Hot property
January 30th, 2024
BOOK EXCERPT
In his 40 years of experience working on sustainable urban design, UBC architecture and planning professor Patrick Condon (at right) has watched housing prices skyrocket out of reach for an increasing number of people.
In Broken City: Land Speculation, Inequality, and Urban Crisis (UBC Press $32.95), due out in May, Condon argues that the economic link between local wages and housing is broken. In Canada, many immigrants, racialized minorities, young people and service workers are prevented from joining the middle classes as they cannot build wealth through home ownership. Wages for workers, adjusted for inflation, have stayed flat, while housing costs multiplied—a trend seen across the English-speaking world. Condon says that the 1% who today own 20% of national income (up from 10% in the 1980s) are the small minority who can most afford to buy property and therefore the biggest beneficiaries of the housing crisis.
In the following excerpt, Condon writes of a period when Vancouver found a way to remain a truly livable place as the city bargained with developers to take back a healthy portion of the increase in land values when land was rezoned for much higher density (which added vast new amounts of value to the land that buildings are erected upon—in the business, called “land lift”). This money was then used for amenities like community centres, daycare, parks and most importantly, affordable housing. It worked … at least for a while. —Ed.
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Conditional Zoning in Vancouver, a Short History
In the 1980s, Vancouver grew up. This sleepy resource town was discovered by international investors. Hong Kong emigres were the first to spot the potential of a city set in a landscape so stunning that it brought tears to one’s eyes. Luckily for Vancouver, it had city officials who knew an exciting opportunity when they saw one. Uniquely, they set up a system to capture as much of this influx of new capital value for public benefit as seemed possible. Derelict industrial sites blessed with incredible water views were rezoned for homes.
With some sage advice from Hong Kong investment experts, city officials zoned these areas for very high-density housing, depending on towers to deliver the bulk of this new density. This approach was the secret to their success. Because British Columbia’s laws allowed it, city staff and other stakeholders could, in effect, bargain with developers for amenity payments as a condition of project approval. The payments were to be negotiated, not imposed.
This model will get a city into trouble in many parts of the world and often for good reason. In some places, this process, pejoratively called paying for zoning, is illegal. Below, I discuss how decades later this strategy got Vancouver into trouble—even if, for a few decades, it all worked out.
In the 1980s and 90s, city staff and political leaders collaborated with talented designers and accommodating developers to evolve what became known worldwide as “Vancouverism.” When it emerged, Vancouverism was unique, an unprecedented model of high-density living in the midst of an amenity-rich urban environment where all the lessons of urban-planning theorist Jane Jacobs and other late-twentieth-century urbanists could be executed. And it was all paid for with captured land Rent [commonly known as land price], as explained below.
The seawall bordering False Creek, one of the public amenities built with money negotiated by city planners from “land lift” accruing when zoning bylaws changed and created new wealth. Also visible are lush green spaces that surround the high density housing areas, some of which are maintained as affordable housing for lower-income families.
A Tax on Land Lift
As in any revolution, a new vocabulary was needed. Most important here was the term “land lift.” When developers negotiated with the city for how many millions they would contribute to the city in return for a new high-density zoning allowance, the yardstick was expressed in percentage terms.
The city was explicit in suggesting that 80 percent of land lift should go to the city, with 20 percent left for the landowner in order to motivate the sale. Land lift was (and is) the difference between the value of the land—its land price, or Rent—before and after rezoning. In the Vancouver example, the difference between its value when authorized for a two-storey building and its increased value when reauthorized for a twenty-storey building was immense. For our purposes, we can assume that there was a one-to-one increase in value as allowable density increased. Doubling the allowable density doubled the land value, which in Vancouver was about $100 dollars per buildable square foot at the time and is over $600 today. So, using 1990 figures, a developer that starts off with an “as of right” allowance to erect a building on a parcel of 10,000 square feet, for which the “as of right” zoning might allow for a two-storey construction—that is, a building with twice as many interior square feet as the site, or a floor surface ratio of two (FSR 2)—would be worth $1 million at the outset of the project. If the construction is allowed to go to twenty storeys, with an interior floor space of 100,000 square feet, the value of the parcel can shoot up to $10 million. If the city negotiates for 80 percent of the land lift, it will net $8 million from this one tower project.
The use of land lift was (and is) a bit more complicated than this account might suggest, especially when the new allowable density was calculated, but this type of revenue gain was the idea. You can now understand how such an accrual of $8 million was really a tax on land, not a tax on the building itself. Thus, it captured the bulk of the post-development increase in land Rent, providing the city with funds to be used for civic purposes.
This captured land Rent was more than enough to create an urban design balance between density and amenities. Community Amenity Contributions (CACs), the politically more palatable name for the land-lift tax, paid for the generously provided open spaces and waterfront promenades that became a part of the city’s fame. CACs paid for community centres and daycare facilities. They paid for broad, well-landscaped boulevards. Portions of land to be used for affordable housing (assuming that construction money was forthcoming from the province) were handed over by developers in their negotiations with the city for future development. Based on the model of False Creek South … the original aim was the construction of an equal number of low-income, medium-income, and upper-income units, and for a time these targets were nearly met—that is, until global land price inflation caught up with Vancouver [and developers no longer would make these deals with the city], making it one of the world’s most unaffordable cities. 9780774869553
More public spaces in False Creek built with funds negotiated from “land lift” deals.
Looking forward to reading the whole book. Seems like there might be warnings and lessons for other cities.