Horrible land deals continue

The Killarney land sellers continue to dream of lotto winnings via selling old junk houses on 50 ft lots.  With the market now further imbalanced and the federal government continuing to meddle with the buyer mortgage rules, the risk of these redevelopment lots has never been greater.  Adding to this risk is the lingering recession, unlikelihood of significant improvements to the energy economy, and rising cost of building materials along with lots of new supply now half built throughout the area.  

I'd say now is not the time to be setting new record prices on 50 ft lots.  Is there a greatest fool out there ready to buy this one?

The $700k threshold awaits for standard Killarney building lots.  I'd avoid this property at such a horrible price.  It is hard to imagine this working out well for the builder.

Basement Pour

We are off to a good start in the week with a late tuesday evening basement pour.  Billy the cribber estimates 44 cubic metres and each truck only holds 7.  Since 6 trucks won't do it, they may use the volumetric truck to produce just the optimal amount.  Regardless of how they do it we can now work on getting the basement to the backfill stage and schedule more work

The pump truck has lots of space on the corner location and will fill the forms very quickly.  I have the remainder of the week nicely planned out - weather is not looking good though.

Cribbers are back

The cribbers arrived and started putting up the forms and ties.  They intend to finish tomorrow and pour after the thanksgiving holiday.  Long weekends tend to arrive at inconvenient moments that disrupt the schedule, especially when planning concrete delivery.  Strangely enough this project wasn’t supposed to be poured until after my row house basement.  I ended up swapping my place in line to get the semi detached cribbed first since it received permits so much earlier.  The row house will have to take its chances with the weather later on.  

Another sunny fall day and forms are going up. Fortunately the construction site is on the way to school so short visits are easy.  

Work begins

Once we pour concrete I tend to start the clock on time to build.  Footing pour is a good date to note down for the real start of build the house up out of the ground.

The mud will still be setting as we start placing forms tomorrow.  No more concrete is available until Tuesday given that Monday is a holiday.   

It is growing season in Killarney right now

Any person observing Killarney right now cannot avoid noticing a construction project is ongoing now on almost every street.  While we are still in this lingering recession, the builders have collectively decided to press ahead with a lot of projects so that it almost appears as if there is a Killarney mini-boom.  This is more an outcome of a spring season where inventory was short (because everyone slowed down new project development in 2016 rather than some massive economy improvement).  The accelerated pace of this building is likely a surplus of new semi-detached product next spring, which may create a favourable buyers market.

Another interesting market update is from my real estate brokerage who comment on these inventory trends.  After a glut of product during the recession, the new townhouse supply has really started to balance.  It could be a good time to be producing townhouses again after three tough years.  

Despite this less than great outlook, I have to get my semi detached built for the spring market, so we are forging ahead.  Here are a few shots of the recent progress.

Here is the footing recovering nicely from getting snowed under.  Amazingly the last of the slow to fruit raspberries and strawberries continued to ripen throughout the blizzard and remain delicious. We will see a bumper crop of Killarney houses growing through the 17-18 winter season, but this is surely the end of the fruit. 

October is municipal politics month for Calgary

The municipal election is full on right now in Calgary.  As a ward 8 resident, I have taken the opportunity to review the platforms of both main candidates, I have met them both, and observed them at the Killarney community run debate over the weekend, plus on the radio replay of the CJSW debate.  

Unfortunately the efforts made to get to know the candidates hasn't made my decision any easier.  The specific development issues I am most interested in don't get any real discussion during campaigns.  The motherhood statements and mantra about the need listen to residents about development issues tends to be vague and dissatisfying.   

Here is the truth about development decisions.  The local councillor only has one vote, but all of the decision making authority is in the council and I believe they look to the local councillor to take the lead on contentious local applications.  The local councillor does not have a lot of time to meet unengaged community members during the term in office.  At a hearing where the real decisions happen may be the only time new, and now highly emotional and motivated potential voters will see their councillor do anything that is meaningful to them, and they are absolutely wanting to see 'their' councillor vote down an application from a builder.  

The councillor (who wants to get re-elected) is highly aware of how the next time the voter is reaching to drop off his or her vote in the ballot box, the vote is likely going to be highly influenced by what happened during that one council meeting that the voter attended.  This explains why the councillors are so influenced by the Calgary brand of NIMBY'ism that is such a prevalent force in political decisions relating to micro site land use applications.

So, what option is the builder going to use to try and get the decision to go in favour of a project? An option may be the  terribly corrupt campaign finance system we have.  The rules of donating to politicians in Calgary is so dismal and open to abuse that it actually provides a way to level the playing field from the rampant NIMBY'ism that impacts a lot of political decisions.  The builder only has one vote in an election, which is totally insignificant.  If some campaign finance cash does not help to level the odds, it wouldn't be spent.

One of the local councillors released his campaign donation list, and the other has chosen not to. I found a review of the list to be an eye opener.  If this is the way to get stuff done in Calgary I need to start spending a lot more money!

Here are your ward 8 candidates.  When reviewing the donor list a few of the funding sources were not exactly what I'd expected, but very insightful.

Building Permit Fee - how much to expect

The City of Calgary fee structure for building permits would be interesting to compare to other jurisdictions.  It is not known to me if the fee is based on cost recovery, or if the City runs a deficit processing these permits.  

To me, of course, the fee is too expensive. I think it should be outsourced.  I don't think the City needs to police building permits, especially now that it requests an engineer oversight for almost everything.  I don't think there is enough value to the customer to justify the fee.  I do think that some oversight is warranted to review plans, but I don't think it needs the office space, administration, pensions and benefits that go along with City staff.

During the current election, it would be interesting if a candidate announced a platform to outsource this departmental function.  I wonder at the likelihood of this policy ever catching on in an election where nobody can really suggest any cuts at City HQ.

So it looks like we paid a $7500 fee to process the BP and fund whatever inspection function is taken on by the City to review a semi-d build.  What would it cost a contractor to service this permit, archive the records, conduct inspections, etc?  Could an independent group of small businesses achieve the same permit inspection function at a lower cost to the builder?  

Footing stakeout, soil bearing report, and cribbing package delivery

By some miracle, everything this week went exactly as scheduled.  I can't recall the last time this actually happened.  Despite the unexpectedly accurate scheduling, I've still failed to get my footing poured before the winter heat season hits us on Sunday.  

In these photos, the survey crew is back to hammer pins in the ground at key locations for the basement walls.  They've also marked the height of top of footing, this dictates how deep the footing will be.  If the excavator does a rough job, a significant amount of extra concrete could be used filling in low spots, or even worse, the footing could be inadequate if there are high spots.  Just as the survey crew left, we saw the lumber yard show up and drop off a large pile of wood and rebar.  Very productive morning, we just need that soil bearing report and we can start the footing.

Multi-part series the DSSP 6.0

The title of this post should be, who is the smartest builder.  That award once again goes to XXX Homes (XXXH).  They've earned this by constantly being the builder that evades costly city requirements the most successfully.  No other builder has the ability to do what XXXH does, and that is find work arounds to the most absurd and costly city requirement, the storm water restrictions contained in the DSSP.

One of the most admirable qualities of the XXXH approach is to gain a huge competitive advantage by avoiding expenses that have no benefit to its customers.  How exactly they do this remains somewhat of a mystery.   The plan prepared by XXXH's contractor is one that would not be approvable by any other builder (such as me). It offers massive cost savings.  I'd estimate that XXXH is currently saving around $30k, and as much as $75k vs other (less smart) builders (like me, I guess I am currently in the dumb builder category).  

Looking at the XXXH approach, which I have done, involved having my own consultant pull the XXXH file at city hall and research it for hidden loopholes in city policy that we could also exploit.  Unfortunately we didn't find any contained in that plan that could not be explained by extremely generous and overly favourable interpretation of the rules (yes some even bordering on totally egregious misinterpretation).  Yet when the time comes to submit a plan, no other builder will get the same latitude from the city. Very puzzling.  

Here is a current open excavation at the XXXH site. They have simply connected pipe, later to attach to the downspout, to a single catch basis that is recessed in the front yard, that also acts as a overflow pond in the event the flow restrictor at the outlet backs up during a high flow event.  The puzzling feature of this design, which is not explainable, is how the entire garage roof water can flow 100 ft to the catch basin (over or under poured patios?).  I, along with other sane observers, would say it is impossible for this to occur.  This is the genius in the XXXH approach.  While its plan is not viable, it is cheap, and saves a lot of money.  The implications of this economization is far reaching and even goes as far as permissible square footage and transaction price advantage for each saleable unit.  

And here it is, XXXH has executed another project that no other builder is allowed to by the city.  This company will save, by my estimate, $250k this year on this one workaround.  Names have been changed to protect the guilty.

Excavation complete

With a full day of digging and dry conditions, the excavation work is done.  Next up is more survey work and the footing prep.  I have a good crew for the cribbing work and expect it to be done quickly. While the project is a few weeks later than I would like to have started work, it is much better than last year when I was unable to dig the basement until Nov. 21.  So we have almost two months of easier weather to work in, and I'd like to take advantage of that as we get into the build.

Fall colours visible from the 26a st excavation  

Utility trench and excavation

Progress at the semi-d site now includes the install of the water utilities to the property line, and the completion of the excavation.  With the hole dug out, we can bring back the surveyors to mark the location of the footing.  The rest of the basement job after the dig tends to unfold in a highly ritualized manner.  The specialized crews are able to come in and take care of business in a way that only people that have done this 1000 times can perform.

As has been the norm during basement projects, the builder during this phase can watch from the sidelines and get his cheque book ready.  To some degree it is a race to get the basement backfilled because that removes a site hazard and potential collapse of excavation walls.  The neighbouring property on this site has had his downspout placed the the worst possible location, so we are moving it (some rain is in the forecast and we want to minimize the chance of sidewall caving from water, the leading cause).  We are also planting the utility pole and getting ready to connect temporary power.  The bad news is we lost our opportunity to get the concrete placed before the seasonal price increase of Oct 1.

The shallow sewer in this part of Killarney - no chance of avoiding a basement lift station.  Maybe the city can use some of the huge fees it is taking for off site levy's to redo some ancient sewer lines?

One last fee...

The City came through with another fee to authorize installation of the underground utility work at the threeplex site. This fee is specifically allocated for storm water improvements, note this is a different fee from the offsite levy for water and wastewater.  Hopefully getting this fee paid will be the absolute end of fees on the rowhouse project.  

This should be the final fee for the rowhouse project.  I am concerned that 2018 will bring some new and increased fees, further damaging the case for building multi family housing in the inner city.

Demo begins

We've got a little demo on the go at the semi detached site.  It always amazes how hard it is to build something yet how easy to take it all down (when you have the right tool).   

Survey stakeout sketch

We've got our regular survey company mobilizing to start the stakeout next week. They forwarded me the stakeout sketch, which is something I have yet to receive on previous jobs.  It shows much of the key information used by the excavator.

The notes in red are the cut lines that are transposed over the basement shape.  The bullseye points are where stakes will be hammered in the ground.  The stakes are offset from the hole so that when working, the machine does not destroy the markers. The excavator will make the hole larger then the actual shape of the basement because the cribbers need to walk around the perimeter to set their forms.

Almost ready to start

With all the puzzle pieces assembled we are ready to start the build. First up is the demolition inspection and we are pursuing the foundation permit with likely delivery later this week.  I'm keeping my fingers crossed to get this poured before the winter heat season begins.  

The fence going up is usually a sign that construction will begin soon

Grade slip arrives

We've been waiting on a grade slip so we can apply for the BP on the Killarney duplex project.  That just arrived, so that means we can get started.  I have tried to book some crews, but it was hard without definite answers on schedule.  With this last piece of the puzzle I think we can make some progress.

This grade slip shows the excavator where to place the trench for the sewer hookup.  With a huge tree in the way, the city has allowed us to trench in a place that should work for everyone.  I can also use the slip to get some fees paid to the city for permitting the road cut for sewer and water hookup.  This slip features a storm connection, so that will cost me approximately $9000 vs using a sump pump to the surface.  I am still puzzled why the City requires this, but there is no way to avoid it.

Frightening price increases for the duration of 2017 for basic building material?

Having completed a little budgeting work on some upcoming projects, I ran into some really alarming cost differences over the previous project that was built using largely early 2017 purchased products.

In order to do some apples-apples comparisons, I looked at actual billing from the invoices.  A piece of type x drywall, commonly used in many party wall and garage framing areas was then purchased for $17.41, and was quoted today for $30.50, ouch that is almost double.  This is from government policy regarding trade tariffs.  What a sick joke the government is perpetuating on the home buyer and building industry!

The other ugly price increase is on OSB, a very common building material.  The 4x8 sheet used to sell for $12.95, quote today $25.75.  The fire rated stuff is a further $10 more, which has always been a contentious issue as a particularly egregious gouge.  I am hopeful that these rates will drop with the end of the endless fire season in B.C.  If they don't or this is as much a product of US lumber tariffs causing production cuts and higher costs for Canadian builders, building houses is going to be a lot more expensive.

A sane person might think that, given the recession is still ongoing, taxes of every kind are going up, and more business obstacles are being applied to the building industry that the government would enact some business friendly changes?  Unlikely given the current political situation we are in.

Was 2017 already the 'good old days' for buying supplies?  Aren't the good old days supposed to be a long time ago rather than the same year as we are in now?  Seriously though, I knew when I got started last fall that it was a good time to get a project in the ground for building costs.  This fall is the opposite and the atrocious fees and costs are ruining my budget.

Demolition ready to go

A little progress this week. The city has issued me a demolition permit for the Killarney house.  

While useful, what I actually need to get, a basement permit, is hung up somewhere in the black box downtown as the city is late issuing the grade slip.  I'll be continuing efforts to get the rest of it untangled otherwise I will be facing some real delays and monetary damage.  Strangely enough someone I spoke to at city hall basically admitted they screwed up.  I asked for $2000 rebate on my permit fees as compensation for the city error and she laughed.  Not likely to happen. 

This issue of city responsibility for its mistakes is interesting.  I've had city staff threaten me with a $10k fine for putting a rut in a poorly graded alley, and I've been fined for not having paperwork at an inspection despite that document being almost impossible to produce.  The city is very eager to impose monetary damages on a builder, but immune to compensating the builder for its mistakes. 

this isn't actually a building permit it is a demo permit.  It will be a miracle if I can get a partial permit this week on the duplex project.   

How much work is it for the builder to launch a small multi-family project?

I recently became curious about the level of involvement of the owner in a complex inner city redevelopment project. As the builder of a growing number of these as of late 2017, I tend to internalize whatever the cost and time investment is to complete the pre-construction planning work without any way of quantifying it. Perhaps if I was doing this project for an investor or client I would be a lot more motivated to track the hours involved in getting to the finish line (the finish line - getting all necessary permits - is actually the jobs' starting line, and I am not there yet on my rowhouse project, but I am oh so tantalizingly close EDIT - 99% complete as of September month end).

The rowhouse has been a particularly nasty, lengthy, and costly process, here is a sen-chronological list of the key events:

• May-June 2016 - agreement reached with seller after months of negotiation.  Seller  faces foreclosure and agrees to sell after both realtors involved give up.  
• July 2016 - mortgage company launches action on default, so property is purchased early to avoid foreclosure.  Soft market allows property to be acquired for a good price (this is a huge relief as everything after this is over budget).
•  Summer -  Nov 2016 - Lengthy land use re-designation public hearing is successful after frustrating disputes with the community association plus politicization of the slow and costly process - the entire fiasco was unnecessary when a few months later the City rezoned an entire chunk of Killarney anyway.  Loss of around $15k in unnecessary work.
• Nov - Dec 2016 - Finally we submit the DP for the rowhouse.  Countless revisions and edits will be needed to result in a DP that is suitable for the City
• May 2017 - this is sort of a one year anniversary of the project since I have had funds tied up in the land.  DP is finally approved, however we soon realize the DP release conditions are impossible because the City acted in a very ill conceived manner.  
• Spring 2017 - old house demolished to pacify angry neighbours and deal with vagrancy issues of the abandoned house.  Unmentionable details here that I am trying to forget.
• Summer 2017 - behind the scenes negotiation allow us to continue to move forward without the DP collapsing and requiring a full redo.  This is ongoing for the remainder 2017 and as of September we appear to be 8 weeks away from a final stamped DP.
• Summer 2017 - Civil engineer is successful at getting a viable stormwater plan approved.  Many concessions needed despite the approval leading to very costly installation budget overrun.  Costly roof specification changes needed to channel rainwater to catch basin network.
• Summer 2017 - BP development continues with some frustrating slowness and revision delays.
• Summer 2017 - energy model work is launched to deal with new energy code related changes and is finalized for submission.  In floor heating system is designed for basement suites.  Other specifications for envelope are agreed upon.
• Fall 2017 - BP partial permit applied for and issued by City.  Garage changes are mandated to deal with fire code issues, leading to difficult design details (yet to be done).
• Fall 2017 - Contractor selected for underground utility install, planned now for October
• Fall 2017 - realization that entire warm building season has been lost due to planning delays
• Fall 2017 - additional $11k in permit fees needed for work that is of little value for anyone
• Fall 2017 - City changes course and issues the full DP, this was an unexpected bonus as we had thought problems with permit issuance were still lingering.
• Fall 2017 - material cost increases from BC fires and government policies are identified
• Fall 2017 - Can we build something yet?
• Fall 2017 - lumber yard produces the necessary drawings for joist and truss design
• Fall 2017 - Hawaii vacation is booked is this going to be the worst possible time to leave?

 At this point in the project I have no way to estimate how much time is personally invested in the permitting process.  For 500 hours (which I have undoubtedly done already, maybe more), the cost of this in billable consulting time to outsource it would be significant, but also the fees to do this spread over entire year of low level aggravating work is not worth the effort for a consultant.  I was discussing a small survey job with a surveyor recently, (billable rate is $180/hr plus expenses), so as the project owner if I was to charge myself out (to myself) in this example at 1/3 of the surveyor fee I would have incurred a $30k bill.  There is no way any client would be able to fund my contribution to this project at a wage level commensurate with my impact on the project for a tiny three unit rowhouse.    

To date, my effort to get this project permitted has been, at times, approaching the maximum of what I can realistically contribute while still running other jobs.  I have had to mobilize countless resources and relationships to operate efficiently, or even just to know what to do in a process without an instruction manual to follow.  And I am still way late, over budget, and extremely frustrated.  Those three conditions are a lot better than bankrupt and exhausted, but I am far from pleased with the multi year marathon where there is nothing yet to show on site.

I have counselled numerous aspiring inner city builders to avoid multi-family projects.  It is way too much risk and work, and the amount of experience and financial resources needed to tackle a project is getting increasingly onerous.  I have another multi family project in the pipeline (with its own saga, some of which has unfolded concurrently), after these are done I am very much reconsidering this type of work.  The hurdles and roadblocks being annually implemented by the City are going to shrink margins and harm many projects.  Builder beware!  

Browsing the project files collected to date may offer a better sense of what has to be compiled to get this type of project permitted.  The documentation work is substantive, someone needs to deal with version control, and stay on top of the filing and archive it all.  This is work far removed from someone who is supposed to be building houses.  

This is a screenshot of my project files.  There are many files, and the list is growing.

Threeplex do-over? Not a chance.

I had a call from an agent in my network about a new listing two lots to the south of my former threeplex build in the Richmond community of SW Calgary.  If purchased, it would be the identical size and shape and land use category as my former project and can only be rebuilt as a threeplex.  I briefly considered purchasing the opportunity, but after some rudimentary analysis (which nobody could possibly be more prepared to undertake than me), taking a pass appears the best option.

This land deal is a rare opportunity to redo an identical project in the same location as one I have recently finished. It has a high degree of predictability for every stage of the process from planning to marketing of the finished homes.  You could say that, compared to anyone else, I have a nearly omnipotent view of every possible angle of how this project would unfold.  I have the plans, the budget, the specs, the knowledge of buyer preferences from open house feedback of the identical project, even some ideas on where I could economize and do the build more efficiently.  Essentially, I have a level of insight into the project that cannot be replicated by any other person without access to my files and experience in managing the build.  And I won't be doing it again.  That should be a pretty strong warning that the project economics are marginal and that speaks directly to the land value and non-building related cost of small multi family building that are driven higher annually by the City.  

There are just way too many reasons to not purchase the property, and hardly any good reason to buy it.  Here is a  large but not exhaustive list of reasons not to do it:

• Price - land is to be listed for about $50k more than I paid for the previous project site, not a chance I would pay $50k more, given my knowledge of the 'as-built' identical project economics from my previous threeplex.  
• Permit risk - there is no compelling reason I would get as nice of a permit authorized by the City as I was able to negotiate in 2015.  A community association or neighbour could easily appeal it for technical reasons that could jeopardize months of planning and investment and result in an inferior permit that would eventually be released, after many months of turmoil.  I have a lot less appetite for this now than in years' past.
• Soil Conditions - the site is downstream of my old location, and the deeper soil uncovered when excavating could get very wet and cause a miserable foundation building experience, worst case this could cost $40k or more to deal with.  Depending on the grades chosen the basement could be in the water table and that would pose some major challenges that I hope to never experience.  No seller will ever give credit for potential soil bearing challenges during an MLS land deal, however, this is a real issue that cannot be overlooked.
• City Fees - all of the City fees that cost more will be financially burdensome especially when combined with the higher land value.  Another $10k in City fees is just a tax on business that is very detrimental to small business owners in Calgary.
• DSSP - the DSSP was a total nightmare for the prior project, and it gets worse every year to get a permit.  The cost of this could climb to a very unfavourable sum.  Look at other pages on this blog to read about DSSP machinations I have been through, and continue to work through.  
• Length of time - financial losses from holding onto vacant sites, or, because this house is in good shape, managing a tenant while planning new projects is a real factor here.  This one gives me a sick feeling just contemplating what I know will need to be done just to get the job the starting gate, let alone the end.  The permitting on one of these jobs can be a costly and unpredictable marathon, and I don't need the exercise.
• Registration of a condo plan - before sale, the threeplex must be registered as a condo, this takes a lot of time and effort, and of course, fees.  The cost to do this work is similar if there was 20 units as three, so on a per unit basis, the threeplex is a lot more expensive.  
• Adverse impacts on the outdoor amenity spaces - buyers love to have their own outdoor space, and, given City policies in this regard, once the building footprint is maximized (so the units can have a good floorplan), the quality of outdoor spaces is diminished.  The lot isn't large enough to offer both good outdoor and indoor space.  Buyers can rebuild and improve outdoor spaces  after the City approves the development completion inspection, but this is a really slippery slope toward creating some future problems, and I can't be party to that type of work (have done this before and don't want to consider this again).

It sort of comes back to the poor economics of small multi family building in Calgary.  Small multi family, in my view, is the single best way to rebuild the inner city in a manner that best respects local livability, affordability, and efficient use of existing land and infrastructure.  Unfortunately the City views small multi building as a cash cow to be milked, and as such, marginal projects such as this one are just made less and less viable each year.  The building code changes and City policy classify a threeplex as a commercial project, and all the additional cost and effort associated with that can only be divided among three townhouses. The City decides annually to take more than it should upfront in fees (offsite levy, asphalt degradation, DSSP water release controls), or adds costly, restrictive policies that provide no value to the clients but a lot of cost and effort to overcome (such as shoring requirements on excavations or landscaping requirements that make little sense like requiring coniferous trees on a small yard, need for a condo registration, visitor parking and garbage bin requirements that don't fit, side door access requirement leading to many grade problems, the list is very long and painful...).  

This is another site I will monitor and, eventually, it will sell and I will take a look at who buys it, what they paid, and observe the eventual rebuild.  It will be interesting!  Good luck to the buyer!

For a few short months, this threeplex was my baby, now it is all grown and under the care of three new families.  As much as I enjoyed building this one and the valuable experience gained doing it, the opportunity to do it again is making me feel ill.