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Claims rush
Residential developers have various paths to create wealth. When markets are cooking, they sell homes. When markets cool, they find other ways to make money for their shareholders. Among the more lucrative methods is to convert farm fields and vacant land to subdivision plans.
Like squirrels gathering nuts, developers scour the countryside searching for future food to store away. Unlike other forms of inventory (or nuts), however, land with regulatory approval doesn’t tend to go bad. The opposite, actually. The value of such land usually grows over time—whether or not a house is ever built. The right to build a home has value. Even if you never build one. It’s a good business.
With new homebuilding at a standstill in Ontario, a land claims rush is underway across the province. Developers are deploying their teams, money, and resources away from dormant building projects to converting farm fields and land into inventory. How it works: developers buy up farmland surrounding an existing community (and a welcoming secondary plan). They prepare development applications, undertake regulatory studies and usher plans through the various municipal and provincial hoops.
It’s good business. Without building a single home or digging a trench in a farm field, developers create real value for their shareholders.
Those with deeper pockets and a longer time horizon put money into the local economy to prime the pump. The purpose is the same. To build potential inventory. It’s smart and forwardlooking. For the developer.
But when everyone does it, the risk of oversupply mounts. It isn’t a concern so much for developers for reasons noted earlier, but it is intensely more problematic for municipalities preparing for the wave of population that may or may not come. Inventory formation creates the illusion that a wave of homebuilding is on the horizon.
It isn’t. It is an illusion.
Some of it will be developed over the next 20 years. Most will not. There will be other constraints: labour, materials, financing and, of course, sales. The further one gets from the GTA and the 401, the greater the constraints become.
For the developer, it doesn’t matter much— the wealth has been created. Time is on their side.
But if you are a wee rural municipality and weighing an investment of $300 million speculating on population and housing growth, it’s trouble. Big trouble. Enabling a developer to build inventory in your community creates only rising costs and future obligations. There is no upside.
The municipality that runs ahead to spend hundreds of millions of dollars putting pipes in the ground and betting on developers converting their inventory into new homes is on a fool’s errand.
There is only downside risk. Potentially ruinous risk.
“Growth pays for growth” must be more than a slogan. It must be cold, hard cash. Up front. Not a promise. Not a payment plan geared to sales. Not an agreement that developers will ignore.
Shire Hall and Council must learn how to play hardball. And quickly. If they really want to be in this game, they must learn to play for keeps—as if it were their own money.
When developers want to build homes and are serious about it, they will pay for the infrastructure for their project. They have the resources, the capability and the motivation.
Residents of this wee rural municipality can’t afford to pay the developers’ bills upfront. It doesn’t have the means. But developers do. They create wealth whenever they convert a farm field into a draft subdivision plan. They must use that wealth to fund their services—not put it on the backs of existing residents.
If Shire Hall doesn’t have the stomach to compel developers to do so, it must stop approving their plans.
Shire Hall cannot spend another dime on promises. It has relied too long on faith and goodwill from developers whose only interest in Prince Edward County is how much wealth they can extract.
Shire Hall has put residents in a terribly risky spot. It must stop spending residents’ money on an illusion. It’s time to play hardball.
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