Why Infill Development Is So Difficult to Achieve

Infill HousingBy Richard McCann

A housing shortage? Develop infill projects. An economic development crisis? Infill development. Traffic congestion? Yep, more infill development. Infill development has become the go-to solution to our land-use ills. It seems so easy—just gather up those odd lots and abandoned properties and create a brand-new project with ready-made customers and retail businesses right next door. If only it was so easy.

Davis has not been able to develop larger tracts of land to attract firms working on innovation and partnering with UC Davis. Opponents of several proposed projects have claimed that developers can instead assemble the numerous infill parcels that already exist within city limits to create the needed innovation parks.

Now a new study in the leading journal, American Economics Review, finds that in Los Angeles, assembling a group of parcels for such projects faces sale prices 15% to 40% more than a single parcel project. And that doesn’t include the typical per parcel transaction costs that are compounded by making multiple purchases. The bottom line is that infill development for larger projects face a high cost premium that must be acknowledged.

As the authors write, “(e)conomic historians contend that the ability to assemble ownership interests is often a crucial prerequisite for economic growth… If land cannot be assembled in sufficient quantity, cities will fail to adjust to new economic realities. Most significantly, land assembly allows cities to become denser. Market frictions that inhibit assembly therefore cause land to be misallocated to suboptimally dense uses.”

The study points out that the significant market frictions of assembling parcels creates a wedge between the declining value of the existing uses and the potential added value from redevelopment. The new use may look obviously beneficial, but the costs of purchase transactions suck away the potential gains. So only those infill projects with large profits can succeed.

They found impediments from both public and private sources.

Public frictions arise from the regulation of land by local governments, including zoning restrictions, development fees, and building codes… Private market failures stem from bargaining problems between the developer of the assembled land and the land sellers, causing problems such as holdouts.

The study looked at 2.3 million parcel sales from 1999 to 2011.  The results are statistically robust.

Some in Davis have proposed that new business parks can be developed in Davis through infill rather than by building on large tracts on urban fringe. The result from this study says that the infill projects must be much more profitable (either through other lower costs or higher returns) to make them competitive with the “greenfield” proposals of late. (And this ignores the higher costs often associated with developing “brownfield” parcels due to replacing and reconfiguring infrastructure.)

So, we don’t have the simple “one size fits all” solution to our problems of housing, economic development or traffic. Infill can’t be the alternative miracle. We are unlikely to see large-scale projects within current City boundaries due to this cost premium. It’s time to move on.

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Disclaimer: the views expressed by guest writers are strictly those of the author and may not reflect the views of the Vanguard, its editor, or its editorial board.

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15 thoughts on “Why Infill Development Is So Difficult to Achieve”

  1. Jim Frame

    Some in Davis have proposed that new business parks can be developed in Davis through infill rather than by building on large tracts on urban fringe.

    The cited study addresses the problems of land assembly, i.e. aggregating multiple parcels under disparate ownership into a single project under discrete ownership.  It’s no surprise that that kind of approach is going to be fraught with problems due to “too many cooks” syndrome.  But that’s never been a strategy that I’ve seen proposed for Davis.

    The Innovation Task Force prescribed a distributed business park strategy in which individual projects would be built on existing parcels, which is a very different animal.  In the case of MRIC, there were a couple of ownerships involved, but the Ramos folks already had an option on the land they didn’t own, so the aggregation had already been dealt with.

     

    1. Richard McCann

      Opponents to MRIC and Nishi proposed infill development as an alternative to those fringe development projects. This article addresses those proposals.

      1. Jim Frame

        I’ve not seen any proposed infill projects requiring parcel aggregation.  My understanding of the infill concept in Davis is to build on open or underdeveloped parcels.  Buying out owners of existing profitable uses is hard to do, unless you’re Mark Zuckerberg.  He recently bought 4 houses surrounding his own so he could control who his neighbors are, but it cost him $30M to accomplish that.

    2. Howard P

      Jim is correct, as to Davis (can think of one “infill” exception, but that would be a very ‘technical’ exception).

      The “aggregation” concept was touted (rightly) for Redevelopment Agencies who used eminent domain to do the ‘aggregation’… worked well sometimes, was grossly abused in others… the latter helped kill RDA’s.  To my knowledge, RDA aggregation has not occurred in Davis.

  2. Todd Edelman

    Hey, in the future if you’re going to summarize a review of a 37-page study with “don’t have”, “can’t be”, “unlikely” and the coup de grâce “It’s time to move on.” in the environment of a generally-thoughtful article-comments couplet that’s nevertheless fully ripe for only a couple of days, it would be swell to let readers know that a review on an important subject such as this is coming a week or two ahead of time.

    Without a long look at the report, it’s hard to tell if things like the cost of driving which is not shared democratically gives an advantage to having something like MRIC at the edge of town.  It’s simply way cheaper than it should be to drive there from anywhere (and unfortunately there’s not so much that Davis can do on its own to responsible-ize the cost of driving, but this doesn’t mean we should give up.) Compare this with something at Nishi which could conceivably include a re-located Davis Depot (as part of the high-speed rail project in which the current Depot parking lot is re-developed for uses appropriate to a Downtown, such as small business offices, services, restaurants, music venue… or, conversely, where Nishi gets an interim station and the Depot is re-developed with re-aligned tracks and Downtown-stuff and better capability for a higher-end train station… assuming that there’s a good alternative, it’s easier and much cheaper to re-build a train station when it’s closed). Whatever ends up being at the Nishi site doesn’t need car parking right there – this can be aggregated with a parking structure that’s part of the 80-Richards project that also replaces the parking capacity of the 1st St. garage…

    Or making a rail-based service of some kind viable on the north-south Woodland-Davis ROW by creating policies that slowly replace commercial properties mostly on its west side from 8th to the Depot will taller mixed-use structures  that would be a few minutes from the Depot and 15-min from Woodland (30-min by bicycle) with minimal surface vehicles impacts by not wasting money on any type of parking. With smart logistics, possibly also including rail, business like the Co-Op could expand, and there’d no longer be empty storefronts at the north end of this asphalt waste of space.

    We can shrug our shoulders at champions of gluttony for parking lots in a city with a housing crisis like the many privately-owned shopping centers around town, waiting for the Holy Market to “naturally” create housing on these sites OR – in a different example – we can create an extremely good moral, legal, ethical and sustainable business argument for PG&E to re-locate their vehicle service yard to some place which works better for everyone… in the long-term, also known as the “on” that we “move” to.

    1. Alan Miller

      Compare this with something at Nishi which could conceivably include a re-located Davis Depot

      Say what?  Take a look at the cost of the new “Vacaville” (not) depot.  That cost $50 million plus.  To build a depot to the new UPRR standards which require room for four tracks and grade separation for the passengers is an extremely expensive proposition.  The current deport configuration, much as it could be improved, is grandfathered in.  Until a mega-source of funding is found, moving this depot is out of the question.  As well, Nishi is not easily accessible by car, especially if Olive access is out of the question now (is it?).  Rail depots should be near downtown for walkability, connectivity and access.  The only possible advantgage would be more parking if Nishi were turned into a parking lot for rail passengers, but the accessiblility, cost and a parking lot generating no tax revenue kills that ideas

      (as part of the high-speed rail project

      WHAT?  High speed rail is not coming to Davis in any scenario.  Sacramento is Phase II, which is not defined even if funding were available, and there’s not even remotely funding to complete Phase I.

      in which the current Depot parking lot is re-developed for uses appropriate to a Downtown, such as small business offices, services, restaurants, music venue…

      Like a parking lot?  The Davis Tower and Station are historic, so you want to take out the parking lot and put in businesses?  I’m not sure the railroad would go along with that either.  People also talk of a parking structure there, but there are real problems with the dimension of that lot to building a structure there.  Maybe not impossible, but challenging to do as there is a small footprint and you need the ramp area regardless of he size of the

      or, conversely, where Nishi gets an interim station

      An interim station?  That would cost a hell of a lot of money to build, only to be abandoned.  Not likely.

      and the Depot is re-developed with re-aligned tracks and Downtown-stuff and better capability for a higher-end train station…

      Re-aligned how?  Higher-end how?

      assuming that there’s a good alternative, it’s easier and much cheaper to re-build a train station when it’s closed).

      Maybe, but any rebuilding of the station that involves re-aligning and improving tracks is going to multiple tens of millions of dollars.

      Whatever ends up being at the Nishi site doesn’t need car parking right there –

      It doesn’t?

      this can be aggregated with a parking structure that’s part of the 80-Richards project that also replaces the parking capacity of the 1st St. garage…

      Maybe OK for storage cars that are used only to leave town, but people aren’t going to walk blocks from their cars for daily jobs, certainly not replacing an existing structure that is already downtown.

      Or making a rail-based service of some kind viable on the north-south Woodland-Davis ROW by creating policies that slowly replace commercial properties

      What does that even mean?  I doubt any rail-based service is currently viable from Davis to Woodland.  What sort of policies would “create” this?  And replacing commercial properties?

      mostly on its west side from 8th to the Depot will taller mixed-use structures  that would be a few minutes from the Depot and 15-min from Woodland (30-min by bicycle)

      So like replace the Food COOP, Hibbert Lumber and ACE Hardware — and by doing so, if you could, this would help a rail-based service of what sort how?

      with minimal surface vehicles impacts by not wasting money on any type of parking.

      Creating mixed use reduces vehicle use?  Maybe in Utopia, not Davis

      With smart logistics, possibly also including rail, business like the Co-Op could expand,

      Not if you slowly replace it . . .

      and there’d no longer be empty storefronts at the north end of this asphalt waste of space.

      Possibly, at least we agree that strip mall is a waste.

      We can shrug our shoulders at champions of gluttony for parking lots in a city with a housing crisis like the many privately-owned shopping centers around town,

      That was convoluted . . . I’m shaking my shoulders at what exactly?

      waiting for the Holy Market to “naturally” create housing on these sites OR – in a different example – we can create an extremely good moral, legal, ethical and sustainable business argument for PG&E to re-locate their vehicle service yard to some place which works better for everyone…

      PG&E may eventually be a site, but it is decades in the future.  There are multiple major utility lines that intersect there, and toxics issues most likely.

      in the long-term, also known as the “on” that we “move” to.

      In the long term, also known as “say what?”.

      [moderator] rescued from spam folder, not sure why this happens sometimes.

    2. Richard McCann

      You need to make a strong case that all of these attributes can generate enough additional profit for a developer to overcome a 40%+ cost premium for a large infill project over a peripheral development. It is the private developers who are building these projects, not some other undefined entity, and in our national economy they are driven by the profit motive. Unless those infill projects can generate enough incentives for developers to overcome this cost barrier, then these are not going to happen.

      And if David is right that peripheral projects also face too many barriers, then that means there won’t be any large-scale developments in Davis. And that means that this town is facing an economic death spiral–we can’t just stand pat and hope to thrive.

    3. Howard P

      “Earth to Todd”:

      The depot triangle will not be ‘redeveloped’ in your lifetime… likely not in any grandchildren’s lifetime… Alan made valid points as to why…

      Unless PG&E finds it in their best interests to redevelop their corp yard (which is much more than a place to park/service trucks… it is also material storage, a NPG fueling facility, and regional staging area)… same as to liklihood.

      Moving the Davis Amtrak station to Nishi/UCD, same.  Alan points out some reasons.

      The north end of the G street strip mall has ‘issues’ related to “toxics” contamination from the old gas station (corner of G/Sweetbriar) and the old ‘cleaners’ at the north end of the strip mall… most have been resolved, but still enough questions to keep many possible developers at more than a 20 foot pole length.

      It is said, “a little knowledge is a dangerous thing”… ignorance is even more so… [or perhaps, just completely worthless]

      To be clear, I didn’t have to do a web search for any of this… neither did Alan…

      Alan and I can be almost polar oppoisites… but he speaks truth on this…

      1. Todd Edelman

        Hi, Alan. I’m gonna try to respond as succinctly as possible to your comments, in order:
        * A new train station straddles the tracks and assumes that the area to the east of Nishi and on the track side of Olive is available. So, one side is accessible from the Downtown side and other from the South Davis side, with e.g. different buses serving and taxis arriving on either side in a way that minimizes conflict with pedestrians and cyclists. The station has mirror facilities on either side such as bicycle parking, luggage lockers (!), and other services at ground level and ticketing above at track level, and restaurants and administrative offices above the tracks. It’s a linear station and the western end is at the eastern corner of the planned Nishi area. With the exception of ADA parking, all the private vehicles are in a garage that’s part of the 80-Richards modifications, i.e. with cars accessing from 80 without going on surface streets at all, and vehicles coming from South Davis parked in the same place It’s as close to the the New Depot as possible, but there will be shuttles from the 80-Richards parking to the Depot and Downtown. People visiting Davis can park right next to the highway, and get into the city easily. Richards, of course, should be nice enough to walk on;
        * I was not referring to the California HSR but the Capitol Corridor moderate HSR (150mph top speed trains; Davis to Oakland in less than an hour). This long-term project shifts cargo rail to other side of the Delta on an existing under-utilised ROW and CC gets the UPRR ROW all to itself (or maybe some other operators can run non-competing services, I dunno, it should be like that….)
        * I know that Davis Depot got funding contingent on free parking, but NO guaranteed bus connections for all trains. This is silly, no? Building a parking lot here is silly, no? Who wants to draw so many drivers through Downtown? It just fills up a little later than now. Anyway, the Depot can stay in operation if there’s no interest in the other station location, though the latter makes a train trip the absolute best choice to get to any development there, it’s way better for South Davis, it’s way better for people for whom there’s no viable transit to the station, at this location everyone accessing the station has essentially no surface street impact north of 80, it’s a bit further from especially the east side of Downtown, but a bit closer to campus.

        * The point of mentioning an interim station is simply that there’s some space near Downtown to do it. Consider complicated things like raising platform heights at DD to the door level of the new trains…
        * The re-alignment with Davis Depot in the same place is only marginal if at all.
        * Again with Nishi 2.0, parking within the complex is less necessary if the station is here. If any is built, I say build it along 80, tall and linear, ironically blocking some of the bad effects of the 80 to Nishi 2.0. The south side can be impervious to sound but not bouncing it to South Davis, and maybe something to absorb some of the particle and gas pollution? Maybe new off- and on’s to the 80, but that’s complicated with Richards so close by?
        * People who live in Davis Downtown would not have to park in the 80-Richards parking structure; others can walk or take shuttles from there to Downtown (free, or free with cost of parking, simple, no stress, 24/7…). People who live just north of Downtown will be encouraged or incentivised to access it from other directions.
        * The parking structure and cinemas on 1st St. stays intact, but the roof is converted to a plaza with a view with restaurants and other destinations, the middle level has kitchens, store rooms and access for delivery vehicles, ADA and possibly taxis that use the existing ramps. So the former free parking now generates income.
        * The west side of the tracks between 8th and 2nd would be slowly converted, all the businesses could stay and some would expand if they want to — I’d put 4 or 5-story mixed commercial next to the tracks, and the same size residential on the west side of the 6th to 8th lot bordering on G. St. Maybe not to impact Hibbert between 5th and 6th, the parking structure on 4th could be converted like 1st at least in part if there’s a new parking structure closer to 5th…  the whole Ace “campus” can be the lower level of a taller structure. There’s space for more commercial and/or residential linear – think high ratio of windows to ceilings, going up towards East Covell on G and the west side of the ROW…. so it’s clear that this needs to be a bikeway, but how dense does it have to be if Woodland also builds dense next to it within its city-limits to justify what would probably be a “tram-train”? Will it simply be too loud and annoying for drivers crossing 8th, 5th, 4th and 3rd? Maybe 4th can be closed — but also it’s just a short light rail train, not a very long freight train. (It would be synchronized with Capitol Corridor services or I’d consider running it along 1st St. to Old Davis Road and either reversing here or with a loop around the current parking lot 10 which I assume that UCD will want to build on at some point? That would be easier to do if there’s a robust transit link here that’s one or two stops from the Depot and 20min from Woodland.)
        * There are robust replacements for the access facilitated by car storage spots, but the more compelling reason to limit car parking is because we need the space for housing and businesses which pay taxes.
        * YES, I can see that PG&E can be a nightmare to re-locate, but there’s really no choice. So very many housing and tax paying business could be on the area which about the same size as nine Downtown blocks. It’s better next to e.g. Mace for access to 80. Thousands of residents here is a fair trade for a small number of PG&E employees who live west of here having a longer commute.

        Here’s a rail-light rail intermodality station concept I came up with when I lived in Prague. “Zastavka u Vytahu” means “station at the elevator” or “elevator station”.. it’s mostly in Czech but the pictures should help.

    1. Richard McCann

      With a 40% cost premium, it’s hard to envision that a developer will be willing to make any proposal for a project. As I said, we need to heavily discount infill as a potential economic savior for the City.

        1. Richard McCann

          The gist of the article I cited. Collecting the parcels to create a single large parcel costs 40% more than buying a single large parcel. That’s a 40% premium on the cost of infill for a large project vs. a single large parcel on the periphery a la Nishi and MRIC.

      1. David Greenwald

        That’s one reason we were so heavily reliant on redevelopment. Look no further than the parking garage proposal that has long since been left by the wayside without RDA money.

  3. Jim Frame

    People also talk of a parking structure there, but there are real problems with the dimension of that lot to building a structure there.  Maybe not impossible, but challenging to do as there is a small footprint and you need the ramp area regardless

    Redeveloping the depot with a parking structure has long been one of my concepts, though I don’t have any real feel for overall feasibility.  However, with regard to size and configuration, I’ll note that you could drop the Holiday Cinema parking structure in there without disturbing either the depot building or the tower.  In fact, the available area excluding those historic structures is more than twice the size of the Holiday structure (which, by the way, includes the ramps).

     

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