Friday, June 10, 2022

A letter to the Globe & Mail's Alex Bozikovic re: density and affordability

This morning, I received an email from Alex Bozikovic, the Globe and Mail's Architecture Critic and a journalist whose work I often admire, questioning what I meant when I tweeted out "one of the greatest fallacies in Vancouver is that increasing density results in greater affordability. It doesn't. As higher and higher densities are approved, land values on a square foot basis increase." 

This tweet was referenced in a Globe and Mail story by Kerry Gold, (whose work I also admire) this morning. Below is my response to Alex attempting to explain what on first glance appears to be an odd statement from me.

Alex, while you can't have affordability without density, increased density does not necessarily equate to increased affordability, especially over time. It may in the short term, but not necessarily over time. 


This is because there are six key cost components (see attached) when it comes to producing housing and determining affordability. Often the price paid for land is determined on a per square foot basis (psf) given the required end price for condos or rents for purpose-built rentals, the density at a particular point in time, and the other cost considerations.  Here are some recent examples.


Condos: The city of Vancouver increased the density along the Cambie Corridor from single-family density to 2.5 FSR in many areas. Developers determined that they could sell completed product for $1400 psf and could pay $400 psf buildable for the single-family lots along the street. The property assessments along the street in turn increased in value from $3 million to around $8.5 million. 


However, for a while the end price being paid by buyers (both investors and 'end-users') dropped from $1400 to around $1250 psf. Land values dropped accordingly. Some lots sold at the lower price, but many were taken off the market. Projects stalled.


Eventually condo prices increased back up to $1400+ a foot.


Another thing happened. One particular architect Arno Matis demonstrated that he could get approval for 2.75 FSR, rather than 2.5. Those who already owned properties benefitted if they hired him and sought 2.75 FSR. Others sought him out.


Once other landowners, realtors and developers were aware a 2.75 FSR was possible, and being advertised by realtors, condo prices did not come down. Rather, the price being paid for the bungalows again increased, both to reflect the increased end sales price but also the assumption that if you hired Arno Matis, or an equally talented architect, you could likely get a 10% FSR bonus, or perhaps more. 


Over the years I have been involved with one development project and several property tax appeals along the Cambie Corridor. Here is a link to a story I did with the Georgia Straight about Cambie Corridor rezonings.,the%20story%2C%E2%80%9D%20Geller%20suggested.


Rental housing: For some time, developers of purpose-built rental housing determined thy could pay approximately $200 psf buildable for land upon which to build a purpose-built project, provided they could rent it out around $3.75 psf. A lot of sites traded at $200 psf buildable.  The value of the land was site area times $200 times FSR density.


If they thought they could get 3.5 FSR, they could pay $3.5 million for a 6000 sq.ft. single family lot, and many did. 


However, recently, construction costs and interest rates have increased quite significantly, and many of these projects are no longer economically feasible as initially conceived.


Three things are happening. 

  • Land values are starting to come down psf: Developers can no longer pay $200 psf buildable. 
  • Developers are seeking higher densities:  Those who have already bought sites are seeking higher densities to reduce the value of the land on a psf basis.  Others are telling the city it must increase densities along the Broadway Corridor and elsewhere to make projects feasible
  • Developers are having to increase their equity contribution:  To address increased financing costs, developers are having to put in more equity to make a project feasible and financeable. 

So, what's my point. Of course, housing affordability is related to density, but it is also heavily influenced by the market value, (whether ownership or rental, and if rental whether a 20% below market component is required), and the five other cost components.


In fact, one might argue that construction cost, interest rates, and municipal fees can be even more significant than density when determining whether a housing development will be affordable.


It is for this reason I do not agree with Vancouver's Director of Planning who says you must have 8 FSR or 12 FSR to make a project feasible. It's much more complex than that. If interest rates go to 12% or 21% as they did in 1981 when I left CMHC to join a private developer, this will change required densities until rents increase, etc. or construction costs or municipal fees are adjusted. Or government subsidies become available. 


Furthermore, as densities increase, land values will increase, all other things being equal.


So, what's the solution? 


I believe we must take density into consideration, but we should establish neighbourhood densities based on context and physical form, not just economics. 


We must consider urban land economics. This is important since if the value of a single-family lot zoned for multi-family is not greater than its single-family value, it won't get redeveloped as multifamily. 


By example, for a while, the required density for townhouses on single-family land in Vancouver was around 1.1 to1.2 FSR. For a single-family lot to be feasible as a purpose-built rental project with a below-market component, a 2.5 to 3 FSR was required. 


But these numbers are constantly changing as construction costs, interest rates, and municipal fees, especially community amenity contribution charges, change. In other words, you can't have affordability without density, but increasing density does not necessarily increase affordability. 


I hope this is helpful. Cheers

Saturday, June 4, 2022

So, what is the right density? Some additional musings on the Broadway Plan.

I recently sent a message to Theresa O'Donnell. Director of Planning and General Manager of Planning, Urban Design & Sustainability. I don't know if she received it since I didn't receive any acknowledgement, but I did send a copy to the Mayor's Office and members of Council. Below is the message:  

Flawed economic modeling for Broadway Plan heights and densities.

Theresa, I have just reviewed your closing comments document. Having spent five decades developing market and non-market housing in the public, private, and institutional sectors, and often been the proponent for greater heights and densities, I must tell you that while I agree higher densities are required to deliver affordable rental housing, the proposed FSRs and heights as set out below are deeply flawed. 

I would suggest that the land values will be determined by the allowable FSR and heights, not the other way around.

I understand that Coriolis was involved in undertaking fiscal analysis for the city, and while I have known and respected this firm for decades, they are not always right. 

For example, they were wrong in predicting what might happen to property values along Cambie Corridor when they set the CACs. 

Who else has provided the following questionable data? 

  • Along Broadway min. 8 FSR (20+ storeys) is required for market rental and office to be financially viable. 10-12+ FSR (30+ storeys) is required for rental with 20% BMR.
  • In residential areas, min. 5.5-6.5 FSR (18-20 storeys) is required for rental with 20% BMR
These FSRs are most inappropriate for a city that does not aspire to be New York. I hope Council does not approve this level of density and height, especially in the absence of more park space and community amenities.

I'll be happy to discuss this further. 

While I didn't hear back from Ms O'Donnell, I did receive a response from Councillor Jean Swanson who wanted to know 

"So, Michael how much density do U think would be required for say 30 percent affordable or 40 percent? Thanks. "

I was pleased to receive this question and would like to share my response to Councillor Swanson

You have asked what the required density is to achieve different levels of rental housing affordability. Unfortunately, there is no correct answer since although land costs are a critical cost consideration affecting affordability, there are five other cost considerations that impact housing prices and rents.

These are construction costs, soft costs, marketing, financing (interest rates), and profit. (See attached slide presentation.)

As these costs, especially construction and financing costs go up and down, the cost to create housing goes up and down. I therefore do not think we should attempt to establish Building Heights and FSRs based on certain land value assumptions today since other cost will fluctuate over time.

In addition, the required density will also depend on whether there are federal and provincial subsidy dollars available for a project.

For these reasons, we should do what we have traditionally done; establish densities based on sound physical planning practices. How many people do we want to accommodate around new transit stations? What floor space ratio and building height is appropriate next to lower density neighbourhoods, recognizing they too will change over time.

And based on the anticipated/desired population increase, what is the required amount of new park space, community facilities, etc. and where might they go?

It is simply wrong to say 

  • a minimum of 8 FSR (20+ storeys) is required for market rental and office to be financially viable. 10-12+ FSR (30+ storeys) is required for rental with 20% BMR.
  • In residential areas, min. 5.5-6.5 FSR (18-20 storeys) is required for rental with 20% BMR

These FSRs are most inappropriate for a city that does not aspire to be New York.

I therefore advocate establishing Building Heights and FSRs that are appropriate from a physical planning perspective, noting that currently, FSRs generally range between 1.5 to 3. While I agree the transit stations warrant special consideration, the density in other areas might be doubled for now depending on location, with bonussing to be determined later over time for more affordable housing projects, considering the other five cost considerations as set out in the attached.

I hope this is helpful. Feel free to share with others to see what they think of my musings! Cheers

Below are the slides I prepared which review six key cost components of housing.

Wednesday, June 1, 2022

June 7, 2022 A Public Hearing for the last major development in DNV's Lions Gate Village -Capilano & Marine

In 2014 I rezoned the former Grouse Inn/Esso property at Capilano & Marine which forms part of the District of North Vancouver's new Lions Gate Village centre. This development, now known as Park West, is nearing completion. On Tuesday June 7th I'll be returning to DNV Council on behalf of Marvel Development, with IBI Architects, to present at Public Hearing a proposal for the adjacent site, currently occupied by the Travelodge Motel, Denny's and Pho Restaurant.

If approved, redevelopment of this property will complete a new public park and road system serving the village. It will also add 330 new homes including 41 non-market rentals, 77 market rentals & 212 condominiums. The non-market building is being constructed to Passive House Standards and the balance of the development is meeting or exceeding DNV's stringent environmental standards.
The condominiums will include rent-to-own and locals-first programs. The overall FSR is only 2.75 and to address traffic concerns, the number of parking spaces has been dramatically reduced to less than one per unit since the development is on the RapidBus route with a stop outside the door.
Details of the application and Public Hearing can be found here:

Recently someone wrote to the Mayor & Council accusing me of being a hypocrite since I strongly support this development but opposed a 28-storey highrise at Broadway & Birch in Vancouver. When I pointed out it that at 10.52 FSR it was a spot-rezoning at almost four times as dense as this development, which conforms with the OCP, he acknowledged that perhaps that made a difference!
If you would like more details about this application and the forthcoming Public Hearing, email me at Since I expect many to oppose the development due to traffic and view concerns, I am hoping that others will show up to support the need for a very sustainable development, offering more housing choices in very a convenient location,