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I doubt that the locations for prospective real estate developments are fungible enough to make the plans and conditions applicable to each interchangeable. Re

by schoen 9y ago

I doubt that the locations for prospective real estate developments are fungible enough to make the plans and conditions applicable to each interchangeable. Remember that the things that are said to matter the most in real estate are "location, location, and location". https://www.nytimes.com/2009/06/28/magazine/28FOB-onlanguage-t.html https://www.nytimes.com/2009/06/28/magazine/28FOB-onlanguage... Housing developments and their costs of construction and their suitability for a particular site and their aesthetic appeal to an area and the demand curve that they face there and their utility connection options and the other regulations that they will be subject to apart from permit approval are all different in different places, so a developer's level enthusiasm for building a particular project in one city or another, or one neighborhood or another, is very unlikely to be exactly transferable... You might say that the auction mechanism would nonetheless take account of this because the developer would only bid amounts that would lead to profitability literally anywhere, but I don't think such amounts exist. ("Cool, the 50-story apartment building concept has been approved for construction on a vacant lot with no existing utility connections 5 km from the nearest other building and 30 km from the nearest bus stop! Let's go build it!")

danieltillett 9y ago
The location requirement can be covered by the bid proposal of the developer. The can say the development requires certain features. It will be in their interest to make this as broad as possible so they create the maximum competition between communities for the development. For example developers could make the conditions so tight that only one location met all the requirements pushing up the cost since that community would know this was the only site and so hold off bidding. Alternatively, the developer could set the conditions broadly so that more communities would bid lowering the cost. The nice thing about this is the friendlier the developer makes the proposal to a community the lower the price they will have pay. The community gets development that maximises their returns while the developer is encouraged to create community friendly developments.
- schoen 9y ago
  Thanks for the interesting response! I wonder how many developers currently think this way (in terms of explicitly specified sets of features rather than specific sites). And, what's more, how eager would they be to be seen to be thinking this way in a public bid? One thing that comes to mind is that some developers might not want to publicly specify some of the features that actually matter to them, for example things about neighborhood incomes, crime rates, homelessness, or other neighborhood demographics. Still, developers may feel that these things will significantly affect the suitability of a site to a profitable project, but not want to deal with the public relations aspects of spelling out their reasoning. I'm not sure how strong an argument that is against your proposal, but maybe developers would consider it pretty fundamental. Edit: Also, it's amusing to think about people trying to quantify aesthetic fit. "We want to build this development in a place that McMansion Hell thinks is overall pretty tacky, but not super tacky." "We want to build this development in a place with an average of 12 architectural classiness points, but in any case not more than 17 classiness points."
  - danieltillett 9y ago
    All those other considerations you mention will play a role, but they will affect the final sale price and hence the undeveloped land value. Developers will be worried about the spread between site acquisition costs (land + development bid cost) and final sale price. Locations with problems will have lower undeveloped land values. In practice this proposal would work best when land owners and communities work together to put together potential sites that meet developers needs. I think developers will hate this idea because instead of the whole surplus going to them and their corrupt buddies in government, it will have to be shared with the local community. Since the bid will be public there is no way to payoff someone in the planning department to get approval for your development. Of course from my perspective this is a feature not a bug.
    - schoen 9y ago
      > I think developers will hate this idea because instead of the whole surplus going to them and their corrupt buddies in government, it will have to be shared with the local community. I would think if there were a lot of developers and a lot of parcels, an alternative is that there would be more supply-side competition for housing and then better-quality housing would be more affordable overall. Do you see factors preventing this outcome from being likely?

by schoen 9y ago

danieltillett 9y ago

The location requirement can be covered by the bid proposal of the developer. The can say the development requires certain features. It will be in their interest to make this as broad as possible so they create the maximum competition between communities for the development. For example developers could make the conditions so tight that only one location met all the requirements pushing up the cost since that community would know this was the only site and so hold off bidding. Alternatively, the developer could set the conditions broadly so that more communities would bid lowering the cost. The nice thing about this is the friendlier the developer makes the proposal to a community the lower the price they will have pay. The community gets development that maximises their returns while the developer is encouraged to create community friendly developments.

schoen 9y ago
Thanks for the interesting response! I wonder how many developers currently think this way (in terms of explicitly specified sets of features rather than specific sites). And, what's more, how eager would they be to be seen to be thinking this way in a public bid? One thing that comes to mind is that some developers might not want to publicly specify some of the features that actually matter to them, for example things about neighborhood incomes, crime rates, homelessness, or other neighborhood demographics. Still, developers may feel that these things will significantly affect the suitability of a site to a profitable project, but not want to deal with the public relations aspects of spelling out their reasoning. I'm not sure how strong an argument that is against your proposal, but maybe developers would consider it pretty fundamental. Edit: Also, it's amusing to think about people trying to quantify aesthetic fit. "We want to build this development in a place that McMansion Hell thinks is overall pretty tacky, but not super tacky." "We want to build this development in a place with an average of 12 architectural classiness points, but in any case not more than 17 classiness points."
- danieltillett 9y ago
  All those other considerations you mention will play a role, but they will affect the final sale price and hence the undeveloped land value. Developers will be worried about the spread between site acquisition costs (land + development bid cost) and final sale price. Locations with problems will have lower undeveloped land values. In practice this proposal would work best when land owners and communities work together to put together potential sites that meet developers needs. I think developers will hate this idea because instead of the whole surplus going to them and their corrupt buddies in government, it will have to be shared with the local community. Since the bid will be public there is no way to payoff someone in the planning department to get approval for your development. Of course from my perspective this is a feature not a bug.
  - schoen 9y ago
    > I think developers will hate this idea because instead of the whole surplus going to them and their corrupt buddies in government, it will have to be shared with the local community. I would think if there were a lot of developers and a lot of parcels, an alternative is that there would be more supply-side competition for housing and then better-quality housing would be more affordable overall. Do you see factors preventing this outcome from being likely?