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Hey Russil - getting to this write-up late...

You quote: "A higher rate reduces the number of sites that are attractive for redevelopment while a lower rate increases the number of sites that are financially attractive for redevelopment."

This seems to be glossing over the dynamic that developers need to buy land - presumably, most of those SFHs are owned by individual households (otherwise, everyone bemoaning speculative buyers may have a point...) ... A lower CAC rate would increase the potential net profit before land costs are considered. Developers are then willing to pay more for the land. Whoever owns the land will take what they can get for it. Windfall to land owners ensues.

Yes, if there was more money to be made, more people might be willing to sell, more supply comes onto the market, housing prices (price of a condo or rents) should go down...

But conversely, I would rather the public (the City) make money, rather than a windfall to private property owners. The the net input cost to develop (land, construction, all the stupid marketing they do, profit, etc.) stayed the same, we wouldn't see significant improvements in affordability.

It is hard for me to understand to what extent just straight upzoning is going to wind up reducing developers' input costs & result in lower cost housing, versus windfall value bequeathed to property owners with no change in the net cost of inputs. How could zoning & CACs (or equivalent value capture) be dialed to increase former & reduce latter likelihood?

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May 18, 2023Liked by Russil Wvong

Thanks for explaining! I learned a lot. A few questions:

Where does the CAC revenue fit into this pie graph?

https://vancouver.ca/your-government/money-in-funding-the-budget.aspx

Given how big of a problem CACs are, I’m surprised that there isn’t more public awareness. There is a potential benefit to it being an abstract issue: people don’t oppose things they aren’t paying attention to. Do you see greater public awareness of CAC reform as having a positive, neutral, or negative effect on achieving that reform?

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May 18, 2023Liked by Russil Wvong

Great write up, fascinating as usual.

Are there any examples that you know of where CACs are not used as major source of a cities funding? Are there models where the city's incentives are aligned to build more housing?

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