Quote:
Originally Posted by rofina
I been screaming this from the roofs for a decade.
If you want affordable housing in high density form it will never arrive, its impossible mathematically.
Case in point;
Lets take the lower amount of $315 a square foot for just the CAC.
Average 530sq/ft unit thats a cost of $166,950.
Lets assume this isnt luxury and developer manages to build for $450 a foot at cost to him. That's $238,500.
In fairyland where the developer has no profit to make, land is free, marketing is free, legal is free, financing is free a 530 sq/ft condo downtown has a guaranteed built on cost of $405,450.
How do you ever expect to see affordability from high rise units if that's reality?
Now imagine a more liveable size unit 1000sq/ft. That's $800,000 of costs guaranteed.
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This is a circular argument that's being expressed here for years. Why would you expect new, high rise market buildings to generate affordability?
The number of new apartments added each year is only a tiny proportion of the total number of owned apartments, and less than the total number of existing apartments sold in any year. Average prices of existing sales in the market in Downtown Vancouver are upwards of $600 per square foot. Some achieve over $3,000 per square foot. Here's
a comprehensive study from last year. The average is around $1,000 per square foot. That's existing apartments - new apartments usually sell at a premium, often a significant premium.
The anticipated selling price of a new development is what generates the CAC in a rezoning. (If a development is built to zoning there is no CAC). You're looking at an example where the CAC was over $300 per square foot - that's unusual. Most are less than that; if a CAC is as high as that, either the developer is adding a huge amount of valuable space to an existing zone, or they're going to sell at a price substantially higher than the land value suggests. The CAC only relates to around 75% of the lift in land value that the rezoning would add - not the total profit a developer will make.
You seem to suggest that a developer who doesn't pay the CAC would charge less than the $1,000 per square foot that the market is already achieving for existing apartments. I don't believe that for a minute; they'd just make a bigger profit. If you got rid of rezoning, and CACs, all that you'd see is an even greater shortage of childcare spaces and affordable housing, and even wealthier property developers. You wouldn't necessarily see any more housing, because the developers are already building pretty much as much housing as the construction industry can build.
With lower and lower interest rates, there's no reason for house prices to fall unless there's a financial recession. If the price of housing (all housing - not just new housing) falls, then CAC calculations will be lower. Land values ought to fall as well. That hasn't started to happen yet. Look at Concord paying $500 per square foot of buildable for the St Paul's site. Those condos aren't going to be less than $1,000 per square foot even if they build strictly to zoning and pay zero CACs.