Basically, it’s my view that the conversion of rural lands to urban uses is a dying industry.
Town after town, city after city have embraced the notion that expansion of their urban boundaries is akin to “sprawl.”
As a result, official plans and city master plans mightily restrict the supply of new urban lands.
The recent bankruptcy of land developer, the Walton Group, which owns hundreds of thousands of acres in the US and Canada, sounds the death knell of this industry.
While Walton (heavily weighted towards Alberta) largely blamed the 2008 financial meltdown and subsequent oil price plunges, I suspect that the extensive and byzantine rules that most towns, cities, states, provinces, counties and townships have enacted to make greenfield development next to impossible contributed to lengthy approval delays or flat out denials.
When I started out in the business in the early 1980s, it would take me about 11 months to do an official plan amendment, rezoning and subdivision application. By the mid-1990s, the same process (for the Palladium, now called Canadian Tire Centre where the NHL’s Ottawa Senators play), the process took 60 months.
Today, it’s at least 7 or 8 years.
One of my clients took 8 and ½ years to get a rural subdivision of just 21 lots approved. And it cost him nearly $900,000 in planning studies. That’s not roads and infrastructure–just studies.
His is one of the last rural subdivisions to be approved because, after that, the city of Ottawa simply passed an explicit moratorium on rural lot developments (later made a permanent feature of their official plan).
The result is that land is in short supply everywhere–in Toronto, San Francisco, Boston, Portland, Seattle, Vancouver, Ottawa, you name it…
And what happens when something is in short supply? Right, its price goes up.
Housing prices are rocketing upwards in practically every desirable city across the planet disenfranchising tenants, young people and people of lesser means as well as elders on fixed incomes.
Now why would politicians and planners do this?
It’s largely because they cater to an audience of landed gentry (aka, homeowners) who vote at a much higher rate in municipal elections than do tenants or young people. Their voters like rising house prices thank you very much since they are sitting owners…
Next, politicians decry rising house prices and demand that something must be done about it so they try rent control, housing subsidies or building affordable housing themselves, none of which works very well or, in the case of rent control, actively hurts the people it’s supposed to help.
Any landlord can tell you that rent control is their best friend–causing a shortage of rental supply, driving vacancies down and giving them myriad ways to increase their rents, often far beyond so called “government-approved increases.”
And in the case of rental subsidies like the ones that PM Justin Trudeau’s government recently announced, trust me, most of those monthly subsidies will end up in the pockets of landlords.
The only land development that makes any financial sense these days is done by very well-capitalized developers with deep local roots and knowledge. Real estate after all is a local, local, local business.
They are the only ones who can manage to navigate a maze of local regulations and they have powerful connections to ensure their success.
And if you administer a truth serum to them, they’ll admit that bizarre planning regulations and NIMBY behaviors are amongst their best friends too. Why? Because they keep the riffraff (that is, competitors) out, and prices and profits high.
Bruce M Firestone, B Eng (civil), M Eng-Sci, PhD
Century 21 Explorer Realty Inc broker
Ottawa Senators founder
Real Estate Investment and Business coach
MAKING IMPOSSIBLE POSSIBLE
Calgary developer Walton International Group in creditor protection
A developer behind suburban communities in Calgary and Edmonton has landed in severe financial turmoil that it blames on two recessions, including the latest rout in Alberta.
Walton International Group Inc. and 32 of its affiliates have obtained protection from their creditors and will attempt to restructure under the Companies’ Creditors Arrangement Act.
The Calgary-based developer, which has $245 million in assets and $253 million in liabilities, is the Canadian arm of the Walton group of companies that’s involved in real estate projects spanning 105,000 acres in North America.
Nine of Walton International’s projects have been caught up in its financial difficulties and are part of the restructuring process, including two Calgary industrial parks and four residential neighbourhoods in Edmonton.
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