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Problem of private investment in urban redevelopment Chang, Ian Wellesley

Abstract

This study is divided into two sections. The first 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 private enterprise. In order to attract the interest of private developers, public assistance is called upon to provide cleared land at a price that makes it 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 redevelopment has not always materialized, with the result that public expenditures to encourage and facilitate private participation has yielded little 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 affecting the extent of private participation in government sponsored urban renewal. Specifically, the study undertakes to test the hypothesis 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 confined 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 if the seven items hypothesized to influence private participation in urban redevelopment was a factor in his investment decision. Secondly, to determine the relative importance of each of these, the interviewees were asked to rank the three most important factors in their investment analysis. The survey results showed that the seven hypothesized factors were considered in the investment decision making process. Of these, project location, price of land, and size of disposition unit were the most important. The hypothesis was further tested against the actual experience of Vancouver Redevelopment Project Nos. 1 and 2. The evidence of these two case studies provided an additional basis for accepting the hypothesis. Based on the research findings, it was concluded that the extent of private investment in urban redevelopment areas is conditioned by the seven factors listed earlier. Some of these appear to be more important than others, but this is likely to vary from one situation to another. However, since the study was necessarily restricted in scope, it was suggested that further testing be done. This would not only serve to test the general applicability of the hypothesis, but might uncover other facets of the general problem of private investment in urban redevelopment.

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