Opinion: REW.ca Financing Growth – New Condo Buyers Paying More Than Their Fair Share

Amenity levies charged to developers, such as CACs, are ultimately passed on to the buyer – and that’s the wrong approach, argues housing expert Michael Geller

The developer of this Cambie Street condo had to pay a CAC equal to $55 a foot buildable to the City of Vancouver. This adds more than $75 a foot to the saleable price, when you add in financing, profit, etc.

For years, municipalities across Canada have been struggling with how best to finance the costs from new development. While Canadians pay a lot in taxes, only eight cents of each dollar goes to municipalities, generally in the form of property taxes and fees.

The concept of charging new developments to help finance the costs association with growth has evolved throughout Metro Vancouver over the past few decades.

In 2004, Vancouver City Council approved a report entitled Financing Growth, which identified two revenue sources: Development Cost Levies (DCLs), which would be charged on all new developments to help pay for roads and other infrastructure; and Community Amenity Contributions (CACs), which would be charged to pay for additional amenities such as affordable housing and childcare, when new development occurs as the result of rezoning.

Financing Growth raised a most important question: Who really pays these fees?

While the cheque is written by the developer, staff concluded that neither the developer nor future homebuyers pay. Instead, they concluded the DCCs and CACs would be paid by the land owner whose property is being rezoned, since the fees would have a downward pressure on land values.

Neither I, nor most Vancouver urban land economists and developers, agree with this analysis. Instead, we believe that new purchasers and tenants ultimately end up paying for these additional fees.

So is this a bad thing? Many would say there is nothing wrong with a system that charges new residents for the additional services they consume. While I might agree in principle, there are serious problems with the City’s approach to financing growth, especially when it results from rezonings.

My concerns relate to both the method of determining the amount of the CACs, and the concept of burdening new buyers and renters with these costs.

Rather than charge a CAC based on the cost of providing services, the City of Vancouver and more recently other Metro municipalities usually calculate the CAC based on the increased value of the land. As a rule, they try to collect 75 per cent of the land value increase, either in cash or in-kind facilities such as childcare facilities or social housing units.

Again, while it may seem like a good idea for municipalities to share in the land value increase resulting from rezonings, this approach can lead to unintended consequences.

For one thing, it encourages municipalities to improperly zone land, so that developers will bring forward rezoning applications for townhouses or apartments and be required to make CAC payments.

However, if developers do not come forward, the result will be an insufficient supply of suitably zoned land for certain types of housing, leading to higher costs.

We are now seeing this happen. In many locations around Metro Vancouver, new townhouse and apartment developments are very expensive, since there are so few suitably zoned sites. As an illustration, I cannot think of any available townhouse sites in either the Westside of Vancouver or West Vancouver.

Neighbourhood residents should also be concerned with this approach. When the city receives the major portion of the land value increase resulting from a rezoning, politicians and officials may be prepared to approve projects at higher densities than good planning might dictate, knowing the money can be put to good use. While they deny this would ever happen, I know otherwise.

New homebuyers and renters should also be concerned with the current approach since they are effectively paying to fund social housing, parks and community centres in other parts of their municipality; facilities that really should be paid for by a broader segment of society, and over time.

Conversely, if rezonings are not approved, there may be insufficient funds to finance new or upgraded community services. In Vancouver, most new childcare facilities are built by developers and financed through rezonings. No rezoning, no childcare. This is no way to plan a city.

So what is the solution?

New developments should be required to offset the costs of growth, but over time. Rather than the current ad-hoc “let’s make a deal” approach, municipalities should pre-zone land through a proper comprehensive city planning process, and impose DCLs and CACs which reflect a portion of the cost of providing additional services.

While some might fear that “pre-zoning” land will result in higher taxes, zoning can be designed so that properties are assessed at their current use, not their future development potential.

We should also look to past practices when new infrastructure and facilities were financed over time through local improvement charges and other forms of taxation. We can also learn from other cities which use bond financing and other approaches to more evenly spread out the costs.

As Metro municipalities consider how best to include greater housing choices in new and existing neighbourhoods, it is a good time to reconsider how best to zone land and finance growth.

We desperately need new approaches that will contribute towards the cost of subsidized housing, affordable childcare and other amenities, without burdening new buyers and renters with more than their fair share of these costs.

Michael Geller is an architect, planner, real estate consultant and developer with more than four decades of experience in the public, private and institutional sectors. Some of his notable projects include the redevelopment of the South Shore False Creek, Bayshore in Coal Harbour and UniverCity at SFU. He is an adjunct professor at Simon Fraser University and is an affiliate of the UBC Masters in Urban Design program. Michael is a well-known commentator on real estate and housing and an adviser to the City of Vancouver's Affordable Housing Task Force. He is also a past president of UDI Pacific and UDI Canada, and has been honoured as a Fellow of the Canadian Institute of Planners and a Life Member of the Architectural Institute of BC.

 

Opinion Vancouver school sites offer housing opportunity: Vancouver Courier June 16, 2015

Affordable family rental housing was built above two schools within Toronto's St. Lawrence community

Last week two Courier stories caught my attention.

The first addressed the need for more family housing in the city. The second reported on a study commissioned by Education Minister Peter Fassbender concluding that 19 schools could be closed down due to low enrolment.

While I did not initially connect the two stories, my friend Ed Korbin did. Korbin is the founder of Instafund, a 30-year-old Vancouver company that arranges financing for developers. He, like many others, is concerned that families with children are being forced to leave the city since they cannot find suitable, affordable accommodation.

He told me about 1950s developments that clustered family oriented housing around children’s play facilities. Sadly most, like Dolphin Court in Kerrisdale, have been replaced by highrises or other buildings catering to empty nesters and seniors.

Given the high cost of land, he thought the Vancouver School Board properties might offer a solution. Most should be retained for future educational facilities, but they could also used to generate long-term income from family-oriented rental housing. He was confident that funding could be arranged to make this happen.

As we looked from our Granville Island restaurant table southward across False Creek, I was reminded of the early planning concepts for our city’s False Creek development and Toronto’s inner city St. Lawrence development.

From 1975 to 1979, I served as the federal government’s special coordinator for both projects, each of which offers some interesting lessons about integrating schools and residential development.

In Vancouver, then-mayor Art Phillips was concerned that families would not move into the somewhat controversial south shore False Creek neighbourhood unless a school was completed with the first housing. The city therefore commissioned Henriquez and Todd Architects to design a cooperative housing development and adjacent elementary school. 

Today, if you walk or cycle along the south shore False Creek waterfront walkway, you will notice that with their orange and red metal roofs, supposedly reminiscent of railway cars, the school and cooperative housing look very much alike.

Over the subsequent years, with its mix of one-third low-income, one-third mid-income and one-third high income households, the South Shore False Creek community has become one of North America’s most highly acclaimed inner city neighbourhoods.

In Toronto, former mayor David Crombie also wanted to see school facilities incorporated into the first phase of its St. Lawrence project. It too was a comprehensively planned community being built on former industrial lands, offering a mix of uses and market and non-market housing.

At St. Lawrence, it was necessary to accommodate both a public school and separate Catholic school. Since the site for the new community was relatively small, Crombie proposed that the two schools be built side-by-side, and be required to share one gymnasium, something that was unheard of. He also demanded that the playing fields be part of the neighbourhood park system, another innovation.

If that wasn’t enough, he also instructed the planners to design a mid-rise, non-market family housing development above the two schools.

Despite these challenges, the project was built and upon completion was named in honour of Crombie.

While the federal funding that contributed to the success of False Creek and St. Lawrence is no longer available, I believe it would be feasible to redevelop many of the 19 school sites identified by the province’s study with a mix of market and non-market housing catering to families and seniors, while still maintaining room for existing and future educational facilities.

In some cases, the new housing could be built beside the schools, with shared play areas and parks. In others, new housing might be constructed above the schools, as it was in Toronto.

In a few cases it might make sense to sell sites to generate much needed revenue to fund new educational facilities. However, the majority of sites could be leased for both non-market and market family housing.

Some leases might be pre-paid. Others would provide for payments over time. The result would be some immediate funding, and a long-term income stream.

More importantly, new suitably sized and priced housing would ensure that families with children can remain in the city, and the classrooms will remain full.

- See more at: http://www.vancourier.com/opinion/vancouver-school-sites-offer-housing-opportunity-1.1970077#sthash.hRoMSICW.dpuf

Opinion: Lessons from the Vancouver Heritage Foundation house tour Vancouver Courier June 10, 2015

While housing affordability and taxation continue to be very much in the news, this week I would like to explore another important issue facing our city: how best to preserve heritage structures and character homes.

My column is inspired by last Sunday’s Heritage House Tour, organized by the Vancouver Heritage Foundation. On one of the most beautiful days of the year, I was fortunate to join hundreds of Vancouverites touring nine heritage properties scattered around the city.

In the interest of full disclosure, I had a particular interest in this year’s tour since along with a business partner, I recently purchased the Vinson House, one of West Vancouver’s oldest houses. Our goal is to save it from demolition through a Heritage Revitalization Agreement. I was therefore especially interested in learning more about Vancouver’s plans to protect heritage properties.

For those not familiar with the Vancouver Heritage Foundation, it is a registered charity that supports the conservation of heritage buildings and structures given their potential contribution to the city’s economy, sustainability and culture.

Although it is confusing, the foundation is not to be confused with the Heritage Vancouver Society, another independent non-profit entity that encourages the community to preserve, restore, and appreciate Vancouver’s heritage.

This year’s tour included the Queen Charlotte Apartments — an impressive 1920’s structure built by Charles Bentall at 1101 Nicola St. in the West End. It was developed at a time when wealthy Vancouverites were moving out of the city to the new suburbs, particularly Shaughnessy.

Once a high-end apartment-hotel, it was converted to condominiums in the 1970s, and is now a much appreciated and cared for property.

As I left the building I walked by a couple of somewhat dilapidated older rental apartment buildings.

Looking at their crumbling cornices and walls, I could not help but wonder what it will take to encourage their owners to restore them to their once former glory. Although they no doubt provide affordable accommodation, they did not appear long for this world, especially if there is ever a fire or earthquake.

Next on our itinerary was one of the oldest surviving houses in the West End. Built at 995 Bute near the end of the 19th century, it has gone through numerous iterations as a single family house, rooming house, multi-suite structure and now back to a single-family house. In recent years, the structure has been raised, original materials were carefully removed, then reinstated, allowing for some modern features including a geothermal and in-floor radiant heat system.

Sadly, another of the tour’s houses is not likely to enjoy such an illustrious future.  

Located at 6385 Marguerite St., this elegant Georgian Revival home was built in 1930 and is a good example of a style popular in Vancouver during the 1920s and 1930s.

However, the house was recently sold, and given its large lot and location, like many nearby houses, it is likely to be demolished and replaced by a much larger and more expensive dwelling.

Although some new neighbourhood houses are designed to look like they are from another era or place, they do not have the heritage significance of the original houses. City officials are well aware of this and are now reviewing their heritage conservation program.

I personally believe one solution to preserving significant character houses outside of Shaughnessy is to allow one or more infill houses to be constructed in return for heritage conservation and designation.

Not only will this help retain these character homes, it will result in new housing choices for those wanting to remain in these neighbourhoods, but in smaller, more suitably designed housing.

It will be like killing two birds with one stone.

One of the side benefits of this year’s Heritage House Tour was discovering many delightful streets around the city. Too often I drive by these neighbourhoods, but rarely get out of my car and explore on foot. I was especially impressed with the leafy streets of the West End, but also charming streets off Commercial and Victoria Drives.

I plan to explore more of these neighbourhoods before next year’s tour. You might want to do the same.

- See more at: http://www.vancourier.com/opinion/lessons-from-the-vancouver-heritage-foundation-house-tour-1.1963372#sthash.ph6HIGC8.dpuf