Understanding Developer's Decision Making in the Region of Waterloo
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Understanding Developer’s Decision Making in the Region of Waterloo by Jinny Tran A Senior Honours Essay Presented to the University of Waterloo in Partial Fulfillment of the Requirements for the Degree of Bachelor of Environmental Studies in Planning Waterloo, Ontario 2016 Financial support for this research was provided through SSHRC Partnership Development Grant # 890-2013- 0034, entitled “Light Rail Transit and Core-Area Intensification: Unpacking Causal Relationships”. We also wish to thank our research partners at the Region of Waterloo, City of Waterloo, City of Kitchener, and Coldwell Banker Peter Benninger Realty for facilitating the development of the survey. Finally, a huge thank you to all of the developers who participated in the pre-testing process or survey. Table of Contents 1. Introduction ........................................................................................................................3 2. Study Area ..........................................................................................................................5 3. Methodology .......................................................................................................................8 4. Summary of Results .........................................................................................................10 5. Developer Typology .........................................................................................................66 6. Developer Typology Analysis ..........................................................................................68 7. Conclusions & Recommendations ..................................................................................88 8. References .........................................................................................................................92 9. Appendix Appendix A: Factors ......................................................................................................... 94 Appendix B: Survey .......................................................................................................... 96 2 1. Introduction Land development--the conversion of lands to occupiable structures--represents the collective activities of key agents, including: regulators (governing bodies), land developers, real estate agents, and consumers in the market. Individual agents have different roles in the land development process. In the past, there have been many attempts to model their complex interactions (e.g. Schaeffer and Hopkins, 1987; Lai, 2001); however, these models inadequately account for factors that influence the behaviours of key agents (Gore & Nicholson, 1991; Coiacetto, 2001). More specifically, there needs to be further research and understanding of the key agent in the model: land developers. Land developers are the primary drivers of change in the development process; they propose what to build, where to build, when to build, and how much to sell it for (Bourne, 1976; Coiacetto, 2001; Morgan, 2010). Different from other agents in the development process, land developers are involved for the entire duration, from acquiring land to selling the final product (Miles et al., 2000). As noted in a literature review conducted by Antanaitis (2015), there are limited empirical studies available that target individual developers using key informant interviews. Many existing models use assumptions about developer behaviour that are often overly simplistic and are unable to account for the complex decision-making strategies of developers and other agents (Knapp et al., 1998). Key informant interviews are useful in providing an in-depth understanding of how and why certain factors affect developer’s decision making, as well as revealing potential patterns in their behaviours. This richer information could in principle lead to improved models of developer behavior. 3 Furthermore, developer behavior can be highly location-specific. For instance, studies of developer typologies (e.g. Bourne, 1976; Fainstein, 1994; Kenney, 1972; Winarso, 2000) discovered that heuristic learning (an approach to problem solving by using general knowledge and experience, also known as using a rule-of-thumb) of land developers varies between geographic areas. Developers’ strategies are affected by local community characteristics such as demographic trends and political structure. Our study focuses on the behaviours and decision- making of developers in the Region of Waterloo, one of the fastest growing regions in Ontario, Canada. In addition to building a better understanding of the behavior of local developers, we intend to use the results of the research to build a location-specific model of developer behaviour. The study will also lay the groundwork to compare developers’ behaviour pre-and- post implementation of a planned light rail transit (LRT) system in future research 4 2. Study Area The Region of Waterloo is comprised of the tri-cities of Kitchener, Waterloo, and Cambridge, and various townships (see Figure 1). Several key features of the area have shaped land development patterns and opportunities. Figure 1: Study Area • The Region is developed around strong industrial/retail cores in each municipality (the Urban Growth Centres: Downtown Kitchener, Uptown Waterloo, and Downtown Cambridge), which is now connected through a main transit corridor. Over the past few decades, the Urban Growth Centres of the tri-cities have witnessed a transition from 5 industrial uses to a growing service sector. They are now the central employment and residential clusters of the Region. • Different from other similarly sized Canadian municipalities, the Region of Waterloo houses three prominent institutions: University of Waterloo, Wilfred Laurier University, and Conestoga Collage. The three colleges draw in an influx of students from outside the Region on an annual basis. As a result, land use in the area of these institutions is highly influenced by student housing demands. In particular, the housing characteristics in the area surrounding the University of Waterloo and Wilfred Laurier University (known as the Northdale neighbourhood) has transformed from mainly low-rise single-detached housing to mid- and high-rise student housing apartments in response to zoning changes in the City of Waterloo permitting higher density developments. The Northdale neighbourhood is now subject to a Community Improvement Plan, which aims to guide student housing developments in the area. • Beyond the student population, the Region of Waterloo aims to attract a diverse workforce from around the province, particularly from the Greater Toronto Area (GTA). The Region of Waterloo is connected to other municipalities by interregional rail transportation (GO Transit and VIA Rail) and by car (Highway 401). However, rail services are often infrequent, where service only facilitates daytime commutes to Toronto. Highway 401 therefore acts as a major commuting and commercial corridor for the Region. To support growth in the Region of Waterloo, Regional Council adopted the Regional Growth Management Strategy in 2003, which established the urban growth boundary and proposed the 6 creation of a rapid transit system. The urban growth boundary limits developable greenfield lands and directs growth in core areas of the Region. In 2011, the Region received funding for the ION rapid transit system: a light rail transit (LRT) system proposed to connect the tri-cities of Kitchener, Waterloo, and Cambridge (Region of Waterloo, 2011). The area, approximately 800 m around the proposed ION track, is known as the Central Transit Corridor (CTC). The CTC intends to accommodate higher density developments and promote sustainable urban intensification projects, attracting and retaining people and businesses into the Region. A number of hedonic studies have found that proximity to higher-order transit has an impact on land uses and house values (Baum-Snow & Kahn, 2000; Cervero & Duncan, 2002; Dziauddin et al., 2014; Krause and Bitter, 2013; Duncan, 2010). Cervero (2003) suggests that the implementation of Light Rail Transit results in pro-development policies along transit corridors, greater development capacities, and support from investors. The research provides an opportunity to analyze developer’s attitudes and strategies prior to the development of the light rail transit in the Region. The study aims to capture development trends specific to the Region of Waterloo, improving the understanding of this complex system, and provide recommendations for policy-making and infrastructure investments. 7 3. Methodology For this study, our research team conducted mixed quantitative and qualitative structured interviews with land developers to gain insight into the perceived values of transit access and general drivers of the real estate market in the Region of Waterloo. Key informant interviews are particularly useful for gathering in-depth information on complex processes where norms, values and informal policies are not obvious to outsiders (Dean & Elliott, 2012). We established connections with prominent developers in the Region by tracing recent major developments to their respective firms with the help of our research partners at the City of Kitchener, City of Waterloo, Region of Waterloo, and real estate network. Our main focus was on development firms with a significant portfolio of work in the Region of Waterloo’s residential market. From our methodology, we estimate that the number of development firms with active developments1