Math vs Myth: Rezoning for new intensity does not inflate land costs

With increasing frequency I see people opposed to new intensities of land use complaining that rezonings for high rise buildings are driving land speculation and increasing the cost of ownership and rental housing. A case in point is this disappointing story in Business in Vancouver where a planning colleague and a ‘retired developer’ allege that the Broadway Plan is driving massive increases in property value and increasing the cost of housing.

Are there any editors fact-checking stories these days?

Yes, new land use intensities increase the absolute value of a property. However the critics miss a critical point: new land use intensity amortizes the new land price over a multiple of the old floor areas. In the article, the critics complain that the value of an aging property rezoned from 35 affordable rental homes to 182 new ones has skyrocketed from $14.5M to $26M. This is their glaring evidence of unaffordability.

However, unpacking the example reveals that the opposite is true.

The new building will replace 35 old affordable units (currently in a building beyond its service life) with an equal number of below market homes in a new energy-efficient building PLUS it will create another 147 market rentals. Note that today’s “expensive” market rentals are tomorrow’s affordable ones! Digging deeper into the true cost of land at the new intensity reveals that the rezoning for a high rise rental tower has in fact REDUCED the pro rata land cost for every square foot of new development from the old value of $503/sf down to $202/sf – a cost at which new market rental can be viable.

Hands down, maths trump myths!