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City sets maximum rents for units in buildings where developers get rental incentives

December 4th, 2013 · 32 Comments

The city put out the strangest report (approved Tuesday) I’ve seen in a while, where it spelled out what the maximum rents could be for units where developers are getting exempted from the usual developer fees (about $140 a square metre for most of the city; some specific areas have slightly different ones.)

The rents — $1,440 for a studio and up to $2,500 for a three-bedroom — seemed not anywhere near affordable, which the city’s persistent critics have noted. But the numbers in the report on actual completed projects indicate that, of the projects built or planned so far, the rents proposed are far, far below those maximums.

So, of course, the proposed maximums got slagged. And there was no indication, in the report or in the comments from Coun. Raymond Louie in the story I wrote, about whether future projects would likely stay at the same relatively low level of the existing projects cited in the report, which would be an achievement, or whether they’ll now creep up to those maximums.

Certainly didn’t do anything to clarify what’s actually going on with the projects out there. It’s perplexing to cover this issue. Vision Vancouver is staking its campaign next year, in part, on its efforts to create affordable housing. But it can never seem to demonstrate effectively or speak convincingly about what it’s doing.

 

 

 

The city is bringing in new rules to make sure it is not giving developers bonuses to create luxury rental units.

In ongoing efforts by the Vision Vancouver council to create affordable rentals (and show it is doing so), a new report spells out that developers who want city incentives for creating new apartments must build them small, prove they do not have expensive finishes, and guarantee they will go for “average rents” for new units.

More Related to this Story

Under the city’s Rental 100 incentive program, developers that build apartments to be long-term rentals are exempted from the standard fees.

The average rents defined in the report, which goes to council on Wednesday, are a maximum of $1,443 a month for a new studio and up to $2,743 for a new three-bedroom apartment.

That’s less than some swisher condo units, but far above the $800 to $1,600 a month many renters are currently looking for on Craigslist – all of which illustrates how difficult it has been for council to demonstrate it is solving affordability problems in what is frequently called one of the world’s most expensive cities for housing.

The West End resident group that has raised questions about the incentive plan says the report clarifies nothing and that its “average rents” are not affordable.

“The only people who can afford them are not who they say their target market is,” said Virginia Richards of West End Neighbours (WEN), whose recent lawsuit against the city prompted some of the rule changes. “We recognize it’s difficult [to figure out how to do this], but it’s something they have to address.”

A housing plan council developed two years ago specified the city would target people making $21,000 to $86,000 a year. In policy circles, affordability is defined as 30 per cent of a household’s gross income. So to be affordable for that group, rents should be $525 to $2,150 a month.

The West End Neighbours’ lawsuit claimed the city manager was improperly given the power to decide whether developers should get the fee waivers without proof of what rents they would charge.

Now there are guidelines for the rents (and the city manager’s powers have been changed), WEN is still not happy.

Vision Councillor Raymond Louie acknowledged he and other councillors frequently have a hard time making the case that they are creating affordable rentals. “Is it a problem explaining it? The short answer is yes.”

But he said that the units being created through the incentive program will become a valuable part of the city’s low-cost housing stock, just as the three- and four-story walk-up apartments of the 1960s and 1970s are now the cheapest rentals in the region.

Those apartments were built with federal government tax breaks that encouraged developers and landlords to invest.

Those breaks disappeared in the 1970s. At the same time, B.C. and other provinces created laws that allowed selling individual apartments. Condos quickly became almost the only form of multiunit construction.

When Vision was elected in 2008 amid the U.S. housing-market collapse and worldwide recession, it proposed giving developers incentives to build long-term rentals.

But many say developers are getting huge freebies for little in return.

Mr. Louie called that a short-term view.

“Despite the fact that it’s initially expensive, we expect they’ll become more affordable,” he said. “In comparison to the other rentals, these are not those with high-level finishes. Over the life of these units, they will become more affordable.”

City reports say the incentive program produced 1,330 units in the first three years up to 2012, and another 660 are in the approval or application process.

Council is trying another experiment to create affordable housing – providing free land to non-profit and co-op housing groups.

That’s a more cautious approach than what previous councils took with plans for affordable housing at the Olympic village. There, the city provided free land, with the eventual goal of being able to rent out units at rates far below market cost.

However, construction costs soared in the pre-Olympics years and the units cost far more than projected. As a result, the city had to rent many out at market rates and is subsidizing fewer than planned.

 

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  • Let’s just get a handle on this affordable housing issue before the insults start flying!

    It has nothing to do with Lewis’ fee simple housing mantra or his aversion to towers. Neither are we dependent on Michael G’s condescending theories!

    Both are remote from ground zero . . .

    http://www.liveleak.com/view?i=005_1386131628

    . . . nor will the issue will solved by Clr Kerry Jang applying his mind blowing techniques.

    In case you all hadn’t noticed the world is in a financial crunch: Vancouver’s housing may appear to be the world’s most expensive but if you apply family income to shelter world wide we just don’t measure.

    Big issues require big responses. Are we up to it?

  • Westender1

    I’m not sure I understand this statement:

    “But the numbers in the report on actual completed projects indicate that, of the projects built or planned so far, the rents proposed are far, far below those maximums.”

    If the units are “planned” how can they also be “actual completed projects”?

    The rents proposed by developers at the time of rezoning are not the rents that are actually going to be charged in these developments. The units will rent for what the market will bear. The units at 1142 Granville Street were proposed to rent for an average of $960 a month. Instead they are renting for $1400 as furnished rentals.

    The recently completed STIR units (up to the 5th floor of the building) at 1221 Bidwell are listed on the Prompton website:

    http://www.prompton.com/alexandra/

    Suite Sizes Available (For Lease):

    Studios: 400 – 505 sq.ft.
    From $1250/month

    1 Bedrooms: 546 – 563 sq.ft.
    From $1590/month

    Unit 516, a 546 square foot one bedroom, is being offered at $1950 a month.

    How is it helping housing affordability in Vancouver to be offering municipal incentives to create these types of units?

  • Kirk

    With the potential slow down in the condo market coming, I can’t help but be cynical on this. If the market is slowing, can developers wait out the downturn by renting out these units until it turns around, and then sell them later as condos? Meanwhile, the City gives them breaks, and they can secure financing. With throngs of developers attending fundraisers at the same time, it has a smell.

    Besides, it’s basically impossible to legislate affordability. Supply and demand is already setting rents far below the numbers given here.

    No one has been able to build their way out of traffic congestion. The more they build, traffic seems to get worse. And, no one has been able to densify their way to affordability. Vancouver has been on the forefront of trying to densify to affordability, and now we’re top 3 of the most expensive cities in the world.

    It’s like the war on drugs. It obviously isn’t creating results, but no one wants to take a step back and admit it. And, there’s so much money being made that no one in power wants to change it.

  • Westender1

    Kirk, to answer your question, no, developers would not be able to sell these units as condos. They are secured as rental units for a minimum of 60 years or the life of the building.

    The “smell” appears to be why expensive rentals are getting public incentives.

    And no, building our way out of affordability challenges does not appear to have worked. But that is the mantra we keep hearing.

  • boohoo

    So what’s the solution then? If building more units isn’t improving affordability, what will?

  • Marvin

    While it may be fair to criticize Council for attempting to describe this rental incentive program as creating “affordable” rentals in the short-term, it is difficult to deny that (1) this program will increase the amount of rental-only units being built and (2) that, in the long term, the rents for these new units will more closely approximate the average rents of $800 to $1,600 a month (without adjusting for inflation).

    Given that the City of Vancouver, without providing massive subsidies, cannot impose any real downward pressure on the market rates for new rental units in the City, it would seem that the rental incentive program is better than having no program at all. Without the program, the number of rentals built would be far less.

  • teririch

    @Marvin #6:

    Just to play Devil’s advocate, the current affordable housing units are being systematically replaced by out of reach for most ‘affordable’ housing units.

    Yes, in the long term (10 + years or so according to Cllr. Louie statement in council) these units will become affordable.

    What happens in the meantime?

  • teririch

    I watched this council meeting and found it interesting that the Vision Cllrs are lost on the fact that perhaps in two parent/adult households that there is the possibility not both people are working. They are basing affordability for two-three bedroom units on the fact that both people are working and working and decent paying jobs. (Have you checked to see what an admin makes these days or for that matter most junior positions)

    Cllrs. Jang, Meggs and Stevenson just assume that the higher end of the market rentals are ‘affordable’ for families based on their assumption both people are working. Jang yammered on about it would only take two people making $40K each to achieve ‘affordable rent’ for a two bedroom place.

    What if you have parents or two adults, with one/two + kids in a two/three bedroom place which by Vision’s standards will be costing $2500 – $2700+/month, and only one parent or adult is working for any given reason?

    What then?

    Jang is so out of touch with reality he should actually just be quiet when it comes to anything to do with ‘affordability’. He proved in that this council meeting (again) He has no clue.

  • Kirk

    @4 Westender1: Thanks.

    @5 boohoo: I don’t have a solution. The war on drugs was a proven failure, so Vancouver went soft on drugs. Is that working better? Looking at the DTES and all its problems and costs, I can’t say it’s been a success either.

    We tried to solve affordability, now we’re amongst the least affordable in the world. We tried to solve drug addiction, now we’re world reknown for having a drug problem.

    Maybe there just isn’t a solution. Are our existing attempts helping? Or, making it worse?

    All I know is that each side’s “solution” costs us all a ton of money, and someone else is making a living off our tax dollars with little improvement to show for it.

  • boohoo

    @9

    So the alternative is do nothing? Like the free market run free?

    I don’t have an answer either, but it seems like doing nothing is not the answer, and doing what we’ve done seems to not be the answer….so…?

    What can we try differently?

  • “Over the life of these units, they will become more affordable.” – Raymond Louie

    Let’s unpack this assumption. How in the past have older–1950s-1970s–apartment units become ever more affordable? Let us first understand that two things were required for this to happen. The first was very high inflation that dramatically reduced mortgage debt and thus the cost of ownership; the second was a rise in real incomes. So, incomes rose as the cost of holding rental real estate plummeted. The market took care of the rest.

    Neither factor has been in play since the late 1980s, and low and behold, affordability has become in crisis ever since, and getting worse. Is inflation likely to rise? Not even on the Bank of Canada’s distant horizon. How about incomes? They continue to decline as they have since the late 1980s in real terms, and especially for those under 30, the biggest potential source of new renters in most every market.

    This idea that a concrete and steel high-rise tower built today at an all-in cost of above $500 psf will ever rent for much less than $3 psf/month in real dollar terms is financially ludicrous and indefensible, so Marvin (6)’s echo of Raymond Louie must also be dismissed. What starts high will stay high, just as it has done since the late 1980s. Federal tax policy has simply not even been that big a factor.

    Times change, and we must change with them.

    Westender1: “They are secured as rental units for a minimum of 60 years or the life of the building.”

    We do not know this, and Vancouver Council has renegotiated nearly every major contract it ever signed. Think just of the ODP for the Concord Lands, let alone half of the CD-1s ever enacted. Change happens, and in fact this is the law.

    If these units were to start losing money and the owners fell on hard times, how is the city not going to approved their sale? Would the city stand by to see a rental tower go into bankruptcy? No one can assure that rentals will stay rentals, as this would illegally fetter a future Council’s legislative prerogative.

    Guess what? Developers know that. They win going up, and going down. Always have.

    As has been said time and time again, but thoroughly ignored by all Vancouver media is what Whistler has done, and nearly every other city in the OECD: create a Housing Authority. Hong Kong owns and rents truly affordable housing to 3.3 million residents of that island city, and does so at no cost to the city treasury. Vienna similarly controls over 50% of the city’s rental housing stock and rents it out at no taxpayer cost at truly affordable rates.

    Social justice does not depend on federal or provincial hand-outs or tax policy changes. It is a choice, and a choice the City of Vancouver refuses to make.

  • Westender1

    I’m not defending the program, but as far as I know the housing agreement adopted as part of the rezoning process for these sites stipulates that the units may only be operated as rentals and may not be stratified.
    So while I agree a future Council could change this agreement and theoretically allow stratification and sale of these rental units, the same applies for every other existing rental building in the City. And for the past 20 years or so, there have been very few examples of stratification and sale of existing rental units.
    I think the idea of these rental units being sold off is low on the list of things wrong with STIR and Rental 100.

  • tf

    Rentals do not become more affordable as they age – this is the one mistake everyone who builds housing makes.
    They forget to plan on maintenance, repair and capital replacement.
    Ask anyone who is managing housing that is over 25 years old and they will tell you costs go up because of the “temporary” nature of construction in Vancouver.
    Rental units have a hard life and need even more attention and regular maintenance than owned units, which just doesn’t happen.
    Rents don’t go down as a unit ages, they go up because of maintenance costs.
    Form a Housing Authority and get people who know what they’re doing – people who know plumbing and electrics and flooring and painting – not politicians or developers.

  • jenables

    I would like to remind you all that using the 30% affordability model that you need to be making $4800/month or 57,600/yr to rent a STUDIO by these numbers. How the hell can anyone defend this?

  • jenables

    I’m looking at you, Boohoo.

  • RicL

    So Vision Vancouver has admitted that over the last few years it was responsible for waiving $10 million in development cost levies to encourage developers to build “affordable rental housing” and now is not sure whether affordable rental units are being created. Development cost levies are monies that the City collects from developers to offset that portion of the costs related to these services that are incurred as a direct result of this new development. Development cost charges help to provide important public facilities and services and ensure that new development pays their fair share of growth costs. The $10 million that has been waived has been shifted from the developers to Vancouver taxpayers.

    Under what authority can the City waive DCLs? The Vancouver Charter allows the City to waive these charges for, certain “eligible developments” including “affordable rental housing”. Section 523D (10.5) provides that “the Council, by by-law shall establish what constitutes an eligible development” and “shall establish the amount or rates of reduction for an eligible development”.

    With the recent changes to the by-laws it appears that the City finally is compliance with the Vancouver Charter but what about the $10 million improperly waived? As a Vancouver taxpayer I would like to see the developers pay.

  • Jay

    @14

    Just to clarify, the studio you’re talking about is a downtown studio in a new or newer building. There are other options. Studios in older buildings in the West End are cheaper, and in New West you can get a 1 bedroom apt. for 800 a month.

    Maybe all this new stock in Vancouver is what’s keeping housing prices cheaper in places like New Westminster.

  • jenables

    So Jay, you don’t have a problem with making unaffordability the norm because people can just move to new west? Also, you need to watch this. http://www.cbc.ca/doczone/episodes/the-condo-game

    I wouldn’t be caught dead being ripped off living in one of these newly built ‘luxury’ apartments with the bubbling laminate, drains that you can’t put water down, and tiny floor plans. I feel badly for those who are duped into thinking they are worth those prices. We are going to hell in a hand basket quickly.

  • Jay

    jenables,

    Studios that cost $1400/month are not the norm.

    Imo there is a ripple effect as more people move into the city centre and, consequently, keep vacancy rates in the outer neighbourhoods at a level that facilitates lower rents.

    Does that make any sense?

  • jenables

    No, as the first thing landlords tend to do when a long term tenant leaves is raise the rent… Especially when they can point to precedent like this. I’m not saying there aren’t affordable rentals out there in the gvrd , but these rents and affordable should always be seperated by a “not” when they are in the same sentence. Also, all the poor people aren’t just going to move away, it doesn’t work like that.

  • waltyss

    Well, jenables, tell us; how does it work?
    If the rents in Vancouver are too expensive for you and you are not prepared to move to areas of Metro Vancouver where the rents are cheaper, what is you solution in providing affordable to you housing in the CoV? Pretend you are Queen of
    Vancouver with absolute powers. What would you do?

  • boohoo

    @15

    Can you point out where I’ve defended this? A simple link or quote would be great.

    Thanks,

  • jenables

    Number ten Boohoo, implies that this avenue was somehow necessary, when the only other alternative given is doing nothing. Who came up with these numbers?

    Walters, I didn’t bother to read your comment.

  • boohoo

    @23

    Ok, so you made a big assumption. So when you say ‘looking at you’ it’s because you made a big assumption about what I think and then accused me of saying/thinking that thing.

    Got it. Maybe you should try again.

  • boohoo

    Rereading what I wrote

    ‘I don’t have an answer either, but it seems like doing nothing is not the answer, and doing what we’ve done seems to not be the answer….so…?’

    I have absolutely no idea how you infer or assume I’m defending anything here. I’m simply stating that what we’ve done doesn’t seem to work. How is that a defense? Take those partisan coloured glasses off please!

  • Simply astounding.

    The one solution applied the world over and even just 100km north in Whistler is perpetually ignored, by nearly everyone..except for tf 13.

    Tens of thousands of units just south of the border have been built on municipal, government, or charitably-owned land for under $200 psf and therefore rentable at full cost and without subsidy for $1.25 to $1.40 psfpm ($500 for a studio, $700 for 1BR). The fact that this is not happening here is criminal, as homeless people are dying in weather like this.

    It appears the threat of such low cost housing to developer profits is so extreme that they spend millions buying municipal politicians, just in Vancouver, to make sure it never happens.

    A society is judged by how it treats its most vulnerable. How are we doing?

  • jenables

    Maybe I’m off base Boohoo. Hard to tell now.. So what we have been doing isn’t working, this must include the actions in the title story? I guess that’s what you meant.

  • waltyss

    Ah, jenables, I asked you a reasonable question. If you were Queen of Vancouver, what would you do to provide what you consider low cost housing? Or are you ignoring me because you don’t have an answer?

  • rph

    @Randy #26. Do we have enough government owned land to make this viable? Enough so that it is not just a select few who luck out or are connected enough to rent in these buildings?

    Some level of government turns over this land for low cost housing, and forgoes profit that could be applied to, well, keeping taxes low or financing public amenities. And then a select/limited slice of the population wins the low rent lottery.

    For this reason, there is never a big push from enough of the general populace to champion this form of rental housing.

    I am not saying that this is not a good idea – I would love to see it if I am ever to get my kids out of the house. But there are reasons why the concept is not embraced by many.

  • Kenji

    @28

    I’m not Jenables but I did sit beside her at a table once so this qualifies me to answer.

    What about:

    – a requirement in new condo developments to set aside [insert figure]% of units as low-cost rental?

    – buying up biggish properties that have been on the market for 6 months (e.g. on arterials where people hate buying) and then going into deals (with new or existing non profits, or PPP even) to set them up as rooming houses?

    – expanding the zoning and construction of float house villages, again with the proviso of a few affordable units? while we can’t make new land, we can kind of fudge it into existance that way.

  • jenables

    Thanks kenji, I appreciate your effort. I will add retention of older, structurally sound buildings that serve a key role in providing actual affordable housing for those folks making less than $40,000, stricter rules regarding residency and taxation(though I’m not sure how much of that is municipal?) and urgent reform of election financing, as well as carefully studying effects of upzoning, taking into consideration all citizens of Vancouver regardless of income. Among other things…like doing the opposite of what they are doing now! I chose not to engage as usually when it comes to these types of conversations waltyss wants fodder to launch an ad hominem attack. Though it would be proving me right to do that now, wouldn’t it waltyss?

  • rph #29: A bit slow getting back to this thread.

    Yes, and enough, to your opening questions.
    The city currently claims to have at least $10 billion worth of undeveloped land in its Property Endowment Fund, $300 million (20 acres) of which could house twice as many people as are currently known to be homeless.

    OK, not so fast. Policy must be measured and contextual. If Vancouver tried to do ALL the heavy lifting on affordable housing and homelessness in Metro, let alone Canada, we’d eventually sink under a flood of the new needy.

    That said, Vancouver should assert itself as a leader and encourage others within Metro, and must build sustainably–meaning built to last and with no subsidy. The provincial housing allowance must cover at least the interest and depreciation on all new or renovated units supplied to Vancouver residents, selected and prioritized on the basis of length of residence and demonstrated need. Of course, if Vancouver took the lead, some additional public and private funding would emerge to help.

    Cities the world over do this for their residents, WITHOUT attracting millions of new poor and homeless or going bankrupt. The rules heavily favour those already present. Cities make more money supplying social housing than collecting taxes from the same land sold to the private sector. Add in all the externalities from homelessness, poor housing stock, and elevated housing costs, and cities and all residents benefit hugely from the provision of some affordable social housing.

    Hong Kong supplies social housing to 3.3 million residents (over 40% of its total population), has one of the strongest local economies in the world, and is not going broke.

    We will never, nor should, get to where Hong Kong is. However, a balance of public and private rentals would provide a floor for the truly needy, should incentivize “graduation” to private housing, and must be strictly and accountably managed to keep all economic costs below the provincial housing allowance.

    If we began such a program, as Vancouver had once 50 years ago, other jurisdictions and levels of government would eventually join in and Canada could join the majority of the OECD with a zero or infinitesimally small homelessness rate.

    We could also then commit the millions of dollars wasted scraping people off the street every day and night with investments in new research and industrial development. That is the world we are competing with, morally and economically.