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Vancouver’s bold new housing plan calls for massive rental construction — but the people who would build it say the city makes it almost impossible. Some are giving up

December 17th, 2017 · 1 Comment

This story is an example of how following a trail of breadcrumbs on a story can lead to outcomes you never expected.

I started out planning to write something about yet another West End site selling for a crazy price — $79.5 million to newbie developer Vivagrand, with only one messy project so far on its resume in Vancouver — as the latest in what has turned into a boom in West End construction that even city planners can hardly believe. I think this is something like the 26th tower, making this take-up of new density as a result of the West End plan something no one had envisioned. It was supposed to take decades to get to the number of units projected. Instead, it’s taken a few years.

But as I was working on that story, along with some casual conversations as about the city’s plans to suppress speculation, people in the industry kept repeating the same story they had heard — that a number of developers had actually cancelled rental projects because of requirements from the city’s real-estate services department that they pay tens of millions in “community amenity contributions.” That’s something that has normally only been charged on condo projects, as part of the city’s model for development, which asks developers who are going through a rezoning to give back about 75 per cent of their “land lift” to the city to pay for the community services that will be needed as new residents move in.

My Globe story on this is here.

But, after years of Vancouver working to incentivize developers to build rentals — a form of housing that had almost stopped dead after everyone turned to condos in the 1980s — some were liking the rental thing so much that they started to plan projects that didn’t ask for city incentives. One example was the 43-storey Wall apartment tower at 1310 Richards, where the company paid almost $24-million in a CAC equivalent.

Then a demand for CACs became part of every rental project that came to the city.

At the same time, land prices were skyrocketing because condo prices were going up — especially downtown, where the Alberni/Georgia corridor seems to be transforming into some kind of luxury investor sculpture garden row of towers.

So landowners who had previously been attracted to rental now found that, not only were they being asked for millions in CACs, but the money on the other side of the equation had changed. Even after paying huge taxes on an outright sale or condo project, they’d still be further ahead than by building rental.

So they started backing out.

That’s only the beginning of the city’s problems when it comes to the ambitious plans to encourage the construction of 20,000 private-market purpose-built rentals. (i.e. permanent rental buildings, not condos that can be sold any time the investor thinks that would work out better.)

The companies with the most experience building rental, like, say, Cressey, are finding it nerve-wracking to go through the permitting process of building rental. A recent project that Cressey got approved near Olympic Village, something that the mayor touted this week as part of the city’s success in getting new kinds of lower-cost housing, almost didn’t make it.

After receiving assurances that the project wouldn’t have to pay a CAC and would qualify for a waiver of normal development-cost levies the city charges on all new construction (part of the incentive for rentals), Cressey got midway through the project and then was asked to provide its budget for the building to real-estate services — usually the opening move when real estate is going to ask for a CAC.

Cressey spent some time convincing real estate that there was no land lift. Once that was done, the company was told that it wasn’t going to qualify for the DCL waiver. Why? Because the city says that construction costs have to be under $250 a square foot for a company to qualify for Rental 100 incentives. That’s to prevent developers from building getting the waiver, then building expensive rentals that, after the first turnover, are rented out for top dollar.

But construction costs have been soaring. So the city decided Cressey likely couldn’t build for the required amount. (Presumably, that would mean no one could). Cressey then had to hire experts to testify that the company, in spite of the current rise, could still build for that amount.

But that’s only the tip of the iceberg, really, when it comes to rental problems. There were so many others that people ended up talking to me about.

One is the city’s plan for False Creek Flats, which many had thought would be an ideal location for rentals — close to downtown, likely to serve local populations working in the city’s booming tech businesses, easy to mix with the current industrial uses on the flats.

But the False Creek Flats plan has essentially made that a no go.

Then there is the rezoning in other areas, which limits heights no matter whether the building is rental or condos. That ends up forcing condo development on those sites, because the land prices make a rental building impossible unless extra density can be added.

David Taylor at Colliers said he had an ideal rental site for sale at 12th and Commercial, an area that is a natural gathering place for renters. But the city’s plan limits the site to six stories. He had a lot of buyers interested in building rental if they could get a couple more stories. But the answer was, Absolutely not. So the site was sold to a condo developer.

I’m sure some people will judge developers who spoke out for this story as just a bunch of privileged whiners who are unhappy they can’t make as much money as they’d like.

Whether they are or not, however, it’s doubtful whether the city is going to be able to meet its rental targets by hoping that developers will build rental as philanthropy. A few are doing it. But likely not enough to build 20,000 units in 10 years.

This whole exercise underscores a problem that I’ve been observing at the city for several years. That is: the people at the top are saying — and even trying to do — all the right things. The city’s housing plan, while not perfect, is a real effort to shape housing supply to better match the needs of people planning to live and work here.

But those goals are undercut when it gets down to the ground level — what happens when a project becomes the subject for negotiations with the real-estate services department, what happens when that project is in the hands of a mid-level planner who is trying to follow sometimes contradictory rules.

That’s why the city is going to succeed or fail, not on the basis of its much-covered policies, but on the basis of how the engine runs, or doesn’t, behind the scenes.

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  • pestygod

    We had approval for our laneway house in East Van that was just taken away by a new city dept of interior design of all things. We only own one home and want to build a laneway to rent, not sell, as a mortgage helper. The city has made our contractor redraw plans because the size of gravel was too small, the ceiling was an inch too high, and now they didn’t want a washer,/ dryer upstairs. We thought it would be handier for a senior or single parent. But nope, the new 10 year Stalinist plan is for fewer laneway homes – meaning fewer rentals- and the red tape is costing us so much we might just give up. Vision is lying about wanting affordable rental units. Anyone buying that lie, I have a bridge to Ladner to sell you.