The problem of rising commercial land costs. (An economic report).
High land values seem not to be a problem in Shorewood's residential areas when it comes to upgrading existing homes. In fact, researched further it might be found that those very residential land values contribute to upward pressure to much of Shorewood's land designated for commercial development.
In addition, commercially zoned land is normally burdened with existing improvement. At the present time some developers are being relieved of both that burden and that of the high cost of land through redevelopment subsidies.
These subsidies seem to give support to high land costs that may not be justifiable under normal free market conditions in the future.
The most successful formula of development encouraged by redevelopment processes in communities like Shorewood is seen in projects consisting of 2 levels of underground parking occupying the total lot area, with 1 floor of commercial at street level and 3 to 5 floors of dwelling units above that.
Of course, increased development of any type will augment the tax base of the given community no matter how insignificantly, at least for a time period.
It seems, however, that upgrading of existing residential property in Shorewood over the past 10 years has improved the tax base much more significantly than improvement of commercial properties has.
This can be easily proved or disproved if the Village were to conduct its own study of the tax records and that of land values..
One of the reasons for encouraging commercial development it seems is to shift some of the rising tax cost to commercial land use, usually paid by property owners who own land but who do not live in the community. High land value produces a high revenue but on the other side tends to discourage higher profit-producing development.
Condos and upscale apartments are usually occupied by people without children and within communities where declining school enrollment is a problem, this type development is not easily justified from that standpoint, that is, that these residential occupancies will increase school enrollment.
Implications have been made that empty nesters in Shorewood would move into the condos and apartments and that families with children would replace the empty nesters in their vacated homes.
Whether or not these implications are on sound ground is yet to be proved. At the same time, whether or not these speculations shall become an eventuality does not detract from the theory that these artificial or marginal contributions subsidize the value of land adding to the trend of its upward cost.
If redevelopment is to be used as the means for attracting families with children to Shorewood, it seems that there's plenty of existing housing that with subsidies could be converted for occupancy by young families with children.
This might be a more direct approach that perhaps should receive more redevelopment attention.
Back to our present formula of combined commercial and dwelling unit development: at some point, the community will not be subsidizing this kind of development and might then expect that the free market will be overwhelmed by land preparation and land costs, operating against future free market development.
Then those communities like Shorewood might be left with commercial areas of declining property values. The cost of a second turn at redevelopment in what might be considered to be normal free market conditions, then may be rather difficult. These conditions may even draw down the values of the development that is presently being subsidized.
Examples of declining property values have been seen recently in Shorewood and in other communities before redevelopment was encouraged by community initiated subsidies. This is the sort of decline that may come with increasing land values.
Therefore, rising value of land is an important factor, as has been seen, and to be dealt with today when developing for profitable purposes.
It seems therefore. that consideration should be given to the effect that the free market may have on present and future rising land costs in relation to future development.
The rising value of land is a certainty. How to distribute its cost over a fixed improvement, over time, is another matter and would be the basis of an interesting economic study.
(An excerpt from an ongoing economic study: Shorewood: an economic study of a suburb).
(Any other economic theories on land values out there?)