Arrested Development?

As costs keep increasing to provide infrastructure to new communities, the City of Calgary is considering re-evaluating the feasibility of creating new communities.

A proposed plan was announced by the city's finance committee recommending that Calgary concentrate new infrastructure between 2015 and 2018 to two undeveloped sectors in Calgary's northeast and deep southwest.

Contained within the City of Calgary's Municipal Development Plan, the phrase "The city will face significant capital and operating shortfalls over the next 10 year period if it continues to provide the same services, in the same way, with the same revenue" sets the stage for a significant debate. Ryan Vanderputten, manager of growth management for the City of Calgary, explained that the proposal does not limit new development, but rather allows capital budgets to meet the City's land supply strategy.

"The proposed 10 year capital budgets will include investment in nine brand new communities, continued investment to build out nine more recently started communities, as well as investment in nine developed communities to support intensification," said Vanderputten.

While, the City is looking at ways to get their spending in check, developers are seeing some concerns with the land development proposal.

"To be clear, the City wants to tie development to its capital and operating budgets. While this is wise in theory it doesn't take into account the desperate need for growth and development as the City continues to grow at its accelerated pace," said Guy Huntingford, CEO of Urban Development Institute. "Therefore solutions other than the traditional ones (where the city controls the pace of new infrastructure for development) need to be explored; failure to address this issue will mean a severe housing shortage in the next few years.

Ward 7 Coun. Druh Farrell explained that the City isn't exactly limiting development, but only releasing areas for development when the appropriate servicing is in place.

"It is limiting it in a way that it can't all develop all at once, but we are certainly meeting the demands of the market," said Farrell.

The City of Calgary has a planned land supply with area structure plans in place for a 13 year supply of Greenfield homes, of this there is a serviced capacity with land use in place for a 3.2 year supply.

"There is capacity for the development industry to apply for tentative plans of subdivision for an additional 12,635 single/semi units, new servicing in 2014 will add an additional 5,651 single/semi units to that supply," said Vanderputten. "In conjunction with the single family lots, there is a potential supply of multi-family units that could be constructed, with over 30,000 units serviced by mid-2014. The total number of units which could be subdivided by mid-2014 is approximately 49,000, accommodating a population of almost 120,000 people."

Huntingford explained that constricted supply will not be able to meet demand, driving up the housing prices, which is already happening.

"Consumers will have limited choices where they can buy new homes so they will vote with their feet and look elsewhere in the surrounding communities where development is still robust and prices are more affordable," said Huntingford. "This will have a very undesirable effect of an increasing population living outside of Calgary, commuting back into Calgary to work and paying taxes to another municipality."

Before, the City was developing more land than needed to meet demand, explained Farrell. Now the City will be looking at supplying enough land to meet demand, but not more.

"They [developers] will have lots of options, there will be plenty of land supply for them to build in new communities, but also for redevelopment," said Farrell.

The City is also working with developers on a way to fund or finance infrastructure and services to bring on additional land supply allowing development in more areas of the city.

Huntingford said, "A restriction in serviced land supply will hurt the development and home building industry as many players will be out of inventory [lots] and ultimately out of business. Many developers will look to other markets to do business and
take their capital out of Calgary."

For the City, the land development proposal makes a lot of sense. "We've taken the absorption of the market for new communities, and we are providing sufficient land supply to meet demand, but we are also encouraging redevelopment," Farrell said.

"In order to keep our costs as low as possible, and our taxes as low as possible, we need to address the cost of growth and this is a prudent way of managing our long term costs so we don't burden the next generation with massive debt."

The City cannot continue to afford developing the edges of Calgary, as it can take years or decades to build out a community.

By really looking at the development of new areas Farrell argued the City will be able to provide services such as libraries, recreation centres, transit and fire services sooner.

Redevelopment of existing Calgary communities is something that Farrell thinks should be looked at, "It makes so much financial sense to redevelop, because we are using what we have and we are maximizing our existing infrastructure. Some of these communities are at the lowest population in their history, so we are re-introducing population into communities that have
been losing population for decades."

The City is looking into a solution that will allow them to meet the housing demand, provide services while minimizing debt levels.

Tagged: Calgary Real Estate News