Community Amenity Contributions and Value Capture in the City of Vancouver
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2019 DESCRIPTIVE CASE STUDY CASE DESCRIPTIVE Negotiated Value: Community Amenity Contributions and Value Capture in the City of Vancouver NEAL LAMONTAGNE LINCOLN INSTITUTE OF LAND POLICY “FLOATING TDR” AND LAND VALUE CAPTURE IN TAIWAN CASE STUDY LINCOLN INSTITUTE OF LAND POLICY I TOPICS Value Capture, Local Government, Land Use and Zoning TIMEFRAME 1990–2019 LEARNING GOALS • Evaluate the use of negotiated benefits to optimize land value capture in balance with the financial viability of new development • Understand the trade-offs involved in a density-for-benefits model of value capture • Formulate and evaluate strategies to ensure that the public benefits wherever public actions increase private values PRIMARY AUDIENCE This case study is well-suited for undergraduate policy and urban studies students and for graduate-level urban planning students, graduate real estate and development students, and municipal policy and decision makers. PREREQUISITE KNOWLEDGE None. S U M M A R Y The case study reviews the Community Amenity Contribution (CAC) policy in Vancouver, BC. CACs are either fixed-rate or negotiated charges levied on new development for higher-value development rights through rezoning. The city calculates how much value is created through the public action and recovers between 70 and 80 percent of that increase (the “land lift”) on behalf of the public. CACs arose in the 1990s as Vancouver experienced strong growth and redeveloped several downtown brownfield sites. Since then, the model has become a key land value capture tool—while also catalyzing public debates about the politics of density. II “FLOATING TDR” AND LAND VALUE CAPTURE IN TAIWAN CASE STUDY DEFINITION OF THE PROBLEM Prior to 1986, Vancouver’s public amenities that supported healthy and livable neighborhoods were financed by property taxes and by federal and provincial governments’ investments. With large-scale master plan developments, such as Champlain Heights and False Creek South, the city ensured that necessary amenities would be available for future residents. Over time, however, these funding sources became more limited as population growth and expanding demands strained the city and its tax base, political pressures limited increases, and federal and provincial governments reduced their contributions. A rapid increase in private development activity and in land values post-1986—as well as the city’s extensive experience with discretionary zoning—hinted at an alternative: requiring private developers to contribute public benefits as a condition of project approval. Since 1986, the city grew and densified alongside planning policies that emphasized urban livability and a residential influx into the downtown peninsula. Redeveloping the city’s formerly industrial waterfront into high-density and high-amenity residential neighborhoods is generally seen as a success, which Punter calls the Vancouver “achievement” (2003), and others deem an influential model of contemporary urban design and development, or “Vancouverism”. Yet urban development and growth have benefits and costs—a central concern to local government is who benefits from and who pays for that growth. Neighborhoods need supportive public amenities in order to thrive, and financing these in an era of competing priorities and fiscal pressures is a challenge. Recovering some of the private value created through urban development and using it for public benefit, then, is an attractive strategy—and at the heart of the land value capture promise. How to efficiently capture this value without compromising the growth that fuels it is a key question, however, and one that the case study will address. Urban land markets are dynamic, and individual development sites have unique qualities, which together make calculating land value a unique challenge. If the city sets a development fee or inclusionary requirement too high, it could endanger future development opportunities; if it were to set it too low, the city would lack resources for needed benefits. Adapting benefits to community need and changing public priorities also requires flexibility—hardly a given in most city governments. Vancouver thus needed a model of how land value capture policy can respond to evolving markets and priorities. “FLOATING TDR” AND LAND VALUE CAPTURE IN TAIWAN CASE STUDY LINCOLN INSTITUTE OF LAND POLICY 1 Map showing the location of Champlain Heights neighborhood in Vancouver. Source: Google Maps. POSSIBLE STRATEGIES AND SOLUTIONS Throughout British Columbia, municipalities can levy impact fees called Development Cost Charges (DCCs) on new development for offsite water, sewer, drainage, street, and park improvements. However, as the sole charter city in the province, Vancouver lacked that authority until the early-1990s, when Development Cost Levies (DCLs) were added to the Vancouver Charter. DCLs are essentially impact fees with the advantage of being non- negotiable and of applying to the total area of new development. They provide predictable funding for needed infrastructure despite their being limited in revenue potential and application—that is, Vancouver can only use them for parks, childcare, replacement housing and roads, water, or sewer infrastructure. Around the same time (1989–90), Vancouver Mayor Gordon Campbell, a former real estate developer, and other political leaders identified the opportunity to recover some increased value from a rezoning. Rising land values provided leverage for the city’s land use authority to compel development that would deliver higher-quality projects and supportive public amenities. An early catalyst was the redevelopment of the Expo 86 site, which the Province of British Columbia sold to a single developer, Concord Pacific. The 204-acre site required rezoning to realize its potential as a mixed-use development, so the city negotiated with the developer to provide a new elementary school, community center, childcare facilities, new parks, and a public waterfront greenway. The success of this planning process affirmed the potential of coordinating large-scale private development with public benefits. Initially, the city’s approach was straightforward: require the provision of minimum amenities, such as developing 2.75 acres of public parks per 1,000 people or for 20 percent of housing potential to be reserved at a discounted land price, as a condition of development approval. Not all projects could justify the costs of the requirements, however, so private developers pushed back and lobbied for flexibility. In addition, the system’s ad hoc nature spurred a general desire to formalize requirements for approving development. 2 NEGOTIATED VALUE: COMMUNITY AMENITY CONTRIBUTIONS AND VALUE CAPTURE IN THE CITY OF VANCOUVER CASE STUDY Concord Pacific Development. Source: Author. To evolve the CAC model into a workable and sustainable system, Vancouver considered four alternative solutions, including: 1. Reduce and apply citywide standards: Reducing the amenity requirement would provide valuable certainty and ensure more projects would be viable throughout the city. This approach would, however, reduce the potential land value capture and limit resulting public benefits or the offsets from higher property taxes or other financing options. Citywide approaches also often create in lowest-common-denominator benefits with reduced capability to provide unique community-centered amenities like Vancouver’s downtown waterfront park. 2. Set requirements based on community needs: Assessing community needs would reflect the priorities of different neighborhoods and to allow for some variation in order to capture more from areas where high land values also increase the cost of providing land-based amenities. This approach would also undermine some undesirable development in a growing city that needs expanded housing choices. 3. Set requirements based on market conditions: Adjusting requirements based on market conditions—or even on the specific financial aspects of individual projects—would allow the city to charge higher fees without sacrificing new development. This could be achieved using staff or consultant calculations and assessed on a regular (perhaps annual) basis. 4. Use alternative financing tools: Alternative models such as tax increment financing or special assessment districts are not permitted in Vancouver’s enabling legislation, and public land ownership is limited by the lack of large land holdings and the increasing cost of land acquisition. This option was therefore not feasible for the city. LINCOLN INSTITUTE OF LAND POLICY 3 SOLUTION AND IMPLEMENTATION To balance its desire to finance a wide range of public benefits while supporting a healthy development industry and generating new housing, Vancouver chose the market conditions approach, #3. In addition to DCLs, the city established CACs as a voluntary contribution wherever additional development value arose from public actions such as rezoning.1 Both fixed-rate and negotiated approaches are used, depending on the location and scale of the project. The fixed-rate approach applies to smaller projects in designated areas where the increased land value is estimated on an annual or semi-annual basis. The negotiated approach, by contrast, applies to larger projects anywhere increased land value is based on a pro forma review. At its core, the CAC model is elegant and simple: It builds on the fundamental proposition that the public controls development potential, and so any increases in value from that potential belongs to the public.