Gamble on Business: The High Cost of Low Density Housing

Thirty years ago my family moved from the Borealis Co-op to a house on Dagenais Drive adjacent to a large green space. We bought the house from the builder; the neighbourhood was still under development and the roads had not yet been paved. Fast forward to today and the first 450 metres of Dagenais Drive are being ripped up in order to upgrade the water and sewer lines, at a cost of $3.16 million, plus $800,000 for repaving.

The 40 houses on Dagenais contribute a total of $21,600 per year out of their taxes toward the Public Works budget. Even including infrastructure charges on their water bills, the payback period for the new pipes will be more than twice their lifespan, about 84 years. Meanwhile Northern Heights contributes a similar amount of money towards the Public Works budget using only seven percent of the road length. The City could replace the water and sewer on 49th Street every 10 years using Northern Heights’ tax contributions.

If one fewer low-density subdivision like Dagenais needed upgrading each year, the savings could pay off the new aquatic centre in 10 years. That’s the difference density makes. The opportunity costs are even greater when you consider prime land that is hardly used at all. Dotted throughout Yellowknife is a patchwork of vacant land that already has pipes, power, road access and sidewalks. Let’s look at some examples.

For well over a decade, the vacant land which used to hold an Esso gas station beside the Courthouse has been sitting empty. Rather than remediate the land quickly, the owners choose to pay $11,600 per year in property taxes. Meanwhile the Gallery Building, a mid-sized commercial building on a similar-sized property, pays $128,000. The difference would cover a third of the cost of Yellowknife’s Street Outreach Program.

Worse still is undeveloped City-owned land that is connected to City services but produces no property taxes. The vacant land across from Diamond Ridge on Con Road is a good example. That land is 173,000 square feet in area, which is 30 percent bigger than the downtown block containing the Centre Square Mall, Office Tower, YK Inn, Northern Heights, the Franklin Empty Lot and the Centre Square Parkade.

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If it had been developed at a medium density – something like the Summit condo development – the City could be collecting $96,000 per year in property taxes. Year over year, those taxes add up. We could have allowed for such a development when Diamond Ridge was built in 1996, and we would have benefited from $2 million in property taxes by now.

Or how about the vacant land between 50A and 51A Avenues: land that is larger than two downtown blocks and is 200 meters from Javaroma and right across the street from J.H. Sissons school. Infilled with medium density housing it would bring in $152,000 per year in property taxes, about the cost of building the climbing wall or putting in sidewalks on Calder Crescent.

The land across from the Copper Sky townhouses on School Draw could reasonably accommodate three Villa style buildings which bring in just under $33,000 per year in property taxes, yet year after year the land sits for sale on the City website for $585,000 (the price of a splash pad for Yellowknife’s children). If the land had been sold a few years ago, almost any reasonable discount would have been recovered at this point by that income.

A common argument against infill is the loss of green space, an important component of any healthy city and a benefit that I certainly enjoyed growing up on Dagenais. But the majority of Yellowknife green spaces are neither high use areas like the Frame Lake Trail or popular with kids such as the 51st Avenue tobogganing hill. Most are large empty patches of public land mainly being used for private benefit such as stoop and scoop-free zones or parking for off-season recreational vehicles. Those are low public-value uses, and they mean higher property taxes for the rest of us, as well as lower service levels from the City.

The climate, geography and economic structure of Yellowknife all do their part to force a higher cost of living on its residents. Why exasperate the problem by following the mistakes of other North American cities?

For those who don’t want a new aquatic centre or a splash pad and feel that the City shouldn’t have paid for the street outreach program or a climbing wall, there is upside in density for you, too. If only those four empty parcels of land that I have mentioned were developed, residential property taxes could be lowered by more than four percent.

Sam Gamble is a managing director of CloudWorks Adventure Capital, a Yellowknife-based real estate investment company. His column aims to explore the second and third order economic effects of decisions facing the North.

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