Governments, developers can play a part, expert says
Derrick Penner
Sun
Squatters supported by the Anti-Poverty Committee (above) occupied a building at 5 West Hastings in Vancouver from Sunday to Tuesday. Affordable housing advocates in Vancouver and Victoria have focused attention on the issue this week during the Union of B.C. Municipalities meeting in Victoria. Photograph by : Ian Smith, Vancouver Sun
Vancouver’s property developers could provide modest, $500-a-month apartments to help ease the city’s housing-affordability crisis, the Urban Development Institute (UDI) contends.
Governments, however, would have to cut the costs they extract from the building process to achieve that goal. Development cost charges and requirements for amenities such as parking need to be dropped for low-cost housing, UDI executive director Maureen Enser said.
The issues of homelessness and affordable housing have come to the fore this week at the year’s Union of B.C. Municipalities convention in Victoria. Activists have occupied abandoned buildings to protest what they see as a lack of action in providing affordable housing.
Enser offered the development community’s perspective on how governments could make modest-rent housing an attractive enough investment opportunity for developers to get involved.
Enser said land and construction are the biggest costs in building new housing.
So, to get modest-rent housing, land-owning governments, both at the municipal and provincial level, could lease land to developers at nominal rates with covenants that ensure rents would remain low.
Municipalities could also waive development cost charges, the fees builders pay to hook up to municipal services, Enser added. And cities such as Vancouver could reduce their requirements for parking.
Enser added that the federal government could also add incentives. The Canada Mortgage and Housing Corp., for instance, could insure loans for modest-rent projects, which would reduce developers’ financing costs.
And federal politicians could consider reintroducing tax incentives, such as allowing developers to write off financing costs and allowing them to roll capital gains over into new investment in rental housing, which spurred previous rounds of rental construction.
Currently, Vancouver requires that new multi-family developments contribute to the supply of social housing, either within their projects or contributions to the city’s social housing fund.
“The bottom line is that [the current system] hasn’t produced a lot of new [housing units],” Enser said. “So we need a much broader approach than just one solution.”
Cameron Gray, director of the City of Vancouver’s housing centre, which is charged with implementing the city’s affordable housing initiatives, said Vancouver has turned over land in similar circumstances before.
He added that doing so in today’s environment is “not an inexpensive option” for city council to consider.
Gray said Vancouver does provide land for subsidized, non-market housing at cut-rate and sometimes nominal lease rates, and does not levy development cost charges on such social housing projects.
Greater Vancouver Regional District levies, however, do apply to social housing developments.
The city has also used zoning as an incentive for developers to add social housing to their developments. Adding density to sites is one example.
Gray is also skeptical that reducing development charges would reduce housing prices.
“In reality, prices are driven by demand,” Gray said.
Vancouver Mayor Sam Sullivan said council is considering many different options for affordable housing.
Sullivan added that city staff is working with developers on getting up to 10 per cent so-called modest-market housing in the Olympic athletes village project on southeast False Creek.
“We’re very motivated to provide more affordable housing, so we’re certainly interested in looking at [Enser’s] proposals,” Sullivan said. “We want to ensure that we have adequate housing for people of all incomes.”
Rich Coleman, B.C. Minister of Forests and Range, and minister responsible for housing, said the province is looking for solid cooperation between governments and the private sector in the initiatives the province supports.
The province has recognized the need for more affordable housing with its recently announced new housing strategy.
“We’re looking for ways to be innovative with [local governments and the private sector],” Coleman said.
THE $500-PER-MONTH APARTMENT
Property developers could build rental housing in Vancouver that lets for $500 a month if they had government help in reducing costs. An Urban Development Institute estimate of current costs shows what makes such housing prohibitive, and offers suggestions to reduce expenses:
objective: A 320-square-foot suite renting for $500 per month, providing a long-term return of six to seven per cent to the developer. To build it, a developer couldn’t spend more than $150 per square foot.
Current costs
$380 per square foot, which would rent for $900 per month based on:
– Land: $100-$140 per square foot
– Construction: $210-$240 per square foot
– Soft costs: $65-$70 per square foot (Including development cost charges)
Cost cuts required to meet objective
– Land: $100 per square foot
– Construction: $110 per square foot (by eliminating parking requirements)
– Soft costs: $25 per square foot (by eliminating development charges)
New total: $145 per square foot
© The Vancouver Sun 2006
