Realtor urges more density in exchange for extra units sold at lower profit
Lena Sin
Province
Density deals are the key to solving Vancouver’s housing squeeze, says realtor Bob Rennie.
Bob Rennie, one of Vancouver‘s most influential realtors, says he’s got a solution to the housing squeeze on families and first-time home buyers.
“It’s simple, simple, simple,” said Rennie. “It has to be so simple that the developer would be crazy not to do it.”
With housing affordability gone in the Lower Mainland, Rennie says it’s time industry, government and would-be homeowners come together to tackle the issue.
The affordability problem is expected to be the focus of Rennie’s annual address today at the Urban Development Institute.
The institute represents the development industry and Rennie’s “state of the union” delivery is closely watched.
“All highrises, whether it’s in Coquitlam, Surrey, Port Moody, Port Coquitlam or Burnaby — they’re all hovering either side of that $500 per square foot. That’s really starting to tax local incomes,” he said.
To help homebuyers latch onto the property ladder, Rennie says city officials need to grant extra density to developers on new projects.
In return, the developer reduces the profit on those extra units to just 10 per cent — a figure Rennie calls “ridiculously low.”
Costs can be further reduced if interior finishes are done to an “Ikea level” rather than high-end granite and stainless steel.
By doing all of that, the price tag can be substantially reduced, by possibly as much as 25 per cent, Rennie estimates.
“I can’t put the developer in the social housing business or the middle-market business,” said Rennie. “But with this model, it’s just icing on the cake. Everyone wins.”
It’s a model that Rennie envisions working not just in Vancouver, but throughout the Lower Mainland.
While it will likely do little for those aspiring to own a detached house in Vancouver, Rennie argues it at least provides first-time buyers and young families the chance to own a larger condo or townhouse, which are currently out of reach for many wage-earners.
By the end of 2007, it required 79.2 per cent of the median pre-tax household income in Vancouver to buy a 1,500-square-foot house, an 18-year high, according to report in January by RBC Financial Group.
While the report said it expects some relief this year, with an increased supply of housing in the Vancouver market, it also predicted moderate price gains.
Whistler has already implemented a similar affordable-housing scheme by increasing densities for developers.
But Whistler politicians say their exact model — which requires the bonus units to be sold at cost — would never work in Vancouver.
“There’s pushback from the development community which places [city] councils in an awkward position,” said Whistler Mayor Ken Melamed. “And particularly in the Lower Mainland, the developer will often move to the next jurisdiction where the council isn’t as worried about it.”
By allowing developers to make a 10-per-cent profit on bonus units, everyone wins, says Rennie.
Rennie says he’s committed to figuring out how to get “the fortunate living with the less fortunate.”
“I want to get all municipal planning departments together and let them yell at me and tell me how stupid I am and how it doesn’t work. But I want to convince them — and I’m going to be rather hard on them,” he said.
A SERIES OF QUESTIONS AND ANSWERS ON PROPERTY VALUES AND WINDFALL PROFITS
Q: Will the first buyer be able to re-sell the property for a windfall profit?
A: No. To prevent flipping of the property for a windfall profit there must be a charge on title in favour of the city, which allows the city to access any proceeds of sale. The charge on title essentially gives the city a claim to the property.
Q: Will implementing this model affect property values?
A: No. The property value will continue to travel with the market. But if the owner purchased a condo for 75 per cent of market value, for example, when he wants to sell the unit he will only get 75 per cent of the profit.
The city, or whoever granted the bonus density, will be entitled to the remaining 25 per cent.
Q: How are prices kept affordable for the next buyer?
A: The next buyer can still purchase at below market as long as they keep the charge on title in favour of the city.
