Month: October 2021

“It’s easier to elect a pope than to approve a small apartment building in the city of Vancouver”

Vancouver city council is making a critical decision next Tuesday November 2: deciding whether to approve or reject a proposed Streamlining Rental policy, which would make it easier to build more rental housing and alleviate our musical-chairs problem. You can submit comments online (subject: Streamlining Rental), or sign up to speak at the public hearing by phone.

When you submit comments online, council gets a copy of everyone's comments, along with a count of those supporting the change and those opposed. It'd be helpful for them to know that lots of people are paying attention.

Background info:

Lack of housing in Greater Vancouver, especially rental housing, is driving up housing costs and making us poorer. We've got a huge mismatch between jobs and housing: basically we're adding jobs faster than we're adding housing. It's like musical chairs, with lower-income renters getting pushed out, or worse, into poverty and homelessness.

High housing costs make us poorer, by lowering our real incomes. I can't count the number of people who say that they have a six-figure income, but in Vancouver they still feel poor. Everyone feels stretched to the limit. There's no way they can pay for higher property tax or a parking permit. Even long-time homeowners feel like they're being pushed out: the only way they're going to benefit from their massive gains on paper is if they sell and move elsewhere.

When rents are high, people want to build more rental housing. Right now the bottleneck is that each and every rental project requires a rezoning, which means time-consuming closed-door negotiations with city staff, followed by a public hearing with vocal opposition from people worried about neighbourhood impacts, and ratification by city council.

A majority on city council almost always votes yes in the end, but the whole process takes a very long time.

The proposed change would make six-storey rental buildings legal on certain major streets close to local shopping areas, without requiring a rezoning. The affected streets are shown on this map, in pink. This would save a huge amount of everyone's time.

Public support for more rental buildings is surprisingly high: according to a 2019 poll, 70% of Vancouverites support four- and six-storey rental buildings in residential neighbourhoods. I don't want to dismiss the concerns of people who are worried about over-crowding and public services being overwhelmed, but using high housing costs to keep newcomers out is a double-edged sword: over time, all your neighbours are going to be replaced with rich people, because they're the only ones who can afford it. A better approach is to build up public services to accommodate the larger population in the neighbourhood.

City council is divided, with four consistent Yes votes in favour of more housing (Kennedy Stewart, Christine Boyle, Lisa Dominato, Melissa De Genova), three consistent No votes (Jean Swanson, Adriane Carr, Colleen Hardwick), and four Maybes (Sarah Kirby-Yung, Michael Wiebe, Rebecca Bligh, Pete Fry). Last time this came up for a vote, in July 2020, council voted to postpone it by a 6-5 vote, with three of the four Maybes (Wiebe, Bligh, and Fry) voting to postpone. On Tuesday we'll see if at least two of the Maybes are willing to vote yes.

Posted to /r/vancouver.

The headline quote is by Ginger Gosnell-Myers.

The residual method of appraisal

What drives land prices up and down?

The price of land is a residual. If you're a builder, how much you're willing to pay for a parcel of land depends on how much you expect to sell the final building for, minus your construction costs (including profit).

Some implications:

  • If house prices go up, land prices will go up.
  • If construction costs go up, land prices will go down.
  • If interest costs go up, land prices will go down.
  • Rezoning a parcel of land, so that you can build more housing on it, increases its value. In Vancouver, whenever the city rezones a parcel of land, it negotiates with the owner to get about 70-80% of the increase in land value (through "Community Amenity Contributions").

Notes on the Residual Method of Appraisal from a UBC course:

If you were planning to buy this piece of land in order to build something and then sell the property for a profit, how much would you be willing to pay for the land? In this sense, the maximum you would pay for this land would be just enough so that the land cost plus the cost of improving the land exactly equals the expected proceeds of selling the property (of course,the cost of improving the property would have to include your required profit as the developer). Your maximum payment for the land is therefore the amount left over after paying all other costs associated with the development. This is the basis of the development method of appraisal; the price of land is determined by what developers of end use products can afford to pay after accounting for all costs of development.

The value of land under this appraisal method is therefore a residual amount resulting from the improvement of land. Any improvement that increases the value of the land's final use increases the land residual. For example, if house prices are increasing, with other costs remaining constant, land prices should rise. Similarly, anything that raises the cost of development lowers the land residual, and lowers the value of land. The cost of construction is therefore directly related to the value of land. Interest rates are also directly related, since financing charges form part of the cost of development.

I learned about this from a post on /r/vancouver by /u/nmm66. 

A personal story: housing scarcity and domestic violence

About a week ago, an anonymous Redditor posted her personal story to /r/canadahousing. She grew up in foster care, went to university in Vancouver but dropped out, and ended up having a hard time leaving an abusive relationship because it was so hard to find other housing. She's now living in the Interior, and struggling just to survive. It's painful to read; it's a reminder that the social safety net doesn't protect everyone, and when people get pushed out of Vancouver by lack of housing, there's a real human cost.

My Story: It’s More Than Just Economics, Housing Impacts Foster Care, Domestic Violence, and Mental Health Too

Upfront- I’m sorry this is long. My friends in Germany (originally from Canada) forwarded me the billboard pictures and told me about this subreddit. So I've been reading now and then. They encouraged me to join and share my personal story and views on why and how housing impacts more than just numbers and graphs and economics. I also apologise for any typing mistakes because I'm typing on a phone. I started writing this back in June and it took some time for me to sit with it.

Jericho Lands

The Jericho Lands make up 90 acres / 36 hectares of land south of Jericho Beach on Vancouver's west side, formerly owned by National Defence. They were purchased by a consortium which includes the Musqueam, Squamish, and Tsleil-Waututh First Nations, and the federal Canada Lands Company.

The consortium and the city have been working on the development plans for the land. I attended a virtual presentation Monday evening (slides). The approach is to have taller buildings and more open space (like Oakridge), rather than shorter buildings which are more filled-in (like Olympic Village).

The plan is to build 9,000 housing units, enough for 15,000 to 18,000 people: by freeing up more existing housing, this would really help with the musical-chairs problem Vancouver has, where lower-income renters get pushed out.

Of the total housing units, the plan is that 20% will be social housing and 10% will be market rental. My understanding is that the social housing buildings will be mixed-income, with 30% of the units below BC Housing's Housing Income Limits and 70% market, so there'd be a total of about 500 subsidized housing units and 2200 market rental units. The rest would be long-term leasehold strata - the First Nations don't want to sell the land.

It's a pretty long process. The policy statement goes to city council for ratification in spring 2022. If they ratify it, it then takes three years to rezone all the land. Then it takes 25-30 years to do the build-out. (For comparison, the Senakw project is adding 6000 housing units, and they expect to have completed a first phase by some time in 2022.)

From participating in the Q&A (where we entered questions via chat), I think the key conflict is between (1) people who are primarily concerned about Vancouver's housing shortage and who want to build more housing, and (2) people who are primarily concerned about overcrowding and want to limit more housing. Everything else seems secondary.

My suggestion would be to focus on building more housing, while striving to address the opposition's concerns about overcrowding by committing to deliver services like childcare and transit.

This is one of several major projects, like Olympic Village, the River District (East Fraserlands), Senakw, and False Creek South.

Read more:

The MacPhail Report

In September 2019, the BC and federal governments set up an Expert Panel on Housing Supply and Affordability in BC, headed by Joy MacPhail. The panel issued their final report ("Opening Doors") in June 2021.

For anyone concerned about housing affordability in Vancouver and BC, I'd recommend reading the whole thing. Some key points:

  • It takes a long time to build more housing in response to high rents ("supply responsiveness"), because of delays in getting approval from local governments. That's the root cause. The report recommends setting time limits.
  • Incentives for local governments are backwards. Any major project requires a rezoning, and they negotiate to get 70-80% of the increase in land value. This means that local governments benefit from keeping land prices high. The report recommends finding some other way to finance local governments.
  • The report also recommends much greater federal funding for non-profits to buy and preserve existing rental units, which are older and therefore more affordable, to keep them from being renovated or replaced with more expensive units.

Some quotes:

A dominant theme throughout the Panel’s consultations and analysis was the slow and unpredictable pace at which new housing — both for-profit and non-profit — receives regulatory approval from government authorities. Speeding up or streamlining processes, such as rezoning and development applications, was identified as critical to enabling a more responsive housing supply. 

We recommend a stronger role for housing needs estimates and citywide official plans, which guide how entire communities are expected to grow. We also recommend reduced reliance on site-by-site public hearings and council approvals that delay homebuilding and amplify the voices of groups opposing new housing at the expense of citywide objectives and affordability.

[Community Amenity Charges] are negotiated in exchange for rezoning property to accommodate more homes. As a result, local governments that proactively increase zoned capacity or update zoning codes to better reflect anticipated growth and community priorities (as outlined in regional growth strategies and official community plans) lose that revenue opportunity. Indeed, local governments can generate CAC revenue by keeping zoning below levels that make redevelopment possible, and selling additional “air rights” through the zoning powers they have been delegated. Consequently, the additional costs, time, and uncertainty associated with the rezoning process—including their negative impacts on housing supply—persist.

The impact of housing shortages is like a game of musical chairs in which players get priority access to chairs (homes) based on how much money or credit they have. Player 1 goes first and may choose from among all the chairs, followed by player 2, player 3, and so on. In each round, the player with the least amount of money is left without a chair and must exit the game.

 

Will the provincial government step in?

Housing is expensive in BC because rents are high, with speculation on top of that. Rents are high because getting new housing approved always requires rezoning, which is slow and difficult. In Vancouver, each project requires time-consuming negotiations with city staff, which then need to be ratified by city council after a public hearing with vocal opposition from the immediate neighbours ("we're full").

Market Urbanism describes the general problem:

Many U.S. cities force every development proposal to go through a long and costly discretionary review process. This is often done by making land-use regulations so restrictive that any development must pursue a discretionary action like a rezoning or a special permit. In practice, this submits all proposed development to months of negotiating and public review, in which locals can shout a project down to their preferred size (which is often a vacant lot) or extract large concessions from the developer.

The city of Vancouver is trying to approve more rental housing, with a goal of 20,000 additional housing units over 10 years, but it's not easy to vote in favour of a project after hearing from its opponents. Each housing project reduces rents everywhere by a bit - a significant benefit for the region as a whole - but it's the immediate neighbours who bear the cost and inconvenience of living next to a construction zone. (It's a "collective action problem.")

If local governments can't figure out how to approve more housing, I expect the province will need to step in, in the same way that West Coast states in the US are overriding local NIMBYism. The provincial government may be in a better position to resolve the conflict, since the benefits of more housing are region-wide.

Frances Bula

A number of signals in recent months indicate that Attorney General and Housing Minister David Eby—a lawyer and one-time civil liberties advocate—is ready to adopt some measures similar to the wave of new pro-housing laws that various American states have introduced in recent years. “We’re looking at absolutely anything to address the affordable-housing crises,” Minister Eby notes. “We are looking at American jurisdictions.”

Video: Kennedy Stewart on the affordability of rental vs. owning

In Vancouver, renting is far more affordable than owning, even at market rents.

Kennedy Stewart gets it. Video of Stewart at a July 2019 public hearing, explaining why he's voting to approve rezoning for a market rental project - 121 market rentals, affordable for household income around $80,000 for a one-bedroom ($2000/month), $100,000 for a two-bedroom ($2600/month). The alternative would be for the developer to build a handful of new duplexes:

Those half-duplexes would sell for about a million and a half, each. That means you'd need an income of about $335,000 a year, to afford them, plus the down payment of $300,000. I'm a renter, and as your mayor, I could not afford that. So the mayor of Vancouver could not afford the alternative to what's being proposed here. Which I think is kind of insane.

More on this particular project (3833 Fraser Street):

Counter-argument: “We’re full”


There's various reasons why people are opposed to new housing in Vancouver ("NIMBY"). One reason is small-c conservatism: people like the neighbourhood the way it is, that's why they live there! Another is financial: homeowners are naturally concerned about the potential impact to property values, since their home is their most valuable asset, and with a detached house selling for $2 million, the stakes are super-high.

I think the strongest argument is "we're full." People fear that an influx of more families to the neighbourhood will overwhelm public services like schools, daycares, roads, and parking. Video of Michelle Segal, from the Fraser Street Neighbourhood Coalition, speaking at a public hearing in July 2019. "More height means more people."

I sympathize, but I think the appropriate response is to add more capacity to serve a larger population, not to block projects that will add more housing. Adding more housing and more families results in an increase in property-tax revenue, which in turn helps to fund services like transit and daycare.

Using high housing costs to keep people out means that everyone who does live there is poorer. If they rent, that's obvious. Even if they own, they don't feel rich - the only way they can realize the value of their home is to sell, and then they face the same high rents.