Municipalities are having to pull back on development charges to obtain infrastructure funding, but are still required to pick up a lot of the slack, says former city of Vancouver director of planning Ann McAfee.Jennifer Gauthier/The Globe and Mail
British Columbians have seen a lot of policies aimed at addressing the housing shortage in the past three years: tax measures aimed at reducing speculative demand, towers around transit hubs, and multiplex units on single-family lots. But allowing development doesn’t necessarily deliver housing, say housing professionals.
Former Vancouver planning director Larry Beasley says provincial and local governments are putting too much faith in their ability to deliver housing through legislation.
“They seem to think that their power is stronger than the marketplace, which actually delivers housing,” he said. “And they seem to think the market will do whatever they say through their laws, and if the market doesn’t respond with more housing, the additional numbers alone will lead to lower prices and rents. My experience suggests that they are sadly mistaken.”
He also believes that their policies are creating the reverse of affordable housing, by increasing speculation through mass rezonings and driving up land prices.
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Vancouver’s Broadway Plan illustrates the gap between a density plan and construction. Four years after its adoption, only three of the 169 developments in various stages of approval have reached occupancy, according to a July 31 memo to council from Josh White, the city’s general manager of planning, urban design and sustainability. He called the rezoning and development progress “strong,” with about 25,000 residential units in the pipeline, and 90 per cent for rental housing. He said in the memo that there are around 3,800 below-market units in the pipeline compared to about 2,100 units of existing units that are impacted by redevelopment. But only 10 building permits had been issued and 59 rezoning approvals given.
“Meanwhile, hundreds of residents in older apartment buildings live with rezoning signs in their front yards and uncertainty over what might happen to their homes,” said housing commentator, retired architect and real estate consultant Michael Geller.
In advance of B.C.’s civic and provincial elections, Mr. Geller will discuss housing policy at Simon Fraser University on Oct. 14, joined by former Vancouver planning directors Ann McAfee and Mr. Beasley.
The decree for density, Mr. Geller said, has “done more harm than good.” The additional school tax, for example, is a challenge for developers because it applies to vacant residential lots. When it was introduced in 2019, most people thought it was aimed at expensive detached houses. But a developer who isn’t ready to build because of the market downturn will also be facing 0.2 per cent tax on a residential lot with an assessed value of between $3-million and $4-million, and 0.4 per cent on the portion above $4-million. Starting next year, those rates go up to 0.3 and 0.6, respectively.
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“With all the projects going onto the back burner, they’re all going to be liable to pay this, and all it’s going to do is add to their costs,” said Mr. Geller, who has been appealing the tax on behalf of a developer client who’s facing the tax because he hasn’t begun construction of a 350-unit apartment building. So far, they’ve paid around $640,000 for that tax alone, he said.
Taken together with Premier David Eby’s recent proposal to tax unsold condo inventory, developer Hani Lammam, executive vice-president of Cressey Development Group, said such policies work against his industry.
“Why would you even start a project, because you get punished for not succeeding? I’m okay with taxing people when they make money; that’s fair. But taxing them for losing money is bizarre.”
Mr. Lammam gave the province a thumbs up for mandating density around transit hubs, which he said was “well intentioned.” That policy, however, became financially challenging when municipalities then mandated affordable housing requirements that added to costs, he added.
Policies are creating the reverse of affordable housing, by increasing speculation through mass rezonings and driving up land prices.DARRYL DYCK/The Canadian Press
“It lacked a team perspective because, really, it allowed the municipalities to say, ‘You can build as big a tower as you want, as long as 20 per cent of it is below market.’ Which means it’s not even that we break even on it, we actually lose money on delivering below market at the level of discount that they were asking for.
“We’ve had actually measurable success over the past 12 months in dealing with municipalities and getting municipalities to adjust their regulations and their demands on our industry. And so that’s been terrific,” added Mr. Lammam.
“But with every little win, we end up with a provincial announcement that counteracts it.”
Mr. Lammam said the federal government should let the foreign buyer ban expire in January and allow foreign investment in Canadian real estate again. He said relatively few from outside the country are buying, anyway.
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“The reality is we need foreign capital to grow our economy. We have to be able to attract foreign investment.”
Mr. Beasley said the affordable housing component should have been factored into the rezonings around the transit hubs so that developers could factor the cost into the purchase of the land from the get-go. Otherwise, land prices go up on the expectation of greater density, and speculators stand to benefit from the lift.
“In any rezoning from now on, the affordable parameters have to be built in from the start.”
Former City of Vancouver director of planning Ann McAfee, who speaks at the SFU event, said municipalities are having to pull back on development charges to obtain infrastructure funding, but are still required to pick up a lot of the slack. Until recently, Ms. McAfee served as a member of the National Housing Council.
“Municipalities are being asked to reduce development charges in order to make market housing, pencil out, and just exactly how are municipalities going to provide the variety of services? This is basic infrastructure plus any other community services which support the housing that’s getting built. So that’s one of the big issues,” she said.
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“Whether it’s new Canadians coming in, having to be housed and serviced, or whether it’s people who can’t afford rents and are now homeless, all these responsibilities are being picked up by the municipalities.”
Mr. Beasley said the pervasive idea by government that it just needs to remove all obstacles in the way of adding supply is “a highly destructive” myth.
“Prices are not coming down, and most new development is stalled.”
He said government needs to stop mass rezonings, re-engage with the public and collaborate with the private sector.