Gnarlsaurus_Sketch t1_jd3idfl wrote on March 21, 2023 at 4:02 PM

Reply to comment by AirtimeAficionado in Let's pour one out for the developers of Pittsburgh by PublicCommenter

Just because the numbers are large does not mean the money is unlimited. Fees and regulatory process have a huge impact on whether projects not only move forward, but also whether they are proposed in the first place. Especially when the fees are levied in percentages and non-refundable.

Demand and prices in Pgh (or even much more expensive cities) aren't nearly high enough for developers to build with no regard for costs.

Your impression of the business likely comes from memes, TV, and a certain orange tinted ex-president.

Also, higher fees affect smaller and mid sized developers the most. Want to make sure only big developers can build? Jack the fees up and make the review process an unpredictable quagmire without a reasonable time frame.

AirtimeAficionado t1_jd3q6kg wrote on March 21, 2023 at 4:52 PM

The primary factor here is the yield projects command, which influences the financing a project can gather and the rates with which that financing matures. These fees have no impact on a project moving forward, period. There is still considerable demand that allows for prime yields (10%+), even with an increase in this fee.

2)These new fees are not fixed, they are variable based upon project costs, which means they will not have an outsized impact on smaller developers.

I do not need to be condescended to on this issue. I am telling you the reality of the situation. There are plenty of things that are insanely expensive and non-refundable in this process, this is a drop in the bucket. It’s only a concern for developers because it will help the city adequately staff DCP and hold proposed designs more accountable than we are today— which is ultimately a good thing.

Gnarlsaurus_Sketch t1_jd3x6fg wrote on March 21, 2023 at 5:36 PM

Raising fees while interest rates are skyrocketing effectively kicks the projected yield rate while it's down. Use all the buzzwords you want, it won't change the fact that this fundamentally discourages development because it decreases the yield rate. Developers who have already submitted proposals might be more likely to move forward, because of their sunk costs. Developers who haven't already committed could decide to build elsewhere.

Even though they are assessed at a percentage rate, the fees still affect smaller developers more because the fees are a larger percentage of their net worth than they are for bigger developers. It's the same principle that renders a percentage based flat tax unfair. Even though it's the same percentage, it affects the little guys way more.

More staff to enforce the shitty zoning we have isn't a good thing unless we reform the zoning first. Other existing expensive non-refundable costs aren't a valid excuse to impose new ones.

AirtimeAficionado t1_jd48ui4 wrote on March 21, 2023 at 6:49 PM

I’m not sure what you’re on about, this is written like an AI language model would write something after being asked to integrate a new term it isn’t really familiar with— in this case “yield.”

The yield is assessed versus the entire construction cost of the project— why I mentioned that in the first place— which is why these sums do not really matter. It’s equivalent in cost to something like four days of a tower crane rental, and does not have a substantive impact on developable yield. Period.

And these developers— Millcraft, Walnut Capital, etc— are not building elsewhere. Development is a field highly dependent on local knowledge, and these firms exist with portfolios exclusively in this area for this reason. The city-especially areas like Oakland— remain extremely compelling for development by anyone, but are particularly important to these local development firms because they have a strategy and portfolio hinging on almost exclusive development here. It would be far more costly and risky for them to go elsewhere. They are not.

Increasing interest rates and inflation matter, but are happening regardless of this policy. These are much larger costs, and the real thing holding development right now. Developers could still build in areas like Oakland in this climate, but are waiting on doing so because they foresee lowering interest rates in the future which will reduce ultimate project cost.

I’m not sure what you’re saying about the “little guys,” but the percentages outlined here should be the same or lower for them— before it was a flat rate of $15,000, now it is variable on project cost.

And I agree the zoning needs to be improved, I am arguing it will improve as a result of better staffing from better funding. I do not know anyone at DCP that is happy with the way things are going, but they are currently underwater and are struggling to keep things moving. This should help, not harm, zoning efforts.