Friday, April 27, 2018

Another Geller SFU Lecture Looking back, Looking forward: Reflections on Housing Metro Vancouver May 10, 2018

While Metro Vancouver has changed dramatically over the past four decades, many concerns of yesteryear are surprisingly similar to those of today – foreign buyers, rental crisis, dwindling land supply, locals-first policies, and disdain for developers. Using his collection of newspaper clippings, in this presentation Michael Geller will offer a different perspective on Metro Vancouver's housing affordability challenges and some timeless solutions.

Date(s): Thu, May 10, 7-9 p.m. PDT
Event Admission: Free but reservations required. Reserve seats on Eventbrite.

Webcast: Free but reservations required. Register on Eventbrite.
Location: Room 1900, SFU Vancouver (Harbour Centre campus), 515 West Hastings Street, Vancouver

Michael Geller AIBC, FCIP, RPP has had a career as an architect, planner, real estate consultant and property developer in the public, private and institutional sectors. He serves on the Adjunct Faculty of SFU's Centre for Sustainable Development and writes regularly for the Vancouver Courier and Vancouver Sun.

Red tape remains a major culprit in Vancouver’s skyrocketing real estate Vancouver Courier April 26th 2018

As city trumpets reduction of processing times, it proposes increased Community Amenity Contribution rates

Why is housing in Vancouver so expensive? The answer depends who you ask.
While most acknowledge our region has a constricted land supply due to water, mountains and the Agricultural Land Reserve, many believe the fault lies with foreign buyers, especially from China, and the thousands of homes they leave empty.
     Others blame speculators who buy and flip pre-sale condos and properties as if they were playing a game of Monopoly.
     Increasingly we are told there is an imbalance between supply and demand. However, more supply on its own does not appear to be the answer. One only needs to look at the record number of condos under construction without any apparent price reductions.
     My colleagues in the development community believe a major problem has been the complex and time-consuming approval system.
     Last November, an early morning photo appeared on social media. Taken outside Vancouver’s Development and Building department, it revealed a row of architectural drawings and brief cases lying on the pavement.
     The owners were nowhere to be seen. They were off keeping warm somewhere. The plans and cases were place holders, so their owners could hopefully submit permit applications that day.
I thought of this photo last week when I received a Vancouver Communications department press release.
     Headlined “New measures implemented by City Hall within the last year to speed up the delivery of new housing and streamline planning and development processes in Vancouver are showing results,” the release went on to report:
  • A 50 per cent reduction in development permit timelines as part of an affordable housing pilot — with initial approval now under 13 weeks.
  • An 80 per cent reduction in times for landscape reviews for single family homes.
  • A 30 per cent reduction in wait times at the Development and Building Services Centre.
     The release added that more improvements were to come, including policy changes to create greater transparency and simplified regulations.
     While architects, builders and developers have often criticized the city for its unnecessarily complex and lengthy approval process and Vancouver city staff, especially Kaye Krishna, general manager of development, buildings and licensing, deserve recognition for their success in reducing processing times.
     Faster approvals should help reduce the cost of housing, especially if the province’s proposed so-called speculation tax and school tax apply to residential development sites awaiting approvals.
(I can’t help but smile at the irony that by adding costly taxes, the province claims to be improving housing affordability.)
     However, the Lord giveth, and the Lord taketh away.
     Shortly after receiving the city’s press release on reduced processing times, I received a draft council report proposing increased Community Amenity Contribution (CAC) rates.
For those not familiar with the term, CACs are contributions provided by property developers when city council grants development rights through rezoning. CACs fund park space, libraries, childcare facilities, community centres, transportation services and cultural facilities.
      They are in addition to Development Cost Levies (DCLs), which are also paid by property developers, based on square footage, to help fund parks, childcare facilities, social and non-profit housing, and engineering infrastructure.
     For a six-storey building along the Cambie Corridor, the CAC will increase from $68.18 to $115 for each square foot of additional floor space approved by rezoning.
(I tip my hat to the city staffer who determined $68.18 would likely be more palatable for some Cambie Corridor developers than $64.14.)
      I question whether these charges increase the cost of housing. City staff and politicians believe not, since their consultants have told them CACs simply reduce the price developers will pay for land.
      Developers disagree but agree to make these payments as long as their cost can be passed on to future buyers.
     The fact that developers are prepared to pay $11 million for single-family lots along the Cambie Corridor proves to me land prices are not being reduced by CACs.
     Given these land costs, increased CACs, DCLs, and a proposed new Utility DCL to come into effect in September 2018, combined with escalating construction costs, interest rates and “soft costs,” developers are gambling they can find buyers willing to pay at least $1,500 per square foot when they go to market.
     we ask why housing is so expensive in Vancouver.


Encouraging investment in rental properties key to affordability B.C.’s new taxes miss the mark and could have dire consequences Vancouver Courier April 11

      Over the past two months, there has been growing concern about the negative impacts of the B.C. government’s proposed housing taxes, especially the so-called Speculation Tax.
     While approximately 80 per cent of British Columbians support a tax to curb real estate speculation, myself included, it is becoming increasingly apparent this tax is not going to achieve this.
     Nor was it intended to, according to UBC economist Tom Davidoff, one of the architects of the government’s tax proposalsInstead, he wanted to restructure the Canadian taxation system to collect more money from foreign buyers avoiding Canadian income taxes.
     The provincial government called it a Speculation Tax knowing this would appeal to voters upset by foreign buyers and rising housing prices.
     Davidoff openly admits he was shocked to discover the tax would apply to vacation properties in the Gulf Islands and B.C. interior.
     the government has tweaked the program to exclude some vacation properties and introduced variable tax rates depending on whether you live in Cranbrook, Calgary or Kolkata, few expect this tax to improve overall housing affordability.
     On the contrary, the new provincial taxes, combined with rising interest rates and more stringent mortgage qualification, could have severe impacts.
     Before expressing glee at the possibility of lower housing prices, we should consider what could happen if they drop too much.
     According to some real estate economists, a 35 per cent decline in housing prices, which is not out of the question, could cost the average homeowner $245,000 in equity. Housing starts could fall by half and 54,000 BC jobs could be lost, increasing the unemployment rate to 7.5 per cent.
     While I oppose the so-called Speculation Tax and so-called School Tax, there are tax measures that would create more affordable rental housing.
How do I know? Because they produced most of the affordable rental housing found around Vancouver today.
     Between 1958 and 1973, knowing that new rental housing typically operates at a loss in the initial years, the federal government offered a tax incentive program to encourage investment in purpose-built rental buildings.
     Indeed, as my dear friend the late Morris Wosk once told me, coins from the washing machines and dryers sometimes represented the difference between positive and negative cash flow.
The new program allowed doctors, dentists, lawyers and other professionals to take advantage of Capital Cost Appreciation (CCA) provisions and other tax benefits, and write off rental property losses against other income.
     During this period, 35,000 rental units were built around the city, including most of the low-rise walk-ups found throughout the West End, Kitsilano, Kerrisdale and Marpole. Not only did these tax incentives result in a lot of rental housing, they created significant employment for architects, builders and suppliers to the construction industry.
     When this program came to an end, another followed. Between 1974 and 1981, thousands more rental housing units were created through the Multiple Unit Residential Building program.
Like the earlier program, it too offered tax incentives to investors that could be used to reduce other income. However, unlike the earlier program, MURB units could be strata-titled and had to remain rental only for a prescribed period. Nonetheless, four decades later, many apartments continue as relatively affordable rental housing.
     More recently, at least 45 per cent of Vancouver’s new condominiums units have been purchased by investors. Most will be rented out. The same thing has been happening in Toronto. Once again, investors will lose money in the initial years. However, over time they will earn a profit.
Unfortunately, the recently announced provincial taxes are going to increase the cost of ownership and rental housing due to higher Property Transfer Taxes and additional holding taxes while awaiting approvals.
     Instead, the provincial government should be emulating past federal governments and creating tax programs to encourage investment in rental housing.
On May 10, to mark my fourth anniversary as a Courier columnist and 35th year in business, I will be delivering a lecture at SFU Harbour Centre.
Titled “Looking back, Looking forward,” it will examine how today’s housing affordability crisis has developed over the past five decades, illustrated with clippings from the Courier and other newspapers. I will also offer solutions — some old and some new. I hope you can join me.
Details can be found here.

Vancouver needs more housing choices at prices the rest of us can afford Vancouver Courier March 27, 2018

     So where are you going to live next? Hardly a day goes by when I don’t overhear someone being asking this question.
     Sometimes it is a student who’s just been given notice to vacate a basement suite since the house has been sold. Or a long-term renter whose building is being demolished to make way for new condos. Or a young couple about to have their first child.
     Often, it’s an older couple whose house has become too big and expensive to keep, especially now that an additional school tax will significantly increase their property taxes.
     I regularly talk to community groups and organizations about the pros and cons of alternative housing choices for students, millennials, empty-nester couples and seniors.
     Many want to know where to find affordable housing. What should they look out for when buying a new or resale home? Is it better to move into a townhouse or apartment? Is concrete that much better than woodframe? How can you avoid the oftentimes reported pitfalls of condominium living?
     While I need more than 700 words to respond to these questions, here are some things to consider.
In the past, many empty-nesters told me they would move out of their house if only they could find a suitably designed townhouse or apartment in their neighbourhood.
     After all, just because they were getting older was no reason to have to move away from the community in which they had lived most of their lives. Why should they leave the shops they frequented for decades or the church they regularly attended?
     While I still occasionally hear this, I do not hear it as often. That is because many of the favourite neighbourhood shops are shutting down or the church is being redeveloped with condos. The neighbourhood is changing.
     Furthermore, children and grandchildren are now living in Langley, Abbotsford, Squamish or Vancouver Island. Perhaps it’s time to cash out and move closer to them.
     Today’s millennials are facing a different set of problems. Affordability is the critical issue. While most are resigned to never living in a single-family house, just renting or buying a decent apartment in Kitsilano, near Main Street or Commercial Drive is often out of the question.
     Lately we have heard a lot of words and promises from all levels of government about the need to address Vancouver’s housing crisis. However, the reality is that most people I talk with are not going to benefit from government assistance.
     Instead, it will be targeted to people in far greater need: the homeless and those in shelters, low-income senior renters, or poor single-parent led households on B.C. Housing’s waitlist.
What we need are more housing choices at prices the rest of us can afford. However, there are real obstacles to producing this housing.
     Firstly, there’s the high price of land. Given values along the Cambie Corridor and other Vancouver neighbourhoods, the cost of land for a space equal to that occupied by the chair you’re sitting on is $1,900. The land cost for a 600-square-foot one-bedroom apartment is $265,000.
     If that is not bad enough, the city recently announced increased Community Amenity Contribution payments along the Cambie Corridor up to $125 per square foot of building area. This equates to $80,000 or more for a small one-bedroom apartment. This is in addition to other city charges including development levies, permits and engineering fees.
     That’s $375,000 and we haven’t yet paid for any of the consultants, marketing fees, financing and other costs, or construction.
     When this is added in, that new Cambie Corridor one-bedroom apartment will likely cost $720,000 before any developer’s profit.
     So, what are we to do?
     For one thing, everyone concerned about affordable housing should challenge Vancouver’s increasing Community Amenity Contribution charges and other fees since they’re always passed on to future buyers. The developer doesn’t pay.
      Secondly, just as your first car was probably a used car, first-time Vancouver buyers should consider resales rather than a new project.
      And if they own a car, they should sell it and join a car-share program. One just has to compare the cost of operating a car for 10 years with the appreciated value of the same investment in real estate to understand why.