The need for incentives to promote desirable forms of growth was identified early on in the PlanSJ process.

You can tell developers where they can’t build in order to minimize unsustainable costs for city taxpayers, but restrictions alone will simply reduce overall growth and infill. Incentives are essential to the success of the plan, since there’s no other way to ensure that development does occur in the places you need it. PlanSJ relies on both philosophies: (1) blocking bad development, and (2) promoting good development.

Incentives can include financial incentives (things that cost the City money either in terms of discounts or through actual payments to developers), but they can also include other measures that either reduce developer costs using fixed-cost City resources, or simply increase the ability of developers to realize a profit.

Key concepts

• We should stop thinking of developers as companies, or even as individuals in the development business. Individual families can become developers … and when it comes to the infill required for PlanSJ, perhaps the ideal developers.
• Availability of ‘starter homes’ can have a great impact on housing demand, so it’s important to break down barriers to the construction and ownership of starter homes.

 

A number of ideas for incentives have been proposed or discussed:

General concepts for development incentives

In-kind services to developers using City of Saint John outside workers

• Demolition of existing structures using City labour and resources
• Remediation of lots in preparation for construction
• Free installation of laterals (which is a value of about $1500 per lateral for a developer)
• Clearing lots and readying them for construction.

These concepts rely on the presumption that City workers could be diverted to perform these tasks without impacting essential City services or increasing City costs significantly.

Discounts of fees paid by developers

• Discounted building permits
• Discounted water rates (for example, three years of free water for new developments) … the argument for this being that ratepayers will benefit in the long term from the resulting growth in the ratepayer base, offsetting the cost to ratepayers of utility subsidies
• Discounted energy rates (for example, one year of free power for new developments) … following the same logic
• Tax deferrals.

Land banking

The idea of land banking has been developed in a number of jurisdictions. The core concept is that land is acquired — in this case, by the municipal government or a development agency — and made available to suitable developers. Ideas for applying the land banking concept in Saint John include:

• Targetting ‘family’ developers — small developers doing single lots/dwellings for their own use
• Gifting vacant lots to suitable developers
• The City acquiring lots that have been taken over by the Province (for example, through tax defaults)
• Establishing a selection committee/process to manage the disposition of free or subsidized lots (including reclamation of land, if conditions aren’t met).

Broken Window incentives

‘Broken Window’ incentives are simply measures taken to improve, ‘clean up’ or otherwise invest in neighbourhoods and streets in order to improve the overall value of properties in that area. These incentives have been effective elsewhere in promoting development by improving the profitability of developments (increasing real estate values). Possible incentives include:

• Greening (remediating and sodding) empty lots (about $1000/lot investment)
• Investing in small-scale (cheap) improvements, such as street furnishings
• Increasing specific types of service levels (for example, snow clearance, or street cleaning) on specific streets
• Neighbourhood involvement and support in community cleanup and maintenance (something already happening in some Saint John neighbourhoods).

Disincentives for vacant lots

The need for specific kinds of disincentives (penalties) to protect opportunities for infill have also included:

• Tax doubling on vacant lots
• Disincentives for parking lots.

Much more work needs to be done to determine which of these concepts could be applied in Saint John, to identify additional incentive opportunities, and what the next steps might be.

 

How to implement

The City has faced significant financial challenges, staff cuts and loss of capacity in the time since the incentives for PlanSJ were discussed as part of the official public consultation. While the need for incentives is still clear, the ability of the City to implement some forms of incentive has certainly diminished. On top of that, May’s election brought in a new Common Council, almost entirely replacing the Council that had launched and supported the PlanSJ concept. The new Council is in the early days of its mandate, and will require time to understand and make decisions regarding the implementation of various PlanSJ elements, including developer incentives.

Moving forward with incentives may require:

• Engaging with neighbourhood and community groups to put a local focus on advocacy with Common Council
• Providing support to Common Council with respect to PlanSJ (understanding the full scope and outcome of PlanSJ’s public consultations, and enabling decision-making regarding incentives and other PlanSJ investments)
• Engaging with the Planning Advisory Committee (PAC) to inform decision-making on a per-application basis.

 

UPDATE HISTORY

2012-09-24  Update by ddrinnan, adding section on reducing costs, overheads and risks for developers.