4.3 Research Operationalisation Framework (s)
4.3.2 Determination of Economic Incentive
To address the research question, it is imperative to determine whether or not SSA ULUP regimes provide prime incentive. This, as pointed out earlier, demands comparing
the value of resources expended in complying with the subject ULUP regime requirement(s) known as cost and the value of the ends of compliance known as benefit. This is illustrated by Figure 4.3.
Figure 4.3 also demonstrates the variables that feed into the cost and benefits of compliance with the subject ULUP regime requirement(s). It is noted that cost and benefits associated with compliance or otherwise with ULUP regime requirement(s) may go beyond an individual property level. This, for example, may include positive and negative externalities to adjoining planned and unplanned developments neighbourhoods (see Corkindale, 2004) and ULUP authorities administrative running cost and benefits. However, these impacts as indicated by Figure 4.3 were beyond the scope of this work. Similarly, zoning and certificate of occupancy requirements were also beyond the scope of this work due to data constraints. Consequently, the linkage of the summation of cost on all the cost variables to the summation of all the benefits of the benefit variables is what is required. Given the complexities associated with methodologies used in the developed world and their huge volumes of data requirements, a practical and innovative way should be adopted to calibrate these values taking into account the merits of the methodologies and SSA data peculiarities. This may require, for example, building cost from scratch and combining different methodologies.
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4.3.2.1 Cost Estimation
As outlined in chapter three, compliance with SSA ULUP regime requirement(s) regarding urban development within the scope of this research is a continuum of activities. These range from preparation and approval of sub-division planning scheme to acquisition of building permit prior to commencement of development, which are undertaken at both public and private sector institutions. It is also evident from the literature that, to expedite action on some of these activities, developers make follow up at these institutions and often make extra out of pocket payments to officials at the public institutions (see Farvacque and McAuslan, 1992; Antwi, 2000; Hammond and Antwi, 2010). These costs, which tend to swell the overall cost of complying with these ULUP regimes requirement(s), need to be taken into account where appropriate. Additionally, it is noted that in a typical planned neighbourhood there are common or ancillary land uses, such as infrastructural facilities, which benefit individuals and institutions within the neighbourhood. It, therefore, stands to reason that the cost of these land uses under normal circumstance should be apportioned among the beneficiary land uses.
The subject ULUP regime requirement(s) compliance requirements from Figure 4.3 are approved sub-division planning scheme, infrastructure and amenities, architectural designs, formalised title and building permit. Denoting cost of these activities as
5 4
3 2
1 , , , ,and
, respectively, the subject ULUP regime requirement(s) compliance
cost per property can be calculated as follows:
1. Approved Sub-division Planning Scheme (ω ) 1
n i 1 1 Equation 4.11Where1 is as previously defined; is the area of land for the property and less or equal to ; is total area of land with uses that is subject to approved common land uses cost allotment under approved sub-division planning scheme and is less than ; is approved sub-division planning scheme cost per hectare land under approved sub-division planning scheme; is the total land area under the approved sub-division planning scheme.
ni
1 is a compounding factor that takes account of cost of time lag, that is time value of money and has i as the capitalisation rate signifying cost of capital and n as time lag.is the error term that takes account of all measurement errors.
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2. Infrastructure and Amenities (ω ) 2
n i j 1 ,...., 2 2 2 1 Equation 4.12 Where 2 , ,
1 , n i are as previously defined for example,
j
2 21,....,
is a range of
particular infrastructure/amenity2can take on at a time; roads and concrete drains, electricity, community park; is the land cost for particular infrastructure/amenity; is cost of particular infrastructure/amenity per unit area of land under a sub-division planning scheme; is the extent of land; area particular infrastructure/amenity occupies under a sub-division planning scheme.
3. Architectural Design (ω ) 3
n i 1 3 Equation 4.13Where,,are the architectural design charge per property, commuting/transport cost for follow-ups on qualified architect or draughtsman per property design to ensure design completion and collection, and professional fee per property design for engagement of a property consultant to contract an architect/draughtsman to design and ensure completion of design respectively. All other variables are as previously defined.
4. Title Formalisation (ω ) 4
n i i 1 1 4 Equation 4.14Whereis the official fee for formalisation of deed per property at public agency(ies);
i
1, 2, 3,...., are variables, such as cost of deed per property, commuting cost for follow ups to expedite action on deed preparation, unofficial fee for formalisation of deed per property at public agency(ies), commuting cost for follow ups to expedite action on title formalisation activities. All other variable(s) are as previously defined.
5. Building Permit (ω ) 5
n i 1 5 Equation 4.15Where , are official and unofficial fees per property paid at public agency(ies) towards acquisition of building permit; is the commuting cost per property for follow ups at public agencies to expedite action on processing of building permit and is the professional fee per property for engagement of a property consultant to pursue procurement of a building permit. All other variables are as previously defined.
Given the foregoing, the subject ULUP regime requirement(s) compliance cost per property can, thus, be assessed as:
1 2 .... 2 .... 51 j
c
UR Equation 4.16
Where UR is ULUP regime requirement(s) compliance cost per property. All other c
variables are as previously defined. 4.3.2.2 Benefits Estimation
Chapter two has demonstrated that the benefits of ULUP in the context of economics are reflected in property prices or values. Thus, the benefits of the subject ULUP regime requirement(s) compliance requirements upon their execution are reflected in property prices or values. This means that the subject ULUP regime requirements’ compliance benefit can be extracted from property prices or values through the compliance requirements outlined by Figure 4.3 as variables. These are approved sub-division planning scheme, infrastructure (tarred roads and drains, electricity, pipe-borne water), social amenities (school), community, convenience shop, architectural design, formalised title, and building permit. Given that the research was interested in the cumulative benefit of compliance with ULUP regime requirement(s) and value or benefit contributions of each of the variables, and data constraints, two approaches to estimation of ULUP regime requirement(s) compliance benefits were adopted.
1. Approach One
Approach one initially adapted the CVM to procure property value data and then determined the value contribution of each of variables through OLS regression. The individual values were subsequently summed up to obtain the overall ULUP regime requirement(s) compliance benefit. Thus, with this approach, real estate valuers and agents guided by the recommended procedures for the CVM were asked to give their professional opinions as to the value of a prescribed property in the study area if it is in an area not provided with and covered by all the ULUP regime requirement(s) compliance
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variables. Subsequently, they were asked to provide their opinions of value for the prescribed property if it is in an area provided with or covered by a particular planning regime requirement to the exclusion of the other requirements. Real estate valuers and agents were used as respondents because they were better placed by their training to provide comparatively more informed opinions of value. Besides, it was to assist in reducing the biases and subjectiveness that may have occured with reliance on actual property owners.
The values reported where the property is without all the planning regime variables were dummied as 0 for all the variables. Conversely, where the property is associated with only a particular variable, a dummy 1 is given to that variable with the reported value or price while the other variables are dummied as 0s. This was then put in Equation 4.4 re-stated as: 0 2b 3c.... np Equation 4.17
Where is the price or the reported values of the property if it is associated with only a particular variable and all other variables are as previously defined. ULUP regime requirement(s) compliance benefits per property can, thus, be expressed as:
nb
UR 2 3 ... Equation 4.18
Where UR is the subject ULUP regime requirement(s) compliance benefit per property, b
which is a conglomerate of range of benefits, and2,3,...,n , the coefficients of Equation 4.17 are the ULUP requirement(s) compliance benefit(s) and all other variables are as previously defined. It is imperative to make the point that the practice of adopting the CVM to procure data for analysis using regression models, such as the subject approach is not without precedent in the extant literature. Hammond (2006) and Hammond and Antwi (2010) applied similar approaches relative to their studies on calibration of economic impact of SSA real estate policies. Such was also the approach used by Bertaud and Mapelzzi (2001) in their assessment of cost and benefits of land use regulation in Malaysia. The use of dummy variables in regression models to determine the coefficients or the magnitude of predictor variables to outcome variables is also acceptable and common in the literature (Field, 2005). In the discipline of real estate finance such practice is common (see Francis et al., 2007; Price et al., 2010).
2. Approach Two
The second approach also adapted CVM, but asked real estate valuers and agents to give their professional opinion of value of the prescribed property if it is associated with all the ULUP regime requirement(s) and if it is not, assuming other value determinants are the same. The difference in means of the two different groups of the reported values was adopted as the benefit of ULUP regime. Illustration of the calculation is as follows: let A1
represent the group of values reported by respondents as the value of the assumed property if it is without ULUP regime requirements and A2 be the group of values
reported by respondents as to the value of the assumed property if it has all the ULUP regime requirements. The difference in means of the two groups (A1 and A2) can be
calculated as: 1 2 A A b UR Equation 4.19
WhereUR is the difference in means between the two groups of reported values by b
respondents representing the value of ULUP regime while A1andA2are the means of groups A1 and A2 respectively.
From the discussions, pitting the subject ULUP regime requirement(s) compliance benefit to the subject ULUP requirement(s) compliance cost to ascertain whether or not the subject ULUP regime provides prime incentive can, thus, be written as follows:
c b d
i P UR UR
P Equation 4.20
Where Pi Pd is prime incentive/disincentive, an indicator of economic incentives/disincentives. If UR is less than or at least equal to c UR , that is, where ULUP b
regime requirements compliance cost is less than or at least equal to ULUP regime requirements compliance benefit then there is prime incentive
P . This signifies planning iregime’s provision of economic incentives. Alternatively, should ULUP regime requirements compliance cost exceeds that of its compliance benefit then a prime disincentive
Pd arises, an indication of planning regime’s provision of disincentives.4.4 Chapter Summary
To address the research question, there was a need to prescribe the means by which the variables in the central argument will be measured. This chapter, therefore, discussed
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some of the quantitative methodologies used in the calibration of economic impact of interventions. The purpose was to outline a suitable measurement framework for the variables embedded in the conceptual framework. It was established that given the complex nature of conventional economic impact methodologies and their requirement of huge volumes of organised data, which are hardly encountered in SSA there was a need for practical and innovative means of capturing the economic impacts of SSA ULUP regime requirements. This was found in building cost impacts calibration methods from scratch and combining methodologies for calculation of the benefit(s). Having done so, it is now appropriate to show how the entire research was designed and data procured and analysed. The next chapter discusses that.
Chapter Five
Research Methodology
5.1 IntroductionThe previous chapters have outlined the research background, framework, its central argument and how variables therein were operationalised. This chapter reports on how the overall research was designed. The purpose is to, inter alia, demonstrate how the investigation was structured to obtain an answer to the research question whilst controlling extraneous variables, as well as the plan that put the research process in motion. The chapter therefore opens a discussion on selection of research paradigm, strategy, population and sample, variables, the methods that were used to procure requisite data, how the procured data were analysed and the ethical issues considered.