Further musings on the future of SEFC Social Housing

Currently, two of the discussions taking place on Frances Bula's blog relate to the proposed cuts to city services, and ThinkCity's position that the city should sell the social housing units at SEFC. Yes, ThinkCity is promoting this, and I admire the organization for taking this stand.

The following are comments that I posted on Frances' blog this morning that hopefully provide a better appreciation of the context within which this decision should be made:

"I think it is ironic that there is a strong link between the two conversations currently taking place on this blog…the cuts to city programs and the decision on what to do with the Olympic Village social housing.

I agree with the concept that we should not create low income ghettos. For that reason, I have been arguing for market condominium and rental housing in the DTES, and I support the creation of smaller projects accommodating lower income households that are integrated into other communities. City Observer has reinforced the value of doing this.

The south shore redevelopment of False Creek confirmed for me the idea that when public land is redeveloped for housing, there should be a mix of incomes…it should not be exclusively for low income people (as were the first phases of the St. Lawrence redevelopment in Toronto) nor exclusively for high income people. (The city has often sold sites for top dollar, which were subsequently redeveloped exclusively with condominiums catering to higher income households.)

If the city was not facing significant financial problems at the Olympic Village, and in many other aspects of its operations, I would have no problem accepting the 252 units of social housing remaining as housing for those in the lower income brackets.

But the fact remains, for a variety of reasons, the city faces losses of tens of millions of dollars over the Olympic Village project. While these losses will not come out of annual operating budgets directly, they will reduce the Property Endowment Fund (PEF), and impact the future financial health of the city.

For those who have not been following the more detailed financing of the entire South East False Creek development, one of the reasons the city is facing significant losses is that it had hoped to cover all the cost of the soils remediation, construction of the beautiful seawall walkway and bridge, the environmental features, parks, community centres, childcare, and some of the social housing costs from the revenues from the sale of the land offered for condominium development.

However, two important things have happened. I am told the cost of all the public components, yes all… have increased, in some cases quite significantly. At the same time, there is a very real danger that the city will not receive all of the land payment it expected from the private developer to fund all of these initial costs, and cost over-runs.

I am not privy to the City’s proforma setting out the costs and revenues. But based on what has been publicly said, Millennium was to pay $193 for the land. I suspect there is a danger we will not get all of this money.

To make things worse, some people have suggested we may not receive any additional land payment, (other than a $17 million deposit which I’m told was paid). Worse still, depending on how well Mr. Rennie does with the condominium sales, we may not even get back all the money we have advanced to the developer to finish the building. (Yes, we could go after his other projects including Evelyn Avenue in West Vancouver and his proposed Davie/Bidwell project, currently going through rezoning, although I note this is being proposed by another related company.)

Now I realize I am starting to sound awfully alarmist, sort of like the mayor and Geoff Meggs and Miro Cernetig in the past, but based on the estimated costs of this project, (Frances, I’m being told the construction cost alone for the buildings is in the order of $450 to $550 a square foot, which is double what Onni or other developers have been paying to build new condominium housing.

As I have suggested before on this blog, a large part of this increase is attributable to form of the buildings and the ‘look at me’ design and construction features that were included so that we could proclaim this the most sustainable community development in the world!

If you want to know what these feature are, costing hundreds of millions of dollars, just go through the sales centre and look at the fancy shading systems on the exterior walls, and ask about the never before tried in North America heating system, and everything else that we’ll be boasting about in Copenhagen, but I digress.)

So my understanding of the current situation is that the city cost over-runs for the site development and community features are in the tens of millions of dollars, (this is in addition to the budgeted costs) and it is likely that we will not get all the money Millennium has promised to pay us for the land. Indeed, as noted above, there is a chance that we won’t receive any more money for the land, and if Miro Cernetig is right, we may not even get back all the money we have lent the developer to pay for the project.

So it is within this context, and the context that I describe in the last paragraphs of this posting, that we must now make a decision on the future of the social housing.

Before you finalize your position, you should also remember that not only is the Social Housing significantly over budget, and require tens of millions of additional dollars of further subsidies if it is to accommodate those in greatest need, IT IS PERHAPS OUR ONLY POTENTIAL REVENUE SOURCE IN SEFC TO OFFSET THE TENS OF MILLIONS OF DOLLARS IN POTENTIAL LOSSES.

There might in fact be another zero in the loss column, but since I haven’t seen the numbers, and don’t want to be accused of being unnecessarily alarmist, I will just talk about tens of millions in losses.

So for me this is no longer a philosophical discussion about the importance of keeping a promise, or the benefits of mixing low and mid and high income households in a community development. If we do lose a lot of money, then the assets and future revenue stream from the PEF will be reduced, and there will have to be additional cuts in future years.

This is why I advocate at least trying to recover the costs of the social housing. I complement Think City for also coming to the same conclusion. I also thank them for sharing that it can be done in a way that does not compete unfairly with the market housing.

And it can also be done in a way that will ensure some social mix, (and remember a former City Council did, at the last minute, give a bonus to Millennium to include some rental housing.

The project is not just condominiums for the wealthy as Ellen Woodsworth and others have stated, and to be fair, almost everyone has forgotten this too.)

By imposing sale and resale controls, it is possible to keep this housing ‘more affordable’ in perpetuity. (And yes, I realize $600,00 units are not very affordable for many, many people in the city, but they are more affordable than $1 million units.)

By leasing, rather than selling the land, the city can retain long term ownership of the property. And by imposing a right of first refusal provision, the city could buy back units over time, as our financial situation improves, if it is deemed important to have an even broader social income mix. (Although personally, I would just build more cost effective units on adjacent lands. )

In this regard, to respond to Glissando Remy, the reason that future social housing units on adjacent sites will likely not be so expensive is that they will not be built at a time of historically high construction costs…with lots of overtime payments to ensure they are finished by a certain date, and with many very innovative and never tried before features.)

A final thought. Yesterday Alice Sundberg, the former head of the BC Non Profit Housing Association invited me to see a non-profit housing project that according to one envelope building consultant needs $100,000 per unit in repairs, due to water penetration. The residents do not have the money.

The city and province claim not to have the money to help this low income group repair their homes. So I was being asked whether I could think of a creative solution that might involve selling the project to a sympathetic developer who might get a density increase and in turn re-build some or all of the social housing units along with some affordable market condominiums. As it turned out, I don’t think this is an appropriate or realistic way to proceed, but it might be possible to repair the building for $50,000 a unit, rather than $100,000 a unit. Nonetheless, this might still force out some of the residents, or indeed force out everyone for a while, depending what happens.

My point is this. This tragic situation is not unique. There are hundreds, if not thousands of existing social housing units currently occupied by low income households that are in need of serious repair. Many are on land owned by the city in the PEF and leased to non-profit organizations. Soon the city is going to be increasingly asked to use the assets of the PEF to help keep the low income households in their units.

So before you insist that the city keep these prime SEFC units as social housing, we should also think about those low income, single parent families, who right now are living in units just off Commercial drive, which are rotting and in need of repair.

We should also be thinking about the petting zoo, and the Bloedel Conservatory, because they too are related to what we do at SEFC.

The city needs to help a lot of unfortunate people who are currently living in deteriorating social housing, and yes, some who would be happy to be off the streets and living in any sort of housing. One way to ensure we can do this now, and in the continuing future, is to exercise good fiscal judgment when deciding on the future of 252 very expensive, but very valuable units in SEFC.

SEFC is supposed to be a ’sustainable’ community. While I am growing tired of the word, let’s come up with a fiscally sustainable solution to complement all its other wonderful and attractive features.