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STIR program to continue with modifications to reduce the amount of public subsidy needed

May 21st, 2012 · 16 Comments

One of Vision Vancouver’s first acts in council was to convene a large group of developers, planners, architects, and housing advocates to come up with a program to create new rental projects in the city.

It was a good time for it, as the recession had hit and development companies were open to new proposals that could keep them going.

The Short Term Incentives for Rental program aimed to encourage developers to build rentals, which had to remain rental for 60 years or the life of the building, whichever was longer, by giving them breaks on parking, giving up the usual development-cost levies, and, in some cases, giving bonus density.

Some critics of the program don’t believe it, but there were some cheap rentals created through the program, mostly on cheaper east-side land where builders stuck to four-storey woodframe buildings. The program also created a huge amount of controversy on some prominent sites — the West End, Marine Gateway, Rize — because the density given as an incentive seemed to produce buildings out of scale with the neighbourhood.

Council voted this week to continue the program (as per my story here), but changed it so that the incentives now only apply to buildings that are rental only.

Some critics are still saying it will lead to the destruction of existing affordable housing or that they don’t understand why developers need the incentives. (That was a point that Councillor George Affleck kept making during the council debate.)

But it seems like this is exactly the kind of incentive that developers got during the 1960s and ’70s, which led to the creation of tens of thousands of four-storey walk-ups all over the Lower Mainland, which are now the precious cheapo housing of the region — so precious that Vancouver council and I believe a couple of others have declared them off limits for development unless a developer offers to build replacements.

Those incentives in the ’60s and ’70s were also criticized by some in their day, by the way, as wasteful giveaways to developers who were profiting by building high-end market rentals that weren’t really providing affordable housing.

And hard to argue that the incentives are not needed. You’d think if developers thought they could make a profit on building rentals, they would have done it long ago. But the city was seeing only about 150 units a year built until the STIR program came in. Then it jumped to what will average 500 a year.

Vancouver council limits developer incentives to rental-only construction


VANCOUVER— From Wednesday’s Globe and Mail
Last updated

Vancouver council is going to restrict incentives to developers who build rental housing in this high-cost city to curtail some subsidies that soared to as much as $70,000 per unit.

The Vision Vancouver-dominated council, which has been peppered with criticism over its rental-incentive program, decided Tuesday to limit it to developers who are building rental-only buildings. The program, which began two years ago, had been open to those trying to mix rental units with condos for sale in the same building.

So far under the program, almost 1,700 units have been proposed and are working their way through the system.

“More units were created in the projects that were 100-per-cent rental,” housing planner Dan Garrison told council Tuesday before the Vision councillors voted to approve the change.

More important, those units also needed far less public subsidy.

Developers of the rental-only buildings got a subsidy of just $4,900 a unit, partly because those units were in low-rise structures that are built of wood, rather than more-expensive concrete.

The units mixed into buildings with condos ended up requiring $23-million in city subsidies to create just 327 units, or $70,000 a unit.

That $23-million consisted of fees that developers normally have to pay to help cover the cost of new city services needed as their new buyers move in.

If the money hadn’t been used as a rental incentive, it would have gone into parks, daycares, community centres and other services for residents.

The program had many critics over the past two years. Local resident groups near some of the projects said they were created out of scale for the neighbourhoods and that developers were given too many freebies.

Resident groups and critics from the left also made the case that the program didn’t actually create any affordable housing. The units, none of which has come onto the market yet because they’re still under construction or awaiting approvals, will be renting at the high end of the range.

Critics from the right, like Non-Partisan Association Councillor George Affleck, asked why the city thinks it has to provide subsidies to have developers build rentals when 1,300 condos a year come onto the rental market, as investors buy them and rent them out.

But Mr. Garrison argued that, as those units age, they will become part of the pool of cheaper housing.

The staff report noted that one-bedroom units renting for $1,500 a month in the 1990s, when they were new, are renting for $1,000 a month now.

He said rental housing continues to be the only option for many people in Vancouver, where it takes an income of $90,000 to buy a one-bedroom condo, $160,000 for a two-bedroom.

The staff report also said the rental housing being built is 70-per-cent cheaper for renters than if they were paying a mortgage on similar-sized condos in the same neighbourhood.

And Mr. Garrison said investor-owned condos are unreliable as permanent stock, because investors may sell them off as real-estate prices rise.

Vancouver, along with other Canadian cities, saw thousands of apartments built in the 1960s and early 1970s when investors could get federal tax breaks meant to encourage rental-housing construction.

But when those tax breaks were ended, apartment building dropped, nowhere moreso than in Vancouver, where high land prices helped reduce apartment construction to almost nothing.

Prior to the city’s rental-incentive program, developers were building only about 150 units a year.

The city’s incentive program is projected to produce about 500 rental units a year.

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