, 1967, p. 6.  9 urban areas.  The increasing acceptance of urbanism as a way of l i f e has  ushered in an urban society which exhibits an increasing affluence among the greater proportion of its members.  The shorter work week, which is 16  a consequence of automation, is making its appearance felt.  Increas-  ing leisure time and recreational pursuits are bywords of a more affluent society.  The impact this has had so far on the urban scene is the i n -  creasing emphasis that is placed on the development of leisure time amenities and urban open spaces."*" Another phenomenon of the age of automation is the increasing 7  geographic mobility of the North American population.  It is a fact that 18  one out of five persons in the U.S. is now moving every year.  This  means that a working person in his l i f e is likely to change his residence eight times and two or three of them would involve moves to an entirely different community.  One consequence of this greater mobility is the  loss of personal contacts with relatives and neighbours who are left behind.^ In addition to urbanism as a way of l i f e and increased geographic mobility, differences in urban residential location are becoming more pronounced.  The growth of the city under a free enterprise system, or  under any non-centralized system, is leading to a high degree of differentiation of residential areas by type of structure, quality of housing Proceedings of the International Conference on Automation, Full Employment and Balanced Economy, (Rome, Italy: British and American Foundations on Automation & Employment, 1967; and Economic Council of Canada, Op. c i t . , p.64 N . P . Miller & D.M. Robinson, The Leisure Age: Its Challenge to Recreation, (Belmont, Cal: Wadsworth Publishing Co. Inc., 1963) pp.472-473 18 Co Abrams, The City is the Frontier, (New York: Harper & Row, 1965), p.17; and Economic Council of Canada, Op,cit.,p.57. 19 M.B. Clinard, "Contributions of Sociology to Understanding Deviant Behavior" in Contemporary Social Problems, Merton & Nisbet (ed.), (New York: Harcourt, Brace & World Inc., 1961) 17  10 and l e v e l s of r e n t a l v a l u e s .  Under a market system of a l l o c a t i n g h o u s i n g ,  where people l i v e depends i n l a r g e measure on the r e n t or s a l e s p r i c e they pay.  A c o n s i d e r a b l e degree of r e s i d e n t i a l s e g r e g a t i o n r e s u l t s b e -  tween p e r s o n s i n v a r i o u s income b r a c k e t s and between persons i n v a r i o u s occupations.  However, r e c e n t f i n d i n g s c l e a r l y i n d i c a t e t h a t r a c i a l and  e t h n i c r e s i d e n t i a l s e g r e g a t i o n a r e more than j u s t economic d i s c r i m i n a t i o n . They have a l s o l e d to the h i g h degree of d i f f e r e n t i a t i o n o f  residential  a r e a s , because even where economic d i f f e r e n t i a l s a r e d i m i n i s h i n g , r a c i a l . r e s i d e n t i a l segregation n  2.  persists.  20  Megalopolis The l a r g e s c a l e movement of p o p u l a t i o n i n t o the o u t e r r i n g s  of  m e t r o p o l i t a n a r e a s , i s , a c c o r d i n g to J e a n Gottmann, u s h e r i n g i n a new phase of m e t r o p o l i t a n development w h i c h he c a l l s M e g a l o p o l i s .  21  I n r e g i o n s such as the n o r t h e a s t e r n seaboard of the U n i t e d S t a t e s the o u t e r r i n g s of m e t r o p o l i t a n a r e a s have expanded to o v e r l a p o u t e r r i n g s of o t h e r m e t r o p o l i t a n a r e a s . of u r b a n and suburban development. city",  with  The r e s u l t i s a c o n t i n u o u s band  T h i s phenomenon i s a l s o c a l l e d  "strip  " c i t y r e g i o n " and " s u p e r - m e t r o p o l i s " .  The words m e g o p o l i s and m e g a l o p o l i s a r e b e i n g h e a r d w i t h i n c r e a s i n g f r e q u e n c y , u s u a l l y a p p l i e d to an a l m o s t c o n t i n u o u s s t r i n g of c i t i e s r u n n i n g from W a s h i n g t o n , D.C. to B o s t o n . . . The p a t t e r n does n o t c o n s i s t of a s t r i n g of m e t r o p o l i t a n a r e a s s t a n d i n g s h o u l d to s h o u l d e r , f i g h t i n g f o r space l i k e a crowd i n a subway, b u t of m e t r o p o l i t a n a r e a s i n a f u n c t i o n i n g g r o u p , i n t e r a c t i n g w i t h each o t h e r . I n the same manner t h a t economic 20 K . E . Taeuber & A.F. Taeuber, Negroes i n C i t i e s , ( C h i c a g o : A l d i n e P u b l i s h i n g C o . , 1965) 21 J e a n Gottmann, M e g a l o p o l i s , (Cambridge: The M . I . T . P r e s s , 1961) p.16  11 development has made the size of the typical nation inadequate and has called for super-nations, i t seems that soon - at least in historical time - urban units w i l l go beyond the scale of the metropolis to the scale of the megalopolis. And just as the metropolitan area is not made up of an accummulation of l i t t l e cities complete in themselves but on a system of specialized and therefore dissimilar areas, the various metropolitan units of megopolis w i l l specialize and become more different from each other than they are today.22 There are over a dozen areas in North America that could develop the same urban megalopolation form as the north eastern seaboard. For example, in California most of the population is in the densely populated San Francisco Bay areas and in sprawling Los Angeles.  Indications now  are that people eventually w i l l f i l l an almost solid population belt run23 ning between the two areas through the Central Valley of California. E.  Urban Form and Structure There have been many efforts to analyse the form and structure  of c i t i e s .  "Form" means the physical pattern of land use, population  distribution and service networks, while "structure" signifies the spatial 24 organization of human activities and inter-relationships.  Ideas such  as Ebenezer Howard's Garden City movement and Frank Lloyd Wright's Broadacre Concept have had considerable influence in the decentralization argument while opposing views have reflected the "Save the Central Cities" movement.  An example of a scheme developed for the retention of the  central city was put forward by L. Hilberseimer during the early 1940's, William Alonso, "Cities and City Planners" in Taming Megalopolis, Vol.11, H. Wentworth Eldredge (ed.), New York, Washington and London: Frederick A. Praeger, 1967), pp.595-596. 23 C. Abrams, Op.cit., p.280. 24 Catherine Bauer Wurster, "The Form and Structure of the Future Urban Complex": Cities and Space, Lowdon Wingo (ed.), Resources for the Future Inc., (Baltimore: The Johns Hopkins Press, 1966), p.75.  12 25 based on a "settlement unit".  Such a unit contains a l l the essentials  of a small community within i t s e l f and each unit is in turn connected to other units to create an overall system of self-contained centres.  Hil-  berseimer's study applies such a system to the City of Chicago. Recent efforts to analyse urban form and structure have focused attention on basic theories similar to Hilberseimer's approach instead of being largely intuitive as in earlier concepts.  More scientific methods  of analysis using computer techniques have been developed.  With the use  of models, many alternative forms of growth and change can be examined. Emphasis on transportation analysis has led to schemes such as the Year 26 2000 Plan for the National Capital Region  and more recently to the Penn-  Jersey Transportation Study, where future growth possibilities have been presented with clear alternatives.  In the Penn-Jersey Study, since trans-  portation policy was the factor most directly under the influence of the study's policy committe, alternative transportation systems were taken as the starting point for investigating different possible regional growth patterns. Many theoretical studies of transportation and urban form have been made by planning teams, such as the proposal for North Buckinghamshire 28 in England,  and by architects such as J . Weber in his "Linear City Devel-  29 opment" in 1965, but few of these radical ideas have been implemented. 25 L. Hilberseimer, The Nature of Cities, (Chicago: Paul Theobald & Co., 1955),pp.192-193. 26  Gruen, Op.cit., p.262; and National Capital Regional Planning Council, The Regional Development Guide 1966-2000, (Washington, D.C.: June 1966), pp.55-75; and interview with Alan Voohrees of Alan M. Voohrees & Associates Inc., Vancouver, B . C . , March 22, 1968. 27 Penn-Jersey Transportation Study, Prospectus, December 11, 1959,p.14 28 Ministry of Housing and Local Government, England, Northampton, Bedford and 29Brian Bucks Richards, Study, (London: New Movement Her Majesty's in Cities, Stationery (London"Office,1965). Studio Vista  13 On a more academic basis, there have been approaches to the theoretical studies of urban form and structure by use of models, as exemplified by Melvin Webber and Kevin Lynch.  Webber suggests that most  of the models used currently are based on "static descriptive" relationships such as density gradients of population, rates of decline of man30 ufacturing and other relationships observed in existing spatial patterns. These models concentrate on the results rather than on the cause of urban form.  He stresses the need for analysis of the "dynamic behaviour" as-  pects of urban structure.  Lynch and Rodwin suggest in their model, which  deals with physical form, that this approach should be followed by studies 31 of the "activity pattern" and its effect on urban form.  Recent studies  for the New Town of Columbia in the State of Maryland takes this approach and offers a better understanding of models in integrating transportation 32 and urban form. 1. Theoretical Concepts. There are many choices for future urban form and structure. 1  33 Catherine Bauer Wurster outlined four broad alternative approaches. (a) Present trends projected.  Region-wide specialization with most  functions dispersed but with a push toward greater concentration of certain functions in the central c i t i e s .  Perhaps un-  stable, likely to shift toward one of the other alternatives... 30 M.V. Webber, "Transportation Planning Models", Traffic Quarterly July, 1961, pp.373-390. 31 K. Lynch and L. Rodwin, "A Theory of Urban Form, Journal of American Institute of Planners. Vol.XXIV(No. 4, 1958)pp.201-214 32 33 Voohrees, Op.cit., Op.cit. pp.78-79 Wurster,  14 (b) General dispersion.  Probably toward region-wide specialization  of certain functions but a considerable degree of sub-regional integration might be induced. (c) Concentrated super-city.  Probably with a strong tendency to-  ward specialized sectors for different functions. (d) Constellation of relatively diversified and integrated cities. With cities of differing size and character, a range from moderate dispersion to moderate concentration would be feasible. Any one of these four alternatives could probably apply in North America, depending on local conditions. The city of Los Angeles recently carried out a study on urban form and structure in which the following four alternative concepts for 34 urban growth were outlined. (a) Centres Concept.  This concept envisions large regional concen-  trations of residence and employment, which would be the focal points for solidifying new growth in the metropolitan area.  It  proposes a city of a highly urban character, while preserving single family residential areas and natural amenities.  It  attempts to minimize travel distances between home and places of daily occupation . . . . (b) Corridors Concept.  This concept proposes a highly urbanized  metropolis, with concentration of employment, commercial services, recreational f a c i l i t i e s and high density apartments located in corridors extending outward from the ...metropolitan core.  This concept would require a mass transit system . . . .  34 Los Angeles Department of City Planning, Concepts for Los . Angeles (Summary Pamphlet, September, 1967) •  15 (c) Dispersion Concept.  This concept seeks an even distribution  of activities, which would accommodate growth while preserving the characteristics that make Los Angeles unique among major cities;  decentralization, owner occupied homes, and  the automobile with its f l e x i b i l i t y of movement.  This con-  cept attempts to keep travel distance from home to work and other daily activities at a minimum, by having jobs, consumer services, recreation and public f a c i l i t i e s located close to the resident population . . . (d) Low Density Concept.  This concept seeks to preserve the  present residential patterns and l i f e style of Los Angeles. It emphasizes the single-family detached house with low rise apartments in about the same proportions as now.  The automo-  bile would continue as the predominant means of transportation.. The four alternative concepts for the urban growth of Los Angeles are not unlike Catherine Bauer Wurster's four theoretical alternatives. 2.  Nodular Metropolitan Concept The Nodular Metropolitan Concept is another alternative for  urban growth and development.  This concept, which is the basis of the  group study, is found to combine elements of the centres and corridors 35 concepts as outlined in the Los Angeles study.  For purposes of c l a r i -  fication at this stage of the study, the Nodular Metropolitan Concept is an urban system based on the following assumptions. 35,. Ibid.  16 (a) Located in a large North American metropolitan region, containing a broad base of varied land use and widely diversified employment and offering a range of residential types. (b) A region of highly urban character with a concentrated central core. (c) Developed as a concentration of growth nodes at intervals along major transportation corridors.  These nodes become  centres for mixed usage or single uses of large proporations. (d) Preservation of outer single family residential areas and existing natural amenities. (e) Development of large areas between nodes as public recreation and open space. (f) Development through a comprehensive plan which co-ordinates the tools of capital budgeting, proper enabling legislation and programmed phasing. It is envisaged that this system w i l l bring about a higher standard of living, create more opportunities for the enjoyment of the city and provide an environment ®hich w i l l stimulate and support present and future i  generations. To achieve this desirable urban condition for the city, the need for increased participation by public and private sectors has been 36 acknowledged. It is likely that totally new means of land use control Nations Cities, Op. c i t . , p.19 36  17 and a d m i n i s t r a t i o n would be needed.  The enormous problem o f r e b u i l d i n g  our c i t i e s w i l l most c e r t a i n l y r e q u i r e the most advanced  technology,  e s p e c i a l l y i n t r a n s p o r t a t i o n and b u i l d i n g . 3.  T r a n s p o r t a t i o n Technology There have been i n r e c e n t y e a r s many i n n o v a t i o n s and r e s e a r c h  i n t o modes of t r a v e l t h a t ,  i f implemented,could p o s s i b l y play a  c a n t r o l e i n making our c i t i e s more l i v a b l e .  Three r e c e n t  signifi-  innovations  are: (a) Conveyors o r moving (b) Automated e l e c t r i c (c) (a)  sidewalks roads  Mini-cars.  Conveyors.  The f i r s t p r o p o s a l f o r i m p l e m e n t i n g the moving s i d e -  w a l k was i n 1893 f o r the Columbia E x p o s i t i o n a t Chicago and l a t e r 37 a t the B e r l i n E x p o s i t i o n i n 1896 and P a r i s E x p o s i t i o n i n 1900. Because o f the problem o f low speed and o t h e r p r a c t i c a l c u l t i e s i n i t s day to day u s e ,  diffi-  the moving s i d e w a l k has: n o t come  i n t o e x t e n s i v e use as an i n t e g r a l p a r t of the u r b a n t r a n s p o r t a t i o n system.  I t s a p p l i c a t i o n seems p a r t i c u l a r l y s u i t a b l e  where  l a r g e numbers o f p e o p l e have to move between two l e v e l s o r a l o n g corridors,  e.g.  a t l a r g e a i r p o r t s (Los A n g e l e s ,  San F r a n c i s c o ,  M o n t r e a l ) to save the passengers from a l o n g w a l k , and i n d e p a r t ment s t o r e s where i t can be used c o n v e n i e n t l y by t r o l l i e s and prams.  Along w i t h e s c a l a t o r s ,  use i n h i g h d e n s i t y n o d u l a r 37  Brian Richards, O p . c i t . ,  the conveyor has p o t e n t i a l  developments. pp.57-62  for  18 (b) Automated Roads. The General Motors Laboratories and Radio Corporation of America have been experimenting with automated roads with considerable success.. A single cable is buried in a shallow trench just beneath the surface of the road and this cable, when energized, gives guidance through an electronic apparatus connected to the vehicles steering system. Secondary cables and detection loops adjust the speed of cars, keeping them at a safe distance behind the one in front. General Motors estimate that vehicles could cruise in groups safely at a controlled speed of 70 m.p.h., giving a capacity of 9,000 vehicles per lane per hour, the equivalent of building five additional 38 lanes of motorway.  The cost of construction of such a system, 39 would compete favourably with contemporary highway construction. (c)Mini-Cars.  Mini-cars have come to the forefront only in recent  years. Their sudden importance can be attributed to: 1. A c r i t i c a l shortage of parking space in the central core. 2. The extremely high costs involved for providing additional parking. 3. An increasing concern for air pollution in our c i t i e s . Although no "on the road" model has yet been developed, many companies have produced prototypes.  The most widely known mini  car is the StaRRcar (for self transit r a i l and road) invented by William Alden. The StaRRcar can be driven along streets until 38 39  Brian Richards, Op. c i t . , p. 77 Brian Richards, Op. c i t . , p. 78  19 the driver requires a faster speed in which case he merely drives up a ramp to an elevated track joining, say, a 60 m.p.h. train of vehicles.  On pressing a dashboard button the vehicle  is automatically ejected at its pre-selected exit.  A mass  shift to the use of StaRRcars would help alleviate the congestion on the road network and would also decrease the problem of inadequate parking spaces in the central core of the cities as three StaRRcars can f i t into the space previously 40 occupied by one conventional car. Other modes of transportation include the monorail, cushion craft, vertical takeoff and landing and helicopters.  In recent years  millions of dollars have been spent on development but their application has been limited to special purposes like the mini mono-rails for secondary transportation at Expo '67 and the helicopter service between Kennedy Airport and downtown Manhattan. For mass passenger transport they apparently s t i l l lack the economies necessary to provide a truly . 4 1 cost competitive corridor service. 4.  Building Systems There are numerous illustrations of advanced ideas in building  systems that could possibly provide for high density core living for the future city dweller.  Three recent illustrations are:  40 Brian Richards, Op.cit., p.73; and A.R.WoIf, Elements of a Future Integrated Highway Concept, presented at the Transportation Research Seminar, March 17-18, 1965, (Washington, D . C : U.S. Department of Commerce). 41 A.R. Rice, Possibilities for Fast Surface Transport: The Case for Fast Rail Service, Planning 1966. Selected papers from A.S.P.O. National Planning Conference, Philadelphia, Pa., (April 17-21, 1966) pp.240  20 (a) Habitat.  With the advent of Canada's Expo'67, the development  of Habitat became a possibility.  Moshe Safdie, the designer  of the project, has used a basic building unit in various combinations to develop a number of housing types.  Habitat  has developed vertical and horizontal circulation systems 42 creating three-dimensional spaces. (b) Intropolis.  A. Watty, the designer, has developed Intropolis  as a system of multi-use blocks that can be connected in various ways to create higher or lower density of living spaces which are :organized on a rational basis to give maximum flexi b i l i t y and interaction.  Three-dimensional spaces and circu43  lation systems are evident as in Habitat. (c) Urbanisme Volumetrique.  This system is based on expanding  structures leaving the ground free.  A three-dimensional tubu-  lar structure with a series of slabs provides terraces for various builders to erect buildings, or to lay out roads and 44 open spaces to create a r t i f i c i a l landscapes. The detail description of any single land use and related building technique as i t could be applied to the nodular metropolitan concept of urban growth is beyond the scope of this study (see matrix, Figure..!).  ^ Moshe Safdie and David Barott, "Habitat 67", Architectural Design (March, 1967) pp.111-119. 43 Wolfgang Gerson, "Residential Environs in the Urban Area: Architecture Canada: (Vol. 44 No. 11, Nov. 1967). pp. 39-41. ^ R . Anger and M. Heymann, "Urbanisme Volumetrique" L'Architecture d'Aujourd 'hui No. 132 (June-July, 1967), pp.36-37 2  1  5.  Urban Pattern With few exceptions, the form of North American cities is 45  based on the grid pattern.  Chicago, New York, San Francisco, Montreal  and Vancouver are a l l examples of grid layout used to subdivide land and in providing services.  It was a quick solution to rapid develop-  ment in any direction and a direct result of large scale surveying emphasis.  Depending on local physiographic features, access to a l l pro-  perties is nearly equal, and theoretically the only factor that affects a property's locational value is its relationship to the central core. The grid has been applied to such varied terrains as flat prairie and steep h i l l s i d e .  San Francisco is a good example of the latter. 46  F.  Social and Spatial System It appears that thechanging urban form and structure is a  process of continuous urban growth and development.  This growth and 47 development is an expression of the existing sociocultural system. if  There are certain social indicators, which are not only demographic in nature, but also of a social behavioural nature.  Demographic character-  i s t i c s are generally an expression of the growth, size and age composition of a population.  But underlying this are social behavioural charac-  teristics, namely the practices of a society, which are expressed in activities and responses of the population. These practices of a socity 45 48. Paul D. Spreigregen, The Architecture of Towns and Cities, to some extent determine the spatial characteristics of the land. (New York: McGraw-Hill Book Co., 1965), pp.174-176. 46 Ernest Landauer. From his Seminar and Research into Urban Social Areas. Vancouver: University of British Columbia, 1965-1968. 47 W. Firey. Man, Mind and Land: A Theory of Resourse Use. (Illinois: Free Press of Glencoe, 1960),pp.207-241. I b i d . , pp.207-245 4 8  22 Thus, a r e l a t i o n s h i p between s o c i a l and s p a t i a l c h a r a c t e r i s t i c s When changes are i n t r o d u c e d i n the urban growth and  exists.  develop-  ment p r o c e s s , they u s u a l l y have an impact on the i n t e r n a l s o c i a l  and  49 s p a t i a l r e l a t i o n s h i p o f the urban of the i n t e r n a l s t a t e o f the urban "variable" states.  Any  another occur over time. depending While  system may  range from " f i x e d " to  s h i f t s of the i n t e r n a l system from one  s t a t e to  These s h i f t s r e p r e s e n t i n c r e m e n t a l changes,  be a number o f e x t e r n a l c o n d i t i o n s which a f f e c t the urban  t h e r e a r e a ti. l e a s t two which s h o u l d r e c e i v e c l o s e a t t e n t i o n i n  urban growth and development a n a l y s i s ; planned change and aggregate G.  These i n c r e m e n t a l changes  on s o c i a l r e f e r e n c e s t r u c t u r e s and e n v i r o n m e n t a l m a n i p u l a t i o n .  t h e r e may  system,  system.  namely those as a r e s u l t o f  those as a r e s u l t of chance, where change i s due  individual  to  action.  Group H y p o t h e s i s A r e v i e w o f the p r e c e d i n g urban growth concepts i n d i c a t e s  the n o d u l a r concept s h o u l d be s t u d i e d .  that  T h e r e f o r e the f o l l o w i n g h y p o t h e s i s  i s formulated:  That the Nodular M e t r o p o l i t a n Concept  provides  a u s e f u l b a s i s to i n i t i a t e a study o f urban  liv-  i n g , and p l a n n i n g .  W. B u c k l e y . S o c i o l o g y and Modern Systems Theory. (Englewood C l i f f s : P r e n t i c e - H a l l I n c . , 1967); and L. B e r t a l a n f f y , " G e n e r a l Systems Theory: A C r i t i c a l Review". G e n e r a l Systems. V o l . 7, 1962, p.3. 1  TRANSPORTATION CORRIDOR RESIDENTIAL AND EMPLOYMENT NODE OPEN SPACE  Scale Ap^rox,lra<  Figure  2  Nodular Metropolitan Concept  24 H.  Individual Thesis Topics The topics chosen for individual research are as follows: 1.  Ian W. Chang-. - "The Problem of Private Investment in Urban Redevelopment".  2.  Ashok G. Shahani:'. - "The Nodular Metropolitan Concept:  Some  Transportation Aspects.':  1  3.  Monica H. Lindeman - "The Nodular Metropolitan Concept:  Some  social and Spatial Aspects." 4.  Ronald E . Mann - "The Role of the Time Element in the Urban Renewal Process."  5.  Arthur R. Cowie - "The Provision and Distribution of Local Open Space in Urban Residential Areas.""^ The relevance of topic 1. to the nodular development concept be-  comes clear when i t is realized that this concept requires a large amount of private capital to become a reality.  Within the existing urban struc-  ture, i t requires a heavy commitment of private funds for urban redevelopment.  Under our market economy system, i t is highly unlikely that such  funds w i l l be forthcoming unless there is a potential for profit.  Assum-  ing that i t is decided to implement the nodular form of urban renewal, i t would be mandatory for government planners to provide a favourable climate  R. Ratcliff, Private Investment in Urban Redevelopment, Real Estate Research Program, Institute of Business and Economic Research, Research Report 17, (Berkeley: University of California, 1961), p.7.  25  for private investment.  It is true that public objectives in renewal are  to maximize community benefits, while private investor objectives center on seeking opportunities for competitively attractive returns at minimum risk.  However, as Ratcliff argues, these two objectives need not be an-  tagonistic, but can co-exist with benefits accruing to both parties. If this is true, then i t behooves those persons charged with the respons i b i l i t y of formulating urban renewal plans and policies to understand the motivations and investment calculus of the entrepreneur.  Similarly,  i t is just as important for the private developer to be sympathetic to the social objectives of urban renewal.  R. Ratcliff, Private Investment in Urban Redevelopment, Real Estate Research Program, Institute of Business and Economic Research, Research Report 17, (Berkeley: University of California, 1961), p.7.  SECTION II  (I)  THE PROBLEM OF PRIVATE INVESTMENT IN URBAN REDEVELOPMENT  CHAPTER 1  INTRODUCTION  The age of chivalry is gone; that of sophisters, economists, and calculators has suceeded. Edmund Burke  The Problem Since its inception in 1949, the federal urban renewal programs in Canada and the United States have been the object of much criticism.  The programs have been attacked for their presumed social,  economic, administrative, and physical inadequacies.  Martin Anderson,  who is one of the harshest c r i t i c s of urban renewal in the United States, argues that the program should be repealed on the ground that i t has incurred great social costs, but has accomplished little.^" Scott Greer, another analyst of urban renewal, argues that the program has been less than successful and suggests that further research be 2 done before extending the program any further. Hlartin Anderson, The Federal Bulldozer (New York: McGrawH i l l , 1967), p. 228-230. 2 Scott Greer, Urban Renewal and American Cities (Indiana: Bobbs-Merrill Co., Inc., 1965), p. 185-190.  1.2 Although the number of c r i t i c s of renewal abound, few have actually undertaken a comprehensive analysis and evaluation of the program, particularly at the micro-level.  Anderson has produced a broad  analysis, but i t was approached from a macro point of view and does not appear to recognize the possibility that some projects may be more 3  successful than others. It would be unduly optimistic and naive to assume that a comprehensive analysis and evaluation of specific renewal schemes or projects could be easily accomplished.  In the f i r s t place, the urban re-  newal program is a broad and complex one.  A second and perhaps more  significant reason is that many municipalities are reluctant to permit 4  an evaluation of their schemes or projects.  However, this does not  alter the fact that there is a v i t a l need to examine the achievements of those schemes and projects implemented to date.  This is necessary  since the urban renewal programs in Canada and the United States appear to be gaining rather than diminishing in popularity. Originally, i t was intended to analyse and evaluate the economic achievements or urban renewal schemes in Canada and to see i f any generalizations could be drawn respecting the relationship between economic efficiency and urban renewal plans.  To this end, a comprehensive  questionnaire was prepared and sent to various selected municipalities with completed urban renewal schemes.  The intention was to apply a  simple cost-benefit analysis to the survey results. _ M. Anderson, Op. C i t . , 272 pages.  4  R.W. Collier, "Administrative Aspects of Urban Renewal,V The Urban Renewal Process in Canada: An analysis of current practice (Vancouver: University of British Columbia, 1967), p.2.  However, the i n i t i a l enquiries yielded few responses and those which were received were too incomplete to facilitate a proper analysis.  This may be a reflection of the "reluctance to disclose  information" problem pointed out earlier.  Secondly, i t became apparent  that i t is d i f f i c u l t to make a meaningful evaluation of any given urban renewal scheme without having f a i r l y intimate knowledge of the municipality concerned.^ Nevertheless,  i t is f e l t that the pilot project undertaken  and the analytical framework devised may s t i l l be useful.  Some of the  problems of response and availability of data have been revealed. appears that "on the spot" research is.niecessary.  It  Secondly, i t appears  that a major difficulty in applying cost-benefit analysis to urban renewal is the problem of quantifying the benefits of renewal.  As A.H.  Schaaf writes, "Quantitative determination of the benefits of urban renewal is most complex and probably can at best represent only tenuous approximations."^  It remains for those with more time and resources  to pursue the research further. Purpose of this Study While the objectives of the federal urban renewal program are broad and varied, i t is possible to identify one objective which has assumed a dominant position.  "'ibid.,  This is the objective of achieving a  p. 1  A.H. Schaaf, Economic Aspects of Urban Renewal: Theory, Policy, and Area Analysis, Real Estate Research.Program, Institute of Business and Economic Research, Report 14 (Berkeley: University of California, 1960), p. 5.  1.4  superior pattern of land u t i l i z a t i o n .  7  That is to say, i t is desired  to refashion and rebuild the physical plant of the city according to modern concepts of urban efficiency. To achieve this objective, much g reliance is placed on the role of private enterprise and capital.  In  order to attract the interest of private developers, governmental assistance is called upon to provide cleared land at a price that makes i t feasible for profitable private development.  This action, of govern-  ment in financing urban renewal f i t s within the framework of costbenefit analysis.  The public urban renewal agency possess broad powers  of control over the redevelopment process and thus can influence the investment quality of urban renewal lands.  It makes the most efficient  use of public funds i f i t is able to encourage sufficient private redevelopment to increase the value of property in the renewal area, and thereby increase tax revenues.  In strict economic terms, the public  expenditure is only justified i f this occurs. The purpose of this study is to see i f there is any relationship between the amount of private redevelopment and the specific plans and policies adopted by government.  Two redevelopment projects in the  City of Vancouver urban renewal program w i l l form the basis of this research. Although the emphasis is on economic efficiency,  i t is re-  cognized that this is not the only investment criteria the local J . C . T . Mao, Efficiency in Public Urban Renewal Expenditures Through Capital Budgeting, Center for Real Estate and Urban Economics, Institute of Urban and Regional Development, Research Report 27 (Berkeley: University of California, 1965), p. 3. g M. Anderson, Op. c i t . , p. 107. 7  1.5 authorities should adopt, nor is i t necessarily the most important one.  William Ludlow points out that the social objectives of urban 9  renewal often should be the main consideration.  However, since the  decision to undertake renewal necessitates the expenditure of large sums of public monies, there is a need to identify the economic costs and benefits of these investments. Hypothesis In order to facilitate a problem solving approach in this study, a hypothesis has been formulated.  It is proposed that the  research concentrate on testing the following hypothesis: THE EXTENT OF PRIVATE PARTICIPATION IN GOVERNMENT INITIATED URBAN RENEWAL IS INFLUENCED BY SUCH FACTORS AS: PROJECT LOCATION, SIZE OF . DISPOSITION UNIT, RE-USE PLAN, TIMING OF SALE OF LAND, METHOD OF SALE, PRICING OF LAND, AND INVESTMENT UNCERTAINTY. The factors listed above were suggested by Richard Ratcliff in his study of twenty urban renewal projects in California."^  It is pro-  posed to test the applicability of these factors to Vancouver's urban renewal schemes. Methodology As mentioned above, Vancouver is to be used as a case study. Specifically, Redevelopment Projects 1 and 2 w i l l be analysed in depth.  William H. Ludlow, "Urban densities and their costs: An exploration into the economics of population densities and urban patterns, "Urban Redevelopment: Problems and Practices, ed. C. Woodbury (Chicago: University of Chicago Press, 1953), p. 113. "^R.U. Ratcliff, Private Investment in Urban Redevelopment, Real Estate Research Program, Institute of Business and Economic Research, Research Report 17 (Berkeley: University of California, 1961), p. 16-29.  1.6 These two projects were chosen because they are the only ones to date in which land has been offered for sale to private investors. The nature of this study does not lend itself to a s t a t i s t i cal test of the hypothesis, since there is not a large enough number of observations with which to apply a meaningful non-parametric test. Ideally, a test such as the Chi-square should be based on at least twenty-five observations.  We have only three.  Therefore, i t becomes  necessary to limit our test to a purely descriptive one. Preliminary steps consists of:  (1)  identifying those areas  of Redevelopment Projects 1 and 2 which have been designated for p r i vate redevelopment, and (2) determining the extent of private participation within those areas.  The extent of private participation may be  determined by comparing the number of land parcels offered for sale by the city to the actual number of parcels sold to private redevelopers. It was decided that the best way to test the study hypothesis was to interview a selected sample of the private developers participating in Redevelopment Projects 1 and 2.  Use of a questionnaire was  considered, but was rejected because of the possibility of low response in an already small universe.  Also, i t was felt that the direct inter-  view technique would be more useful in that i t might be possible to secure more detailed answers.  Two of the hypothesized factors . . pro-  ject location and timing of disposition . . may also be analysed in light of current theories of Metropolitan Vancouvers growth pattern and in light of known market conditions existing at the time the renewal  1.7  lands were offered for sale.  This procedure can serve as a check for  the answers received in the interviews.  Essentially, each respondent  interviewed was asked i f each of the hypothesized factors was a consideration in their investment decision. Scope and Limitations of Study The scope of this study is limited by the fact that Vancouver does not have a very large, completed private redevelopment component in their urban renewal program.  Schemes 3 , 4 , and 6 offer more private  redevelopment opportunities, but they are only in the preparation stage at the present time.  The primary implication of this is that i t does  not present a wide enough variety of private investment situations with which to fully test the hypothesis.  In this study, we have only i n -  dustrial re-uses and a small private housing re-use to analyse. The term "redevelopment" is consciously used in this study as a deliberate substitute for the more comprehensive term "renewal". The reason for this is that the analysis is restricted to clearance  -  projects where the drastic treatment of demolition is applied and the cleared land offered for sale to private developers.  This concentra-  tion on redevelopment is necessitated by the fact that no rehabilitation has been undertaken to date in the Vancouver renewal program. The main limitations on the study is the shortage of time and resources with which to carry out a more thorough research effort. An important ramification of this constraint is that i t may be d i f f i cult to identify the true impact of a l l the factors hypothesized to affect the investment quality of urban renewal lands.  That is to say,  1.8 the investment motivations of individual developers vary and consequently the importance of any one of the factors described earlier w i l l vary accordingly.  Without studying the motivations of a wider variety  of investors, the representativeness  of the survey results may be open  to question. In spite of these difficulties, i t is our belief that the study can s t i l l be useful.  It should help to determine i f the factors  suggested by R. Ratcliff and stated in the study hypothesis are generally applicable to the Canadian situation, and to Vancouver in particular.  Such a study may provide a guide for future urban renewal plan-  ning, particularly i f the study hypothesis is found to be acceptable. Even i f i t were not acceptable, the negative result may point the way for further research into the problem of private investment in urban redevelopment. Definitions Some of the abbreviations and terms frequently used in the study are listed and defined below: 1.  N.H.A. refers to the National Housing Act.  2.  C.M.H.C. refers to Central Mortgage and Housing Corporation.  3.  Redevelopment means a program of acquisition and clearance of blighted or substandard areas and the rebuilding of these areas for appropriate uses.-^  4.  Disposition Unit means the land which has been acquired and cleared and which is intended to be sold to either public or private developers. Sizes of disposition units  N.H.A.: Urban Renewal, a pamphlet, C.M.H.C.  1.9 i n c l u d e , f i r s t , the s i z e of the p r o j e c t ; second, s i z e s of p a r c e l s i n t o w h i c h the p r o j e c t may be d i v i d e d ; third, the square f o o t s i z e s o f s p e c i f i c uses.12  D i s p o s i t i o n of Urban Renewal P r o j e c t Land, T e c h n i c a l Guide 14 (Washington: Urban Renewal A d m i n i s t r a t i o n , H.U.D., 1964), p.7.  : 1..10  CHAPTER 2  ECONOMIC ASPECTS OF THE FEDERAL URBAN RENEWAL PROGRAM  T h i s c h a p t e r c o n s i d e r s t h e meaning and causes o f slums and b l i g h t , t h e i r economic consequences, the economic o b j e c t i v e s o f the u r b a n r e n e w a l program, and some o f the measures used t o a c h i e v e these o b j e c t i v e s .  I t i s suggested h e r e t h a t a major economic  conse-  quence o f b l i g h t i s a m i s a l l o c a t i o n o f l a n d r e s o u r c e s and t h a t a predominant a i m o f t h e u r b a n r e n e w a l program i s t o s e c u r e t h e most e f f i c i e n t u t i l i z a t i o n of land.  F o r the purposes o f t h i s a n a l y s e s ,  the N o r t h A m e r i c a n " f r e e e n t e r p r i s e " v a l u e system i s adopted; i . e . p r i v a t e i n v e s t m e n t i s viewed as t h e p r i n c i p a l v e h i c l e , w h i l e government i n t e r v e n t i o n i s seen p r i m a r i l y as the s t i m u l a n t . Development  o f Urban Renewal L e g i s l a t i o n i n Canada  To p u t the s t u d y i n p e r s p e c t i v e , i t i s u s e f u l t o l o o k back and t r a c e the development o f t h e f e d e r a l u r b a n r e n e w a l program i n Canada.  The prupose here has been t o d e s c r i b e a few k e y landmarks  a l o n g t h e way. Urban r e n e w a l , o r u r b a n redevelopment as i t was then c a l l e d ,  '1.11 was introduced in Canada in 1949.'''  In that year the National Housing  Act contemplated for the f i r s t time the clearance of slum areas.  Slums  were thought of as areas of bad housing breeding intolerable social conditions, crime, vice, fire and deliquency.  It was thought that  federal aid would allow municipalities to get r i d of these blighted areas in the community and to use the cleared areas for decent housing for low-income families.  In 1954, the re-use provisions of the Act  were slightly extended to include other public uses of land. very l i t t l e was done under the 1949 and 1954 Acts.  However,  By 1956, under  the impetus of experiments in Toronto and St. John's Newfoundland and with the inspiration of President Eisenhower's Committee's Report in the United States, i t was realized that the narrow re-use of cleared land and-other limitations of the 1954 amendments were far too restrictive and that fundamental broadening of the redevelopment program 2 would have to be made. As a result, the Federal Government amended the Act in 1956. The changes were, for that day, far reaching.  The Federal Government  was empowered to share in half the actual cost to a municipality of acquiring and clearing blighted areas.  The re-use of the land was re-  moved from the restraints of public purpose.  For the f i r s t time, i t  became possible for land to be cleared, for the people displaced to be rehoused elsewhere, and for the land to be re-used for the most appro3 priate purpose as determined by the municipality. This change did ^Stanley Pickett, "A Milestone in Urban Renewal,", Habitat, Vol. VII, No. 4 (July/August, 1964), p. 2 2 Ibid., 3  Ibid.  p. 3.  1.12 much to free urban renewal from the negative idea of eliminating i n tolerable conditions to the positive concept of city building. The legislation enacted prior to 1964 constituted what  4 Humphrey Carver called Round One of urban renewal in Canada.  The  aim was to look broadly at blighted housing areas and pick out particular sites for clearance and redevelopment, either for housing or for some other re-use.  But the focus was on redevelopment sites.  Round Two, starting with the 1964 amendments to the N.H.A., saw the introduction of a new feature.  This was the designation of an area  for an "urban renewal scheme" which may involve several different kinds of renewal action, in addition to clearance and re-development. Also, unlike the previous legislation, i t is now possible to use N.H.A. funds to renew non-residential areas.  Within a scheme area  existing housing can now be refinanced with NHA mortage insurance and a municipality can obtain grants and loans for many different types of neighbourhood improvements."' Slums and Blight:  Their Meaning  The terms "slums and blight"jare key terms in the raison detre of the urban renewal program, yet nowhere in the law are they defined, nor are there any commonly accepted standards in Canada by which their existence can be statistically measured.  Nevertheless,  the concept of urban renewal assumes that there are minimum standards and requirements for building and living conditions and that there is _  Humphrey Carver, "Community Renewal Programming," Habitat, Vol. VIII, No. 3, (May/June, 1965), p. 6. "'ibid. , p. 7.  1.13 a public responsibility to maintain these standards by preventing or arresting blight and by rehabilitating or redeveloping those areas which reach a certain level of substandardness.^ Allen A. Twichell has suggested that the two basic characteristics of blighted areas are substandardness and either stagnation or deterioration.^  While this definition provides a useful  point of departure, i t does not answer the question, "'sub what 1  standard?"  This is a most d i f f i c u l t question to answer because  subjective value judgements are then introduced. Otto Davis and Andrew Whinston define a blighted area as one where renewal would produce a net social gain, but where private g action is lacking because of certain obstacles.  Blight, in their  words, is said "to exist whenever (1) strictly individual action does not result in redevelopment;  (2) the co-ordination of decision-  making via some means would result in redevelopment; and (3) the sum 9 of benefits from renewal could exceed the sum of costs." blight is viewed as a relative concept.  Here  Although blighted areas are  often characterized by substandard buildings, land sub-divisions and layout, and public f a c i l i t i e s , not a l l substandard areas are blighted according to the above definition. An area is blighted i f and only D.H. Webster, Urban Planning and Municipal Public Policy (New York: Harper & Bros., 1958), p. 500. ^Allen A. Twichell, "Measuring the Quality of Housing," Urban Redevelopment: Problems and Practices, ed. Coleman Woodbury (Chicago: Univ. of Chicago Press, 1953), p. 11. g Otto A. Davis and Andrew B. Whinston, "The Economics of Urban Renewal," Law and Contemporary Problems, Vol. XXVI (Winter, 1961), p. 111. 9 . I b i d . , p. 111.  '1-.14 i f i t f u l f i l l s a l l three conditions.  Also, blight is not only a  residential phenomenon since i t may include industrial and commerc i a l areas as well. The Economic Consequences of Slums and Blight Blight results from a complexity of interrelated physical, economic, and social forces.^ due to:  (1)  In operational terms, blight may be  substandardness in original construction,  of maintenance., or (3)  (2) lack  a substandard or non-conforming use.''"''' The  f i r s t case reflects either a discrepancy in housing norms between builder and code-writer or a change in standards over time; cond reflects lack of capital investment;  the se-  the third usually indicates  a different use of the building or land than that originally planned. Whatever the causes of slums and blight, the result is considered to be an economic l i a b i l i t y to the city.  In his article,  The Challenge of Urban Renewal, Carter McFarland describes three common economic consequences of blight: increased municipal service costs,  (1) (2)  reduced tax revenues and inefficient land uses,  (3)  12 the flight of industry, commerce, and housing to the suburbs.  The  consequences are usually reflected in a decline in land values and in a deterioration of municipal fiscal position.  A convenient feature  of these negative effects is that they can normally be measured in dollars and cents.  However, there is a host of consequences which  ^ D . H . Webster, Op. c i t . , p. 501  ton:  ^ S . Greer, Op. c i t . , p. 24 12 Carter McFarland, The Challenge of Urban Renewal (WashingUrban Land Institute, Technical Bulletin No. 34, 1959), p. 15-27.  1.15 are s t i l l economic in nature, but which do not easily lend themselves to precise measurement.  These include the social costs in terms of  health and welfare problems arising out of poor living conditions, the costs of inconveniences and frustrations, and the many incidental effects resulting from congestion, poor location, and undue loss of time and energy.''"  3  The economic consequences of slums and blight take on added significance when i t is realized that these are not confined solely within the blighted area, but may spread to other parts of the urban area.  "Blight does not stand s t i l l .  It has a way of spreading from  house to house, from block to block, from neighbourhood to neighbour14 hood."  These external diseconomies may be manifested in such oc-  currences as the decline in value of properties adjacent to the blighted areas or in the spread of crime and diseases to the rest of the urban area. Public policies to mitigate against the economic effects of slums and blight have largely been based on the belief that most substandardness is produced by lack of maintenance.  Lack of mainten-  ance in turn is assumed to be the result of a lack of commitment to the house or to the neighbourhood.  Lowden Wingo, J r . , appears to  share this view when he argued that the phenomena of blight fits comfortably within a framework of economic analysis because of the 13 D.H. Webster, Op. C i t . , p. 502. 14 Selecting Areas for Conservation, Urban Renewal Service Technical Guide 3 (Washington: Urban Renewal Administration, 1960), p. 1.  I..16 central role of resource a l l o c a t i o n . ^  He suggests that blight seems  to refer to the condition of the urban physical plant which has been the subject of net disinvestment over a period of time.  It is ident-  ified with properties on which outlays for repair, maintenance, renovation, and modernization have been less than those needed to maintain the property in its original condition, or at a stable level of economic productivity. ing a l i t t l e naive.  William Grigsby refutes this argument as be-  He suggests instead that most substandardness 16  occurs as a result of substandardness in original construction. Nonetheless,  the emphasis on maintenance seems to have prevailed in  government renewal policies and legislation. Role of Public Policy To begin with, i t should be recognized that urban renewal is occurring constantly as a normal private market operation.  Every  time a building is torn down and a new one put in its place, redevelopment has occurred.  Similarly, when a homeowner or a landlord re-  pairs or paints his property, rehabilitation has taken place.  Such  actions are taken voluntarily by the owners of the properties with the expectation that the costs incurred w i l l be more than offset by a resulting increase in the property's value, or by an increase in the satisfactions  that the property provides its owner-occupant.  If  this was not expected, the action would not be taken. L. Wingo, J r . , "Urban Renewal: A Strategy for Information and Analysis,". Journal of the American Institute of Planners, Vo. XXXII No. 3, May, 1966, pi 146. 16 W. Grigsby, Housing Markets and Public Policy (Philadelphia: Univ. of Pennsylvania Press, 1964), p. 229.  1.17 The existence of slums and.blight is evidence that voluntary, privately initiated renewal has not - and presumably w i l l not be - sufficient to eliminate those land uses which are generally considered unhealthy, unsafe, and inefficient. profit potential has kept private investment away.  The lack of a But since slums  and blighted areas have significant social, economic, and physical impacts, government has deemed i t desirable to intervene in the renewal process. The role visualized for public policy is one of bringing about renewal in situations where i t might not otherwise occur. This usually means the creation of an environment in which private investments w i l l be attracted.  Two main approaches have been employed  to try to achieve this ebjective.^  The f i r s t approach consists  essentially of using public funds and the power of eminent domain to acquire and clear lands in an urban renewal area and then selling or leasing the land to private developers at a price related to "cleared" and serviced land in the area.  A second and more recent  approach consists of federal grants for the cost of public improvements in the renewal area  landscaping, expanded recreational  f a c i l i t i e s , increased maintenance and protective services, replanning of streets and spot clearance  and the insurance of mortgages  secured by either rehabilitated or newly constructed properties in the renewal area.  The latter method may be augmented,  ^ A . H . Schaaf, Op. c i t . , p. 1-9.  1-. 18 with code enforcement. Although government is now taking a fairly active part in urban renewal, their programs are s t i l l based on the philosophy that government should not enter where private enterprise can do the job.  As a result, the federal program is viewed primarily as  a catalyst to private action.  Exceptions are public improvements  such as public housing, parks, and streets. Program Objectives In the previous sections some of the causes and economic consequences of slums and blight were discussed.  It was pointed  out that a purpose of the federal urban renewal program was to mitigate against these consequences.  Richard Ratcliff writes that,  "The urban renewal program is a public response to the dynamics of the urban structure.  The aids and incentives of the program would  not be so necessary were i t not for the ever increasing impact of social, economic, and technological change on long-lived physical urban f a c i l i t i e s which are subject to constant wear and deteriora18 tion and d i f f i c u l t and expensive to modify."  Given this general  purpose, the next step would be to identify the specific economic objectives of the Canadian federal urban renewal program. In his review of published urban renewal studies, Kevin Cross identified the most consistently recurring economic goals of renewal.  These consisted of: 18  (1)  reduction of high per capita  R.U. Ratcliff, Op. c i t . , p. 2.  1*19 s e r v i c e c o s t of b l i g h t e d a r e a s ,  (2)  i n c r e a s e per c a p i t a tax r e -  venues from b l i g h t e d a r e a s , and  (3)  encouragement of p r i v a t e  19 investment.  These t h r e e o b j e c t i v e s may  be viewed as the  de-  s i r e to improve the f i s c a l p o s i t i o n of l o c a l governments and  to  r a i s e the l e v e l of e f f i c i e n c y i n the f u n c t i o n i n g of the u r b a n mechanism.  There i s e v i d e n c e t h a t the aim of u r b a n e f f i c i e n c y i s  predominant i n c u r r e n t p o l i c y . F o r i n s t a n c e : 1. The 1964 amendments to the N.H.A. a l l o w e d of n o n - r e s i d e n t i a l a r e a s .  f o r the r e n e w a l  2.  The s t i p u l a t i o n t h a t u r b a n r e n e w a l schemes be r e l a t e d to a comprehensive community p l a n .  3.  The and  4.  The a d m i n i s t r a t i v e emphasis on i n c o r p o r a t i n g economic analysis i n t o plan proposals.  emphasis on community wide s t u d i e s p r i o r to implementing an u r b a n r e n e w a l scheme.  Redevelopment as a  Strategy  Redevelopment or c l e a r a n c e of r e n e w a l .  preparing  i s the most d r a s t i c t e c h n i q u e  I t i n v o l v e s the a c q u i s i t i o n of l a n d through a  p a l i t y ' s power of eminent domain and s t r u c t u r e s on the l a n d . t e c h n i q u e adopted.  munici-  the t o t a l d e m o l i t i o n of a l l  H i s t o r i c a l l y , i t was  the f i r s t r e n e w a l  W h i l e i t has been h e a v i l y c r i t i c i z e d f o r i t s  b u l l d o z e r approach, i t n e v e r t h e l e s s t o o l today, though emphasis i s now  i s s t i l l an i m p o r t a n t r e n e w a l put on r e h a b i l i t a t i o n and  con-  s e r v a t i o n where p o s s i b l e . Renewal a u t h o r i t i e s may  undertake clearance  for  the  19 K e v i n J . C r o s s , " P a r t V Urban Renewal S t u d i e s : A C r i t i c a l E v a l u a t i o n , " The Urban Renewal P r o c e s s i n Canada: An A n a l y s i s of C u r r e n t P r a c t i c e (Vancouver: U n i v . of B r i t i s h Columbia, 1967), p. 11.  1.20 purpose of facilitating public improvements, such as streets, parks, and public housing, or to encourage private redevelopment.  As  suggested in an earlier section, public intervention has arisen out of the failure of the natural process of land use succession to arrest the problems of urban deterioration. Richard Ratcliff offers several reasons why private land • u * -i A use succession has failed:  2  0  1.  The units of ownership are too small for economic redevelopment in most cases.  2.  The owners are often persons of small means or who are unaware of the potentials of renewal.  3..  The degree of value decline among the individual properties in an area is variable so that many different stages in economic l i f e are represented.  4.  Private assembly into tracts of practicable size for redevelopment is d i f f i c u l t and costly because of the remaining value in many properties even in a blighted area, because owners over-value their holdings or because holdout owners exploit their, monopoly positions. For these and other reasons, private redevelopment is gener-  ally on a small scale and in most instances is economically feasible only when there is a strong demand for a given re-use and when the original structures are well depreciated.  Under such a combination  of circumstances there w i l l be a favourable relationship between the cost of acquiring the site and its value  when cleared and ready for  redevelopment. The last statement in the above paragraph is a key to the  R. Ratcliff, Op. C i t . , p. 2-3.  U21  economic rationale of redevelopment.  Land acquired and cleared may be  sold to private developers at a "write-down" price.  This "write-down"  is usually justified on the grounds that i t is necessary to overcome 21 the cost disadvantage of the market.  A l l this would not be necessary,  i f the private developer was not such an essential link in the urban renewal process.  But he i s , and his importance seems to increase as  the size of the scheme increases.  The economic objective of achieving  an optimal allocation of land, and hence improving land value, implicity assumes a flow of private capital.  Without this flow, the program  w i l l have failed in respect of its main economic objective, and the public burden of the land "write-down" w i l l not be justified. Our purpose is to examine the extent to which the planners and decision makers, through their urban renewal plans, affect the investment quality of lands in the renewal area and thereby some of the costs and benefits of the renewal program.  Louis Winnick, "Economic questions in Urban Redevelopment," American Economic Review, Vol. II, No. 2 May 1961, p. 290-292.  1.22  CHAPTER III  EFFICIENCY IN GOVERNMENT URBAN RENEWAL EXPENDITURES  This chapter is concerned with pointing out the need for efficiency in government urban renewal expenditures and with describing a criterion which can be used as a measure of economic efficiency. Also included is a brief discussion of the role economists can play in helping to achieve efficiency in expenditures for renewal.  As before,  the focus is on government expenditures for urban redevelopment. Growth of the Public Urban Renewal Program in Canada From an inauspicious beginning in 1949, the urban renewal program in Canada has mushroomed to the point where i t is now fairly well established in public policy.  In June, 1967, thirty-eight urban renewal  projects costing an estimated $225,437,000 had been approved for implementation under the National Housing Act.'''  In addition, seventy-one ap-  plications to prepare urban renewal schemes have been approved since 2 1964 under Section 23A of the Act.  If a l l the latter schemes are approved  '''Urban Renewal and Public Housing in Canada, Vo 1.3, No.2 (2nd Quarter, 1967), p.23. 2  Ibid.  1.23 the  c a p i t a l r e q u i r e d t o implement them s h o u l d f a r exceed t h a t w h i c h has  a l r e a d y been committed. The most s t r i k i n g f e a t u r e o f t h e growth o f u r b a n r e n e w a l i n Canada i s t h a t i t i s a r e l a t i v e l y r e c e n t phenomenon even though l a t i o n has e x i s t e d s i n c e 1949. for  legis-  Of the t h i r t y - e i g h t schemes approved  i m p l e m e n t a t i o n , twenty-one were approved between J a n u a r y 1, 1964  and December 31, 1967, w h i c h c o u l d be a t t r i b u t e d t o the f a c t t h a t t h e  3 u r b a n r e n e w a l p r o v i s i o n s o f t h e N.H.A. were broadened. U n l e s s t h e r e i s a change i n government  p o l i c y , i t may be  e x p e c t e d t h a t u r b a n r e n e w a l a c t i v i t y i n Canada w i l l c o n t i n u e t o i n c r e a s e . The F e d e r a l Government i s a c t i v e l y promoting r e n e w a l .  I n a statement  d e l i v e r e d i n the House o f Commons on May 23 and June 1, 1964, the Honourable John R. N i c h o l s o n , former M i n i s t e r r e s p o n s i b l e f o r t h e o p e r a t i o n s o f C e n t r a l Mortgage and H o u s i n g C o r p o r a t i o n ,  said,  "...Second, we c a n no l o n g e r r e s t c o n t e n t w i t h a f e d e r a l u r b a n r e n e w a l p o l i c y , w h i c h i s c o n f i n e d t o c l e a r a n c e and redevelopment a l o n e . Such a p o l i c y by i m p l i c a t i o n a c c e p t s the p r o c e s s o f decay and r o t as i f i t were something i n e v i t a b l e and n a t u r a l . We know t h e r e i s no a u t o m a t i c p r i v a t e market p r o c e s s w h i c h r e g e n e r a t e s u r b a n a r e a s as they d e c l i n e . T h e r e f o r e , the government b e l i e v e s t h a t i f t h e r e i s t o be such a r e g e n e r a t i v e p r o c e s s i t must be developed as a m a t t e r o f p u b l i c p o l i c y . We propose to encourage and h e l p the p r o v i n c e s and t h e i r m u n i c i p a l i t i e s t o d e v e l o p ^ i t t o g e t h e r w i t h the f e d e r a l government and i t s a g e n c i e s . " Subsequent speeches by o f f i c i a l s o f the C e n t r a l Mortgage and Housing C o r p o r a t i o n have c o n t i n u e d t o u n d e r l i n e the problems o f u r b a n b l i g h t  3 Canadian H o u s i n g S t a t i s t i c s - 1966 (Ottawa: C e n t r a l M o r t gage and H o u s i n g Corp., 1966), p.60. ^John R. N i c h o l s o n , "A F r e s h Approach t o Canada's H o u s i n g , " Statement d e l i v e r e d i n the House o f Commons on May 28 and June 1, 1964.  1.24 and s t r e s s e d the need f o r r e n e w a l .  I t a l s o appears t h a t u r b a n  i s a p o p u l a r program w i t h m u n i c i p a l governments who of i m p r o v i n g l o c a l h o u s i n g c o n d i t i o n s and  renewal  see i t as a means  the p r o p e r t y t a x base."*  The Need f o r E f f i c i e n c y and the C r i t e r i o n Problem " I t s h o u l d go w i t h o u t s a y i n g t h a t a l l d e c i s i o n - m a k i n g or groups attempt  to economize, i n the t r u e sense o f the word.  persons That i s ,  they t r y to make the 'most , as they c o n c e i v e of the 'most', o f whatever 1  r e s o u r c e s they have.  B u s i n e s s f i r m s may  have a c o m p a r a t i v e l y c l e a r - c u t  n o t i o n o f what they mean by the most, w h i l e consumers and u n i t s have much more d i f f i c u l t y i n d e f i n i n g i t . they make t h e i r d e c i s i o n s by drawing i n the b e s t way  But a l l o f them, u n l e s s  s t r a w s , are t r y i n g to do something  p o s s i b l e w i t h the r e s o u r c e s t h a t are a v a i l a b l e . "  quote summarizes, i n a g e n e r a l way, used i n t h i s  governmental  This  the d e f i n i t i o n of e f f i c i e n c y as  study.  The r e c e n t r a p i d e x p a n s i o n of the u r b a n renewal program i n Canada has a l r e a d y been d e s c r i b e d .  W i l b u r Thompson p o i n t s o u t t h a t ,  "Renewal programs a r e , moreover, up a g a i n s t the h a r d f a c t s o f a f i e r c e c o m p e t i t i o n f o r p u b l i c funds w i t h o t h e r p o w e r f u l c o n t e s t a n t s , such  as  p u b l i c h e a l t h , j u v e n i l e d e l i n q u e n c y , v o c a t i o n a l t r a i n i n g , g e n e r a l educat i o n , u r b a n t r a n s p o r t a t i o n , outdoor r e c r e a t i o n , and o t h e r h i g h p r i o r i t y programs.  R e a l i z i n g t h a t e n l a r g e d u r b a n renewal budgets w i l l be  c u l t to a c h i e v e , any. new  o v e r - a l l s t r a t e g y o r s e t of t a c t i c s t h a t m i g h t  "*M. A n d e r s o n , Op. (New York:  diffi-  c i t . , p.9.  ^R.N. McKean, E f f i c i e n c y i n Government Through Systems A n a l y s i s John W i l e y and Sons, I n c . , 1958), p. 3-4.  1.25 e x a c t more r e n e w a l l e v e r a g e f o r each p u b l i c d o l l a r s p e n t would be most welcome."  The problem, as Thompson sees i t ,  7  i s one of economy and  e f f i c i e n c y i n urban renewal. G r a n t e d the need f o r measuring the e f f i c i e n c y o f p u b l i c  expend-  i t u r e s f o r u r b a n r e n e w a l , we a r e then f a c e d w i t h the problem o f s e l e c t i n g a method f o r measurement.  The d i f f i c u l t y i n measuring the e f f i c i e n c y of  government e x p e n d i t u r e s i s t h a t , u n l i k e p r i v a t e b u s i n e s s f i r m s , t h e r e i s no c o n v e n i e n t i n d e x o f e f f i c i e n c y , such as p r o f i t a b i l i t y .  P u b l i c expendi-  t u r e s f o r u r b a n r e n e w a l a r e u n d e r t a k e n f o r the b e n e f i t o f the community as a whole.  Not o n l y a r e many o f the b e n e f i t s d i f f i c u l t to q u a n t i f y ,  b u t we must know what v a r i a b l e s a r e r e l e v a n t f o r e v a l u a t i o n and how g w i l l be a f f e c t e d by a p a r t i c u l a r s e t o f r e n e w a l a c t i o n s .  they  Also, since  u r b a n r e n e w a l i s t y p i c a l l y m u l t i p u r p o s e , t h e r e i s the problem of combini n g the d i f f e r e n t e f f e c t s o f u r b a n r e n e w a l i n o r d e r t o produce a u s e f u l 9 i n d e x f o r comparing the e f f i c i e n c y o f a l t e r n a t i v e u r b a n r e n e w a l p o l i c i e s . The method most commonly suggested f o r a n a l y z i n g the e f f i c i e n c y of p u b l i c u r b a n r e n e w a l e x p e n d i t u r e s i s b e n e f i t - c o s t a n a l y s i s .  Benefit-  c o s t a n a l y s i s i s t h a t b r a n c h of economic a n a l y s i s w h i c h i s used when making d e c i s i o n about p u b l i c i n v e s t m e n t . ^ W h i l e i t has w i d e r a p p l i c a t i o n s , and can be used i n the p r i v a t e s e c t o r , i t i s most u s e f u l i n the p u b l i c , where p r i v a t e i n c e n t i v e s f o r g a i n and market c o m p e t i t i v e f o r c e s do not provide s t r a i g h t forward guidelines f o r choice.  Benefit-cost analysis  '^W. Thompson, A P r e f a c e to Urban Economics Hopkins P r e s s , 1965), p. 295-296 g J . Mao,  ( B a l t i m o r e : Johns  Op. c i t . , p. 12  Ibid. ^ N . L i c h f i e l d and J . M a r g o l i s , " B e n e f i t - C o s t A n a l y s i s as a t o o l i n Urban Government D e c i s i o n Making," P u b l i c E x p e n d i t u r e D e c i s i o n s i n the Urban Comminity, ed. H.G. S c h a l l e r (Washington: Resources f o r the F u t u r e , I n c . , 1963), p.118. 9  1.26 is most useful when faced with the problem of choosing among alternatives. It is less useful as a decision making tool when confined to the analysis of a single alternative. The purpose in undertaking this brief discussion of benefitcost analysis is to describe the larger analytical framework into which this study f i t s .  For this purpose, public renewal expenditures may be  viewed as a policy instrument designed to promote certain economic and social objectives.''"''"  The community may be likened to a giant machine  which transforms various inputs, both controllable and uncontrollable, into a set of outputs.  Public urban renewal expenditures constitute a  controllable input into this transformer.  By varying this input, govern-  ment can significantly influence the speed, character, and pattern of the community's growth and development.  Given the goals of the community  and their relative importance, one can then compare the efficiency of different public expenditure programs in urban renewal.  This framework  for appraising economic policy was developed by Jan Tinbergen and is 12 shown schematically in figure 3. Tinbergen divided a l l economic variables into three classes: 13 exogenous-controllable;  exogenous-noncontrollable;  and endogenous.  The entire set of variables is viewed as being linked together through a system of simultaneous equations.  Given the values assigned to the  independent variables, the corresponding values of the dependent vari''"''"J. Mao, Op. c i t . , p. 18. 12 J . Tinbergen, On the Theory of Economic Policy (Amsterdam: North Holland Publishing Company, 1952). 13 Tinbergen's theory is summarized by J . Mao, Op. cit.,p.18-19.  FIGURE 3 Framework for Evaluating Economic Policy Exogenous-Controllable Variables ( i . e . , policy instruments): Impact on Endogenous Variables:  Community s urban, renewal program; 1  selection of project areas; acquiring and clearing a slum and disposing of the land for redevelopment" in accordance with planned uses; rehabilitation of structures by ! owners and improvement of public j f a c i l i t i e s by local government;  The Response Mechanism: (Model or other procedure for forecasting the impact of changes in policy instruments on the endogenous variables of the system.)  Effect of urban renewal on land value in project area and elsewhere in the city; effect of renewal on f i s c a l position of city; effect of renewal on quality of housing occupied by prerenewal families in the project;  Change in Social Welfare  contribution of national policy toward racial integration, etc.  | relocation program for families J displaced by urban renewal; ! method of financing urban renewal. Exogenous-Uncontrollable: Number of families, businesses, industries in the project areas and elsewhere in the city;  Irrelevant Effects: E . g . , the redistribution effect of public renewal expenditures;  number of dwelling units, establishments and their conditions by type and by location;  payment on the obligations of local redevelopment agencies, etc.  current crime rate and incidence of contagious disease; current f i s c a l position of city; ratio of white and nonwhite population in the project areas and elsewhere in the city; demand for housing and supply of housing.  Adapted from:  K.A. Fox, "Economic Models for Area Development Research" (mimeographed), chart following page 13; and Arthur D. L i t t l e , I n c . , o p . c i t . , p.15  ables are uniquely determined.  These equations also explain how and to  what degree target or dependent variables are affected by changes in independent variables resulting from, say, shifts in government policy. In terms of the model, a shift in government policy causes the independent variables to take on a new set of values, which in turn causes the target or dependent variables to seek new equilibrium values.  Given  this sytem of equations, different government policies can be expected to produce different responses in the target variables.  If in addition  there exists a welfare function which defines the relative importance of different target variables, the policy maker may be in a position to not only distinguished between different policies, but also to select that course of action which produces the "best" results. The above theory can be applied to this study since, as Ratcliff points out, "The Local Public Agency possesses broad powers of control 14 over the redevelopment process."  Urban renewal actions taken by the  government w i l l induce specific responses from the private sector of the economy.  If the objective is to encourage private investment for re-  development, the government expenditure is considered economically efficient i f i t results in an increase in property values, not only in the project area, but also in the community at l a r g e . ^  This may be a  useful definition, but i t does not help in ranking alternative projects. Our next concern is with criterion. An acceptable criterion for efficient public renewal expenditure would be to maximize gains minus costs, assuming gains and costs R. Ratcliff, Op. c i t . , p.16. ^ J . Mao, Op.cit. , p.22-24.  1.28 can be measured i n the same u n i t s .  16  most o f whatever a c t i o n s can be taken. three p o s s i b l e courses  T h i s i s e q u i v a l e n t t o making the To i l l u s t r a t e , suppose we have  o f a c t i o n , A,B, and C,  been o b t a i n e d by u s i n g the a v a i l a b l e r e s o u r c e s  The g a i n s t h a t c o u l d have i n B and C a r e what have  to be g i v e n up when the r e s o u r c e s a r e used i n A. the c o s t s o f d e v o t i n g g a i n s from A.  These s a c r i f i c e s a r e  the i n p u t s t o A, o r the c o s t s o f o b t a i n i n g the  When c o s t s a r e viewed i n t h i s way, i . e .  as g a i n s  that  must be g i v e n up, i t c a n be seen t h a t t o maximize g a i n s minus c o s t s i s the same as m a x i m i z i n g t o t a l g a i n s . Mao goes a s t e p f u r t h e r than the s i m p l i f i e d example above.  presented  He a r g u e s , q u i t e r i g h t l y , t h a t s i n c e the b e n e f i t s and c o s t s  a s s o c i a t e d w i t h a r e n e w a l program a r e spread over time, and s i n c e a sum of money a t d i f f e r e n t p o i n t s i n time has d i f f e r e n t economic s i g n i f i c a n c e , .  .  .  . .  ,  . 1 7  i t i s more a p p r o p r i a t e t o maximize the p r e s e n t v a l u e o f n e t g a i n s . From t h i s , he suggests t h a t as a d e c i s i o n r u l e , government s h o u l d undertake a . p r o j e c t o n l y i f the v a l u e o f i t s n e t s o c i a l c o n t r i b u t i o n ( t h e d i f f e r e n c e between p r e s e n t v a l u e o f b e n e f i t s and p r e s e n t v a l u e o f c o s t s ) 18 i s g r e a t e r than z e r o .  Moreover, i n o r d e r t o maximize n e t s o c i a l con-  t r i b u t i o n s , the government s h o u l d keep on expanding i t s t o t a l r e n e w a l budget u n t i l no a d d i t i o n a l p r o j e c t makes a f u r t h e r c o n t r i b u t i o n t o n e t 19 s o c i a l b e n e16f i t . F o r the m a r g i n a l p r o j e c t , n e t s o c i a l b e n e f i t i s e q u a l R. McKean, O p . c i t . , p. 46 ^ J . Mao, Op. c i t . , p. 32 18 J . Mao, " E f f i c i e n c y i n P u b l i c Urban Renewal E x p e n d i t u r e s Through B e n e f i t - C o s t A n a l y s i s , " J o u r n a l o f the American I n s t i t u t e o f P l a n n e r s , V o l . X X X I I , No. 2, March 1966, p.98. Ibid.  1.29  to zero. On the basis of Mao's criterion, i t might appear that government is not justified in acquiring and clearing land i f the present value of these costs exceed the present value of the proceeds from the sale of the land to private developers.  This line of reasoning may be  objected to, particularly i f i t is believed that in order to attract private developers, i t is necessary for government to "write down" the cost of the cleared land.  In defense of Mao, i t would probably be fair  to say that his criterion is intended to be applied to the entire urban renewal project and not to only one specific aspect of the project, such as private redevelopment lands.  For i f i t were always possible for the  proceeds of the sale of renewal area lands to exceed the cost of acquiring and clearing them, then i t is questionable whether government should be in the land development business.  Under this circumstance, private  investors can do the job since i t would always be profitable for them to do so. A l l that is suggested here is the criterion advocated by Mao should not be used as the sole basis for deciding whether or not to undertake public acquisition and clearance of land for private redevelopment.  As Ratcliff points out, the community wide benefits of improved  efficiency in land use through private redevelopment may more than offset 20  the deficit incurred in the public land disposition action.  In addition,  increased tax revenues from the redeveloped lands may, over a period of 20  R. Ratcliff, Op. c i t . , p. 3.  1.30 time, close the i n i t i a l deficit gap between cost and proceeds.  Thus,  i t has not been expected that a l l the benefits of private redevelopment are site-centered in the sense of contributing directly to the value of the cleared land for the specified re-use. The criterion is useful however in comparing the relative efficiency of alternate proposals.  It may be possible to calculate  benefit-cost ratios for each alternative and to select that alternative which presented the highest B/C ratio.  Although i t is too restricting  to be the basis of a decision rule, the criterion can serve as an i n dicator of the planning "efficiency" of the project planners. For example , those disposition units which result in a situation where the present value of land sale proceeds exceed the present value of costs of acquisition and clearance may reflect better land use planning and marketing. The foregoing has emphasized the need for efficiency in government expenditures for urban renewal.  It was also pointed out  that government is in a position to influence efficiency by the economic policies i t adopts.  In this regard, two essential tasks need  to be done.  First, the benefits and costs or urban renewal must be  identified.  Second, benefit-cost analysis should be incorporated into  the public decision making process.  The economist can make an important  contribution in these areas. Role of the Economist Davis and Whinston suggest two roles the economist can play  1.31 in urban renewal.  21  an industrial firm.  They liken his role to that of a consultant to F i r s t , given the goals of the firm, he tries to  find the best or most efficient means of achieving these goals. Second, he must try to clarify vague goals by pointing out possible  inconsistencies  and determining implications in order that re-evaluations and explicit statements can be made. Given the objective of encouraging private investment in urban redevelopment areas, the economist should be called upon to identify and interpret the trends in urban land use, insofar as they reflect economic change.  Also he can help in understanding the motivations  and-investment calculus of the private investor.  Finally, the  economist can provide information on current real estate market conditions. A l l these possible services of the economist can be utilized to enhance the marketability of the land and thereby increase the efficiency of public urban renewal expenditures.  0. Davis and A. Whinston, Op. c i t . , p. 105-106.  1.32  CHAPTER 4  INVESTOR OBJECTIVES AND THE IMPACT OF GOVERNMENT  Because the r o l e of the p r i v a t e redeveloper i s an important one i n urban renewal, i t i s pertinent to describe h i s investment obj e c t i v e s and h i s d e c i s i o n making process.  In l i n e with t h i s , i t i s  necessary a t t h i s point to elaborate on the impact l o c a l governments have on the investment q u a l i t y of redevelopment lands. Role of the P r i v a t e  Investor  Our c i t i e s have been b u i l t l o t by l o t , p a r c e l by p a r c e l , through the decisions and actions of p u b l i c and p r i v a t e investors.''" Though government i s a major developer of land — f o r public b u i l d i n g s , parks and s t r e e t s -- the development of urban land has been l a r g e l y l e f t to the p r i v a t e investor.  Through the enforcement of b u i l d i n g codes,  zoning and s u b d i v i s i o n c o n t r o l s , government i s able to r e s t r a i n undesirable p r i v a t e land uses.  But, as R a t c l i f f argues, our economic  system i s so ordered that the i n d i v i d u a l investor or developer prospers R. R a t c l i f f , Real Estate Analysis (New York: 1961), p.4. 1  McGraw-Hill,  1.33 most who serves the community best, since what benefits the community 2 benefits the individual in the long run. Since urban redevelopment in our large cities is seldom undertaken completely by government, private redevelopment is necessary and is encouraged.  The larger and more diverse the project, the more im-  portant private redevelopment is likely to be.  However, the partici-  pation of the private investor is purely voluntary and unless he is willing to undertake a commitment, the project w i l l f a i l insofar as the private redevelopment aspect is concerned.  Given this situation,  it  is important for planners to understand the objectives and calculus of the private investor. Investor Objectives Every investor in real estate expects to secure some return from his investment, otherwise he would not commit his capital.  This  return need not be in terms of a monetary income, but may be expressed in some personal satisfaction or in some other form of intagible benefit.  In most cases however, the investment decision is closely tied  to the cost-revenue relationship.  Ratcliff has identified four types of investors in terms of their investment objectives:  (1)  Investor for use, (2) Investor for  regular return, (3) Investor for capital gain, and (4) Creditor-investor.  2  Ibid.  3  I b i d . , p. 104..  1.34 The f i r s t three types supply equity capital and are the generating force of real estate activity.  In most cases they are joined in the  investment by the fourth type of investor, the supplier of credit or loan capital. Before going further, i t is possible to eliminate certain parties who, although they may acquire interest in redevelopment lands, are not purchasers in the sense that concerns this study: (1) Public or governmental agencies. These groups purchase or are given land for public uses such as schools, parks, or parking.  However, these uses represent a collective  investment by'.thecommunity and are not competitive with private uses. (2) Lending agencies.  Although the mortgage lender is an  investor and plays a key role in redevelopment, he is not an investor in the sense of owning land, but rather in an obligation secured by a real estate enterprise.  The  mortgage lender is not usually a bidder in the real estate market. By eliminating these two groups, there remains three general categories of land purchasers who have been active in redevelopment areas: (1) the investor-user who acquires land as a site for conducting some specific activity, (2) the capitalist-investor who acquires land for income purposes, and (3) the builder who buys land for the purpose of building a structure which he then sells or leases to an  1.35 investor-user.  4  When discussing the investor-user, i t is useful to categorize him as either a non-profit user or as a user for profit.  The non-  profit user usually seeks a site for some quasi-public or social purpose, such as a hospital, church, club, or senior citizen housing project.  Like a l l other buyers, these users look for the lowest possible  price. The upper limit of their price offer is often set by: (1) the price of competing sites which are at least as favourably located for the proposed use, and (2) by their financial resources."* Users for profit base the upper limit of their bids on their profit expectations at the location in question.  In many cases, the  enterprise has a number of locational choices, albeit with differing levels of marginal productivity. Some sites may be less productive, but are lower in price, while other sites may be very productive, but are expensive to purchase. The principal consideration for the user for 6 profit in this case is the productivity-price relationship.  His bid  w i l l be set at a price which w i l l produce a productivity-price relationship competitive with that of other equally attractive sites. The capitalist-investor attempts to use money to make more money through the medium of real estate productivity.  7  It is true that  some capitalist investors are mainly interested in a long-term investment that w i l l yield a regular income, while others are chiefly  interest-  4  R. Ratcliff, Private Investment in Urban Redevelopment, p. 9. ^Ibid., p. 9. ^Ibid., p. 9. 7  I b i d . , p. 11.  1.36  ed in the potential for capital gain.  But the distinction is not a l -  ways clear since investors may shift from one position to the other as g circumstances change.  Long-term investors do not overlook the possi-  b i l i t y of windfall gains and capital gain investors are well aware of the advantages of a regular return on investment.  Therefore, i t is  equally useful for analysis to treat both groups as one since basically the same method of productivity analysis is applied by each group. The builder-investor i s , in a real sense, a capitalistinvestor.  For example, in the case of income properties, such as an  apartment project, he may assume the position of a capitalist by con9  tributing to the equity capital.  This contribution may be in the form  of an ownership interest of equivalent value.  As a result, he may have  an advantage in bidding for land which he can improve himself since his cash requirements would be lower than for non-builder investors.  This  affords him an opportunity for double profit (builder's profit and investment return) and gives him greater f l e x i b i l i t y when offering a price. The builder-investor also assumes the role of a capitalist i f he leases the improved property to a user.  This arrangement known as  a lease-back appears to be widely used since i t enables a user to set up his operation with a lower cash equity. Investors Productivity Analysis The preceding section outlined the purposes or objectives of  9  Ibid.  1.37 investors seeking real estate.  Essentially, these purposes included  the provision of a site for the conduct of some business or other activity (investor-user) and the provision of an outlet for investment funds  (capitalist-investor). The decision of whether or not to invest in a given piece of 10  real estate depends on its expected productivity.  Since the primary  objective of investment is the enjoyment of benefits over and above the return of capital, there would be no advantage to the investor unless he could recapture the capital he put in plus either an interest return or a profit.  The productivity of real estate is depended upon to  restora the original capital and to produce the incremental interest or profit.  Therefore the f i r s t step for the investor is to undertake some  form of productivity analysis.  This means he must consider the develop-  ment potential of the property and forecast the net income i t w i l l produce. Productivity of real estate is created by three main factors: (1) location, (2) neighbourhood, and (3) site.''"'''  In addition to these  three factors, the local real estate market is an important factor to be considered.  Through the interactions of supply and demand forces,  the real estate market serves to translate productivity into a dollar 12 expression, both rental value and capital values.  Although .. ; .': ...  rental and capital values are basically functions of productivity, ^ R . Ratcliff, Real Estate Analysis, p. 103. ''"'''S. Kahn, F. Case, and A. Schimmel, Real Estate Appraisal and Investment (New York: Ronald Press, 1963), p.63. 12 R. Ratcliff, Real Estate Analysis, p. 196.  1.38 their dollar expressions can vary with changes in market balances, in market prospects, and in the institutional framework within which the 13 market operates.  Consequently, an accurate forecast of productivity  requires knowledge of underlying real estate market trends. Of the three factors mentioned above, location may be the most important.  Because of the common desire to reduce frictional  costs of distance, investors are willing to pay in rent an amount up to the savings which they can make in transportation costs because of 14 the accessibility of the site.  Hence, the productivity of real es-  tate is directly related to the element of convenience. In addition to convenience, locational value is influenced by favourable and unfavourable exposure.^  Favourable exposure may be  manifested as a choice view, exposure to sun and breeze, or close proximity to centers of fashion and prestige.  Unfavourable exposure  may occur as a consequence of unsightly views, noise, smoke, smells, and disturbances. The neighbourhood affects real estate productivity in the sense that compatibility of land uses is likely to produce more effic16 ient uses and generally higher property values in the area.  This is  an example of where sound planning and development controls can enhance the productivity of any given real estate in a neighbourhood. I b i d . , p. 106-107. 14 R.M. Haig, Major Economic Factors in Metropolitan Growth and Arrangement (New York: Regional Plan of New York and its environs, 1927). ^ R . Ratcliff, Real Estate Analysis, p.64. 16 Kahn, Case and Schimmel, Op. c i t . , p.66 1 3  1.39 The site is an important factor in productivity because its physical characteristics determine the limits '•' and costs of its potent i a l uses.  For example, odd shaped and irregular lots are d i f f i c u l t  to develop and have fewer possible uses.^  Land which is marshy, 18  rocky, or h i l l y may be too expensive for economical development. The process of productivity analysis is a complex one requiring expert evaluation of the physical and locational characteristics of the real estate and of the dynamics of urban land use patterns^ Along with his prediction of productivity, the investor may evaluate the risks and uncertainty bearing on the realization of his predicted 19 productivity.  When a l l these calculations are made, he utilizes the  techniques of real estate appraisals to determine the amount he should pay for the property.  This figure represents the upper limit of his  bid and is termed the "investment value". Investment Criteria Private investors tend to look for the lowest total capital 20 cost for the project relative to its productivity.  In other words,  they w i l l attempt to maximize the productivity-price ratio.  Lower land  and development costs mean lower cash equity requirements, lower debt service on the mortgage, possibly a higher return on equity, and larger cash flow.  The distribution of capital costs between land and improve-  ments is also important since land is not a tax depreciable asset. "^A. Weimer and H. Hoyt, Real Estate (New York: Ronald Press, 1966), p. 68. I Q 18 Ibid., p. 69 19 R. Ratcliff, Real Estate Analysis, p. 113. 20 R. Ratcliff, Private Investment in Urban Redevelopment,p.13.  1.40 Therefore, the larger the share of development costs that can be attributed to structural or depreciable costs, the more attractive i t 21 is for the private developer. Impact of Local Government Through their direct control over the redevelopment process and their plan designs, local governments play a mjaor part in determining the investment quality of redevelopment lands.  In fact the  policies and decisions of the local government can be considered the key to a successful land disposition program.  It has been suggested  that to be successful, disposition must be preceded by a correlation of a l l efforts from the original conception, through planning, acquisition, appraising, negotiation, disposition, and administration, other22 wise the final sales or disposition and development w i l l not occur. In terms of the earlier discussion on investor objectives, the essence of the problem is to provide redevelopment lands which are as productive as non-redevelopment area lands.  Productivity i t was  observed, is influenced by location, neighbourhood, site, and the real estate market.  The discussion turns now to the matter of how local  government, through specific policies and practices, influence the productivity and thereby the saleability of land in redevelopment areas. Project Location The selection of an area for redevelopment is almost entirely 21 Ibid. 22 Urban Renewal Advisory Committee, Society of Industrial Realtors, Urban Renewal and the Real Estate Market (Washington: National Association of Real Estate Boards, 1964), p.15.  1.41 within the hands of the local authorities.  While the senior levels of  government, particularly the G.M.H.C., review the proposed location, they seldom challenge the local authorities choice.  Perhaps this is  reasonable since the local planners are in a better position to judge the appropriateness of a particular area for redevelopment.  As a re-  sult, the choice of the local planners usually commits the federal and provincial governments - - who provide the major share of the financing - to that choice.  Therefore, i t is important that this choice be made  realistically. The location of the redevelopment project area largely determines the re-use of the land, which in turn establishes the investment 23 quality of the cleared land.  Because of this, a careful analysis of  the possible re-uses which are appropriate for the area should be undertaken.  A proposed re-use for which the productivity to the investor is  too low relative to the cost of development w i l l not result in a sale, or alternatively, i t may result in low bids.  If the investment value  turned out to be zero, i t is conceivable that the land could not even be given away, especially i f a structure must be erected to make use of the site. A second consideration is demand for the land.  It would be  wise to test investor demand for the land at the time of redevelopment under the assumption of the proposed re-use limitations.  For example,  establishment of a need for middle-income housing does not mean that the market w i l l provide i t . 23 R. Ratcliff, Private Investment in Urban Redevelopment,p.17.  1.42 James R. Appel summed up the importance of location when he said, "Location is the most important consideration in real estate i n vestment.  If proper attention is given to land utilization and market-  ability studies, the plans for redevelopment of urban renewal areas should afford private enterprise with good opportunities for investment. Size of Disposition Unit Size of the disposition unit is important in terms of city wide land needs and the space needs of specific activities.  Care must  be taken to avoid offering an excessive quantity of land to a weak or declining market.  For instance, a large quantity of land near the urban  core offered for commercial development may not be completely sold i f the market is unable to absorb i t .  This might occur i f the size of the  city has not reached the stage to justify more commercial development, or i f the pattern of r e t a i l activity has decentralized to the suburbs in the form of planned shopping centres. It appears that there is an optimum size of land for any given use.  If the parcel is too large for the specified re-use, i t may pre-  vent economical simultaneous development or i t may be unsuitable for 25 phasing. Also, the resulting price may be too high thus discouraging investors who either cannot raise the necessary funds or do not want to 26 commit so much capital to a single enterprise.  If the parcel is too  24  James R. Appel, "What has been the private investment experience in urban renewal?" Urban Renewal in Private Enterprise, Selected Papers of Midwest Urban Renewal Conference for Businessmen, September 2022, 1961 (Lansing: Michigan State University, 1961), p.40. 25 R. Ratcliff, Private Investment and Urban Redevelopment, p.18. 2 6  Ibid.  1.43 small, i t may prevent the construction of an economically viable unit. Such a situation might arise where a shopping centre requires a larger space than is available for profitable operation. As in the case of project location, market studies and studies of the space requirements of specific enterprises should be made to en27 sure the marketability of the disposition units. Timing of Sale In most cases, local authorities want to dispose of redevelopment lands as quickly as possible in order to hasten the enjoyment of community benefits,  to reduce the costs of delay (caused by loss of tax  revenues, interest on borrowed funds, and administrative expenses), and to give the impression of "getting the job done".  Yet, the precise  moment at which the lands are offered for sale could affect its saleability and the prices received.  28  Land offered for sale before acquisition and clearance : is complete may not bring the highest possible price.  Investors, particu-  larly the smaller ones, w i l l discount their bids i f they cannot visualize the f u l l developmental potential of the area.  ILarge national developers  on the other hand may not react negatively to a sale in the early stages of execution, since they are likely to be more experience and sophisticated and are able to see through present conditions.  Furthermore, in  a large, complex project, they may wish to buy early in order to have 27 A good discussion of space requirements is contained in F.S. Chapin, Urban Land Use Planning (Urbana: University of I l l i n o i s Press, 1965), p. 383-456. 28 R. Ratcliff, Private Investment in Urban Redevelopment, p.21.  1.44 time f o r the n e c e s s a r y e n g i n e e r i n g , a r c h i t e c t u r a l , and f i n a n c i a l p r e parations. G e n e r a l l y s p e a k i n g , t h e r e a r e c l e a r advantages to buy when the l a n d s have been c o m p l e t e l y a c q u i r e d and c l e a r e d .  An i n v e s t o r w i l l n o t  have t o t i e up h i s c a p i t a l w h i l e the l a n d i s n o n p r o d u c t i v e and he w i l l not have t o bear the r i s k of changes i n market c o n d i t i o n s w h i c h may make the  l a n d l e s s a t t r a c t i v e as an i n v e s t m e n t . A n o t h e r a s p e c t of t i m i n g i s the c u r r e n t s t a t e of the money  market.  S i n c e most r e d e v e l o p e r s use borrowed funds t o f i n a n c e t h e i r  purchase and improvements, the immediate s a l e a b i l i t y o f the r e d e v e l o p 29 ment l a n d s may be c o n t i g e n t upon the a v a i l a b i l i t y o f mortgage f u n d s . I n a t i g h t money market, such f u n d s may n o t be a v a i l a b l e  i n sufficient  q u a n t i t y or a t a low enough r a t e t o e n a b l e r e d e v e l o p e r s t o p r o c e e d . T h i s s i t u a t i o n i s l a r g e l y beyond the c o n t r o l of the l o c a l a u t h o r i t i e s , but  i s a c o n d i t i o n w h i c h s h o u l d be r e c o g n i z e d .  I f i t i s advantageous  f o r the redevelopment l a n d s t o be d i s p o s e d of i n times of f i n a n c i a l s t r i n g e n c y , t h e n the p a r t i c i p a t i n g governments m i g h t c o n s i d e r some f o r m of d e f e r r e d payment arrangement.  The c o s t s of such an arrangement  would however have t o be weighed a g a i n s t the community wide b e n e f i t s t h a t m i g h t be r e c e i v e d as a r e s u l t of the p r o j e c t a r e a b e i n g d e v e l o p e d immediately. Re-use P l a n The r e - u s e p l a n i s the o f f i c i a l map and document w h i c h how  specifies  l a n d i n a redevelopment a r e a i s t o be used and the manner i n w h i c h  i t may be d e v e l o p e d . 29  These l i m i t a t i o n s imposed upon the redevelopment  A. Weimer and H. Hoyt, Op. c i t . , p. 118  1.45 site can affect its investment quality.  If the restrictions are felt  to be too onerous, the developer may not be willing to pay the asking price or he may decide that he cannot operate within the limitations and refrain from bidding. When the site is in a good location, i t is not as likely that the restrictions on land use and development w i l l hinder investor i n terest too much.  But where the site is in a less favourably located  area i t may be advantageous to minimize the restrictions on redevelopment.  F i r s t of a l l , the investor may be willing to pay more for the  land i f he is given a freer hand, and secondly, he may even be able to produce a better plan than that devised by the local planning agency. The community could be protected from .undesirable or low quality developments by making architectural approval a condition prior to development.  In practice such redevelopment areas could be zoned as  Comprehensive Development Zones as defined in the City of Vancouver by-law. Method of Sale The method of sale is considered to be an important manipulative device in the hands of the local authorities for obtaining the most favourable price, rapid redevelopment and the most desirable re-use. From the investor's viewpoint, the method of sale is a factor in the 32 attractiveness of the investment opportunity.  It is a factor to the  30 City of Vancouver, Zoning and Development By-Law, No. 3575. July 5, 1966, p. 163. 31 R. Ratcliff, Private Investment in Urban Redevelopment, p. 22. 32 Summary of the Midwest Urban Renewal Clinic, Dayton, Ohio March 1957, Workshop Session No. 8, Sponsored by A.C.T.I.O.N.  1.46 extent that i t affects the purchase price and the costs of preparing to make the offer. In his study of American redevelopment experience,  Ratcliff  identified in pure or combined form, five common land disposal methods: (1) Sealed bids, (2) Auction, (3) Negotiated Sale, (4) Predetermined 33 asking price, and (5) Plan competition. The sealed bid method is the standard method of disposing of public property.  It is the fairest to a l l bidders and tends to produce 34  the best price in a competitive situation.  The main drawback of this  method is that i t tends to discourage those investors who prefer negotiation.  It is a bothersome and risky method because there is no  assurance of success for the cost and effort involved in preparing the bid. The auction method is seldom used for the i n i t i a l offering. It may be used following the opening of sealed bids to permit any of the bidders to raise their offer.  This method works to the advantage  of the local government because i t usually results in a higher price being received in a competitive market situation.  In addition, where  there are two or more original bids that are the same, i t can be used to break the tie. The negotiated sale is the traditional private market method of exchanging real estate.  Most redevelopers probably prefer this  method because they are familiar with i t and because i t provides them 33  R. Ratcliff, Private Investment in Urban Redevelopment.p.22 Ibid.  1.47 w i t h the o p p o r t u n i t y to b a r g a i n on a f a c e - t o - f a c e b a s i s . From the s t a n d p o i n t of the p u b l i c ,  t h i s method enables  them  to s e l e c t the r e d e v e l o p e r on the b a s i s of c e r t a i n o t h e r c r i t e r i a sides p r i c e .  be-  I t i s e a s i e r to g i v e p r e f e r e n c e to l o c a l d e v e l o p e r s  or  to put emphasis on r e p u t a t i o n f o r good work, f i n a n c i a l s t a b i l i t y , s u p e r i o r re-use p r o p o s a l , and promptness of a c t i o n .  The  primary  j e c t i o n s to t h i s method are the i m p l i c a t i o n s of p r e f e r e n t i a l the chance t h a t the h i g h e s t p o s s i b l e p r i c e may  a ob-  treatment,  not be o b t a i n e d , and  f e a r t h a t the r e l a t i v e l y i n e x p e r i e n c e d p u b l i c o f f i c i a l s may  be  the  out-  maneuvered by the more s k i l l e d p r i v a t e i n v e s t o r . The  predetermined  a s k i n g p r i c e method o f d i s p o s a l has  the  advantage of s i m p l i c i t y , b u t i s not as e f f e c t i v e as the b i d and methods i n s e c u r i n g t h e - h i g h e s t p o s s i b l e p r i c e .  auction  Under t h i s method,  the p r i c e s e t i s determined  through  techniques.  shown t h a t the a c t u a l s a l e p r i c e s under  E x p e r i e n c e has  standard r e a l e s t a t e a p p r a i s a l  35 the b i d system may  v a r y g r e a t l y from those e s t a b l i s h e d by  appraisal.  T h i s means.that the minimum s a l e p r i c e s e t by the l o c a l a u t h o r i t i e s be  too low  to r e f l e c t the t r u e l a n d v a l u e or too h i g h to a t t r a c t  may  offers.  P l a n c o m p e t i t i o n as a method of land d i s p o s a l can be used i n c o n j u n c t i o n w i t h o r i n l i e u of p r i c e c o m p e t i t i o n .  Where i t i s used i n  c o n j u n c t i o n , the c r i t e r i o n f o r the l o c a l a u t h o r i t y would be t h a t p r o p o s a l which c o n t a i n s the b e s t combination ment p l a n .  — Where  the p r i c e i s f i x e d ,  I b i d . , p.  24  to  of p r i c e and  select redevelop-  the c r i t e r i o n f o r s e l e c t i o n b o i l s  1.48 down to o n l y the r e l a t i v e m e r i t s of the p l a n s . P l a n c o m p e t i t i o n i s d e s i r a b l e as f a r as the p u b l i c  agency  i s concerned because i t e n a b l e s them to b e n e f i t from the t a l e n t s competent d e v e l o p e r s and t h e i r p r o f e s s i o n a l s t a f f s .  It  of  i s an e x p e n s i v e  way of b i d d i n g and because of t h i s , o n l y those r e d e v e l o p e r s w i t h  suf-  f i c i e n t f i n a n c i a l r e s o u r c e s may be m o t i v a t e d to p a r t i c i p a t e . P r i c i n g Problems The minimum p r i c e e s t a b l i s h e d f o r redevelopment l a n d i s i m p o r t a n t i n two r e s p e c t s .  If  i t i s too l o w , the s i t e does n o t  return  i t s f a i r share of the c o s t s of a c q u i s i t i o n and c l e a r a n c e , thereby s u l t i n g i n an u n n e c e s s a r y and u n j u s t i f i a b l e p u b l i c s u b s i d y . too h i g h , o f f e r s to purchase w i l l n o t m a t e r i a l i z e . i n the l a t t e r case however, downward.  If  re-  it  is  L e s s harm i s done  s i n c e the p r i c e can always be a d j u s t e d  The o n l y l o s s would be a d e l a y i n the d i s p o s i t i o n program. The problem f o r the l o c a l a u t h o r i t i e s i s to e s t a b l i s h a  sounder b a s i s f o r p r i c e d e t e r m i n a t i o n .  From the f o r e g o i n g comments  it  s h o u l d be c l e a r t h a t i n s o f a r as p u b l i c economy i s c o n c e r n e d , i t i s i m p o r t a n t t h a t the " r i g h t " p r i c e be e s t a b l i s h e d .  T h i s would mean the  a d o p t i o n o f a more r e a l i s t i c approach to r e a l e s t a t e a p p r a i s a l . particular,  In  l e s s r e l i a n c e s h o u l d be p u t on the t r a d i t i o n a l c o s t and  income approaches to v a l u a t i o n and more emphasis p u t on e s t i m a t i n g the "most p r o b a b l e s e l l i n g p r i c e " of the p r o p e r t y under known c o n d i t i o n s of i t s  offering. ^ 3  3  ^Ibid.,  p. 26  1.49 Uncertainty II  The  greater  the u n c e r t a i n t y  l e s s a t t r a c t i v e i t i s and preneur.  37  Investors  the g r e a t e r may  i n an investment s i t u a t i o n , the the p r i c e d i s c o u n t  choose not  t h e i r p r e d i c t i o n s of p r o d u c t i v i t y are  by  to i n v e s t i n a g i v e n  subject  terms of p r o b a b i l i t y and  can be  entre-  project i f  to u n c e r t a i n t i e s .  c e r t a i n t y can be d i s t i n g u i s h e d from r i s k i n t h a t r i s k can be in  the  a l l o w e d f o r i n the  Un-  predicted  investment c a l c u -  lation.  A l t h o u g h government has uncertainties use  and  such as  those r e s u l t i n g from a d r a s t i c change of  occupancy i n a ' b l i g h t e d  those u n c e r t a i n t i e s uncertainties  no c o n t r o l over a l a r g e number of  area —  i t would do w e l l  land  to minimize  i t does have c o n t r o l o v e r . There are  two  t h a t concern i n v e s t o r s which can be reduced by  k i n d s of proper  38 planning  on  the p a r t of l o c a l government.  terested  i n r e c e i v i n g the prepared land as q u i c k l y as p o s s i b l e a f t e r  consumation of the purchase.  Investors  Long d e l a y s b e f o r e d e l i v e r y leaves  i n v e s t o r open to p o s s i b l e changes i n market c o n d i t i o n s , and  are v i t a l l y i n -  financing  environment which c o u l d reduce the p r o f i t a b i l i t y of the s i t e .  second type of u n c e r t a i n t y  r e l a t e s to the  n e c e s s a r y f o r the f u l l u t i l i z a t i o n of  ducing p r o d u c t i v i t y . 37 38  Ibid  P.  I b i d . , p. 27-28  A  i n s t a l l a t i o n of p u b l i c works  the o p e r a t i n g  enjoyment of the  site w i l l  efficiency  of  s u f f e r , thus r e -  I f these u n c e r t a i n t i e s e x i s t , the  27  terms,  the redevelopment s i t e . Where  the p r o v i s i o n of these works i s h e l d up, the e n t e r p r i s e or the f u l l  the  investor  will  1.50 either discount his bid or refrain from bidding. One way of reducing these uncertainties to the investor is to implement a master plan which w i l l ensure that the project lands f i t into a co-ordinated overall plan.  Another measure is to set up a  capital improvements program which w i l l provide funds for continuing public work.  1.51  CHAPTER 5  CASE BACKGROUND  Before proceeding to an analysis of the survey results,  it  is necessary to describe the area of Vancouver designated for redevelopment under projects 1 and 2, and to summarize the redevelopment proposals for these areas.  The ensuing discussion w i l l be deliberately  general and brief, because, insofar as this study is concerned, no special advantage is gained from a detailed description.  The reader  is referred to the appropriate publications of the City of Vancouver.''" The First Step Vancouver's urban renewal program started with the initiation of the 1957 Redevelopment study.  This study, which was published in  December, 1957, grew out of the Citys f i r s t venture into public housing in 1952.  With the completion of the L i t t l e Mountain public housing pro-  ''"The following publications are recommended: (a) Vancouver Redevelopment Study, City of Vancouver Planning Department, December, 1957 (b) City of Vancouver Redevelopment-Project 1, Technical Planning Board, City of Vancouver, November, 1959. (c) City of Vancouver Redevelopment-Project 2, Technical Planning Board, City of Vancouver, July, 1963.  1.52 ject, the City began to consider public redevelopment on a city-wide scale.  In June, 1955, the Technical Planning Board recommended that  the City apply for federal aid under Section 33 of the N.H.A. to undertake a comprehensive review of Vancouver's housing conditions.  Federal  approval was subsequently received and the study began in July, 1956. One of the main objectives of the Vancouver Redevelopment study was to survey the older, dilapidated areas of the city to deter2 mine how they could be improved as places to live and work.  The broad  terms of reference of the study were to select those areas of predominantly residential use which might require redevelopment during the next twenty years, and to produce a program of redevelopment, integrated 3 with the City's Twenty-year Development Plan. Based on results of the survey, two types of planning areas were suggested.  These were labelled as: (a) Comprehensive Redevelopment  Areas, in which large scale redevelopment was deemed necessary, and (b) Limited Redevelopment Areas, where spot clearance and varying re4 habilitation measures were proposed.  It may be noticed that during  this period, the emphasis was on redevelopment of blighted housing areas, since there was no legislation for renewing non-residential areas. A preliminary draft report of the Redevelopment study was reviewed by City Council in September, 1957, in conjunction with the ^W.E. Graham, "Vancouver: Part 1 - 2 0 year program for urban renewal," Urban Renewal and Public Housing in Canada, Vol. 1, No. 2 (2nd quarter, 1965), p.3. 3 Vancouver Redevelopment Study, p.2. 4Ibid., p.4.  1.53 proposed 1959-1963 Five Year Plan of Capital Expenditures.  5  As a result,  $3,000,000 of a recommended amount of $4,000,000 was included in the Five Year Plan as the City's share of the net cost of redevelopment projects.  The 1959-1963 Five Year Plan was later extended to 1965 and a  further $1,000,000 was allocated for this purpose. The final report of the Redevelopment Study was completed in December, 1959, and was approved in principle by City Council in February, 1958. Redevelopment Project No. 1 Following Council approval of the 1957 study, the Technical Planning Board was instructed to take steps to implement the study re6 commendations.  This consisted of preparing and submitting applications  to the federal government for financial assistance to undertake two directly related projects.  The objective of the f i r s t project was to ac-  quire, clear, and dispose of land in Redevelopment Project No. 1. under Section 23 of the N.H.A.  The objective of the second and complementary  project was to provide a "bank" of subsidized low-rental housing under section 36 of the N.H.A. Project Location Redevelopment Project No. 1 is situated in Comprehensive Redevelopment Areas 'A' and 'D' (see map in Appendix A).  Area 'A' is  bounded generally by Main Street, the Burrard Inlet waterfront, Semlin "*City of Vancouver Urban Renewal Program: Proposed Study under Part V of the National Housing Act, City of Vancouver Planning Department, August, 1966, p.5. City of Vancouver Redevelopment-Project 1, p. 1.  1.54  Drive, Hastings Street, McLean Drive and False Creek Flats.  Area 'D'  is bounded generally by Burrard and Granville Streets, F i r s t Avenue and Broadway.  These two areas were found to contain the highest percentage  of substandard residential structures in the four Comprehensive Redevelopment areas.^ Although ninety percent of area 'A' was zoned for industry and g commerce, i t was used predominantly for residential purposes.  Some  industry did infiltrate into the area, but industrial use was generally precluded by the small lots and by difficulties of land assembly.  Most  of the residential properties (eighty-eight percent were over forty years old) has passed their point of maximum depreciation and tax revenues for 9  the area had thus diminished far below its economic potential. For the purpose of redevelopment, area 'A' was further divided into three sub-areas: A - l , A-2, and A-3.  These are delineated on the  map in Appendix A. Area 'D' was zoned predominantly for industry except for approximately three half blocks on the north side of Broadway which were zoned commercial, and approximately four blocks between Sixth and Eighth Avenues which were zoned for medium density multiple dwellings.  Al-  though this area was largely zoned for industry, i t contained a substant i a l proportion of residential uses (seventy-nine residential structures as against one hundred and eight industrial or commercial premises).^ ^Ibid., p. 6. g Vancouver Redevelopment Study, p. 6. 9  Ibid.  1.55 Many of the houses existing there were considered among the worst in the 1 1  city. As in the case of area ' A ' , area 'D' was sub-divided for the purpose of redevelopment. as area D-4.  Project 1 includes that part of area 'D' known  Boundaries of this sub-area are shown in the map in Appen-  dix A. Redevelopment Plan As approved by the three levels of government, Redevelopment Project No. 1 involved the acquisition and clearance of some twenty-eight acres within an overall area of seventy-five acres.  The cleared lands 12  were to be used for public housing, industry, and park replacement. To provide the "bank" of housing for persons displaced by clearance, the MacLean Park and Skeena Terrace public housing projects 13 were built.  These units provided accommodation for 1,230 persons.  It was decided that the residential portion of area 'A' was of sufficient size, is ;sufficiently well supplied with social and cultural institutions, and is well located with respect to downtown that 14 its development as a residential neighbourhood was deemed desirable. With this in mind, City Council, on April 29, 1958, rezoned a gross area of about ninety acres from commercial and industrial to residential, as recommended by the 1957 Redevelopment study.^ ^ I b i d . , p. 44. 12 Urban Renewal in Vancouver, Progress Report No. 7, City Planning Department, A p r i l , 1966, p. 3. 13 City of Vancouver Urban Renewal Program: Proposed Study under Part V of the National Housing Act, p. 18. 14 City of Vancouver Redevelopment-Project 1, p. 8-9. 15 ,., Ibid. T  1.56 It was proposed to acquire and clear the existing structures in area A - l to provide sites for industry and public housing.  Five i n 16  dustrial lots averaging about 259,000 square feet were thus created. In addition, ten acres were provided for the Raymur Place public housing complex. In area A-2, the plan was to clear the land to provide space for a new park replacing the old MacLean Park.  This site was thought to  be more desirable because of its better location in relation to the overa l l neighbourhood. Originally, the intended re-use for area A-3 was as a private housing development.  However, after protracted negotiations between a  prospective developer and the City, no agreement was reached and the proposed development was dropped.  Following this, the City decided to  turn the cleared land in A-3 over to be used for an extension of the 18 MacLean Park housing project. In area D-4, a more limited program was proposed, aimed at eliminating the worst housing and certain residential structures which are not expected to be cleared by natural redevelopment. changes were proposed for this area.  No major street  Scattered sites were to be acquired  and cleared and resold for light industrial use, and for the possible 19 development of a team track to service the area.  Twenty-eight i n -  industrial parcels were created by the consolidation of some sixty lots 16 City of Vancouver Property and Insurance Department f i l e s . ^Urban Renewal in Vancouver, Progress Report No. 7, p. 4. 18 City of Vancouver Redevelopment - Project 1, p. 9 1 9  I b i d . , p. 10  1.57 within area D-4.  20  Estimates of Costs Under the terms of the N.H.A., the costs of acquisition and clearance, and the recoveries are shared between the senior levels of government.  The Provincial government could, i f i t desired to, share  its portion with the municipality.  In British Columbia, the cost sharing  and recoveries are shared on the following basis: Federal Government (C.M.H.C.) - fifty percent Provincial Government - twenty-five Municipality - twenty-five  percent  percent  A summary of acquisition and clearance costs for project Nos. 1 and 2 are set out in Appendix B. Redevelopment Project No. 2 Redevelopment Project No. 1 was in the nature of a pilot projects  To continue the program of acquisition and clearance for residen-  t i a l , industrial, and public uses undertaken in Project No. 1, Redevelopment Project No. 2 was initiated. were:  The principal aims of Project No. 2  (a) to continue the program of eliminating poor housing, (b)  to create effective areas for redevelopment,  (c) to create adequate areas  for housing (both public and private) of people displace by future clear22 ance, and (d) to improve neighbourhood conditions through public works. Project Location Like Project No. 1, Project No. 2 lies within Comprehensive 20 Urban Renewal in Vancouver, Progress Report no. 7, p. 4. 22 City of Vancouver Redevelopment - Project 2, p. 6-9.  1.58 Redevelopment Area ' A . Again, for purposes of redevelopment, area 'A' 1  was further sub-divided into sub-areas:  A-5, A-6, and A-7.  Redevelopment Plan Project No. 2 involves the acquisition and clearance of about twenty-nine acres, within an overall area of sixty-four acres, for r e s i 23 dential, industrial, and public uses. It was intended to create a substantial number of industrial sites of varying sizes in area A-5 by the clearance of residential and 24 certain non-residential structures.  The total area of industrial sites  to be created was approximately sixteen acres. The four blocks in area A-6, together with sections of Georgia Street and Dunlevy Avenue, were recommended for redevelopment for public and private residential use, primarily to provide accommodation for people 25 displaced from a future redevelopment project in this area. was divided into two sections, A-6 north and A-6 south.  Area A-6  A-6 north was  to be sold to private developers for low and medium density housing developments. . A-6 south was allocated for a public housing site. Area A«»7 was recommended for acquisition and clearance to provide a site for a school recreation site for the adjoining Lord Strathcona elementary school. ^ 2  Urban Renewal in Vancouver, Progress Report No. 7, p. 5. h  City of Vancouver Redevelopment - Project 2, p. 13.  'ibid., p. 16 'ibid., p. 18  1.59  CHAPTER 6  ANALYSIS  Summary o f F i n d i n g s The s u r v e y r e s u l t s a p p e a r t o g i v e w e i g h t ility  o f t h e s t u d y hypothesis.'''  Four  to the acceptab-  o f the seven f a c t o r s  to i n f l u e n c e the e x t e n t of p r i v a t e p a r t i c i p a t i o n i n urban ment were f o u n d  t o be r e l e v a n t .  disposition unit,  These a r e ;  hypothesized redevelop-  project location,  p r i c i n g o f l a n d , and investment  uncertainty.  size of Each  of t h e t e n i n v e s t o r s i n t e r v i e w e d s t a t e d t h a t these were f a c t o r s i n their  investment  decision.  The r e m a i n i n g  three factors  -- r e - u s e  t i m i n g . a n d method o f s a l e were l e s s i m p o r t a n t , j u d g i n g from results.  Slightly  over one-half of the interviewees s a i d  plan,  the survey  that  these  were c o n s i d e r a t i o n s i n t h e i r d e c i s i o n t o i n v e s t . Each respondent  was a s k e d  to rank i n order of importance, the  t h r e e most i m p o r t a n t f a c t o r s b e a r i n g on t h e i r i n v e s t m e n t 1  The  s u r v e y d a t a i s summarized i n A p p e n d i x E.  decision.  Re-  1.60 suits show that project location, size of disposition unit, and price were the most important. highly ranked.  Of these, project location was by far the most  This was followed by price, second, and size of dis-  position unit, third.  Other factors were not ranked often enough to be  included. A statistical test was applied to see i f there was any concordance among the interviewees in the ranks they assigned to the above three factors.  Using Kendalls Coefficient of Concordance test, i t was  found that at the .05 level of significance, the respondents were apply2  ing the same standard in their ranking.  In other words, the agreement  between the ten interviewees was the result of their using some common criterion for ranking and is not the result of pure chance. Problems of the Survey Although the survey results tend to favour acceptance of the hypothesis, no conclusive statement should be made without further testing.  The r e l i a b i l i t y and validity of the survey results need to be  verified with a larger and perhaps.more representative sample than was available for this study. Two problems arising out of the survey approach could have affected the r e l i a b i l i t y of the survey results.  First of a l l , i t was  not possible to arrange a personal interview with a l l selected respondents with the result that four telephone interviews had to be used. The drawback of the latter survey method is that i t does not provide _  ^ A description of the test and the calculations on which this statement is based is contained in Appendix F.  1.61  either the scope or depth of the face-to-face interview.  Also, respondents  may be less disposed to give unqualified answers to an interviewer they have not met or seen.  To the extent that this is true, the answers re-  ceived via telephone may not be truly representative. The second problem stemmed from some respondents unfamiliarity with certain terms used in the questions.  Terms such as re-use plan,  timing of sale, method of sale, and uncertainty were not recognized and in some cases were not fully understood, even after being defined and illustrated with examples.  Either the respondents had never considered  these factors in their decision making process, or i f they had, they understood them in different terms. By definition, a "no" answer means that the respondent does not consider a specific factor relevant to his investment decision. The total number of "no answers may reflect an upward bias i f the respondents do in fact consider these factors but in a different frame of reference from that which was presented them.  The same sort of incon-  sistency could also have occurred in some of the "yes" answers. For example, where the respondent may not have thought about the relevancy of the question put to him, he might have answered "yes" because he felt that this was the "proper" answer.  If this is true, then the total  number of "yes" answers w i l l also reflect an upward bias. Simple logic tells us that both of the above situations cannot occur simultaneously in a situation where the answers f a l l into one of two possible categories.  Based on impressions gathered during the inter-  1.62 views, i t is suggested that the total number of "yes" answers may be high for the reason described above.  Specifically, this may be the case  with such factors as timing and method of sale, and uncertainty.  This  proposition seems reasonable when viewed in the contest of Redevelopment Project No. 1.  Most of the investors interviewed bought Project No. 1  land for their own use.  The City did not put the land on the market  until i t was ready for immediate re-use, thereby reducing investment uncertainty for the purchaser.  In addition, most of these investor-users  had no previous experience with purchasing redevelopment land and hence may not have particularly strong opinions about the sealed bid method of land purchase.  What this suggests is that, in the case of Project  No. 1, the neophyte investor had no reason to consider a l l the factors assumed to affect his investment decision and as a result, his answer to the questions on timing and method of sale and uncertainty may be largely based on a hypothetical situation. To some extent, the lack of concern for certain factors - - such as the ones mentioned above - - may be significant in that i t indicates these factors are not in fact relevant to private investment decisions in urban redevelopment.  Before i t can be stated as a truism however, addi-  tional testing of the hypothesis w i l l have to be done. The Survey as a Method of Hypothesis Testing Because survey research is now widely practiced, there are as many definitions of the word "survey" as there are people who have written 3 about them.  The lack of an a l l encompassing definition reflects the  —  C.Y. Glock, "Introduction", Survey Research in the Social Sciences, ed. C.Y. Glock (New York: Russell Sage Foundation, 1967),p.XVIII  1.63 diversity of definitions.  One point on which there is agreement however  is the general consensus that survey research is a quantiative rather than a qualitative method, requiring standardized information from and/ 4  or about the subjects being studied.  Standardized information has been  defined as the data which is received by asking a l l subjects the same questions.  The most common methods of data collection are the personal  interview, mail questionnaires, and telephone interviews.^ What is the relation of the survey method to economics research? James N. Morgan points out that economics is the study of how economic systems work, or ought to work, in the allocation of resources to serve the various ends of society.  7  In the process, economists study the  forces that affect the aggregate flows in the system and the way the aggregates influence one another and f i t together in a complete structural system. Two kinds of assumptions are made in structural dynamic models g of economics.  One set consists mainly of identities and definitions;  such as the equation for Gross National Product, Y = C+I+G+X.  The other  assumptions are basically behavioural relations, mostly at the aggregate level.  These include relations between aggregate investments and i n -  terest rates, or between aggregate consumption and aggregate income.  Be-  hind these aggregate assumptions are many implicit assumptions about the behaviour of individual actors — consumers, producers, and investors. 4  Ibid.  5  Ibid.  J . N . Morgan, "Contributions of Survey Research to Economics," Survey Research in the Social Sciences, ed. C.Y. Gloek (New York: Russell Sage Foundation, 1967), p. 236. 7  8  Ibid.  1.64 Morgan argues that progress in economics requires both a theory of behaviour of these individuals and a method of going from this to the be9 haviour of aggregates.  It also requires estimates of the actual strength  of the relationships, i . e . , measures of the strength with which different factors actually affect the behaviour of the individuals.  Further, such  estimates should be quantified to the fullest possible extent. The type of research proposed by Morgan can be best undertaken through a survey.  The sample survey is the only practical way to assess  or estimate the present state of affairs with regard to some variable that changes over time for a large group of subjects.^  If the variable 11  did not change over time, the answer could be determined by experiment. But economic variables, such as price, do change over time;  hence the  experimental method is not appropriate. Case Analysis of Redevelopment Projects 1 and 2 The survey research just described has yielded data which tends to favour acceptance of the study hypothesis.  If the hypothesis is in  fact true and generally applicable, i t should help to explain the success or failure of the City of Vancouver's redevelopment land disposition program.  Put another way, the experience of Redevelopment Projects No. 1  and 2 should serve to support the above proposition. It is proposed to analyze both Project No. 1 and No. 2 to see i f there is any relationship between their degree of success in attracting 9  Ibid.  10 B. Berleson and G.A. Steiner, Human Behaviour: An Inventory of Scientific Findings (New York: Harcourt, Brace and World Inc., 1964), p.26. Ibid.  1.65 private redevelopment and the policies and plans adopted for these two projects.  Such an approach would not duplicate the findings of the sur-  vey, but would either strengthen the i n i t i a l findings or case grave doubts over them.  As Wilson Gee points out, the case method, while  distinct in i t s e l f as a method, bears a direct relation to the other 12 technical methods.  The case study is complementary to the sample  13 survey.  The sample survey measures many people on few characteristics, 14  usually at one point in time.  The case study examines intensively  many characteristics of one "unit", usually over a long period of time.^ Redevelopment Project No. 1 A l l of the thirty-three lots in areas A - l and D-4, assembled for sale to private developers, have now been s o l d . ^  Proceeds from  the sale of the five industrial parcels in area A - l amounted to $112,544.^ Cost of acquisition and clearance for area A - l totalled $824,500, but this included the cost of acquiring and clearing ten acres for the Raymur Place public housing project.  The proceeds from sales in area D-4 were  $504,000 compared with acquisition and clearance costs of $630,000. Area A - l and D-4 are located in what is considered the outer ring of Vancouver's central core.  The lots offered for sale within these  areas have a minimum frontage of fifty feet.  A developer could purchase  as much land as he needed, so long as his proposed use complied with the 12 W. Gee, Social Science Research Methods (New York: AppletonCentury-Crofts, Inc., 1950), p. 232. 13 B. Berelson and G. Steiner, Op. c i t . , p. 27. Ibid. Ibid. 16 Records of the Property and Insurance Department, City of Vancouver. and cost figures are from Property and Insurance Department,^ A11 City revenue of Vancouver. 7  1.66 the City's Zoning and Development By-Law or was approved by the Technical Planning Board.  Sites in A - l and D-4 were fully acquired and cleared be-  fore being put on the market.  Method of sale was i n i t i a l l y by sealed  tender with an undisclosed minimum price. Based on the comments of the respondents interviewed, the prime reason for the successful marketing of the land in areas A - l and D-4 was location.  The City had selected these sites for redevelopment because  of their adverse blight conditions.  In the re-use proposals, the need for  good industrial sites in the inner city was suggested and the success of the disposition program would indicate that this proposal was economically viable.  Most of the industrial firms in A - l and D-4 have a trade area  predominantly oriented to the central core of Vancouver.  Eight of the  ten developers interviewed pointed out that this was the most influential factor in their investment decision. The need for optimum size industrial lots was a consideration in the preparation of redevelopment plans for Projects 1 and 2.  Recogniz-  ing that a reason for the lack of industrial development in area A - l was the unavailability of adequate size lots, the City undertook to create . generous size industrial lots backing on to the Great Northern Railway 18 tracks.  Similarly, in area D-4, twenty-eight industrial lots were  created by consolidating some sixty lots, many of which were originally 19 twenty-five feet wide. lg 19 Urban in Vancouver: Progress Report City ofRenewal Vancouver Redevelopment - Project 1, No. p. 7, 9. p.4.  1.67 In the case of area A - l , selection of developers was based on the bidder's price and development proposal, while in area D-4, selec20 tion was made on the basis of price only.  In the former case, the  bidding went to a second stage when i t was discovered that the prices 21 bid were below the City s undisclosed minimum.  Tenderers were sub-  sequently invited to make a second offer over the counter, changing the method of sale to negotiation.  It is possible that the i n i t i a l bids  on A s l were discounted in order to compensate for the higher developmental standards required by the City. No judgement has been made on the relative merits of the alternative ways of selecting developers.  The intention here was merely to  give an example of how the two methods affected both the speed with which the sales were completed and the prices that were i n i t i a l l y offered.  In  the case of area A - l , certain public objectives had to be accommodated. Because the Raymur Place public housing project was to be built directly across the street from the industrial sites, the City decided that these should be of a quality commensurate with the residential character of the neighbourhood. Before being offered for sale, a l l the land in areas A - l and 22 D-4 were fully acquired and cleared.  This was probably the most effec-  tive way of timing the sale since both the scale of the entire undertaking and the nature of the operations of the purchasers are relatively 20 City of Vancouver, Tender Advertisements for Redevelopment Project No. 1, July 7, 1964 and October 6, 1964. 21 Interview with a representative of the Property and Insurance Department, City of Vancouver. 22 Ibid.  1.68 small. The prices established by the City for land in areas A - l and D-4 were realistic and competitive.  Average price per front foot for  23 sites in A - l was $139.  When this figure is compared with the $250-400  per front foot value of industrial land in the Powell and Hastings Street area, or with the $150-240 value for the Clark Drive area, i t is easy to 24 see why prices in A - l were very attractive.  Similarly, the average  price per front foot of industrial land in area D-4 was $300, compared with $300-400 for the Cambie to Main Street area (between Second and Sixth Avenues). By not disclosing the minimum acceptable price, the City u t i l ized an effective way of ensuring that i t received the best offers possible, under conditions of competition.  Experience has shown that 25  a published minimum price also tends to become the maximum price offered. By not advertising the minimum price, the City can hedge against a low valuation on their part by allowing the forces of market competition to operate. Since the properties in A - l and D-4 were delivered to the purchasers without delay and since a l l the necessary public improvements were installed within a reasonable time, the developers were not faced with any market or use uncertainties.  The City's policy is to dispose of  redevelopment land as quickly as possible and the promptness with which 23 Calculation based on actual sale prices obtained from Property and Insurance Department, City of Vancouver. 24 Comparative industrial land values obtained from Trend News, 1965, published by the Vancouver Real Estate Board, p. 7. 25 R. Ratcliff, Private Investment in Urban Redevelopment, p.23.  they were able to act is largely the result of the timing of the land sales. Redevelopment Project No. 2 To date, only two of the seven parcels offered for sale in 26 area A-6 (North) have been sold.  These two parcels, sold for $39,200  each, are expected to be used for a row housing project built under the Strata-Titles Act. Except for the church and senior citizen's housing parcels, the five remaining are designated for private, low to medium density 27 housing.  The project is located within the Strathcona redevelopment  area and is about one-half mile from the central core.  Average area of  28 the private housing parcels is 27,700 square feet. has been by sealed tender. for each parcel.  Method of bidding  Bidders are informed of the sale price set  Quality of development proposal was the chief factor  in the selection of developers.  The re-use plan called for the proposal  to be in harmony with the City's recommended form of development and to conform with the City's Zoning and Development By-Law. Why have sales in A-6 (North) not been as successful as those in areas A - l and D-4?  The reason may be that the expected productivity  of the site for the designated re-uses are not sufficiently high to attract private investment.  In other words, the level of rents that could  26 Records of Planning Department, City of Vancouver. 27 City of Vancouver, Strathcona Redevelopment: Call for Development Proposals, p. 8. Ibid.  1.70 be obtained does not appear to be high enough to enable investors to amortize their costs and secure an attractive rate of return on their investment.  This argument for not investing was alluded to by a prom-  inent, large real estate developer interviewed. The incompatibility of the stipulated re-uses and location is a major reason why the three remaining private housing parcels are s t i l l unsold.  It is open to question whether the area is viable enough  to sustain low to medium density housing at economic rentals.  Based on  current per square foot construction costs of $10.00 - 12.00 for three storey frame apartments, the rental required to yield a ten to fifteen percent return on investment is in the range of $120-140 per suite per 29 month.  The realities are that the people who presently live in the  Strathcona area have relatively modest incomes.  Data compiled for the  Vancouver Redevelopment Study estimated 1961 median monthly income for 30 a l l families at two hundred and ninety-nine dollars. Similarly, for single person households under sixty five;,years of age, median monthly 31 income was estimated to be one hundred and f i f t y two dollars.  If the  same gross debt service ratio standard (the ratio of income to mortgage payments) used by mortgage lenders can be applied to renters, then the families in the Strathcona cannot afford to pay more than about eighty dollars per month (twenty-seven percent of gross annual income) for rent. Incomes have undoubtedly increased since 1961, but i t is unlikely that 29 Calculation based on discussion with a professional real estate appraiser. Construction cost estimates obtained from Real Estate Trends in Metropolitan Vancouver, 1966, published by Vancouver Real Estate Board. 30 Vancouver Redevelopment Study,Table 14, p. 47. Income figures were projected from 1957 based on the assumption that incomes had risen 21.5 percent, the wage rate increase recorded for Vancouver between 1957 and 1962. Ibid.  1.71 they have increased sufficiently to enable the present Strathcona residents to pay the $120-140 monthly rents.  Assuming that no more than  twenty-seven percent of annual income should be devoted to shelter, the required income to pay rents of $130 per month is about $6000.  An annual  income of $6000 would represent a sixty-seven percent increase since 1961. There is the possibility that people from outside the Strathcona area would occupy the new housing i f i t were built.  But this is by no  means certain and may be dependent on the complete renewal of the area. If investors are concerned with this element of uncertainty and do not wish to, or have to, take the risk, they w i l l not act. The developmental restrictions imposed on investors was another factor hindering the sale of the remaining parcels.  It may be a source  of i r r i t a t i o n to investors when they are told they must conform to both the City's Development and Zoning By-Law and the development concepts for A-6 (North).  In a situation where site productivity is comparatively  limited, such restrictions tend to further lower investment returns. To mitigate against this, the investor w i l l discount his bid i f he is interested in purchasing the property. In view of the foregoing discussion, the productivity-price relationship of the land becomes c r i t i c a l .  Based on the original prices  asked for the land parcels, the per square foot values are as follows:  1.72 Table I  a  Redevelopment Project No. 2 - Area A-6 (North) Land Prices  Planned Re-Use  Sale Price  A  Church  B  Parcel Description  C  Total Area Sq.Ft.  Price per Square Foot  $44,500  33,000  $ 1.34  Senior Citizen's Housing  53,000  30,360  1.74  Low Density Multiple Housing  39,200  29,040  1.34  D E F  II  b  II  II  ti  Medium Density Multiple Housing  65,000  32,470  2.00  Low Density Multiple Housing  26,700  19,800  1.32  42,100  29,040  1.44  G  II  Compared with other land values within the City of Vancouver, the above 32 prices are the lowest to be found.  The only other area in Metropolitan  Vancouver in which a comparable price exists is the City of North Vancouver, and this is for frame construction apartment sites only.  From this, i t is  8L  Descriptive data taken from City of Vancouver document, Strathcona Redevelopment: Call for Development Proposals, p. 8. ^Sale price of parcels obtained from Planning Department, City of Vancouver. 32 Comparison based on "Apartment Site Values in Metropolitan Vancouver; 1966-1967. Trend News, 1967, published by the Vancouver Real Estate Board.  1.73 obvious that.selling price is not the chief obstackle to investor interest. Rather, the productivity-price relationship is the c r i t i c a l consideration. Under current market conditions, there is no incentive for developers to go into the Strathcona area.  Apartment vacancy rates in  Greater Vancouver are currently in the order of one of two percent 33 an extremely low figure.  This means that a developer w i l l concentrate  his attention in areas of the city where he can obtain the most attractive returns on his investment.  Present apartment rents in Greater Van-  couver run from an average of eighty-five dollars per month for a bachelor suite to an average of one hundred and fifty dollars per month for a two 34 bedroom suite.  The Strathcona area, i t was argued, would not likely  generate such an income because of the income characteristics of the residents. It might be suggested that i t would be feasible to accept a lower income level because the cost of land in A-6 (North) is comparatively low.  However, building construction costs of at least $10.00-12.00  per square foot would seem to rule out this possibility. As further evidence of the fact that investors view A-6 (North) as a risky multiple housing area, i t was discovered - - through discussions with City personnel and an investor  that few i f any investors are  willing to use much of their own funds to undertake development.  Also,  with the present shortage of mortgage funds, lenders have become very 33 Vancouver Real Estate Board, Trend News, 1967, p. 13. 34 Vancouver Real Estate Board, Real Estate Trends in Metropolitan Vancouver, 1966, p. B-9.  1.74 selective in their placement of loans; preferring to lend only on prime quality projects. The method of sale established for A-6 (North) was another impediment to investor interest.  The City fixed the selling price of  each parcel and reduced the bidding to a plans competition.  Because of  the expenses involved in preparing proposals which are not guaranteed of being accepted, many potential investors are reported to have shyed away from bidding.  A coincident event which may have accentuated the  problem was the decision by the local Architectural Association to ask its members to refrain from participating in redevelopment proposals for A-6 (North). It is interesting to note that as a result of the poor sales in A-6 (North), the City apparently revised its policy on land disposition in this area.  A Tender advertisement dated April 2, 1968 asked for sealed  tenders, but suggests that the fixed land price - plans competition method of selecting developers has been waived.  The advertisement asks for  offers on each parcel, though pointing out that the highest offer or any offer may not necessarily be accepted. Implications of the Case Analyses The two case studies presented were particularly useful for testing the study hypothesis because of their contrasting outcomes.  Pro-  ject No. 1 was successful in terms of private redevelopment, while Project No. 2 was not.  Examination of Project No. 1 revealed that the factors  assumed to influence private investment were present or deliberately  1.75  allowed for. Such was not the case in Project No. 2.  Therefore, as a  preliminary observation, the findings of the survey appear to be valid.  1.76  CHAPTER 7  SUMMARY AND CONCLUSIONS  Basis for Study This thesis started out by suggesting that a. major objective of the federal urban renewal program in Canada is the achievement of an efficient pattern of urban land uses.  To accomplish this objective,  much emphasis is put on the role of private enterprise.  In this re-  gard, i t was argued that unless favourable investment opportunities are presented in redevelopment areas, l i t t l e or no private investment w i l l take place.  This w i l l not only mean that the hoped for private redevel-  opment w i l l f a i l to materialize, but in addition, the public funds expended to attract such redevelopment w i l l be wasted. In view of these realities, i t was argued that local governments or planning agencies must understand and accommodate the objectives of private investors.  This is in no way a suggestion that the social  and physical objectives of the community should be sacrificed.  It is  1.77 believed that the broader goals of the community and the more limited economic objectives of the private entrepreneur can be reconciled to the benefit of both parties.  For example, private redevelopment of a  commercial district can rejuvenate the economic and social v i t a l i t y of that d i s t r i c t — a benefit to the community — and at the same time produce an attractive investment return to the developer. The success of a redevelopment land disposition program is very much within the control of the local government.  Through their  manipulation of seven key factors affecting the investment quality of redevelopment land, they influence the amount of private redevelopment that w i l l occur.  These factors, identified by R. Ratcliff, are;  pro-  ject location, size of disposition unit, re-use plan, timing of sale, method of sale, price and uncertainty.  The purpose of this thesis was  to test the hypothesis that these factors influence the extent of p r i vate participation in urban redevelopment.  Research was conducted  using both the survey and case study methods.  Vancouver Redevelopment  Project Nos. 1 and 2 were examined in the case studies. Research Conclusions Analysis of the survey results show that there is a good basis for accepting the hypothesis.  However, no final statement should be  made until further testing substantiates the r e l i a b i l i t y of the survey findings. The hypothesis was tested against two cases.  Redevelopment  Project Nos. 1 and 2 were both examined to see i f there was any relation-  1.78 ship between the amount of private redevelopment undertaken and the presence or absence of the seven independent factors or variables. Again the evidence pointed to the acceptance of the hypothesis. Of the seven factors bearing on the private investment decision, project location, price, and size of disposition unit were found to be the most important.  In almost every case, project location was  cited as the major consideration.  There is l i t t l e doubt that this was  the chief factor in the success of areas A - l and D-4 of Project No. 1. Location was also found to be the principal reason why area A-6 (North)u of Project No. 2 has not been as successful. Suggestions for Future Research Although our pilot research seems to have confirmed the thesis hypothesis, there is no reason why i t should be accepted without further verification.  Some of the problems of the survey have been discussed  in Chapter 6.  In light of these problems, the survey should be extended  to a larger and perhaps more diverse sample.  In addition, steps should  be taken to improve the contents of the survey questionnaire so that i t is more lucid and less ambiguous. Some of the other items which may be suitable for additional research include the following: 1. Other types of redevelopment projects.  Our study has been con-  firmed to industrial and housing re-uses.  It would be useful to  examine projects consisting of commercial and mixed re-uses to test the generality of the hypothesis.  1.79  2. Larger redevelopment projects.  The projects that were studied  here are relatively small and involved small local investors. It would be desirable to observe the behaviour of the major investors or developers in order to see i f the hypothesis applies to the same extent.  Such investors are most likely to be found  in the larger redevelopment projects.  1.80  APPENDICES  1.81  APPENDIX B  SUMMARY OF ACQUISITION AND CLEARANCE COSTS  The following tables summarize the estimated costs of acquiring and clearing lands in Redevelopment Project Nos. 1 and 2.  It  should be emphasized that these costs are preliminary totals and do not necessarily reflect the actual final costs.  They are presented here in  order to give some idea of the scale of costs involved in both projects.  TABLE B5I Net Costs of Acquisition and Clearance Project No. 1 Costs of Acquisition and Clearance Areas A - l , A-2, and A-3 (27.22 acres) Area D-4 (8.91 acres)  $3,535,903 1,707,514 $5,243,417  Subtotal Recoveries Areas A - l , A-2, and A-3  873,657  Area D-4  598,156 1,471,813  Net cost of acquisition and clearance (rounded to nearest $1,000) City of Vancouver Redevelopment-Project 1, p.11.  $3,772,000  A P P E N D I X  EXHIVI TION :/ PARK  E  G  N  L  G  /  It  5  I Hi' I S  Si  • g •.«:.«>• air II  It  CITY  OF VANCOUVER URBAN RENEWAL PROGRAM  REDEVELOPMENT  PROJECT  REDEVELOPMENT I  I  URBAN  PROJECT  RENEWAL  SCHEME  EBll  NO. I  f I •  I  1  BgSB  URBAN  RENEWAL  SCHEME  I  NO.5  (proposed) U. R . S C H E M E  NO. 2 NO. 3  U. R . S C H E M E  NO.6  P R O J E C T 200  mmm m mm  NO.4  (proposed) "  BLOCK  42 -  BLOCK  52 "  8  PROPOSAL  FEDERAL - PROVINCIAL  PUBLIC  HOUSING  FEDERAL -  PUBLIC  HOUSING  PROVINCIAL  (EXISTING) (UNDER  CONSTRUCTION) ,.|-„  ggagSgj  FEDERAL -  PROVINCIAL  PUBLIC  S c a l e  HOUSING  (PROPOSED)  <  feet 3000  ri  1.82  TABLE B 2 Net Costs of Acquisition and Clearance'  3  Project No. 2  Costs of Acquisition and Clearance Areas A-5, A-6, and A-7 (28.0 acres)  $5,954,650  Recoveries Areas A-5, A-6, and A-7 Net cost of acquisition and clearance (rounded to nearest $1,000)  2,098,050  $3,857,000  City of Vancouver Redevelopment --Project 2, p. 20  1.83  APPENDIX C  LAND DISPOSITION DATA  Redevelopment Area A - l Location  Land Re-Use  Sale Price  Date of Sale  Type of Investor  Remarks  DL 182 16,200 Light Industrial 22,500  16/2/65  Income  30/3/65  User  3. Blk.80,Lot 1  23,750  16/3/65  Builder  4.  25,800  16/2/65  Income  24,194  2/3/65  User  Sale Price  Date of Sale  Type of Investor  18/5/65  Income  1. Blk.79,Lot A 2.  11  "  Lot B  Lot 2  5. Blk.95,LotE  Sold to a User  Redevelopment Area D-4 Location  Land Re-Use  Remarks  DL 526 15,000 1. Blk.218,Lots32-33 Light Industrial 15,000 2. " Lots 30-31  27/4/65  3.  29/12/64  11  " Lots 25-26  4. Blk.2A,Lotl2  5. Blk.228,Lot42  11  15,000  11  Commercial 22,150  II  Builder User  6/4/65  City exchanged this lot for another held by current user.  1.84 Location  Land Re-Use  Sale Price  Date of Sale  Type of Remarks Investor  6. Blk.228,Lots5-6  Commercial  14,500  6/4/65  User  7.  Light 14,500 Industrial  Lots9-10  8.  "  Lotsl5-16  9.  "  Lot, 33  15,000  30/3/65 24/11/64 Builder  6,100  29/12/64  Income  10. Blk.229,Lots9-12  28,500  29/12/64  User  11. Blk.230,Lots5-6  14,500  26/4/66  Income  6,150  28/6/66  User  15,300  19/7/66  12.  11  Lot39  13.  "  Lots35-36 Commercial  14.  11  Lots30-32 Light 20,500 Industrial  15. Blk.238,Lots8-10 16.  "  17. 18.  11  9/2/65  21,000  24/6/65  Lots34-35 "  16,666  19/1/65  Lots32-33 "  17,500  8/6/65  15,200  19/1/65  19. Blk.239,Lots7-8 20.  "  12.10/65  21,000  Lotsl4-16  Lot F  " 11  11  Commercial  5,500  8/8/67  18,500  9/2/65  22. Blk.249,Lot A  13,876  3/11/64  23.  50,000  28/9/65  21. Blk. 240, Parcel C of Lots29-36  24.  Lotsl6-20 "  11  Lots23-25 Light 36,000 A-C Industrial  29/12/64  Income  User  Income  User 11  25. Blk.250,Lot38  6,500  8/6/65  Income  26. Blk.269,Lot 4  13,250  27/4/65  User  27.  Lot 8  12,200  2/2/65  Lotsll-14  36,000  29/12/64  28.  " "  SOURCE:  Sold to Another User  Sold to another User  City of Vancouver, Property and Insurance Dept.  1.85  APPENDIX D  SURVEY METHOD  The following is an outl ine of the survey method used in the study.  The results of the survey are summarized in Appendix E and are  analyzed in Chapter 6. A.  Identification of survey area: This was done by reviewing the urban renewal program of the  City of Vancouver.  Since the study was only concerned with private i n -  vestment, only those areas designated for private redevelopment were selected for survey.  Four areas (three in Redevelopment Project No. 1  and one in Redevelopment Project No. 2) were identified, but only three were actually surveyed - - Areas A - l , D-4, and A-6 (North).  The fourth,  Area A-5, has not been offered for sale to private developers as yet. B.  Identification of survey universe: A l i s t of a l l the persons or organizations purchasing land in  the three redevelopment areas was compiled from records of the Property and Insurance Department of the City of Vancouver.  Thirty-four purchasers  were identified. C.  Selection of sample: Out of the universe of thirty-four investors, a sample of twelve  was chosen.  Limitations of time and personnel prevented the use of a  1.86 larger sample.  In Area A - l , since only five parcels were involved, i t  was decided to survey a l l five. offered for sale.  In Area D-4, twenty-eight parcels were  Instead of choosing a simple random sample, an  attempt was made to obtain a sample which covered a wide geographic area. A sample of eight (28.6 percent) was selected. D. Survey technique: After the sample of investors was selected, an interview questionnaire was prepared. The use of interviews was favoured because i t offers a greater opportunity to obtain more detailed information than would be available from a mail questionnaire. Each respondent was asked i f the factors listed in the hypothesis was a consideration in his investment decision. answers were requested.  Yes or no  Finally, each respondent was asked to rank the  factors in their order of importance.  Originally, the intention was  to have respondents rank every factor on the l i s t , but a pilot test showed that this was d i f f i c u l t to do.  It appeared that the most positive  responses were received for up to three ranks, and the survey, respondents were simply guessing.  that beyond this,  Consequently, in the  balance of the survey, respondents were only asked to rank the three most important factors in their decision making. E. Responses and difficulties: Out of a sample of twelve investors, i t was possible to contact and interview only ten. operative.  Generally speaking, the interviewees were co-  However, two of the respondents appeared to harbour some  suspicions as to the purpose of the research and as a result, may have held back on their replies.  1.87  APPENDIX E  SUMMARY OF SURVEY RESULTS  Two summary tables are presented here.  Table E - l shows the  number of "yes" and "no" answers received to the question, "Was (the specific factor) a consideration in your investment decision?"  Table  E-2 shows the respective ranks applied by the respondents to the seven investment factors.  TABLE E - l TABULATION OF INTERVIEW RESULTS Investment Factor  Was Factor Considered: Yes  No  Project location  10  0  Size of disposition unit  10  0  Re-use plan  6  4  Timing of sale  6  4  Method of sale  5  5  Pricing of land  10  0  Uncertainty  10  0  57  13  TOTAL  1.88  TABLE E-2 SUMMARY OF RANKS Investment factor  Number of times ranked First  Second  Third  Project location  8  2  0  Size of disposition unit  2  1  4  Re-use plan  0  0  2  Timing of sale  0  0  0  Method of sale  0  d  0  Pricing of land  2  6  2  Uncertainty  9  1  1  12  10  9  TOTAL  It should be noted that where the total of the number of times ranked is less than 10, either no rank was applied or fewer than 10 of the respondents applied a rank to that factor. It w i l l be recalled that each respondent was only asked to rank the three most important factors in his investment decision.  1.89  APPENDIX F  APPLICATION OF KENDALLS TEST  From table E - l , i t can be seen that project location, size of disposition unit, and pricing of land have received the most emphasis. Since i t is useful to see i f there is any communality of judgement amongst the ten respondents, a statistical test of association is applied to the factor rankings. M.G. Kendalls test of concordance is used here.^  This test  is used to measure the degree of association between three or more rankings of N objects or variables.  It involves the calculation of  the coefficient of concordance, W. The following summary has been abstracted from table E-2. It shows the respective ranks applied to the three most important factors and w i l l be used for the calculation of the coefficient of concordance, W.  For a detailed description of this test, see; S. Siegel, Nonparametric Statistics (New York: McGraw-Hill, 1956), p. 229-239.  1.90 TABLE F - l RANKING OF THE THREE MOST IMPORTANT INVESTMENT FACTORS Factors  Respondents N/k  A B C D E F G H I J  I k = R.  Project location  2 1 1 1 2 1 1 1 1 1  12  Size of disposition unit  1 3* 3  Price  1 2 2 2 3 2 2 2 2 1  3* 1  2-. 3  3  3  2*  24 19 55  Method To compute W, the f i r s t step is to find the sum of ranks, R., in each row of the above N x k table. The R.'s are then summed J J and divided by N to obtain the mean value of the j ' « Finally, the R  s  deviation of each R. from the mean value of R. is calculated and the J J sum of the squares of these deviations found.  Knowing these values,  the value of W can be computed using the following equation: W=  s 1/12  where  k  2  (N 3  N)  s= sum of squares of the observed deviations from the mean of R., that is, j s = (R. - R./N) 1 J k = number of sets of ranking, i . e . the number of judges. 2  N = number of entities (Objects or individuals ranked) 2 3 1/12 k (N - N) = maximum possible sum of the squared deviations, i . e . the sums which would occur with perfect agreement among the k rankings. These ranks are inserted as a dummy rank to facilitate the calculation of W. The respondent did not explicitly apply a rank to these factors, but implied that this is the rank he would apply.  Calculations (a) Preliminary: From table F - l , R Hence, R  = 55,  1Q  = R /N = 55/  = 18.3,  Therefore, s =(12 - 18.3) + (24 - 18.3) + (19 - 18.3) = 72.7 2  2  (b) Calculation of W: W=  72.7 1/12  (10)  2  (3  3  - 3)  W = .36  Reference to the Table of C r i t i c a l Values of s in the Kendall Coefficient of Concordance shows that at the .05 significance level, W = .36 2 is significant.  This means that in 95.0 percent of the cases that  might be examined, the respondents would apply the same standard of ranking.  2  I b i d . , p. 286.  1.92 BIBLIOGRAPHY Books and Pamphlets Abrams, C The City is the Frontier. Anderson, Martin.  New York:  The Federal Bulldozer.  Harper and Row, 1965.  New York:  McGraw-Hill, 1967.  Berleson, B. and Steiner, G.A. Human Behaviour: An Inventory of Scient i f i c Findings. New York: Harcourt, Brace and World, Inc., 1964. Buckley, W. Sociology and Modern Systems Theory. Prentice-Hall, Inc., 1967. Chapin, F.S. Urban Land Use Planning. Press, 1965.  Urbana:  Englewood C l i f f s :  University of  Illinois  Cross, K. and Collier, R.W. The Urban Renewal Process in Canada: An Analysis of Current Practice. Community and Regional Planning Studies. Staff Research Project 3. Vancouver: University of British Columbia, 1967. Economic Council of Canada. Toward Sustained and Balanced Economic Growth: Second Annual Review. Ottawa: Queen's Printer, 1965. Eldredge, H.W., ed. Taming Megalopolis. A. Praeger, 1967.  Volume II.  New York:  Firey, W. Man, Mind and Land: A Theory of Resource Use. Press of Glencoe, 1960. Gee, Wilson. Social Science Research Methods. Century-Crofts, Inc., 1950.  Illinois:  New York:  Glock, C Y . (ed.). Survey Research in the Social Sciences. Russell Sage Foundations, 1967. Gottman, J. Megalopolis.  Cambridge:  Indiana:  Grigsby, William. Housing Markets and Public Policy. University of Pennsylvania Press, 1964. The Heart of Our Cities.  Free  AppletonNew York:  M.I.T. Press, 1961.  Greer, Scott. Urban Renewal and American Cities. Co., Inc., 1965.  Gruen, V.  Frederick  New York:  Bobbs-Merrill  Philadelphia:  Simon and Schuster, 1964.  1.93 Haig, R.M. Major Economic Factors in Metropolitan Growth and Arrangement. Regional Plan of New York and its Environs, 1927. Hall, P.  The World Cities.  New York:  Hilberseimer, L. The Nature of Cities. 1955.  McGraw-Hill, 1967. Chicago:  Paul Theobald and Co.,  Kahn, S., Case, F . , and Schimmel, A. Real Estate Appraisal and Investment. New York: Ronald Press, 1963. Los Angeles Department of City Planning. Concepts for Los Angeles. Summary Pamphlet. September, 1967. Mao, J . C . T . Efficiency in Public Urban Renewal Expenditures Through Capital Budgeting. Center for Real Estate and Urban Economics. Institute of Urban and Regional Development. Report 27. Berkeley: University of California, 1965. McFarland, Carter. The Challenge of Urban Renewal. Technical Bulletin No. 34. Washington: Urban Land Institute, 1959. McKean, R.N. Efficiency in Government Through Systems Analysis. York: John Wiley and Sons, Inc., 1958. Merton and Nisbet, ed. Contemporary Social Problems. Brace and World, Inc., 1961.  New York:  New Harcourt,  Miller, N.P. and Robinson, D.M. The Leisure Age: Its Challenge to Recreation. Belmont, C a l i f . : Wadsworth Publishing Co. Inc., 1963. Ministry of Housing and Local Government. Northampton, Bedford and Bucks Study. London: Her Majesty's Stationery Office; 1965. Outdoor Recreation Resources Review Commission. Projections to Years 1976 and 2000: Economic Growth, Population,. Labour Force, Leisure and Transportation. Washington: U.S. Government Printing Office, 1962. Owen, W. The Metropolitan Transportation Problem. and Company, Inc., 1966. Penn-Jersey Transportation Study.  Prospectus.  New York:  December 11,  Doubleday 1959.  Proceedings of the International Conference on Automation, Full Employment and Balanced Economy. Rome, Italy: British and American Foundations on Automation and Equipment, 1967.  1.94 Ratcliff, R.U. Private Investment in Urban Redevelopment. Real Estate Research Program. Institute of Business and Economic Research. Report 17. Berkeley: University of California, 1961. Rice, A.R. "Possibilities for Fast Surface Transport: The Case for Fast Rail Service," Planning 1966. Selected papers from A.S.P.O. National Planning Conference, Philadelphia, Pa., April 17 - 21, 1966. Richards, B. New Movement in Cities. Reinhold Publishing Corp.,  London: 1966.  Studio Vista, and New York:  Schaaf, A.H. Economic Aspects of Urban Renewal: Theory, Policy, and Area Analysis. Real Estate Research Program. Institute of Business and Economic Research. Report 14. Berkeley: University of California, 1960. Schaller, H.G. (ed.). Washington:  Public Expenditure Decisions in the Urban Community. Resources for the Future, Inc., 1963.  Siege1, S. Nonparametric Statistics.  New York:  McGraw-Hill, 1956.  Spreiregen, P.D. The Architecture of Towns and Cities. H i l l , 1965.  New York:  McGraw-  Summary of the Midwest Urban Renewal Clinic. Dayton, Ohio, March 1957, Workshop Session No. 8. New York: A . C . T . I . O . N . , 1957. Taeuber, K . E . and Taeuber, A . F . Negroes in Cities. Publishing Co., 1965. The Regional Development Guide, 1966 - 2000. Regional Planning Council, 1966.  Washington:  Tinbergen, J . On the Theory of Economic Policy. Publishing Company, 1952. Thompson, W. A Preface to Urban Economics. Press, 1965.  Chicago:  National Capital  Amsterdam:  Baltimore:  Aldine  North Holland  Johns Hopkins  Urban Renewal Administration. . Selecting Areas for Conservation. Urban Renewal Service Technical Guide 3. Washington: Urban Renewal Administration, 1960. Urban Renewal Advisory Committee, Society of Industrial Realtors. Urban Renewal and the Real Estate Market. Washington: National Association of Real Estate Boards, 1964.  1.95 Urban Renewal in Private Enterprise. Selected Papers of Midwest Urban Renewal Conference for Businessmen, September 22-29, 1961. Lansing: Michigan State University, 1961. Vernon, R. Metropolis, 1985. 1960.  Cambridge:  Harvard University Press,  Webster, D.H.. Urban Planning and Municipal Public Policy. Harper and Bros., 1958. Weimer, A. and Hoyt, H. Real Estate. Wingo, J r . , L . , ed. Cities and Space. 1963.  New York: Baltimore:  New York:  Ronald Press,  1966.  Johns Hopkins Press,  Wolf, A.R. Elements of a Future Integrated Highway Concept. Paper presented at the Transportation Research Seminar, March 17-18, 1965. Washington: U.S. Department of Commerce, 1965. Woodbury, C. (ed.).. Urban Redevelopment: Problems and Practices. University of Chicago Press, 1953.  Chicago:  Public Documents City of Vancouver.  Zoning and Development By-Law No. '3575, July 5,  National Housing Act.  1966.  1953-54, C.23.  Nicholson, John R. "A Fresh Approach to Canada's Housing," Statement delivered in the House of Commons on May 28 and June 1, 1964. Articles and Periodicals Anger, R. and Heymann, M. "Urbanisme Volumetrique," L'Architecture d' Aujourd'hui, No. 132 (June/July, 1967). Bertalanffy, Y. "General Systems Theory: Systems. Volume 7, 1967.  A c r i t i c a l Review," General  Carver, Humphrey. "Community Renewal Programming," Habitat, VIII, No. 3 (May/June, 1965), 6-10. Central Mortgage and Housing Corporation. Urban Renewal and Public Housing in Canada. Vol. 3, No. 2 (Second Quarter, 1967).  1.96 Canadian Housing Statistics - 1966. Davis, O.A. and Whinston, A.B. "The Economics of Urban Renewal," Law and Contemporary Problems, XXVI (Winter, 1961), 105-117. Gerson, W. "Residential Environs in the Urban Area," Architecture Canada. Volume 44, No. 11 (November, 1967). Graham, W.E. "Vancouver: Part 1 - 2 0 year program for urban renewal," Urban Renewal and Public Housing in Canada. Vol. 1, No. 2 (Second Quarter, 1965), 3-4. Lynch, K. and Rodwin, L. "A Theory of Urban Form," Journal of The American Institute of Planners, Volume XXIV, No. 4 (November, 1958). Mao, J.C.T. "Efficiency in Public Urban Renewal Expenditures Through Benefit-Cost Analysis," Journal of the American Institute of Planners. XXXII, No. 2 (March, 1966), 95-106. Pickett, Stanley. "A Milestone in Urban Renewal, "Habitat, VII, No. 4 (July/August, 1964), 6-10. Safdie, M. and Barott, D. "Habitat '67," Architectural Design (March, 1967). Statistical and Survey Committee. Vancouver, 1966. Trend News, 1967.  Real Estate Trends in Metropolitan  Vancouver:  Vancouver Real Estate Board, 1966.  Vancouver Real Estate Board, 1967.  Webber, M.U. "Transportation Planning Models," Traffic Quarterly (July, 1961). "What Kind of Cities Do We Want?" Nations Cities. Volume 5, No. 4 (April, 1967). Wingo, J r . , L. "Urban Renewal: A Strategy for Information and Analysis, "Journal of the American Institute of Planners. XXXII, No. 3 (May, 1966), 143-154. Winnick, Louis. "Economic Questions in Urban Redevelopment," American Economic Review. II. No. 2 (May, 1961). Reports Planning Department, City of Los Angeles. May 2, 1966.  Major Issues for Los Angeles,  Planning Department. Vancouver Redevelopment Study. of Vancouver, 1957.  Vancouver:  City  1.97 City of Vancouver Urban Renewal Program: Proposed Study under Part V of the National Housing Act. Vancouver: City of Vancouver, 1966. Urban Renewal in Vancouver, Progress Report No. 7, Vancouver: City of Vancouver, A p r i l , 1966. Technical Planning Board. City of Vancouver Redevelopment - Project 1. Vancouver: City of Vancouver, 1959. Other Sources Bell-Irving Realty.  Interview with professional staff appraiser.  City of Vancouver.  Records of the Property and Insurance Department.  City of Vancouver. 1 and 2.  Tender advertisements for Redevelopment Project Nos.  Strathcona Redevelopment:  Call for Development Proposal.  Personal interviews with personnel in the Property and Planning Departments. University of British Columbia. Lectures of Dr. W.G. Hardwick,. Associate Professor, Department of Geography. January to A p r i l , 1967. University of British Columbia. Lecture of Dr. E . Higbee, Professor of Geography, University of Rhode Island. November, 1967. University of British Columbia. Seminars and Research of Professor E . Landauer, Department of Anthropology and Sociology, 1965-1968 University of British Columbia. Seminar of Mr. Alan M. Vorhees, Alan M. Vorhees and Associates. March, 1968.  

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