I always enjoy taking a telephone call from journalist Peter Caulfield. He's genuinely interested in the topics he writes about and eager to learn more. I discussed 'inclusionary zoning' with Peter for approximately 45 minutes while driving across Vancouver Island to attend an affordable housing conference in Tofino, which I reported on in a previous blog. we would have spoken longer, but I eventually was out of cellular range!
Thursday, February 23, 2023
|I have known Jean Swanson since 1974 when as CMHC's Assistant Architect/Planner I was involved with the construction of new and renovated social housing buildings in Vancouver' Downtown Eastside|
Introduction. On February 13, I read an opinion column by Jean Swanson urging the provincial government to impose vacancy controls on BC landlords so that they couldn't raise the rent after a tenant moves out. While I am not actively involved in the ownership or development of rental housing, based on my 5 decades of experience in the public and private housing sectors, I strongly believe this would do more harm than good. I therefore cheekily posted a tweet to the effect that someone needs to explain the economics of rental housing to Ms. Swanson.
The Tyee saw my tweet and invited me to write a response to Ms. Swanson's proposal. It is reprinted below. My key points are rents are increasing when a tenant moves out because for political reasons, allowable rent increases set by the provincial government are unrealistically low. Yes, they protect in-situ renters and that's a good thing. But they discourage new rental housing construction. That's a bad thing. Especially for those looking for rental housing.
There are many better solutions other than imposition of a vacancy control. One way is to subsidize tenants, rather than developers of rental housing. Yes, this puts more money in landlords' pockets but if we don't, over time the shortage of rental housing will further increase. Other ways include encouraging more private sector investment in both non-market and rental housing.
Unfortunately, if you review the comments posted following my column online at the Tyee, most readers don't want to see more money go to landlords. While I understand this sentiment, this attitude is partially responsible for the crisis we're in. I welcome your comments.
The Case Against Vacancy Controls for Vancouver
Better to increase payments for rent costs to people with low incomes. Latest in a series on housing advice to leaders.
Planner and real estate consultant Michael Geller responds to a Tyee piece urging vacancy controls by former city councillor Jean Swanson.
While I have known and respected Jean Swanson’s community activism for five decades, I fear vacancy controls will not result in more affordable rental housing. On the contrary, they could do much harm. Before explaining why, I would like to share some background.
I first met Jean Swanson in 1974. At the time she was a Downtown Eastside community activist. I had recently moved from the Canada Mortgage and Housing Corp.’s head office in Ottawa to become CMHC’s assistant architect/planner for British Columbia.
I was surprised to discover that despite repeated requests to the provincial government, the shelter component of welfare had not increased in 14 years. I proposed that Swanson and I jointly write a Vancouver Sun opinion piece urging the government to increase the allowance.
Unfortunately, others in the community opposed this initiative, arguing increasing the welfare shelter component would simply put more money in landlords’ pockets.
This was precisely what I wanted to do, to encourage and assist them to fix up their buildings.
Which brings me to Jean Swanson’s vacancy control proposal that would prevent landlords from raising an apartment’s rent after a tenant moves out. To understand my concerns, I would offer this additional background.
Between 1958 and 1972, the federal government provided tax incentives to developers and investors to build “purpose-built” rental buildings. At the time, there was no rent control and no capital gains tax.
These incentives allowed doctors, dentists, lawyers and other professionals to write off capital cost allowance, or CCA, against other income.
These buildings were not always financially viable when finished. As the late Morris Wosk once told me, who along with his brother Ben built many Vancouver apartment buildings, the coins from the washing machines and dryers were often the difference between positive and negative cash flow.
During this period, approximately 35,000 rental units were built throughout the city, including most of the low-rise walk-ups found in the West End, Kitsilano, Kerrisdale and Marpole.
In 1973, the NDP provincial government introduced rent controls. The allowable annual increase varied, but in 1975 it was 10.6 per cent and new construction was exempt for five years.
Unfortunately, once rent controls were introduced, developers stopped building rental buildings since condominium development was more attractive. Purpose-built rental construction plummeted.
In 1977, to encourage new rental supply, new buildings were totally exempt from rent control.
During this period, the federal government implemented a succession of rental housing programs. They included the Limited Dividend program, which offered high-ratio mortgages in return for reduced profits. The additional Assisted Rental program and Canada Rental Supply program both offered preferential financing to developers.
And then came MURBs. Between 1974 and 1981, the Multiple Unit Residential Building program resulted in thousands of additional rental housing units in Vancouver.
Like the Capital Cost Appreciation program, it offered investors attractive tax incentives which provided “write-offs” against other income. However, unlike previous programs, MURB units could be strata-titled and sold later, provided they were rented for a prescribed period. Four decades later, many MURB apartments continue as rentals.
Notwithstanding all these programs, rental supply did not keep up with demand. Then, something unexpected happened.
In the 1980s, financial institutions increasingly required condominium developers to presell a percentage of the units in a building before approving financing. Since it was easier to presell to investors, buildings were designed with a high percentage of small suites appealing to investors. Over time, approximately 45 per cent of Vancouver’s new condominiums were purchased by investors and rented out.
While rents did not always cover costs in the initial years, over time investors earned a profit and tenants helped pay off their mortgages. In 2022 42.5 per cent of all new rental units built in Vancouver were condominiums.
Now back to Jean Swanson’s proposal for vacancy controls. In her Tyee article, she writes:
“Over half of Vancouver’s population rents. With more than 60,000 purpose-built apartment units in the city and a turnover rate of 10.8 per cent last year, 6,000 rental units could be kept affordable each year after the current tenant leaves.
“Instead of rents rising on average 43 per cent, these units would rise the allowable annual increase — two per cent this year, for example — even if their tenant dies or leaves. This would free up more apartments at lower rates for folks who need them.
“Instead of billions of dollars flowing into the hands of landlords — which are, increasingly, multinational investment vehicles — vacancy controls would keep that money in renter hands, reducing inflation, and letting tenants spend their savings at local businesses and on things that they need.”
This seems like a convincing argument. However, some of the information is incorrect and misleading.
“This reflects the fact that… landlords can also take the opportunity to renovate between tenants. In doing so, they raise unit quality and can then ask for higher rents from new tenants.”
Also, while “multinational investment vehicles” own rental buildings in Vancouver, most rental suites are owned by families, small companies and individuals renting out condominium apartments and basements.
The key reason why landlords raise rents when tenants move out is because under rent controls, the annual allowable increase is no longer 10.6 per cent as it was in 1975. It was 2.6 per cent in 2020, 0 per cent in 2021, and 1.5 per cent in 2022. However, property taxes, mortgage rates, energy, building maintenance and operation costs increased significantly more. (The allowable increase in 2023 is 2.6 per cent, well below the rate of inflation.)
If a vacancy tax was imposed, several things would happen.
Landlords would likely think twice about upgrading a suite after a tenant moves out.
Tens of thousands of condominium owners would sell their suites, most likely to owner-occupiers, significantly reducing the rental housing stock.
Developers would be further deterred from building new rental apartment buildings. As it is, many buildings with development approvals are not proceeding because of higher interest rates and construction costs. A vacancy tax would be the final nail in the coffin.
As an alternative to vacancy controls there are several actions that governments could take to prevent substantial rental increases whenever a tenant moves out while also increasing the supply of rental housing.
The first is to impose more realistic annual rental increases that reflect the rate of inflation. As noted, in 1975 the allowable rental increase was 10.5 per cent. This corresponded with the inflation rate that year of 10.7 per cent.
While it may be politically attractive for governments to restrict rent increases below the rate of inflation, this short-term gain becomes long term pain.
Governments should again exclude new apartments from rent controls. This has worked in the past and if introduced would most certainly spur more rental housing construction.
While federal, provincial and municipal governments have implemented programs to encourage new rental construction, consideration should also be given to bringing back programs like MURBs that encourage more private investment in rental housing. This time, they could help fund both private and non-profit projects.
Finally, governments should recognize that sometimes it is better to subsidize the tenant rather than developers and landlords. Rent supplement programs such as Shelter Assistance for Elderly Renters, or SAFER, should be expanded and the shelter component of welfare should most definitely be increased.
Sadly, the rental housing crisis is going to be with us for some time. But there is much that can be done. There just must be the political will.
Note: you can find comments from Tyee readers here: https://thetyee.ca/Opinion/2023/02/21/Case-Against-Vacancy-Controls-Vancouver/
Saturday, February 18, 2023
While I most often listen to CBC radio, over the years, I have enjoyed my association with radio station CKNW. (I would listen to CKNW more often, but I tire of the same commercials, especially "you're approved!")
Prior to the 2008 election, I enjoyed being a guest on the Christy Clark show. The highlights were often our conversations during commercial breaks, and I sometimes regret not taking her advice to go door knocking as a candidate during the election. She also rightly advised me to get better known in the South Asian community. (When Kennedy Stewart did a postmortem on the election, he told me that while I did well on both the eastside and westside of the city, I did very poorly in those ridings with a larger South Asian population.)
For three years following the 2008 municipal election, I participated on CKNW's Civic Affairs Panel, a weekly feature on the Bill Good Show. The more time I spent with Bill Good, the more I respected him. I enjoyed discussing issues with fellow panelists Frances Bula and the late Jim Green, although Jim and I did not always agree completely on many issues. But then again, we came from quite different worlds, and had vastly different perspectives on most matters. I never tired of Frances' perspective on issues.
I also enjoyed being an occasional guest with Jill Bennett, Linda Steele, and Jody Vance. However, over the past few months, I have especially enjoyed chatting with Jas Johal. Although I have never actually met him in person, since our interviews are over the phone, I admire his calm disposition and thoughtful questions. He strikes me as a very caring sort of person.
Over the past few weeks, we have discussed several topics including David Eby's housing proposals, the financial difficulties of the developer Coromandel, and most recently the growing interest in converting office buildings into housing. One of the advantages of having to appear on the show is that it forces me to do a bit of research on a topic before our conversation.
|The Qube was formally the Westcoast Transmission Building|
|Conversion of the BC Hydro Building into the Electra was one of the first high profile conversions in Vancouver.|
This was particularly true on the matter of converting offices into housing. While I have never undertaken such a project, I have had a longstanding interest in the concept. I remember well when the BC Hydro building became The Electra in 1995 https://theelectra.ca/ and the Westcoast Transmission building (the building suspended by cables on Georgia Street) was converted into the Qube condominiums in 2005 https://en.wikipedia.org/wiki/The_Qube_(Vancouver) Both clever names!
Here are a few more observations based on the limited research I undertook.
This has become a hot topic in the US, especially Washington https://www.washingtonian.com/2022/07/28/should-dcs-empty-office-buildings-get-turned-into-apartments/ and some Canadian cities where the office vacancy rate is high and there is a desire to enliven the downtown. Calgary certainly comes to mind. The Urban Land Institute has included it in several recent publications and a forthcoming workshop is being held.
ULI publication-fall 2022 special feature – can be complicated and tricky but daring developers and ingenious architects are showing the way to address housing shortages
Sustainability proponents often argue that the most sustainable building is one that already exists. For this reason, conversions can be highly desirable. However, they are not always feasible. Factors influencing the likelihood of success include the size of the floorplate, and whether the windows may be too far away from the core; and whether there are 'post-tensioning' cables in the floor. This is common in some office buildings since it reduces the number of columns. However, it makes it difficult to drill holes for plumbing.
One of the advantages of conversions is that although they are not always less expensive, they are usually faster to complete since most of the structure can be reused.
One challenge of conversions is the fact that office buildings rarely have balconies or other outdoor space. This can be addressed by creating 'Juliette balconies' which are essentially a railing in front of a sliding door. However, another potential solution is to add a bank of balconies to the outside, with access doors. Several companies, including Lumon, the Finnish company to whom I consult on retractable balcony glass panel systems, are exploring the feasibility of adding balconies to existing buildings. This could be a game changer, especially since Covid has increased the desire for some private outdoor spaces associated with dwelling units.
Monday, February 13, 2023
Last weekend, I attended a housing affordability conference in Tofino organized by the Planning Institute's North Vancouver Island Chapter. I signed up for several reasons: I hadn't been to Tofino for 25 years. The last time was when my wife Sally chartered a bus and organized a surprise 50th Birthday Party for me and fifty friends at the Wickaninnish Inn shortly after it opened. A memorable event, despite the rain.
I was also keen to hear about recent affordable housing initiatives on the Island and meet younger planners interested in affordable housing. It's now 51 years since I joined CMHC at a time when there was a lot of money available to build public housing and innovative non-profit and coop projects (and I never tire of talking about 'the old days'. I look forward to the return of some of these programs including Section 15.1 and 34.18 of the National Housing Act which funded many of the projects built around the province.
I also like to promote the opportunities for modular construction in smaller communities around BC. like the modular housing I helped design and develop in Chase and Keremeos.
The conference program included a presentation by Ian Scott - Interim Executive Director, Tofino Housing on Tofino's severe shortage of affordable housing and the role of the Tofino Housing Corporation. Many property owners are adding RVs and trailers on their properties to help meet this demand. Planners and municipal officials are inclined to take a relaxed attitude to this, given the severe need. (I could not help but compare this to the situation in Vancouver where tent cities are appearing along Hastings and surrounding streets.)
Sadly, I suspect it takes a few fires and deaths before administrations take more affirmative action to address the problem.
On a positive note, we heard about the housing corporation's success creating affordable housing projects. I was interested to hear that rather than develop and build the housing itself, the corporation has been partnering with Catalyst Community Developments Society https://catalystcommdev.org/, a non-profit entity with considerable housing development experience. This is an idea that could work well in other smaller communities. And larger communities for that matter.
This was followed by a Local Housing Panel including Vancouver architect Bruce Haden - Principal, Human Studio, Chris Bozman - a local builder, and Ian Scott. It was moderated by Bruce Greig- Director of Community Planning for the nearby District of Ucluelet. I was disappointed to hear how the success of projects was so often tied to which local politicians were in power. Many politicians put the unfounded fears of residents ahead of the need for affordable housing.
Another session looked at legal aspects related to affordable housing including Housing Agreements. The presenter was Guy Patterson - Partner, Young Anderson, a law firm that specializes in providing legal services to local governments. His talk examined how legal agreements can be written to ensure that affordable housing remains affordable over time.
As someone who often negotiates such agreements on behalf of a developer, it was interesting to be one of only four or five real estate consultants/developers in a room of public sector planners discussing housing agreements.
The afternoon session included presentations by Vancouver Island University master planning students Courtenay Miller, Alisha Feser, and Alicia McLean. Each was quite inspiring, especially Ms. McLean's impressive development approvals toolkit. I urged her to present it to UDI and UBCM officials so that she could compare the attitudes of planners, developers, and government officials in terms of what needs to be done to improve municipal approval procedures.
The Final Session - featured two speakers from CMHC-Cleo Corbett - Senior Specialist, Government Relations, and Elizabeth Tang -Specialist, Outreach and Project Development. It was gratifying to see CMHC getting back into the funding of affordable housing. Sadly, no one from the province was in attendance.
On the Saturday morning, there was a housing tour that featured some colourful staff housing which was developed along with a new hotel development. We also visited informal 'temporary' RV and mobile home communities.
There's nothing like seeing a burned-out mobile home to appreciate why some fire safety regulations should be enforced, especially since there's oftentimes nothing more permanent than a temporary solution.
No trip to Tofino would be complete without some good seafood. Unfortunately, the restaurant was closed at the Tofino Resort and Marina https://tofinoresortandmarina.com/ where the conference was held. But we did enjoy some good meals at The Shed https://www.shedtofino.com/ and Wolf in the Fog.
|Vancouver Island oysters|
|The Cedar Sour - Cedar infused rye, lemon, thyme and egg white|
|A lot of tuna and seaweed is served in Tofino|
|Potato crusted smoked oysters with apple puree and truffle oil, and seaweed salad with mushroom, puffed rice, daikon, sesame mayo, miso chili oil and added tuna sashimi.|
|The bar in the Wolf in Fog is most impressive|
If you haven't recently been to Tofino, or nearby Ucluelet I can highly recommend a trip. If you have an electric car there are charging facilities, but don't expect your Tesla cruise control or full self-driving features to work for part of the trip when there is no Wi-Fi or cellular service. Hopefully, improved service can be provided in the not-too-distant future since it is a bit unnerving for some of us who like to be connected to be out of communication for such a long time. After all, the road is still a bit rough in places and many of today's cars do not have a spare tire!
|This photo does not do justice the magnificent views along the west coast of Vancouver Island|
Wednesday, February 8, 2023
From the Squamish Chief February 4, 2023
After decades of visioning, nearly 1,000-unit Sea to Sky development may happen
Fine Peace Furry Creek Development Ltd. has succeeded in getting its rezoning application approved by the SLRD, giving it a chance to succeed where other developers have sputtered.
A decades-long vision of building a major residential golf-resort development may finally be on its way to becoming a reality.
A rezoning application four years in the making has been approved, giving Fine Peace Furry Creek Development Ltd. a chance to make good on a nearly-1,000 unit development in Furry Creek.
Multiple developers have tried to make the vision a reality, but those attempts have sputtered since the 1990s.
Furry Creek has a golf course and about 150 residential units, but the full build-out never happened as the land has changed hands.
Fine Peace is the latest owner, acquiring part of the land in 2017 and expanding its foothold in 2018. Now it has a real shot at succeeding where other developers fell short.
On Jan. 25, the Squamish-Lillooet Regional District board voted unanimously in favour of adopting rezoning, Official Community Plan amendments and other bylaws related to Fine Peace's application.
The area will thus be rezoned into a CD-3 comprehensive development zone.
As a result, this rezoning has paved the way for the developer to build 750 residential market units, 120 non-market affordable residential units and 120 resort-hotel units.
There would also be 2,323 square metres of commercial space, a community centre, an administration office, a childcare facility, a transportation hub and 19.1 hectares of parks, trails and open space.
A new fire hall and public works yard, among other things, are also part of the deal.
The end result would be a sizeable community around the golf course that is perhaps most famous for being the setting of a showdown between Adam Sandler and Bob Barker in the movie, Happy Gilmore.
During the adoption of the project in January, there were no comments from elected officials.
However, back in Sept. 28, 2022, when the project was given third reading, there were a few sparse remarks from elected officials.
That day, only directors Jenna Stoner and Tony Rainbow, who respectively represent the District of Squamish and Electoral Area D, had comments.
Stoner acknowledged the years of work from staff, elected officials and the public on this project.
"I think it's really important to remember there were already development rights on this property, and I think through staff, with direction from the board, we've gotten to a really good place," she said.
"It's a much more forward-looking community than what was originally available to the developer. I appreciate the diversity of housing forms that are now presented. There are no fossil fuels going into any of this development. There are significant amounts of contribution to affordable housing."
She said these are things that the SLRD should be looking for in new large-scale developments such as this one.
Rainbow was the next to comment.
"A couple of months ago, I had no idea of the opposition," he said.
Right after, he said that perhaps it was the wrong place to make that statement, and decided not to speak further.
Back in August, Rainbow presided over a public hearing where residents filled the multi-purpose room of Britannia Mine Museum.
There, he heard comments from two main camps of people.
One camp was clearly in favour of the proposal.
The other was composed of those who said they were not anti-development, but complained extensively about one or more aspects of the proposal.
Safety, traffic and environmental concerns were raised. Some questioned the location of the commercial space and others were worried about building heights.
One group of five discontented residents went as far as retaining a lawyer to represent them at the hearing. Most of the others with complaints represented themselves.
The largest group in favour of the project was represented by a person who said she spoke for 110 people living in Oliver's Landing, a townhouse complex by the beach in Furry Creek.