Lake oriented subdivisions in North Carolina: Decision factors and policy implications for urban growth patterns. Part I, Developer decisions

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LAKE-ORIENTED SUBDIVISIONS I N

NORTH

CAROLINA: DECISION FACTORS AND POLICY IMPLICATIONS

FOR URBAN GROWTH PATTERNS

P a r t I

-

D e v e l o p e r D e c i s i o n s

Kaymond J . Burby 111 R e s e a r c h F e l l o w

C e n t e r f o r Urban and R e g i o n a l S t u d i e s I n s t i t u t e f o r R e s e a r c h i n S o c i a l S c i e n c e U n i v e r s i t y n f N o r t h C a r o l i n a a t Chapel H i l l

The work upon which t h i s p u b l l c a t ~ o n L S b a s e d was s u p p o r t e d i n p a r t by f u n d s p r o v i d e d by t h e O f f i c e of Water R e s o u r c e s R e s e a r c h , Department of t h e I n t e r i o r , t h r o u g h t h e Water R e s o u r c e s R e s e a r c h I n s t i t u t e of t h e U n i v e r s i t y of N o r t h C a r o l i n a a s a u t h o r i z e d u n d e r t h e Water R e s o u r c e s R e s e a r c h A c t o f 1964.

P r o j e c t No. A-023-NC

Agreement No. 14-01-0001-1401, F.Y. 1968

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ACKNOWLEDGMENTS

Thts investigation was supported by the Water Xesources Research Institute, at the University of North Carolina, and Public Health Service Grant No. UI 00128-06 from the National Center for Urban and Industrial Health. A note of thanks is due Professor David

N.

Howells, Director of

the Water Resources Research Institute, for his interest and encourage- ment throughout.

Professor Shirley

F.

Weiss, Associate Research Director of the Center for Urban and Re~ional Studies, provided valuable advice from the earliest stages of the project to completion of the final product.

I

would also like to thank Professors Edward 3 . Kaiser and Henry C. Hightower, who provided many helpful insights and suggestions.

I

am indebted to Newton Andrus who assisted in the interviewing phase of the study

.

In addition, a special word of appreciation is due all the land development entrepreneurs in North Carolina who gave so freely of their tine.

I

am also indebted to numerous officials in local and state agencies, members of the real estate and appraising professions, and personnel of the

U. S.

Soil Conservation Service who furnished much valuable information.

A

final acknowledgment is due Barbara Goins who was responsible for

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TABLE OF CONTENTS

CHAPTER

I.

INTRODUCTION

Xesearch Objectives

11. THE

LAND

DEVELOPPiENT PROCESS AND DEVELOPER DECISIONS: k CONCEPTUAL OVEINIEW

Land Development as a Sequence of States and Decisions Agents in the Land Development Process

The Land Development Firm

The Entrepreneur and his Firm

Operating Characteristics

OF

Land Development Firms Marketability Studies

Feasibility Studies Summary

Implications for the Study of Developer Decisions An Approach to Understanding Developer k h a v i o r

An Economic Interpretation of Developer Behavior Economic Considerations and Environmental Innovation A Note of Caution

Social Aspects of Developer Behavior Summary

1x1. DETERMINANTS OF THE USE OF ENVIRONNENTAL INNOVATIONS : HYPOTHETICAL RELATIONS

Innovation, the Entrepreneur, and his Firm Access to Information

Previous Experience

Experience in Land Developmen; Type of Firm

Diversity of Business Interests Geographic Scope

of

Operation

Use

of Technical Publications

Orientation to Sources of New Ideas

Integration in the Land Development Industry Rationality of Approach

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iii

Page

Innovation and Characteristics of the Site

Physical Characteristics of the Site

Price of Land

Siza of the Parcel

Percent of the Parcel not Developable

Ground Cover

Locational Characteristics of the Site

Distance to Highways

Distance to Employment

Distance to Central Business District

Distance to Convenience Shopping

Surrounding Income Level

Visual Quality of the Approach

Amount of Surrounding Development

Institutional Characteristics of the Site

Water Sys

terns

Sewer Systems

Provision of Other Governmental Services

Governmental Repzlatory Provisions

Summary

IV. ENVIRONMENTAL INNOVATION IN RESIDENTIAL DEVELOPMENTS:

EMPXRICAL FINDINGS

55

Methodolo~y

55

The Sarnple

56

Measurement of Variables

6

1 The Dependent Variable

6

1 The Independent Variables

02

Nethod of Analysis

6

7 The Determinants of Environmental Innovation: Empirical

Findings

6

7 The Entrepreneur, His Firm, and Environmental Innovation

66

Access to Information

65

Integration in the Land Development Industry

_{6 9}

Rationality of the Approach

G 3

Status of the Entrepreneur and His Firm

7

3

Market Evaluation

7

3

Characteristics of the Site and Environmental Innovation

7

7 Physical Characteristics of the Site

7

7 Locational Characteristics of the Site

83 Institutional Characteristics of the Site

8

9

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Page

V. ENVIRONMENTAL INNOVATION AND THE LOCATION OF NEW URBAN

DEVELOPMENT

9

5 Price of Raw Land

Size of Development

Amount of Developable Land

Amount

of

Surrounding Development

Access to Activities and Places

Access to Downtown

Access to Employment

Access to Convenience Shopping

Access to State, U.S., or Interstate Highways

Implications of Environmental Innovation for Modeling

Urban Growth

VI.

A

FOCUSED VIEW OF EMIRONMENTAL INNOVATION AND PUBLIC POLICY:

THE CASE OF LAKE-ORIENTED SUBDIVISIONS

109 A Note on the History and Mechanics of Lake-oriented

Development

109 Public Policy and Community Lakes

--

Some Areas of Concern

111 Lakes and the Public Interest

11

1 Lakes and Public Safety

11

1 Community Lakes and Water Quality

112 Ownership and Liability

113 Toward the Adequate Control of Lake-oriented

Subdivisions:

A

First Step

115 The Effects of Public Policy on the Provision of Lakes and

Other Environmental Innovations

11

6 VII. CONCLUSIONS AND DIRECTIONS OF FUTURE RESEARCH

119 Conclusions

Directions

of

Future Research

APPENDIX A. NUMBER OF LAKE-ORIENTED RESIDENTIAL SUBDIVISIONS

REPORTED

IN

NORTH CAROLINA, 1967

125 APPENDIX B. INVENTORY OF LAKE-ORIENTED RESIDENTIAL

SUBDIVISIONS IN NOETH CAROLINA, 1967

APPENDIX C, LAND DEVELOPERS INTERVIEWED IN CONNECTION WITH

COMPARATIVE STUDY OF LAKE-ORIENTED AND NON-

LAKE-ORIENTED SUBDIVISIONS, SUMMER 1967

143 APPENDIX D. INTERVIEW SCHEDULE

149

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LIST OF TABLES

Table

Page

1. Summary of Inventory Response

5

6

2 .

The Determinants of Environmental Innovation: Tentative

Findings for all Developers

7

0

3. Evaluation of Consumer Desires

--

Combined Rating

7

4

4 .

Relative Evaluation of the Use of Environmental Innovations-

Ordered by Cost of Installation

7 6

5. Relative Evaluation of the Use of Environmental Services

7 7

6. Characteristics of the Site and Environmental Innovation:

All Firms

7

8 7. Characteristics of the Site and Environmental Innovation:

Small Firms (Less Than

40 Lots Per Year)

81

8. Characteristics of Site and Environmental Innovation: Large

Firms

(40

or More Lots Per Year)

8

2

9 .

Characteristics of Site and Environmental Innovation: Lower

Price Subdivisions (Average Lot Price Under $4,500)

84 10. Characteristics of Site and Environmental Innovation: Higher

Price Subdivisions (Average Lot Price $4,500 and Over)

85 11. Environmental Innovation and the Mean Price Paid for Raw Land,

Interviews With North Carolina Developers, Summer 1967

9

3

12. Environmental Innovation and the Mean Size of Residential

Residential Subdivisions, Interviews with North Carolina

Developers, Summer 1967

9

9 13. Environmental Innovation and the Mean Amount of Undevelopable

Land in Residential Subdivisions, Interviews with North

Carolina Developers, Summer 1967

101 14. Environmental Innovation and the Mean Amount of Surrounding

Contiguous Development in Residential Subdivisions,

Interviews with North Carolina Developers, Summer 1967

102

/

15. Environmental Innovation and the Mean Distance to the

Central Business District

of

New Residential Subdivisions,

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16. Environmental Innovation and the Mean Distance of New

Residential Developments to Employment, Interviews

with North Carolina Developers, Summer 1907

17. Environmental Innovation and the Mean Distance of New

Residential Subdivisions to Convenience Shopping,

Interviews with North Carolina Developers, Summer 1967

18. Environmental Innovation and the Nean Distance of New

Residential Subdivisions to State, U.S.,

or Interstate

Highways, Interviews with North Carolina Developers,

Summer 196

7 LIST

OF FIGURdS

Page

104

105

1. The Residential Land Development Process: Sequence of

States, Key Decisions, and Decision Factors

9

2.

Conceptual Scheme of Sets of Factors Influencing Developer

Behavior

23

3. Decision Agent Characteristics Related to Environmental

Innovations

4

2

4. Site Characteristics and Environmental Innovation

5

2 5. Inventory of Lake-oriented Subdivisions in North Carolina

1967 by County

58

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CHAPTER

I

INTRODUCTION

Since the turn of the century studies of population growth and

distribution have indicated that the internal growth of cities has

declined in the face of an unprecedented expansion of the "urbanized"

portion of our population. At the same time peripheral growth, pri-

marily in the form of new single-family dwelling units, has soared.

The

Phenomenon has been so pronounced that many consider the suburbani-

zation of our population the most important demographic and social

11 development in twentieth century America.-

A concomitant trend has been the increasing capacity of our society

to absorb the tremendous pace of technological change which has charac-

terized the second quarter of this century. Increased productive capa-

city, rising incomes, and shorter working hours have all wrought funda-

mental changes in the structure and outlook of society, Not the least

of these changes has been the growth of leisure. Commenting on this

phenomenon, Paul

F. Douglass notes,

Americans are experiencing a change in the structure of their

lives in relationship to the content of time and the pace and

values of living. ..enjoyments once reserved for a privileged

11 Theodore Lowi, "Notes on the Politics of Suburbia," in Problems

of ~m&ica' s Expanding Metropolitan Fringe Areas, Alexander Kira (ed

.)

,

-

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elite are becoming widely distributed

...

Already there is

emerging a new role for the family, a new concept of neigh-

borhood, a new sense of community, and a new vigor of parti-

2

1 cipation.-

The research reported in this paper is concerned with the impact

of the confluence of these two trends, suburbanization and leisure,

upon the environment created in the process of converting open land to

residential use.

The critiques of the past and current patterns of residential

development have been many and varied. As Richard Ratcliff has observed,

Intelligent, scientific land planning has not been character-

istic of much of past subdividing. The gridiron pattern has

predominated, and because lots were produced for sale rather

than use, little weight has been given the ultimate integra-

tion of the new area with the surrounding community. Other

outgrowths of shortsightedness and urge for quick profit

were the excessive land set aside for commercial use and the

3 /

lack of adequate provision for recreational and public areas.-

Nevertheless, changes in the pattern of residential development are

rapidly taking place. Where in the past the typical motivation in land

development was". ..the hope for large profits, with a sense of social

responsibility for sound community development often absent,"

environmental design has now become one of the most discussed topics in

21 Paul

F. Douglass, Recreation in the Age of Automation, The Annals,

313 (September 1957), p. ix.

31 Richard U. Ratcliff, Urban Land Economics (New York: McGraw-

Hill :oak

Company, l949),

p.

167. See also,

A .

Allan Schmid, Rural to

_--

Urban Land Conversion, Economic Aspects and Research Needs (East Lansing:

-

Department of Agricultural Economics, Michigan State University, April

7 - -

1966), p.

58, for another aspect of this criticism.

41

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the land development

For the most part this interest would

seem to be the result of an "increasing awareness on the part of our

6

1 population of the quality of urban living in terns of its amenities."-

Thus, with more free time consumers have caused a demand which goes

beyond the house and, as was noted in the National Association of Home-

builders' Journal of Homebuilding, "extends to the look and 'feel' of

7 /

the community."-

In the past most research relevant to changes in our expanding

urban environment has centered on the consumer's role in this process.

Comparatively little research has been devoted to the land developer

despite the fact that,

I ' , 1

From a community stdndpoint, one of the most crucial phases

in the productive process which creates usable space is the

point at which land is taken out of agricultural use and

prepared for urban use. It is here that the basic skeleton

of the city is created and land use patterns aregcjrystallized

so that future changes are difficult and costly.-

While the consumer influences and is'-influenced by the developer, the

"developers of the land and the builders of the structures appear to be

nos

t

directly involved in the location and tlie,:;,physical

design of suburban

: .

5/

Indicative of this trend is the Land Use Research Program

jointry sponsored by the ~ationai

Association of Homebuilders and

the

Urban Land Institute which was founded in 1959 and which has become

increasingly active in recent years.

6/

Paul

F. Wendt,,"Forecasting Land Uses,'' Urban Land (July-August,

I'

1367);

p. 10.

7/ James San Jule, "Great Environmental Problems Challenging Today's

~uildzrs

,'~ournal

of

Honebuilding (July 1965)

,

pp. 59-60.

.

,

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subdivision developments and thus are key figures in the development

;irocess."9/

Because a lrnovledge of residential developer behavior

promises to provide us with new insights into the land development pro-

cess as well as increased ability to simulate urban growth, the Center

for Urban and Resional Studies is currently engage<: in a continuing

research effort aimed at exploring factors which contribute to this

101 behavior.

-

The Center's approach has been to view the land development pattern

of an urban region as "the cumulative result of

a

complex of decisions

and actions by individuals and groups each being guided by his own

incentives...In the aggregate, the confluence of actions may be said to

11/

zenerate land development and shape and change the urban setting."-

An initial effort was made to forecast

the

spatial pattern of urban

srowth by means of a ldonte Carle type probobilistic model which distri-

12/

buted new growth on the basis of various nixes of "priming" decisions.-

While this model has been operational, .=.mtiuuing

research '.;as examined

4 I

9

PI. R . t l o l f e ,

c.

L o c a t i o n a l

Fac'-.ors

Involved

in

Suburban

-

J,,ondil

(unpublished

s t u d y , University

of Vas!lin$torl,

136l), p .

3-9.

10/ This research is summarized in, Research

Progress, (Chapel

-

Hill: Center for Urban and Regional Studies, Institute for Research in

Social Science, University of North Carolina, August, 1967), pp.

2-3,

5-6.

11/ Shirley F. Weiss, John

E. Smith, Edward

3.

Kaiser, and Kenneth

-

B. Kenney, Residential Developer Decisions, (Chapel Hill: Center for

Urban and Regional Studies, Institute for Research in Social Science,

University of North Carolina, April, 1966),

p.

1.

(19)

-

5-

factors which contribute

to

the decisions of the various agents involved

13'

This work looks toward the development of

in the development process.-

a second generation of models based on the more behavioral aspects

of

land developnent decisions. These models will break the current model

into two submodels, "one focusing on land subdivision and related opera-

tions (a producer submodel), and another concerned with household selec-

tion of residence location (a consumer model) primarily from the

supply

14/

of home sites provided by the producer subnodel."--

Research Objectives

The present study represents an expansion of the Center's interests

to an examination of innovation in the development of residential sub-

divisions. This effort has three primary objectives: 1) to determine

the correlates of innovative behavior in the land development industry;

2) to examine the relationship between innovation in environmental design

and the location decisions

of

residential developers; and 3) to deter-

mine

the public policy factors which either facilitate such development

or

are affected

by

its existence.

A

related study now in progress

focuses on the locational decisions

of

consumers with respect to this

type

of

development.

13/ See Research

&

Progress, o ~ .

c x . , p.6

-

14/ Weiss, Kaiser, Kenney, Smith, and Stollenwerk, !'Developer

-

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Environmental i n n o v a t i o n i s d e f i n e d i n broad terms. By e n v i r o n - ment we mean f e a t u r e s of a s u b d i v i s i o n which a r e n o t r e s t r i c t e d t o a n

i n d i v i d u a l l o t , b u t which may be enjoyed and u t i l i z e d by a l l t h e members of t h e community. T h e i r v a l u e may be e i t h e r a s a s o u r c e of v i s u a l amenity o r a means t o pursue v a r i o u s r e c r e a t i o n a l endeavors. I n many c a s e s both of t h e s e purposes a r e s e r v e d . For i n s t a n c e , a community l a k e i s a n environmental f e a t u r e w i t h t h e s e c h a r a c t e r i s t i c s .

I n n o v a t i o n i s used i n i t s most g e n e r a l s e n s e . We a r e p r i m a r i l y concerned w i t h environmental f e a t u r e s which a r e

not

i n common u s e , though they may have been f i r s t developed a number of y e a r s ago. For i n s t a n c e , g r i d i r o n s t r e e t p a t t e r n s were under a t t a c k a s e a r l y a s f o r t y y e a r s ago, b u t advanced concepts of s t r e e t d e s i g n , such a s t h e u s e of c u l s - d e - s a c , l o o p s , and c i r c l e s , a r e j u s t now approaching u n i v e r s a l use. A r t i g i c i a l l a k e s were f i r s t used i n a r e s i d e n t i a l s u b d i v i s i o n a s e a r l y a s 1885 whes a c h a i n of l a k e s was b u i l t on T u r t l e Creel: i n D a l l a s , Texas; b u t , t h i s environmental f e a t u r e i s r a r e l y found i n r e s i d e n t i a l developments. Thus, our i n t e r e s t i s n o t i n t h e development of the i n n o v a t i a n , b u t i n t h e f a c t o r s which seem t o govern i t s u s e o r acceptance.

A s t u d y of t h e u s e of enPironnenta1 innovation i n r e s i d e n t i a l developments i s considered important f o r a number of r e a s o n s . F i r s t , p u b l i c a g e n c i e s , such a s t h e Department of Housing and Urban Development, have been encouraging t h e use of new d e s i g n concepts i n l a n d s u b d i v i s i o n

f o r a number of y e a r s . Yet, t h e r e h a s never been a n i n v e s t i g a t i o n of why some d e v e l o p e r s u t i l i z e such f e a t u r e s w h i l e ~ t h e r s a r e c o n t e n t t o

(21)

better methods of

disseminating

and presenting information on new design

techniques.

Second, while a number of innovations have been actively

promoted, there is little indication that various side effects of these

innovatious have been considered. For instance, it is certainly within

the realm of possibility that an innovation can cause as many additional

problems as those it solves. Third, as environmental innovations are

accepted at an increasing pace, the locational pattern

of

new residential

development may be altered. This aspect has a number of implications

for those interested

in

simulating urban growth phenomenon. Finally, a

study of environmental innovation promises to increase our knowledge of

the land development process.

This report is presented in seven chapters. Chapter Two attempts

to lay a foundation for the development of hypotheses concerning the

acceptance and use of environmental innovations, and their effect upon

the

location of new residential subdivisions. Chapter Three investi-

gates the relationships which would be expected on the basis of the con-

ceptual overview and presents a comprehensive set of hypotheses. Chapter

Four discusses the methodology used ro test

these

hypotheseses

and

the colpirl-

cal findines. Chapter Five extends this discussion to

a

consideration

of the impact of environmental innovation on the location of new urban

development, Chapter Six looks at the implications of these findings for

the formulation of ?ublic policy. The use of community lakes is used

as an example for this discussion. Finally, Chapter Seven presents the

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CHAPTER I1

THE

LAI?D

DEVELOPMENT PROCESS AND DEVELOPER DECISIONS

:

A

CONCEPTUAL OVERVIEW

g/

In order to provide a framework with which to investigate the pro-

vision of environmental innovations in residential subdivisions, this

chapter develops a conceptual overview of the land development process

and the role of the land development entrepreneur in this process.

Land Development as a Sequence of States and Decisions

In general, urban areas grow through the conversion of vacant and

16/

agricultur~l

land on their peripheries to urban use.--

If one focuses

on

a giken site

G n

the rural-urban fringe, it may be visualized as passing

throu!;h

a ncmber

of "ststes" before finally being occclied for ur'szn

residential

use.

(See

F i g u r e

1.) While

the site

is

initially

vacant

and

cot

in use o~ possibly

> s ? : t

of an a.guLc:ilt.:;.sl enterprise,

at some

"hi~her"

u s e .

This may

be

a

?!.annm;

dizzctor rho includes the site

in a forecast

of

future urban growth or

a

specdstor looking for a Fro-

f

itnble irves

trnent

.

-

17'

We call this point in the land development process

15/ This chapter is based upon Weiss, Smith, Kaiser, and Kenney,

-

OJ.

G. 16/ Edward J. Kaiser, "Toward a Model of Residential Developer

~ e h a v z r "

(unpublished Ph.

D. dissertation, University of North Carolina,

1966), p. 2.

17/ See Marion Clawson, "Urban Sprawl and Speculation in Suburban

-

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FIGURE 1

THE RESIDENTIAL L A N D DEVELOPMENT PROCESS: SEQUENCE O F STATES, KEY DECISIONS, A N D DECISION FACTORS

SEQUENCE O F STATES

I

DECISION AGENTS KEY:

SUPPORTING :

DECISION FACTORS

INTEREST CONSIDERATION FOR DEVELOPMENT

A DECISION AGENT CONSIDERS THE L A N D AS H A V I N G

DEVELOPMENT POTENTIAL W I T H I N A G I V E N T I M E PERIOD

A D E C I S I O N AGENT H A S CONTACTED ANOTHER AGENT REGARDING THE POSSIBLE SALE OR PURCHASE O F THE

1 L A N D

FOR DEVELOPMENT DEVELOPMENT

A DECISION AGENT A DECISION AGENT H A S A DEFINITE H A S BEGUN I D E A O F THE PHYSICAL

T I M I N G A N D DEVELOPMENT O F CHARACTER O F THE L A N D

DEVELOPMENT

A D E C I S I O N AGENT H A S PURCHASED THE RESIDENTIAL PACKAGE O F HOUSE A N D LOT

D E C I S I O N T O DEClSll Of U T O DECISION T O D E C I S I O N TO CONSIDER L A N D PURCHASE L A N D DEVELOP L A N D PURCHASE H O M E

LANDOWNER L A N D O W N E R DEVELOPER CONSUMER DEVELOPER DEVELOPER

I

REALTORS REALTORS

I

FINANCIERS FINANCIERS PUBLIC OFFICIALS PUBLIC OFFICIALS

I

REALTORS FINANCIERS PUBLIC OFFICIALS

CONTEXTUAL FACTORS DECISION AGENT CHARACTERISTICS

(24)

the 'state of urban interest.

The site has achieved this status through

the considered decisions of one or more of the decision agents in the land

development process, be he a landownCr, developer-builder, or public

official.

A t

a later point in time an agent may see the site as having

potential for a specific urban use, such as a residential subdivision.

However, for land to move to the next "state" in the process the decision

agent, possibly supported by other secondary agents, such as realtors or

financial intermediaries, must make a conscious and identifiable decision

to actively consider the land. From this point land moves from state to

state as the land is programed for development and various improvements

are made. Finally, the improved site is sold or rented to the consumer

and a final, or long-term state of "residence" commences.

Agents in the Land Development Process

This view of the land development process is extremely valuable

in that it focuses our attention upon both the complexity of the pro-

cess itself, the number of "yes" decisions involved, and the number

of actors who become involved at one stage or another.

The

complexiry

of the process is highlighted by Wolfe, who says that,

The development of unimproved land into subdivision housing

is a complex process involving many individual, organiza-

tional, and institutional actions of a private and public

nature. Even more complex in many ways

...(

are)

...

the

factors and forces influencing the separate but interrelated

elements involved in this process.18/

One way of simplifying this complexity is to focus on the agents who

participate in the process and their contribution to the eventual pro-

duction of residential land.

18/

Wolfe,

%.

g .

(25)

Thus, the landowner may either facilitate or hinder the process of

19/

land conversion depending upon his decision to hold or sell his land.-

Alternatively, he may greatly simplify the process by assuming the roles

of developer and merchandiser, that is, by developing and selling the

land himself. The developer is the central agent in the land develop-

ment process. His policies determine when land will first be considered

as suitable for residential,use,

when it will be programed for develop-

20'

Finally, the consumer,

ment, and when improvements will be made.-

although constrained in his choice of location by what developers and

landowners provide, has a direct influence on the pattern of future

211 development through his choice of residential packages.-

Other decision agents in the land development process play secondary,

though in most cases vital roles. Thus, the merchandiser or realtor has

the primary responsibility of selling the dwelling to the consumer.

19/

Factors contributing to this decision have been intensively

investigated by John E. Smith, "Toward a Theory of Landowner Behavior

on the Urban Periphery" (unpublished

M.R.P.

thesis, University of

North Carolina, 1967).

20/

For a summary of work on developer behavior see, Weiss, Smith,

-

Kaiser and Kenney,

2. &.

21/ Related investi~ations

of the role of the consumer in the

development process include

:

Shirley F. Weiss

,

Kenneth B. Kenney, and

Roger C. Steffens, '-Consumer

Preferences in Residential Location: A

Preliminary Investigation of the Home Purchase Decision,'' Research

Previews Vol. 13 (April 1966), pp. 1-32; Louis Earl Armiger, Jr.,

"Toward a Model of the Residential Location Decision Process:

A

study

of Recent and Prospective Buyers of New and Used Homes" (unpublished

M.R.P.

thesis, University of North Carolina, 1966); Samuel Hardy Leaman,

"A

Study of Housin~

Decisions by Negro Hone Owners and Negro Renters1'

(unpublished M.R.P.

thesis, University of North Carolina, 1967); and

Mark Thomas Eldridge,

.

Explorations Into Decision Factors in the Rental

.,

Housing Market" (unpublished M.R.P.

thesis, University of North Carolina,

(26)

I n a d d i t i o n , he may s e r v e a s t h e key a g e n t i n a s s e m b l i n g t r a c t s o f l a n d , o r a s a n i n t e r m e d i a r y i n t h e t r a n s f e r of l a n d . F i n a l l y , h e p e r f o r m s t h e v i t a l f u n c t i o n s o f a i d i n g i n t h e "flow of d e s i r e a t t i t u d e s between consumer and b u i l d e r . It-- 22' The r o l e o f f i n a n c i a l i n s t i t u t i o n s n e e d s l i t t l e e l a b o r a t i o n . I n a n i n d u s t r y a s u n d e r c a p i t a l i z e d a s r e s i d e n t i a l b u i l d i n g , f i n a n c i a l i n t e r m e d i a r i e s a r e i n d i s p e n s a b l e i n p r o v i d i n g t h e f u n d s t o k e e p t h e p r o c e s s i n motion.23' F i n a l l y , t h e v a r i o u s o £ f i c i a l s of l o c a l , s t a t e , and f e d e r a l a g e n c i e s h a v e a p e r v a s i v e impact on a l m o s t

24

/

e v e r y d e c i s i o n made by o t h e r a g e n t s . - -

The Land Development

%

From t h e p r e c e d i n g d e s c r i p t i o n of t h e l a n d development p r o c e s s and t h o s e i n v o l v e d i n i t , i t seems e v i d e n t t h a t a n u n d e r s t a n d i n g o f t h e u s e o f e n v i r o n m e n t a l i n n o v a r i o n s i n r e s i d e n t i a l development: must come

from a n i n v e s t i g a t i o n of t h e c e n t r a l a g e n t

--

t h e l a n d d e v e l o p e r . The E n t r e p r e n e u r and Eli; S i r n

--

U n f o r t u n a t e l y , a n unambiguous

d e s c r i p t i o n of t h e l a n d d e v c l q m e n t e n t r e p r e n e u r and h i s f i r m i s extremely

d i f f i c u l t . I n f a c t , t h e e x a c t n a t u r e of t h e e n t r e p r e n e u r may be a s c o n p l e x a q u e s t i o n a s t h e n a t u r e of t h e l a n d development p r o c e s s i t s e l f .

2 2 / Wolfe, 9.

~.:s.,

p . 3-15. See a l s o , E r i c C a r l s o n , T h e R e a l t o r ' s

-

Role i n Raw Land T r a n s d c t i ~ ? . :

&

E x p l o r a t o r y - s t i g a t i o n R e s e a r c h

-

-R e p o r t , (Chapel H i l l : C e n t e r f o r Urban and -R e g i o n a l S t u d i e s , I n s t i t u t e f o r R e s e a r c h i n S o c i a l S c i e n c e , U n i v e r s i t y o f N o r t h C a r o l i n a , May 1 2 , 196)).

23/ See H . O e n j a n i n F i s h e r , F i n a n c i a l T n t e r m e d i a r i e s

in

t h e Develoi-

-

--

merit D e c i s i o n P r o c e s s , R e s e a r c l ~ P a p e r , (Chapel H i l l : C e n t e r f o r Urban a d

-

E e g i o n a l S t u d i e s , I n s t i t u t e f o r R e s e a r c h i n S o c i a l S c i e n c e , U n i v e r s i t y

rf

Worth C a r o l i n a , September 26, 1 9 6 6 ) .

24/ See Edward J. K a i s e r and S h i r l e y F. Weiss, "Local P u b l i c P o l i c y and

the

R e s i d e n t i a l Development P r o c e s s , ' ' Law and Contemporary Proble,bs

(27)

As Ratcliff notes,

...

the producers are diversified in organization, experience, skill and financial capacity. The land developer may be an amateur with raw land to unload. Some operations are carried out as a sideline by a group of investors organized in a syndicate. Such a g r m p may contain persons who ere engaged in some aspect of the real estate business and who manage the project

...

The best type of land preparation is likely to come from large real estate development companies, which regularly engaze in land development and often in building operations.

Often land development is combined with a number of other business interests. For instance, a study of Atlanta developers in 1966 indicated that they had from one to eight concurrent business interests, with an average of 2 . 5 . - 2 6 / In the present study, comprising interviews with eighty-two firms engaged in land development in the State of North Carolina, firms had an average of 2 . 8 concurrent activities.

One of the factors which accounts

for

this diversity is the fact that land development is not a difficult field to enter, The primary requirements are land and enough capital to finance

a

modicum of improvements. However, this ease of entry into the field creates difficulties

for the analyst, for the universe of developers is unknown and constantly shifting.

Operating Characteristics of Land Development Firms

--

While land development firms nay be extremely diversified as to background and

scope of operation, each firm or entrepreneur engaging in land development

25,' Ratcliff, 1949,

2-

a*,

p. 165.

-

26/

Kenneth

B.

Kenney (unpublished manuscript,

1966).

(28)

r i c t e r m i u e o b j e c t i v e s , o r g a u l z e r c s o u r c c G , and c o n t r o l t h c o p e r a t i o n s 27/ a e c e s s a r y t o t r a n s f o r m t h e raw m a t e r i a l s i n t o a f i n i s h e d p r o d u c t . -

However, tile s c e p s i n v o l v e d i n t r a n s f o r m i n s raw l a n d i n t o a

f r n i s h e d p r o d u c t r e a d y f o r r e s i d e n t i a l u s e a r e e x t r e m e l y v a r i a b l e . 25/ F u n d a m e n t a l l y , t e n b a s i c o p e r a t i c i n s a r e i n v o l v e d i n t h i s p r o c e s s : -

Analyzin:, u a r k e t c o n d i t i o n s ( d e t e r m i n i n g t h e need fo: and t h e p r o p e r t i m e f o r t h e proposed d e v e l o p m e n t ) . S e l e c t i n : a n a p p r o p r i a t e l o c a t i o n .

A n a l y z i n g t h e p r i n c i p a l f e a t u r e s of t h e s e l e c t e d t r a c t and d e v e l o p i n g p r e l i m i n a r y p l a n s and d e s i g n .

P u r c h a s i n g t h e l o c a t i o n and e s t a b l i s h i n g a method of f i n a n c i n z .

D e s i p i n g t h e l a y o u t o f t h e a r e a , l o c a t i n g t h e p r i n c i p a l f a c i l i t i e s and d e t e r m i n i n g t h e r e l a t i o n s h i p between p u b l i c and p r i v a t e l a n d u s e s .

S e c u r i n g a p p r o v a l of Qovernnent a u t h o r i t i e s a s r e q u i r e d . Arrangirlg p r o t e c t i o n a ~ a i n s t r i s k s by means o f i n s u r a n c e and b o n d s .

I n s c a l l i n z u t i l i t i e s , s t r e e t s , and t h e v a r i o u s c o n v e n i e n c e s n e c e s s a r y f o r t h e d e v e l o p n e n t .

E s t a b l i s h i n s r e s t r i c t i o n s and methods o f r e g u l a t i n g l a n d u s e s .

S e l l i n 2 p a r c e l s o r p r o c e e d i n g w i t h c o n s t r u c t i o n .

I n p r a c t i c e e a c h of t h e s e s t e p s b r e a k s down i n t o a number of s u b -

*'/

m e a t o n d e c i s i o n s , e a c h of which c a n s t y m i e t h e d e v e l o p n e n t p r o c e s s . -

l i s t s some t w e n t y c r i t i c a l d e c i s i o n s i n v o l v e d i n t h e l a n d p u r c h a s e d e c i - s i o n a l o n e . 3 0 The i m p r o b a b i l i t y of a n a l y z i n ~ and w e i g h i n g t h e i m p o r t a n c e

271 A r t h u r 1.1. I J e i n e r and Homer Hoyt, R e a l E s t a t e , 5 t h E d i t i o n (New z r k : The Xonald P r e s s Company, 196G), p. 3 3 7 .

281 I b i d . , p . 33:.

-

29/ S e e W i l l i a m L. C . Wheaton, " P u b l i c and P r i v a t e A g e n t s of Change i n Urban E x p a n s i o n , " i n Explcict* i n t o Urban S t r ~ c t u r e , ~ ~ f e l v i n M. Webber,

e t . a l . , ( e d 8 . )

,

( P h i l a d e l p h i a : U n i v e r s 5 t y of P e n n s y l v a n i a P r e s s , l 3 6 7 ) ,

- -

pp. 1 5 4 - 1 9 6 .

30/ I J i l l i a n L . C . Flheaton, a s m o d i f i e d by K a i s e r , 1 9 6 6 ,

2.

c i t . , p . 6 0 , L-

(29)

of each of these subdecisions to the final outcome, to say nothing of

the factors which contribute to each decision, needs little elaboration.

Yet, in order to explain the use of environmental innovations by resi-

dential developers, we should have some understanding

of

what is involved

in at least the major decisions the developnent entrepreneur must make.

Two classes of decisions seem most inportant

--

one, the determination

that a market exists, and two, the determination of the feasibility of

developing a ~ i v e n

tract.

14arketability

-

Studies

--

Wheaton su~zests

that market criteria, the

entrepreneur's evaluation of the consumer, are the "decisive force

affecting as rxch as 90 percent of the micro-locational decisions to

31/

But, what is meant by market criteria

invest in metropolitan areas

.'I-

is somewhat elusive. In its most basic sense, market criteria are the

set of convictions

t h a t

customers exisl: for the product. Beyond this

Wheaton suggests that market decisions have fact, the number of potential

users; judgmene, the continuity of present trends; and value, the c h o i c ~

between alternatives, elements. He feels that the fact component is

often weah because of a lack of available date.g'

Ratcliff

echoes this

feeling when he notes

that,

"In practice

the

interpretation

of

the market

is often a perfunctory process, based on judgment and opinion rather

than statistical evidence. The prime test is usually the current

31/

-

Wheaton,

2 .

G.,

pp.

167-163.

32/ I x . , pp.

166-163.

(30)

s a l a b i l i t y of buildin:: l o t s . ' , - 33' These c o n c l u s i o n s a r e supported by Kenney's survey of A t l a n t a developers, which i n d i c a t e d t h a t less than 25 p e r c e n t of t h e f i r m s interviewed d i d any s o r t of formal market

341 otudy.-

For purposes of t h i s s t u d y , t h e primary c o n c l u s i o n s which can be drawn from t h e n a t u r e of developer m a r k e t a b i l i t y s t u d i e s , o r t h e gene@ l a c k of t h e n , i s t h a t they, "tend t o make producer r e s p o n s e s t o changes i n t a s t e very slow and incremental."- 35' T h i s f a c t o r may account f o r tla p a s t omissions of t h e l a n d development i n d u s t r y w i t h r e g a r d t o t h e

36/ i n c l u s i o n of e n v i s o n n e n t a l a m e n i t i e s i n subdivisions.-

F e a s i b i l i t y Studies

--

When t h e development e n t r e p r e n e u r has d e t e r - . ?

mined t h a t a narlcet e x i s t s f o r r e s i d e n t i a l l o t s i n a given p r i c e range and/or l o c a t i o n , t h e n e x t c r u c i a l s t e p i s t o f i n d a s u i t a b l e t r a c t of land on which t o l o c a t e t h e development. T y p i c a l l y , d e v e l o p e r s sequen- t i a l l y e v a l u a t e t r a c t s of land u n t i l they f i n d one t h a t meets t h e i r

371

_In

_{e v a l u a t i n g a given t r a c t , t h e prime c o n s i d e r a t i o n} requirements.-

1.7ould seem t o be t h e , " u c a b i l i t y and m a r k e t a b i l i t y of a l l p a r t s of t h e

331 R a t c l i f f , 1949,

op.

c&., p. 16G.

-

341 Kenney, 19G5,

a.

&.,

p. 42.

-

* I

351 Wheaton, 2 .

g . ,

p. 170.

-

361 T h i s may a l s o e x p l a i n t h e l a c k of r e l a t i o n s h i p found between l o c a t z n a l c h a r a c t e r i s t i c s of s u b d i v i s i o n s and t h e p r i c e range i n which t h e development f a l l s , which i s a market f a c t o r . That i s , i f d e v e l o p e r s a r e n o t r i p r a u s l y uarlcet o r i e n t e d , t h e i r l o c a t i o n a l behavior i s not l i k e l y t o r e f l e c t narlcet v a r i a t i o n s . See K a i s e r , 1966,

2 .

k t . , p. 187.

(31)

38' _{Thus, d e v e l o p e r s w i l l e v a l u a t e t h e number of l o t s which may}

a r e a .

"-

be produced on t h e t r a c t and t h e c o s t of p r o d u c i n g them. The n a r k e t - a b i l i t y s t u d y produces e s t i m a t e s of t h e demand f o r t h e proposed h o u s i n g a t t h e g i v e n l o c a t i o n and t r a n s l a t e s t h i s f i g u r e i n t o a n e s t i m a t e of

391 a n n u a l turnover.-

These s t u d i e s t h e n a l l o w t h e d e v e l o p e r t o weigh t h e c o s t s of development a g a i n s t t h e p o t e n t i a l r e v e n u e t o be d e r i v e d

--

i n o t h e r words t o d e t e r m i n e t h e p r o f i t a b i l i t y of t h e v e n t u r e . C o n c u r r e n t w i t h t h i s d e t e r - m i n a t i o n , t h e d e v e l o p e r must a l s o make a s e r i e s o f checks w i t h p u b l i c

o f f i c i a l s t o d e t e r m i n e t h e a v a i l a b i l i t y of s e r v i c e s t o t h e s i t e , t h e zoning of t h e p a r c e l and s o on. I n a number of c a s e s h e w i l l a l s o c o n t a c t a

f i n a n c i a l i n s t i t u t i o n , u s u a l l y t h e mortgage i n s u r e r o r g u a r a n t o r , t o 401 a s s u r e t h e a v a i l a b i l i t y of f i n a n c i n g f o r t h e f i n i s h e d product.-

Whether t h e d e v e l o p e r w i l l t h e n proceed w i t h t h e p u r c h a s e of t h e p a r c e l depends upon r e i n f o r c i n g d e c i s i o n s i n t h e above s t u d i e s , and, i n a d d i t i o n , such f a c t o r s a s , " t h e f i n a n c i a l p o s i t i o n of t h e f i r m , s u b s e q u e n t l a n d p u r c h a s e s , t r e n d s i n l a n d v a l u e s , t a x r e a s s e s s m e n t , s c h e d u l i n g of p u b l i c works, a n n e x a t i o n , and changing market conditions."--

411

I t s h o u l d be n o t e d , however, t h a t t h i s o u t l i n e of o p e r a t i n g p r o c e d u r e s i s n o t u n i v e r s a l l y

c h a r a c t e r i s t i c of t h e l a n d development i n d u s t r y . For i n s t a n c e , a s t u d y

381 Weimer and Hoyt, 9.

&.

,

p. 341.

-

391 J o h n E . Smith,

The

L o c a t i o n a l D e c i s i o n P r o c e s s

of

R e s i d e n t i a l Land ~ e v e l z e r s : Toward E m p i r i c a l Model, R e s e a r c h Memorandum, (Chapel H i l l : C e n t e r f o r Urban and R e g i o n a l S t u d i e s , I n s t i t u t e f o r Kesearch i n S o c i a l S c i e n c e , U n i v e r s i t y of North C a r o l i n a , J u l y 21, l 9 6 5 ) , pp. 22-23.

I b i d . , p . 26.

-

411 I b i d . , p. 3 5 .

(32)

of "small scale" developers indicated that,

...

the process is rather random in nature and depends to a

large extent on the availability or listing of land for sale,

with comparatively little "bird-dogging' for land in good

development locations.. .?he variety of operation 1 approaches

427 taken by the firms interviewed was impressive.-

This variation in operating procedures indicates that one must be extremely

cautious in generalizing in this area.

While firms seem to vary a great deal in the rigor with which they

evaluate the feasibility of a parcel, the factors they consider in sucb

studies seem to be rather uniform. Weimer and Hoyt note that,

Factors important in studying both costs of development and

marketability include 1) topography;

2) limitations established

by zoning ordinances and other regulations; 3) accessibility

to places of employment, to schools, and to shopping, amusement,

and civic centers;

4)

location with respect to high-quality

neighborhoods and special attractions such as golf courses;

5) taxes; 6) potential special assessments; and 7) future pro-

bable management, financing, and maintenance costs.g/

Interviews with a cross-section of developers in the Greensboro,

N.

C.

441

area generally corroborate this list.-

Summary

--

From the preceding description of what is known of land

development firms and their operations, it can be seen that a summarizing

description of the firms and their methods of operation would be extremely

hazardous. Probably the safest generalization one could make is that it

42/ Kenneth

B. Kenney, Locational Decisions

of

Residential Land

~evelopment

an_d

Building Firms in the Greensboro Urban Area, Research

Memorandum (Chapel Hill: Center for Urban and Regional Studies, Institute

for Research -in social Science, University of North Carolina, September

17, 1964), p.

8, 14.

43/

-

Weimer and Hoyt,

s.

c&.,

p. 342.

441 Kenney,

22. c

&

.

,

1964; Smith, op. cit., 1965.

(33)

i s n o t a good i d e a t o ~ e n e r a l i z e a t a l l . R a t c l i f f p r o v i d e s a n e x c e l l e n t a c c o u n t of t h i s s i t u a t i o n . He s t a t e s t h a t ,

The b a s i c i n f o r m a t i o n a l and a n a l y t i c problem stems from t h e c o m p l e x i t y of r e a l e s t a t e a s a n economic good, t h e d i v e r s i t y i n t h e r e a l e s t a t e market c o n d i t i o n s which a f f e c t t h e t r a n s - a c t i o n , and t h e h e t e r o g e n e i t y of t h e p a r t i e s t o t h e t r a n s a c t i o n

i n t h e i r p e r s o n a l c h a r a c t e r i s t i c s and f i n a n c i a l s i t u a t i o n s . With s u c h a l a r g e number of v a r i a b l e s impinging on e a c h t r a n s - a c t i o n , t h e p e r m u t a t i o n s and c o m b i n a t i o n s i n t h e s i g n i f i c a n t f a c t o r s which i n f l u e n c e t h e f i n a l t r a n s a c t i o n . . . a r e i n f i n i t e . It would a p p e a r t o be d i f f i c u l t indeed t o d e r i v e

_{~ 4 7 ~ ~ '}

g e n e r a l i z a t i o n s from such a d i v e r s i f i e d u n i v e r s e . -

Because of t h e c o m p l e x i t y of t h e d e c i s i o n s t h e y must make, l a n d d e v e l o p e r s u n d o u b t e d l y s i m p l i f y t h e s i t u a t i o n t o one of manageable t e r m s . I n t h e end d e c i s i o n s would seem t o t u r n on v a l u e such t h a t t h e s t r i k i n g c h a r a c t e r i s t i c of d e c i s i o n s of development e n t r e p r e n e u r s " i s t h e u n s y s t e m a t i c a p p r o a c h i n t h e : . n s l y s i s of f a c t o r s l e a d i n g t o them.

,471 D e c i s i o n s a r e a r z i v e d at: n o r e i n t a i t i v e l y , t h a n s y s t e r n s t i c a 1 l y . ' ~ -

n a t u r e of d e v e l o p e r d e c i s i o n s seems t o i n d i c a t e t h a t a n i n t e n s i v e a n a l y s i s of a l i m i t e d n u d e r of f i r m s c a n n o t p r o v i d e d a t a upon which t o b a s e

meaningful ~ e n e r a l i z a t i o n s a b o u t t h e use o r impact of e n v i r o n m e n t a l inno- An a l t e r n a t i v e i s t o employ what v a t i o n s i n r e s i d e n t i a l developments.-

451

R i c h a r d U . R a t c l i f f , Modern Real E s t a t e V a l u a t i o n , (Mqdison: Democrat P r e s s , 1 9 6 5 ) , p . 112.

46/

-

Weiner a n d Hoyt,

22. a,,

p . 338.

47/

K a i s e r , 1956, OJY+.

c,iLt.,

p . 58. See a l s o Wheaton,

op.

ciici.,

p p .

167-1%; and Weimer and Koyt, 0Q- c i t . ,

-

p p . 338-339.

(34)

i s known a s " c o n c e p t u a l v a r i a b l e a n a l y s i s . " - 491 E s s e n t i a l l y , t h i s method of a n a l y s i s s e e k s t o reduce human b e h a v i o r t o v a r i a b l e s and t h e i r r e l a t i o n s . The o b j e c t i v e i s t h e n t o account f o r v a r i a t i o n i n t h e dependent v a r i a b l e s . The e s s e n t i a l s t e p s i n t h i s t y p e of a n a l y s i s may be d e s c r i b e d b r i e f l y a s : 1) e x p r e s s a l l c o n c e p t s a s v a r i a b l e s ; 2) d e v e l o p h y p o t h e s e s a b o u t t h e r e l a t i o n s h i p between c o n c e p t s ( v a r i a b l e s ) , 3) d e v e l o p o p e r a t i o n a l measures of t h e v a r i a b l e s ; 4 ) c o l l e c t d a t a a b o u t t h e d i s t r i b u t i o n of t h e v a r i a b l e s i n t h e " r e a l " world; and 5) t e s t t h e d a t a f o r i t s correspondence t o t h e h y p o t h e s e s .

An Approach t o U n d e r s t a n d i n e Developer Behavior

Previous r e s e a r c h a t t h e Center f o r Urban and Regional S t u d i e s has r e s u l t e d i n t h e development of a c o n c e p t u a l scheme which promises t o

be of u s e i n a n a l y z i n g d e v e l o p e r b e h a v i o r and develop in^ u s e f u l h y p o t h e s e $ . It i s f e l t t h a t t h r e e s e t s of d e c i s i o n f a c t o r s w i l l e x p l a i n t h e d e c i s i o n s which, " i n t u r n e x p l a i n t h e e v o l u t i o n o f p r o p e r t y through t h e developmenk 501 These f a c t o r s a r e : c o n t e x t u a l , d e c i s i o n a g e n t , and p r o p e r t y p r o c e s s .

"-

c h a r a c t e r i s t i c s .

C o n t e x t u a l f a c t o r s p r o v i d e t h e macro environment f o r development d e c i s i o n s . They p r o v i d e t h e g e n e r a l i z e d areawide s e t of c o n s i d e r a t i o n s

491 T h i s method of a n a l y s i s was psoposed by Iiebert Blumer, i n " ~ o c i z o ~ i c a l A n a l y s i s and t h e ' V a r i a b l e ,

"'

American S o c i o l o p , i c a l Review, 21 (l95G), pp. 663-630.

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which "determine t h e o v e r a l l r a t e and type of change i n t h e urban community and t h e g e n e r a l s t r u c t u r e of t h e p o p u l a t i o n of d e c i s i o n a g e n t c h a r a c t e r -

511

_{Contextual f a c t o r s}_{m y}_{be thought}

i s t i c s and p r o p e r t y c h a r a c t e r i s t i c s . " -

of a s f a l l i n g i n t o two broad c a t e z o r i e s , socioeconomic f a c t o r s and p u b l i c p o l i c i e s . I n e s s e n c e , they provide t h e broad c o n t e x t f o r d e c i s i o n s i n t h e a g g r e g a t e .

Decision a g e n t c h a r a c t e r i s t i c s r e f e r t o t h e f a c t o r s which d i s t i n g u i s h t h e v a r i o u s p a r t i c i p a n t s i n t h e land development p r o c e s s . Previous r e s e a r c h on land d e v e l o p e r s would seem t o i n d i c a t e t h a t much of t h e v a r i a t i o n i n d e c i s i o n a l behavior nay be explained by f o u r developer c h a r a c t e r i s t i c s : 1 ) t h e type of f i r n , p r i m a r i l y t h e e x t e n t of d i v e r s i f i c a t i o n ; 2) t h e s c a l e of o p e r a t i o n , t h e number of r e s i d e n t i a l l o t s p e r y e a r which a r e produced; 3) t h e e n t r e p r e n e u r i a l approach, t h e s e t of p e r s o n a l a t t i t u d e s and b e l i e f s which i n f l u e n c e t h e n a t u r e of t h e d e v e l o p e r ' s d e c i s i o n s ; and 4) t h e l i f e c y c l e of t h e f i r m , t h e e x t e n t of t h e f i r m ' s e x p e r i e n c e i n l a n d develop-

52/ n e n t

.-

S i t e c h a r a c t e r i s t i c s a r e a r e p r e s e n t a t i o n of urban s p a t i a l s t r u c t u r e a t t h e micro l e v e l

-

tile l e v e l of t h e i n d i v i d u a l s i t e . Reference t o t h e l i s t of f a c t o r s d e v e l o p e r s c o n s i d e r i n conducting f e a s i b i l i t y s t u d i e s i n d i c a t e s t h a t most of t h e s e consideraLions r e f e r t o p h y s i c a l a s p e c t s of t h e s i t e o r i t s s p a t i a l c o n t e x t i n t h e o v e r a l l s t r u c t u r e of t h e urban a r e a .

511 K a i s e r and Weiss,

2. 'it,

p . 4 .

-

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- 2 2 -

There are several aspects of site characteristics which are important. First, site characteristics obviously have a physical dimension. This refers to the land itself

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to factors which cannot be changed except by direct modification of the site. Not so obvious is the locational dimension of site characteristics. These aspects of site characteristics adhere to the site due to its location relative to urban activities, transportation networks, and the aerial distribution of social values. Locational site characteristics are a result of "the fixity of land in space, the socioeconomic organization of the community, and the spatial pattern of social preferences."-

53'

Their value is dependent upon the spatial context and cannot be changed by alteration of the site. Finally, site characteristics

may

be seen to have an institutionai aspect. This refers to the influence of the institutions of the community, such as local government. While these aspects of site characteristics are not inherent in the site or the spatial organization of society, they seem to have a pervasive effect on the disposition of land in the community.

A

well known example of an institutional site characteristic would be the site's classification in a local zoning ordinance.

As seen in F i ~ u r e

2,

this conceptual scheme considerably simplifies the complex set of factors which influence developer behavior. Further, it focuses our attention on a relatively determinate set of variables which we can expect to be related to the provision of environmental

531'

Ibid., p. 17.

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COMCEPTUAL SCHEME

OP

SETS OF FACTORS INFLUENCING DEVELOPER BEHAVIOR

I

1

DECISION AGENT CHARACTERISTICS

!

S I T E

i

/

CHAPICTERISTIC

1

!

DEVELOPER I

i

BEHAVIOR

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i n n o v a t i o n s i d s u b d i v i s i o n s . y e t , t h e c o n c e p t u a l scheme, a s t h u s f a r developed, does n o t provide u s w i t h a b a s i s t o p r e d i c t what t h e s e r e l a t i o n s h i p s should be l i k e . For t h i s purpose we t u r n t o a n a n a l y s i s of t h e l a n d d e v e l o p e r a s a n "economic" and a s a " s o c i a l 1 ' b e i n g .

5 4 1

An Economic I n t e r p r e t a t i o n of Developer Behavi.0~-

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From'an economic p o i n t of view t h e r e s i d e n t i a l d e v e l o p e r and h i s f i r m a r e u n i t s of pro- d u c t i o n . That i s , r e s i d e n t i a l l o t s a r e produced through t h e t r a n s f o r - mation of v a r i o u s i n p u t s i n t o a s a l a b l e o u t p u t . The f i r m w i l l s t a y i n b u s i n e s s only s o long a s t h e revenues r e c e i v e d from t h e o u t p u t s exceed,

i n t h e long run, t h e c o s t s of production. The f i r m must make a p r o f i t . 7 .

The f i r m ' s d e c i s i o n s a r e concerned w i t h determining " a l t e r n a t i v e i n p u t combinations of l a n d , c a p i t a l , and l a b o r a s t h e y a r e r e l a t e d t o

5 5 /

a l t e r n a t i v e o u t p u t r e s i d e n t i a l packages of house, l o t , and location."- P r o f i t becomes t h e primary decision-making c r i t e r i o n . The v a r i o u s f a c t o r s we have d i s c u s s e d i n t h e preceding s e c t i o n may be r e l a t e d t o d e v e l o p e r

behavior by a n a l y z i n g t h e i r r e l a t i o n s h i p t o t h e components of t h e d e v e l o p e r ' s

5 6 /

p r o f i t f u n c t i o n , a s c o n s t r a i n e d by t h e terms of t h e p r o d u c t i o n function.-

5 4 1

T h i s s e c t i o n i s based on K a i s e r , 1966,

=:

g.,

pp. 87-134. For purposes of t h i s s t u d y we have g r e a t l y simplified t h e a n a l y s i s i n o r d e r t o f o c u s on o n l y t h e key p o i n t s .