ANALYSIS OF THE DEMAND FOR COMMODITIES IN THE 2012 DRAFT LAKE TAHOE REGIONAL PLAN
John B. Hester, AICP, Planning Director, Tahoe Regional Planning Agency
There are 3 categories of commodities:
1.
Those for which available allocations were not used between 1987 and 2011;
2.
Those for which available allocations were generally used between 1987 and 2011; and
3.
Bonus units intended to encourage and reward (i.e., incentivize) certain development actions
between 1987 and 2011.
In all cases the amount of the commodity that was available was not determined by the “market”. The
amount was determined through public policy and regulations. For this analysis, allocations are
considered “used” when they are assigned to an approved development project and no longer available
for other approvals.
Allocations Not Used
In this case the total allocations set by public action exceeded market demand. Commercial floor area
(CFA) is the only commodity for which available allocations were not used. Hence the long term market
demand for CFA was less than the allocation and the amount used represents the average market
demand.
Between 1987 and 2011, 575,237 square feet of CFA were used (199,995 were remaining in 2011) for an
annual average absorption of 23,009 square feet. Alternative 3 in the draft 2012 Regional Plan includes
the remaining 199,995 square feet from 2011 and an additional 200,000 square feet (399,995 total).
Over a 20 year plan horizon this equals 20,000 square feet per year. This is about 15% less that the
average annual market demand of 23,009 square feet per year experienced from 1987 to 2011.
Allocations Used
In this case allocations set by public action were less than market demand (i.e., the market was
artificially constrained). Residential allocations are the only commodity for which all allocations have
historically been used. Hence, the residential market demand generally exceeds the available allocations
(Note: In this situation prices would be expected to increase more than they would in a “free market” as
the supply is artificially constrained. That appears to be the case in the Tahoe Region). The amount by
which residential demand exceeds supply is beyond the scope of this analysis.
Residential allocations differ from CFA in that they are released annually. Until the 2009 recession,
annual releases of allocations were less than market demand. Residential demand has decreased since
2009, resulting in 86 residential allocations that have been distributed to local governments, but not
used. This is an anomalous short term trend that should not be expected to continue over longer
periods of time.
Between 1987 and 2011, 6,001 units were allocated for development and 5,915 were used. The annual
average rate of use was 237 units. Alternative 3 in the draft 2012 Regional Plan includes the remaining
86 units and an additional 2,600 units. This equals 134 units per year over a 20 year planning horizon.
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This is approximately 57% of the rate of development experienced from 1987 to 2011. The 2,600
allocations also represent 64% of the 4,091 total Development Rights that exist in the Tahoe Region. If
134 allocations per year are used, the Region will be built-out in 2042.
Bonus Units
In this case bonus units were “created” by public action to encourage and reward certain development
actions. Neither of the two remaining allocations of commodities, residential bonus units and tourist
bonus units, was fully utilized between 1987 and 2011. Hence, the incentive was not adequate to
facilitate the development action desired.
Between 1987 and 2011, 771 residential bonus units were allocated for development (629 were
remaining in 2011) for an average annual absorption of 31 per year. Alternative 3 in the draft 2012
Regional Plan includes the remaining 629 units from 2011 and an additional 600 units (1,229 total). Over
a 20 year plan horizon this equals 61 per year. This is about double the amount absorbed between 1987
and 2011, but the proposed transfer ratios, and therefore the bonus units available as an incentive for a
qualified development, have been increased significantly. The residential bonus units should help satisfy
some of the market demand that will not be satisfied with residential allocations. Whether the new
ratios will facilitate the desired development decisions requires a separate analysis.
Between 1987 and 2011, 148 tourist bonus units were allocated for development (252 were remaining
in 2011) for an average annual absorption of 6 per year. Alternative 3 in the draft 2012 Regional Plan
includes the remaining 252 units from 2011. Over a 20 year plan horizon this equals 13 per year. This is
more than double the amount absorbed annually between 1987 and 2011, but the proposed transfer
ratios, and therefore the bonus units available as an incentive for a qualified development, have been
increased significantly. Whether the new ratios will facilitate the development decisions desired
requires a separate analysis.
Conclusion
The allocations of commodities in Alternative 3 of the draft 2012 Regional Plan better reflect market
demand (CFA), except where constrained by supply (Residential). Alternative 1 would further constrain
supply, Alternative 2 has the same allocations as Alternative 3 but no bonus units for incentives, while
Alternatives 4 and 5 would meet or exceed market demand for CFA. Determining the actual residential
demand is beyond the scope of this analysis. In order to achieve desired policy objectives, transfer ratios
have also been adjusted. Alternative 3 includes bonus units to encourage qualified residential projects
and Alternatives 4 and 5 include bonus units to encourage qualified tourism projects. Whether the new
ratios will facilitate the development decisions desired requires a separate analysis.
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