There’s no reason it should make development scarcer , so long as developers can still make a profit.
They can either absorb the cost by reducing their profits, or pass it on by increasing the price of the non-affordable units...which is effectively a transfer from the more wealthy to the less wealthy , which is hardly unprecedented.
That as long clause of yours is where the problem is. Fewer projects will be profitable. Reducing the profits increases developer’s risks. Not every project turns out profitable, and squeezing the margins will increase the risk of bankruptcy. Increasing the price has its limits. Non-affordable units are non-affordable because few people can afford it. Only a limited amount of them can be sold.
Where “unprofitable” means 1) negative profit 2) zero profit 3) positive profit, but less than you hoped for 4) less profit than you could have made elsewhere...?
Reducing the profits increases developer’s risks.
Yes. But risk is already built into expected profit. Developers don’t live in a risk free world.
Not every project turns out profitable, and squeezing the margins will increase the risk of bankruptcy.
But it’s not the case that any one developer is forced to take on a project. If they think the risk too is too great, they can walk away. If no developer takes it up, nothing happens, which is not in the interest of the authority that is sponsoring it. So the authority would then need to lower their demands ,so that everybody eventually meets in the middle. It’s called negotiation, and it’s not new or strange or bad.
Non-affordable units are non-affordable because few people can afford it.
“Affordable” means you lower prices on the lowest tier of units so that some people can afford then who would not be able to otherwise. That doesn’t mean that anyone else is squeezed out of the market entirely..if they have a limited budget, they just have to settle for slightly less square footage. Nothing is non-affordable in the sense that Jeff Bezos couldn’t buy it.
Won’t that make new developments more expensive as the developers will be discouraged from even starting the projects?
There’s no reason it should make development scarcer , so long as developers can still make a profit.
They can either absorb the cost by reducing their profits, or pass it on by increasing the price of the non-affordable units...which is effectively a transfer from the more wealthy to the less wealthy , which is hardly unprecedented.
That as long clause of yours is where the problem is. Fewer projects will be profitable. Reducing the profits increases developer’s risks. Not every project turns out profitable, and squeezing the margins will increase the risk of bankruptcy. Increasing the price has its limits. Non-affordable units are non-affordable because few people can afford it. Only a limited amount of them can be sold.
Where “unprofitable” means 1) negative profit 2) zero profit 3) positive profit, but less than you hoped for 4) less profit than you could have made elsewhere...?
Yes. But risk is already built into expected profit. Developers don’t live in a risk free world.
But it’s not the case that any one developer is forced to take on a project. If they think the risk too is too great, they can walk away. If no developer takes it up, nothing happens, which is not in the interest of the authority that is sponsoring it. So the authority would then need to lower their demands ,so that everybody eventually meets in the middle. It’s called negotiation, and it’s not new or strange or bad.
“Affordable” means you lower prices on the lowest tier of units so that some people can afford then who would not be able to otherwise. That doesn’t mean that anyone else is squeezed out of the market entirely..if they have a limited budget, they just have to settle for slightly less square footage. Nothing is non-affordable in the sense that Jeff Bezos couldn’t buy it.
As a PS, I’m assuming it’s a known factor that they agree to.