►
Description
Building and Massing Presentation Module #5: Financial Feasibility of Development
A
I
want
to
transition
into
a
little
bit
more
of
a
nuanced
and
and
higher
level
conceptual
financial
model
that
looks
at
the
relationship
between
unit
density
and
the
feasibility
of
building
these
projects
to
begin
with,
because
those
two
things
are
related
as
well.
If
we
said
well,
we
want
to
go
with
four-story
buildings.
We
want
to
go
with
larger
site
plans,
larger
sites
that
are
dedicated
to
the
area.
A
That's
going
to
inhibit
the
ability
for
developers
to
build
units,
and
the
units
is
what
make
these
projects
pencil
so
before
we,
you
know,
go
off
on
the
idea
of
saying:
well,
let's,
let's
just
have
a
smaller
building
footprint
and
lower
unit
count
and
we'd
be
happy
with
that.
You
have
to
ask
the
question:
is
it
financially
feasible?
A
A
All
of
those
run
on
the
same
conceptual
principles
that
I'm
going
to
explain
to
you
using
this.
This
graphic
on
this
axis
we're
looking
at
the
cost
for
dwelling.
So
this
is
how
much
it
costs
to
produce
each
dwelling
unit
in
any
of
those
different
kinds
of
scenarios
on
the
bottom.
Here
you
have
density,
it's
the
number
of
units
that
are
allowed
in
the
code
per
you
know,
per
area
of
land.
You
typically
use
acres
in
our
codes.
A
A
This
orange
line
is
always
going
to
be
higher
than
the
average
cost
per
unit,
because
it's
basically
taking
the
incremental
cost
of
adding
new
units
called
the
marginal
cost.
So
every
time
you
add
a
new
unit,
you're,
adding
new
margin
to
the
cost
of
the
development,
and
this
dashed
line
is
the
market
price.
This
is
the
price
that
you
would
get
either
for
rent
or
for
sale
of
the
unit.
A
The
marginal
costs
will
increase,
as
density
goes
up
as
the
marginal
cost
increases.
It
will
at
some
point,
hit
what
is
considered
the
market
price
that
market
price
across
where
the
marginal
cost
crosses
the
market
price
is
referred
to
as
the
optimal
density.
This
is
the
density
at
which
the
project
is
penciling
best.
It's
making
the
most
return
on
the
investment.
It
makes
the
most
sense
for
the
developer
to
do
it.
A
A
Then
the
project
is
just
not
going
to
pencil
at
all.
It's
just
you're
never
going
to
pencil
it.
So
that
means
that
the
the
development
won't
be
built,
and
so
the
way
to
look
at
this
is
that
the
developer
is
always
going
to
want
to
hit
this
optimal
density
point
but
will
accept
being
within
this
range.
A
So
this
is
going
to
vary
by
by
you
know,
area
it's
going
to
vary
by
market.
It's
going
to
vary
by
by
development
type.
There's
lots
of
detail
to
this,
but
I
want
us
to
understand
this
concept
that
there's
a
goldilocks
range
in
density,
where,
if
we
don't
set
the
density
high
enough
you're
going
to
be
in
this
region
and
the
projects
are
going
to
be
infeasible.
A
If
you
set
the
density
too
high,
let's
say:
eight-story
buildings
are
in
this
range,
where
the
marginal
cost
is
never
going
to
pencil
to
make
that
return,
the
investment
you're
never
going
to
see
an
eight-story
building
built,
but
what
you
will
see
built
is
what
the
market
can
bear,
and
so
this
might
be,
for
this
might
be
five.
It
might
be
six
story,
buildings.