Higher-density development: Cost of Growth report contradicts city-paid consultant’s study

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            Faulty methodology and narrow frame of reference asserted in GOHBA consultant’s study

Ottawa Construction News staff writer

The Greater Ottawa Home Builders Association (GOHBA) has provided a consultant’s report to contradict assertions that the higher-density urban category is the only development option that produces a surplus (per capita) for municipal resources, revealing major inconsistencies and incomplete information in the study that Ottawa municipal officials and politicians are using as background for the city’s official plan.

Rob Pierce, chair of the GOHBA’s builder-developer committee, says the association commissioned Malone Given Parsons Ltd. (MGP) to review the Hemson Consulting’s March 2013 Update to Comparative Municipal Fiscal Impact Analysis, based on a 2009 study.

The MGP study “identified a number of shortcomings that potentially undermine the accuracy of the study’s results, and puts into question its applicability to inform future development in the City of Ottawa,” GOHBA executive director John Herbert wrote in a letter to city planning committee chair Coun. Peter Hume. Pierce said the consultant, reflecting its retainer, gave city planners what they were seeking — the view that “the only development that is financially or fiscally sustainable is higher-density urban development.”

However, “the scope of the study that the city gave Hemson to do is the only result that they could come up with,” and Hemson – to produce its numbers in 2013 – contradicted its own recommended calculation methodology set out in its 2009 report, Pierce said.

“The 2013 Draft Fiscal Analysis uses a marginal costing method as opposed to an average cost approach even though the 2009 Hemson study stated that a ‘marginal approach is better suited to analysis involving short-term, narrowly focused development issues’ and that an average cost approach is considered more appropriate since the purpose of the study is to assist council to make policy decisions that will have long-range implications’,” Herbert wrote in his letter to Hume.

There were other problems with Hemson’s study, Pierce said.  “Its research was quite simplistic.  The consultants looked at 13 developments across the city, how much road had to go to build the developments, so much per metre to build the roads and pipes underground.  They didn’t take into account the other land uses that end up in suburban plans of development compared to the inner city, such as schools, parks, and so on, all now put a lot of facilities in suburban areas.”

Pierce and Herbert also expressed concerns about the Hemson study’s narrow focus.  “With fiscal impact constricted to only analyzing impact to local government spending and taxation, it is no surprise that infill density development is cost-efficient,” Herbert’s letter says. “However, the analysis fails to consider other essential factors including:  the availability of development sites; servicing capacity and infrastructure conditions; housing preferences of different demographics; market factors; and affordability of housing types in different locations to name a few.”

Pierce noted that while high rise condo developments may be efficient, they are generally not suitable for families.  “The average selling price of a high rise condo is $500 per sq. ft.,” he said. “Low rise townhouses and family homes are generally 100 to 125 sq. ft.  It isn’t affordable for most families to buy high rise condos.”

“What they are going to have to do to find the affordable house is to go outside the city or live in Gatineau,” Pierce said.

These policies might effectively price families out of the Ottawa market.  “The information we have is that families are a very important piece of the economic picture.  Families do spend money.”

The Hemson study “is too narrowly focussed, and it is ill-informed to use it to be making long-range financial decisions.”

Worse, the MGP report discovered that if Hemson had followed its 2009 recommendations for average cost rather than marginal costs, that the lower-density urban developments would certainly still be sustainable and would not cause a drain on municipal coffers.

Pierce says the GOHBA is concerned that if the city gives weight to the Hemson consulting report, the stage “is being set for a substantial development charge increase.”

“We’re concerned where the city is going with the Hemson report, and think it getting more weight than we’re led to believe,” he said.

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