Kerry Gold Globe and Mail - Curv projects seeks approval to remove social housing units - Globe and Mail, November 29, 204

Renderings of the CURV condo project in Vancouver by partners Brivia Group and Henson Group.

For many years I was a fan of Inclusionary Zoning which required a developer to build affordable housing, in return for greater development rights. More recently, I've changed my mind for several reasons. For one thing, they increase the price of the non-subsidized units. This in turn can increase the price of existing housing. Also, mixing social housing with expensive market housing often doesn't work, especially in a soft market. And currently we are in a soft market.

Last week Kerry Gold wrote about one such project in the Globe and Mail. Of course I had to tell her what I thought, and appreciate the fact that she slightly 'santitized' my comments! Here's her story.

The Curv tower development in Vancouver’s West End is a case study in investor influence and market dynamics – and the role developers play in delivering crucial below-market housing.

The 60-storey project promised 102 units of social housing on the levels below the luxury condo and market-rate rental suites, a feature that helped them obtain rezoning approval for considerably more density. Presales had been going well. The marketing spokesperson said they had set a record last year, with the sale of a $4,400-per-square-foot unit on one of the top floors.

But the market for presales has gone soft, and the developer has applied to remove the social housing units from the development. Instead, Montreal-based Brivia Group has applied to the city to pay cash-in-lieu, or a community amenity contribution.

The building originally had 50 secured purpose-built market rental units, but that would increase to 174 units, if the city approves its request to forego the social housing.

“I am not surprised to see this,” said developer and consultant Michael Geller, who’s been keeping an eye on the project – touted as the world’s tallest passive house building – since it launched presales in May, 2023.

“I remember going to the project launch and observing that absolutely no mention was made of the social housing units in the building by the marketing team,” he says. “I think every experienced luxury condo developer will tell you that it is fine to include predominantly market rental units in the same building as condos or create social housing units in a separate building nearby.

“But the Curv wants to be super luxury and just the threat of very low-income people in the building, hanging outside, will deter buyers,” Mr. Geller said.

Two months ago, the city amended the West End rezoning policy to allow for cash-in-lieu payments instead of delivering social housing units, to help with “financial challenges and “recent economic shifts,” said Dan Garrison, the city’s director of housing policy and regulation.

“The changes would also align the West End’s housing requirements with the newly approved [provincial] guidelines for transit-oriented areas,” he said in an e-mail.

Such payments should cover costs for off-site social housing, including land and construction, and will be “determined on a case-by-case basis through the rezoning process,” according to the amendment. The West End community would be given priority for the funds.

Because of the market downturn, there are 280 social housing units within three projects that have been rezoned around the Burrard Street corridor that are not getting built, according to the city.

When Brivia Group’s partner Henson Development applied for a rezoning four years ago, the city policy for the area required either 25 per cent below-market housing or one-for-one replacement of the existing rental apartments, whichever was greater. There are 51 units in two older apartment buildings lost due to the redevelopment at 1059-1075 Nelson St. (the addresses have since been changed to 1059-1083 Nelson St.). But the city considered the promised social housing and purpose-built rental units at the Curv a bonus towards their 10-year housing targets.

“The issue of CAC’s being renegotiated when the market goes soft is very problematic – it generates all sorts of potentially bad behaviour,” says Cameron Gray, former director of housing for the city of Vancouver. In the 1990s, Mr. Gray worked in the early formation of CACs, which the city used to finance below-market housing.

When social housing is involved, it usually requires a developer partnering with the city or a non-profit operator, which is more complicated. Mr. Gray said he can understand why a developer would prefer to simplify and instead have 174 market rate rental units to sell off to a pension fund or other investor, or simply hold as an investment.

“But if you allow the CAC to be treated as insulation for the market, then suddenly the city starts taking on the risk,” he said. “So, the city becomes the risk-bearing partner. It can result in a developer coming in and saying, ‘I can offer them a whole bunch, get my rezoning and come back and say, it doesn’t work … bail me out.’”

As well, the cash might not make its way to social housing if it’s not immediately directed there. And cash loses value due to inflation.

“If the city is doing pay in lieu, it has to put the money to work in social housing pretty quickly,” said Mr. Cameron, who is a fan of the city “land banking,” or purchasing properties in a soft market.

“They have to make the money work, because if you stick it in the bank and have it do nothing, at some point it may become reallocated to street improvements or the art gallery or child care, or something. So, you have to be pretty intentional about what you are doing.”

In the four years since council approved the rezoning, wait-lists for social housing have outpaced population growth, according to Metro Vancouver’s housing data book for 2023. The data showed a 27 per cent growth in the number of people in need of social housing, with 18,865 households on BC Housing’s social housing wait-list. That was up more than 4,000 households since June, 2022.

Mr. Geller pointed out that other municipalities, such as Burnaby, are also adjusting their below-market housing requirements now that projects are failing to get built.

The Curv site had been flipped a few times over the past decade, with each flip driving up the value. The apartment blocks were initially purchased by Wall Financial Corp. in 2013 for a reported $16.8-million, with a plan to develop a tower. They then sold the site in January, 2016 for $60-million, a share sale to a group of Chinese immigrant buyers, as reported by the South China Morning Post. Only a month after the purchase, the consortium then flipped it for $68-million. In 2021, Montreal’s Brivia Group purchased the site for an undisclosed sum and proposed the luxury mixed residential tower.

Construction failed to start this year because the developer has had problems selling its 358 luxury strata units in a market downturn.

Before the downturn, the marketer for the project, Jacky Chan, said many of the buyers were super wealthy, seasoned investors and holders of large property portfolios. More recently, he said the higher interest rates and China’s own housing downturn were having an impact on the Vancouver market.

In B.C., developers must show they’ve got the financing in place to start construction within 12 months of filing a disclosure statement with the BC Financial Services Authority. Lenders require about 70 per cent of the project is presold.

“We still need another $100-million,” Mr. Chan said in June. “We have filed a new disclosure statement that gives us another year to work on it, because of how big it is. We were able to retain 95 per cent of the buyers. … People want to stay in and continue to see this building come through.”

Brivia Group did not respond to a request for an interview.