Bonusing downtown housing: an evaluation of goals and means

The purpose of this thesis is to examine the potential effectiveness of a relatively new zoning innovation -residential density bonuses. The investigation examines the extent to which such bonuses are likely to stimulate the development of housing in the downtown areas of large North American cities. As a prerequisite to the evaluation of density bonuses, the underlying goal, that is, the desirability of more housing in the downtown, is first considered. The likely effectiveness of a bonus system is then evaluated in light of the public goals to be realized and the expected impact of bonuses on downtown real estate markets. Chapter One provides an introduction to the problem area noting that, despite the apparent advantages of bonus systems, there is cause to doubt their effectiveness. Three objectives are established for the thesis: firstly, to re-examine the arguments for downtown housing; secondly, to evaluate the potential effectiveness of bonus systems, and; thirdly, to discuss other mechanisms which might complement or replace bonus systems. Parameters governing the investigation's scope and limitations are discussed. Chapter Two presents, as an example, a brief description of the bonus system used in downtown Vancouver. The underlying goals, and the analysis undertaken in defining the bonuses themselves, are discussed. The results of interviews with a number of local developers are summarized, drawing attention to the strengths.and shortcomings of the system in practice and suggesting inconsistencies in its most basic assumptions and premises. An historical perspective on the evolution of the downtown core is presented in Chapter Three. Attention is drawn to the implications of sustained employment growth on the area's character and residential function. The public goals and policies which emerged in response to changing conditions in the area are examined, and the underlying arguments supporting the housing goal are critically reviewed. It is concluded that the arguments are largely intuitive, emotional and value based, supported by a very limited base of empirical evidence and analysis. Chapter Four examines the evolution and construction of " density bonuses " as a mechanism for land use control. Their expected effectiveness is then evaluated - in light of land valuation and real estate investment theory. It is argued that the methods for calculating bonuses are overly-simplistic, that bonuses are unlikely to be sustained over time and that, in any case, they are most likely to be captured by original landowners, providing little or no incentive for subsequent landowners. It is concluded that these shortcomings seriously undermine the expected usefulness of bonus systems in stimulating the provision of residential development in the downtown. In Chapter Five, the goals for downtown are re-examined. Alternatives to the provision of housing as a " solution " to the downtown's " problems " are put forward. Alternative means of providing housing are identified. Chapter Six outlines a series of questions and issues related to the topic which could provide directions for further research. In the concluding chapter the implications of the findings are discussed. It is suggested that the arguments for housing in the downtown should be .re-considered within a strategic context, that is, in terms of the role of housing as a legitimate downtown function rather than as a bandaid solution used to repair the negative consequences of employment growth in the area. It is suggested, further, that the expectation that " bonuses " for housing might provide a positive economic inducement for developers over time is largely an illusion, and one which should not be promoted without more convincing arguments first being established. Finally, the need for a rigorous examination and evaluation of such techniques, before and subsequent to their application, is emphasized.Applied Science, Faculty ofCommunity and Regional Planning (SCARP), School ofGraduat