Friday, October 19, 2018

So who should I vote for to make Vancouver housing affordable?

Last week, I wrote a column in the Vancouver Courier on who to vote for in the forthcoming election. If you didn't see it, you can find it here: https://www.vancourier.com/opinion/too-many-vancouver-candidates-are-promising-more-than-they-can-deliver-1.23458598

Having subsequently attended the CBC housing debate hosted by Stephen Quinn, and listened to many of the candidates, for those of you who have not yet voted I would like to share the following thoughts.

1) Don't vote for someone just because you like their promise of a 4-year rent freeze, because it will never happen. The city doesn't have the authority to impose this, and even an NDP led government has too much common sense to ever allow it.

2) Don't vote for someone because he or she promises to build more housing units than anyone else. For one thing, none of the mayoral or council candidates (with one exception) are carpenters or builders. They won't build anything. While the city does build units on city-owned lands, ( good examples are the rental apartments built with provincial government money on 12 city-owned sites that took almost 10 years to complete, or the 600 modular housing units (that I first proposed during the 2008 election campaign) completed over the past year with funding from CMHC and others), most new homes will have to be built by non-profits or the private sector. 

I was once in charge of the non-profit program in the CMHC Vancouver office in the 1970s. I understand the programs. The non-profits can only build with someone else's money, even on free land. The number of units to be constructed over the next 10 years will not depend on what some mayoral candidate promises. It will depend in large part on how much money is available from senior governments, (The city is not likely to provide funds if it's offering land), or private lenders. In the past, the private lenders have been very cautious about lending to non-profits. Who wants to foreclose on all these well-meaning people if the project gets into financial difficulty?

As for the tens of thousands of affordable homes to be built by private developers, if the rent controls and zoning requirements being promised by some of the candidates are to be kept, (for example, any condo project requiring rezoning must target 50% inclusionary affordable units, or any renovated rental unit must first be offered to the displaced tenant at the same rental rate,), many developers will move to Burnaby or Surrey or elsewhere. They won't be able to finance projects in Vancouver, especially if the new Council agrees with my friend Tom Davidoff and seeks more and more Community Amenity Contributions from every rezoning, which some candidates have also promised.

3) Do vote for candidates who are promising larger scale city-wide planning. This is a realistic and necessary promise and will happen....finally.

4) Don't vote for a candidate who repeatedly promises to end the practice of selling off city land and instead says she'll offer 20 or 30 year leases. The reality is that today the city of Vancouver rarely sells land, except in special instances. It generally leases land, except where a site might be consolidated with a privately owned adjacent site. The city will occasionally sell of 'street-ends' but who's worried about this? As for her proposal of 20 or 30 year leases, this demonstrates acute ignorance of real estate financing. The minimum lease term has to be 50 or 60 years.

5) Finally, don't vote for someone who promises to 'fix' housing affordability. As a chief economist for a major financial institution said to me over lunch today, sadly, we can't fix housing affordability in Vancouver. We can address it by improving public transit to other municipalities. We can increase housing choices by allowing duplexes and townhouses and small apartments in single-family zones, or higher densities elsewhere. But given the historic land values in this city, the cost of construction, increasing interest rates and rather flat incomes, sadly the housing affordability that many are hoping for is not going to happen.

Why is that? Even if land is free, given construction costs, soft costs including consulting and municipal fees, insurance, taxes and financing, no non-profit or private developer can build new one bedroom units renting for $375 a month or even $735 a month. It is difficult to economically build a new home that would rent for $1,000 a month.

So what do we do for those who can't afford to pay more? Governments can offer increased rent subsidies to those in greatest need. The province already does this. But is it willing to offer more? Is the city prepared to offer rent subsidies? It might want to. But I question whether it will be able to afford to given what I predict will be a significant decline in the Community Amenity Contribution payments to be received from developers.

There are a lot of good, sensible, people running in this election. But a lot of others have no real understanding of real estate economics and are making promises that can't be kept. Like Gregor Robertson's promise to end homelessness, they can best be described as aspirational.

I'm hoping we will end up with a council with some balance, that will offer different points of view representative of the general population. We'll know soon.

I'll be on CTV election night offering some perspective on the election results around the region from a housing planner's perspective. Now get out and vote.

4 comments:

Robert Renger said...

Michael, You wrote:
“The reality is the city of Vancouver rarely sells land, except in special instances. It generally leases land, except where a site might be consolidated with a privately owned adjacent site.”
Do you have any insight as to why the City sold the Olympic Village lands instead of leasing them (like the False Creek South lands to the east some 35 years earlier)?
Thanks, Robert

Michael Geller said...

Robert Renger, it's a fair question. I was told the city offered to sell the land, because given the requirements and restrictions related to the timing of completion of the units for the Olympics, and sustainability requirements
, they were advised that they might not get acceptable bids if the land was leased

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