Mike Mackay, CEO of Strand Development, in front of one of their properties in the Dunbar neighbourhood in Vancouver, B.C.Jimmy Jeong/The Globe and Mail
Mike Mackay is not the biggest fan of concrete towers.
He much prefers lower-scale buildings, no more than six storeys, mostly built out of wood. “They have a greater sense of community. You know your neighbours.”
Mr. Mackay is not another disgruntled Vancouver resident objecting to the torrent of proposed towers the city has unleashed throughout its 500-block Broadway Plan area or other parts of the city designated for very high density.
No. Mackay is a developer, a second-generation builder whose company, Strand Development, where he is now CEO, was started by his father almost half a century ago.
The era of the shoebox condo is over
Mackay has built concrete buildings and has more in the pipeline, but he favours six-storey wood-frame projects as the kind of housing that his friends, relatives, and other Vancouver residents seem to prefer living in.
“It’s more appealing. Many people like the scale. Our size is just more conducive to livability.”
More importantly, he believes his lower-rise projects are, on the whole, more affordable. Concrete construction is inherently more expensive, between the cost of the materials and the longer time it takes to build in concrete (something any construction-costs estimator will confirm.)
The shorter timeline “allows us to get into income much faster and minimizes exposure to risk.”
The demand from cities such as Vancouver and Burnaby that developers provide up to 20 per cent of the units in many concrete buildings as rentals at below-market rates makes the financial planning for those towers really tricky, and further, requires that the market-rate units go for top dollar.
“The rent for the rest has to be at such a high level, it’s unrealistic,” he said.
A rendering of one of Strand's six-storey projects.Strand
As a result, he believes he is doing a better job of providing the kind of reasonably priced new rental housing that benefits the city much more in the long run than the concrete-tower-with-some-units-below-market model that Vancouver has favoured for certain areas. (It’s a model that Burnaby also has in place.)
“Ironically, we are the relatively affordable option,” he said.
His new apartments on Fraser Street, one finished, one in process, rent in the “high $4 a square foot” range. While that still might seem vertigo-inducing to some, it’s less than the $5, $6 or $7 a square foot that developers of concrete-towers-to-be in the Broadway Plan area were counting on to cover the subsidy needed for the below-market apartments in each building proposed under that zoning.
Mr. Mackay’s approach has another advantage – his low-rise buildings are less financially risky, so he can proceed faster and with more projects than someone steering one or more complicated concrete tower projects through city processes, contracting, and leasing. And he finds that the rent he can charge is not that much lower than the more expensive-to-build tower apartments.
He’s not the only developer who thinks that way.
Several other private developers concentrate on the lower-rise market as a less precarious, more affordable and therefore more saleable one. So does Metro Vancouver, the regional government body, which has launched a new program to build affordable housing.
As Toronto seeks low-rise apartments, bylaws requiring amenities may stand in the way
“We don’t have any concrete, for the most part,” says planner Michael Epp. “We’re doing only six-storey wood-frame because it’s 10 to 15 per cent cheaper than concrete.”
That’s an advantage that the very active pro-housing movement in California has emphasized in its push to get cities in that state to allow more housing density, arguing that a requirement for “inclusionary zoning” – a term that means a builder is required to have some proportion of apartments or homes renting or selling for less than usual market prices, usually restricted to lower-income households – in effect stalls new housing construction.
“The taller you go, the more unfeasible a project becomes,” says Shane Phillips, the housing initiative manager at UCLA’s Lewis Center for Regional Policy Studies in Los Angeles.
He said that, while the YIMBY (Yes In My Back Yard) movement in the United States is not actively lobbying against inclusionary-zoning policies that already exist, they are lobbying to try to prevent them from expanding. Mr. Phillips said it makes more sense to have direct government support for low-cost housing than larding complex requirements onto private developers.
“If YIMBYs had their ideal world, there would be no inclusionary mandate and more government subsidy into affordability.”
Vancouver rental builders, facing slowing demand, say government support needed
The problem for cities like Vancouver is that the idea of requiring some subsidized apartments out of development projects has been its major solution to housing affordability for three decades.
That strategy got boosted when the federal government stopped subsidizing social housing in the mid-1990s. In order to keep adding to its stock of lower-cost apartments, Vancouver (and eventually other cities) offered extra density above existing zoning to builders to get those precious units.
Canada, unlike the U.S., doesn’t have a tax credit for those who invest in low-cost housing, something that has made those kinds of projects work slightly better in the United States.
Instead, Vancouver (and Canadian cities in general) have only one tool at their disposal – require or create incentives for developers to include low-cost units in their projects.
In the past, that worked reasonably well in American and Canadian jurisdictions where builders were developing on vacant or almost-vacant land. The idea was pioneered in Montgomery County, Md., in the mid-1970s, when developers with large projects – often on formerly semirural land – were required to make 15 per cent of their homes available at moderate rates.
But that strategy becomes much more challenging when it is applied to existing neighbourhoods and land where there is already a lot of housing. The land cost is higher. The buildings have to be significantly taller to compensate for that. And there’s generally a lot more pushback from the many residents who already live there.
It’s one of the reasons Vancouver’s Broadway Plan, which set up a zoning incentive that favoured the concrete tower with below-market units over all other forms, is having so many problems.
In Vancouver, planners say it takes a village to grow a city
Besides the fact that most existing residents in the area dislike the design and neighbourhood-street-hostile towers being proposed, the requirement for the below-market units has stalled a significant number of the 150-plus proposed projects.
Those projects were counting on high rents in the market units, but the pool of people willing to pay high rents has shrunk as vacancy rates have increased.
The city and various developers have argued in the past that towers are necessary because they are the only form that works in a city like Vancouver, where the demand for single-family homes from those who can afford them keeps land prices too high to make low-rise apartments affordable.
Yet, they are currently going up all over town in neighbourhoods near the Broadway Plan area.
In Grandview-Woodland just to the east, for example, there’s been a building boom of low-rise apartments since a new neighbourhood plan got approved almost 10 years ago.
According to the city’s open-data records, that area has seen 253 multiple-dwelling building permits since 2017. While the official plan does allow some towers in the northern end of the neighbourhood and a few have been proposed, a big chunk of the new building has been through a surge of construction of low-rise apartments in the southern section, especially around the Nanaimo-Broadway intersection.
That’s the kind of housing density Mr. Mackay thinks works best.
“I am pro below-market rental. I just don’t think the private sector should be delivering it.”