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Rent now, pray later: City has mixed success in creating affordable housing

City of Vancouver incentives produce thousands of new suites at punishing rents

Back in November 2010, Mayor Gregor Robertson joined developer Dale Bosa in a vacant lot at 1142 Granville St. for a typical photo opp to mark the beginning of a new housing project.

Shovels in hand, Robertson and Bosa dug up dirt for the cameras at a press conference to announce the construction of a 10-storey, 106-unit building on the downtown strip.

Another expensive highrise?

Not exactly.

The building, now known as the Standard, was the first of its kind to be developed under the mayor’s ambitious plan to create what many in Vancouver say is impossible: affordable housing for households earning between $21,500 and $86,500 per year, where a maximum of 30 per cent of income is spent on rent.

The Standard is a rental tower and was built under the city’s Short Term Incentives for Rental program, or STIR as it was commonly known. It launched in July 2009 and ended in December 2011.

The key word in the program’s name was incentive.

In the case of The Standard, Bosa and his BlueSky Properties Inc. company saved $638,000 in development cost levies, received an increase in density, had its application fast-tracked and wasn’t required to build as many parking spots.

In return, Vancouver got much-needed rental stock and the developer agreed to keep the units as rental for 60 years or life of the building, whichever is greater.

But what Bosa and other developers who signed on to the STIR program couldn’t agree to at the time of negotiations was a guarantee on cost of rent.

At that press conference in 2010, the mayor and Bosa projected the rent for all 106 of the 320-square foot studio apartments to be between $950 to $1,000 a month. A staff report to council that same year said the developer estimated the studios “will rent on average for $960 per month.” At the time, the average rent downtown for a similar apartment was $1,090.

Today, rents at The Standard range from $1,260 to $1,400 a month for a fully furnished studio apartment. And rents at other STIR projects, including one on Victoria Drive, are in the $1,800 a month range for a two-bedroom.

“I don’t recall that we ever published projected rents prior to starting construction,” said Daryl Simpson, senior vice-president of Bosa Properties, in an email to the Courier. “What is important for you to know is that at the outset we did not necessarily intend to rent furnished suites.”

With Craigslist advertising a bachelor apartment for $1,100 a month on Broughton Street in downtown and a 700-sq.-foot one-bedroom in Mount Pleasant for the same price, the question is this: Did the STIR program achieve the mayor’s stated goal of providing more affordable housing for residents?

A simple comparison of rents says no.

A more complex analysis comes from Vancouver’s chief housing officer Mukhtar Latif, whose report to council last year praised the program but also stressed patience with the concept and rent prices.

“An increased supply of rental housing is needed to meet growing demand, help mitigate rent increases, provide affordable housing for moderate income households and create a sustainable affordable market rental housing stock, recognizing that purpose-built rental housing with security of tenure becomes more affordable over time relative to new construction,” Latif wrote.

Under the STIR program, 19 projects resulted in the construction of 1,329 market rental units. That was nearly a five-fold increase in approved rental units when compared to the five preceding years.

Also significant was the units were built without any assistance from the provincial or federal governments in a city where vacancy rates averaged 0.9 per cent over the past 30 years.

The trade-off, however, was $8.9 million in development cost levies waived from the 19 projects. The money is normally used to build parks, childcare facilities and social and non-profit housing.

The city has argued the loss in development cost levies can only be measured on paper and the waiving of such fees was necessary to increase rental stock that otherwise wouldn’t be built.

For now, the city is continuing with a graduated form of the STIR program called Rental 100. As of last week, 539 more rental units had been approved or were under construction under the new version of the program.

Still, Latif has made it clear that city council cannot control the cost of rents and noted they “can be inflated during the period of construction by the allowable rent increases set out annually by the provincial residential tenancy office.”

Which is not good news for renters.

But the position of the Vision Vancouver camp is that something has to be done to build affordable housing even if the programs aren’t, as Coun. Geoff Meggs put it, “bullet proof.”

“We have to play with the cards we were dealt and some of our critics wish we were in some kind of magical universe where we could print money and force all kinds of things to be done,” said Meggs, who dismissed suggestions that developers were collecting windfall profits under the programs. “I maintain that providing thousands of rental units is a real contribution to housing affordability for families that have no possibility of buying a condominium.”

Meggs, who is seeking re-election Nov. 15, made those comments in an interview with the Courier prior to a public forum on housing affordability held earlier this year at the WISE Hall on Adanac Street.

His assessment of STIR was also an acceptance that home ownership is but a distant dream for many in Vancouver, where the average price of a detached home continues to surge above $1 million.

Statistics show more than 50 per cent of households in Vancouver are renters. And with Vancouver continuing to rank at or near the top of least affordable city in the world, the percentage of renters is expected to increase. So are the number of people seeking housing outside Vancouver.

“It’s becoming increasingly impossible for many, many people — perhaps, even the majority — to contemplate living in Vancouver, never mind owning a place to live,” Meggs told the crowd of about 150 people at the WISE Hall in May. “It’s something that I’m very worried about because it seems to me that housing is a right and it’s important in a city that’s going to function properly.”

With the city unable to control the economic forces that lead to high housing prices, the sales pitch by Meggs and Latif to keep people in Vancouver is that renting is cheaper than owning a home.

A city staff report provided an example of the cost of purchasing a $390,000 two-bedroom East Side condo. Here’s the math: First take a 10 per cent down payment and couple that with monthly strata fees of $150 and property taxes of $135 for a total of $40,000. Then assume the mortgage is at five per cent. Amortize that over 25 years for a cost of $2,550 a month. The purchaser would require an income of $102,000 per year.

To rent a two-bedroom East Side apartment, a deposit of $2,200 would be required before paying the monthly cost of $1,455. Income required would be $65,000.

What’s not factored into the city’s analysis of renting is the uncertainty of long-term tenancy, problem landlords and rent increases. Also, there’s the cost of a parking spot at a residence, storage fees and, if it applies, other expenses such as childcare that limit what a person or family can pay for rent.

Add it all up, as Greg Clark did this year when completing his taxes, and renting in Vancouver is expensive for a family. He and his wife Christine, a couple in their early 40s, have two young daughters and need to work full time to afford their 850-sq.-foot two-bedroom apartment on Victoria Drive, where they pay $1,750 a month. Greg does home renovation work and Christine is a yoga instructor.

“It’s definitely tough to save money,” said Clark, noting the family’s childcare costs were $16,000 last year and he paid $1,200 for a parking spot. “A lot of people are in situations where if they stop what they’re doing, they won’t be able to stay in the city. There’s no wiggle room. You really just can’t take some time off.”

That said, Clark is happy with his apartment, which is close to Trout Lake and its community centre. Commercial Drive, a handy transit hub and an elementary school are also nearby.

The building is another STIR project and built by Cressey Development Group. Known as The Porter, the building is one of two on the property along Victoria Drive, near the Croatian Cultural Centre. The entire complex has 200 units and rents range from $885 a month for a 480-sq.-foot studio to $2,100 a month for a 1,030-sq.-foot three bedroom.

Clark believes more rental buildings of this type should be in Vancouver and he favours alternative housing options such as duplexes, townhouses and laneway houses. Such variety, he said, could assist a category of renters — and buyers — who can’t afford a million-dollar fixer-upper.

He doesn’t know if he’ll ever afford a house in Vancouver and he and his wife have talked about moving to a smaller town “to get more quality living out of your day-to-day and not spending your day-to-day figuring out how to pay for it all.”

For now, the family is staying put.

Ironically, he noted, he and his wife lived in Brooklyn, New York for a few years and left their $1,800 a month apartment to try to get ahead in Vancouver, where they both attended university.

Then one day, Clark heard on the radio that Vancouver had surpassed New York as the least affordable city in which to live.

“It’s, unfortunately, a reality that we’re living with,” he said.

But as it did with Clark and his family, the lure of Vancouver’s beauty and its temperate climate continues to attract people from all income levels.

So when Cressey Development advertised The Porter units for rent last spring, the developer wasn’t surprised that both buildings filled up within two months of opening the doors.

Why the interest?

“It’s the shortage of housing options,” said Hani Lammam, the vice-president of development for Cressey.”There’s so little housing options that anything that comes on the market is quickly swallowed up.”

Up until the STIR program was created, Lammam said, the development community lost interest in building market rental housing after the federal government cancelled tax benefits in the 1980s that made projects feasible.

The majority of the city’s purpose-built rental stock was constructed in the 1960s and 1970s and is badly in need of renewal.

Some landlords have renovated their buildings but that has meant evicting tenants. Many tenants can’t afford to move back in because the rents get jacked up to pay for renovations.

With Cressey’s project on Victoria Drive, the city agreed to waive $640,000 in development cost levies, allow for more density, decrease the number of parking spots and fast-track its application.

“We do this because we believe in the long-term viability of rental housing and it’s a good business decision,” said Lammam, noting it’s a strategy that will give the company steady cash flow once the mortgage is paid.

Cressey is building another market rental building only a few blocks from Bosa’s tower at 1142 Granville St. It is also being done under city’s STIR/Rental 100 program.

Located on the newly created Continental Street, near the on-ramp to the Granville Bridge from Pacific Street, the building will feature 89 studio and one-bedroom apartments.

The city waived $640,862 in development cost levies. Lammam said the projected rents are expected to be in the $2 per square foot range. Asked if the rents will increase once the building opens in the middle of next year, Lammam replied, “We can only have projected rents two years in advance, so we’re guessing.”

Tom Durning of the non-profit Tenant Resource and Advisory Centre, which provides renters in B.C. with legal education and information about residential tenancy law, said rent increases are never good for people.

But Durning, who lives in the West End, is keenly aware of the need for more rental housing in a city that continues to attract people from across the country and all parts of the world.

Climate refugees is what he calls them.

“I don’t know if the city is being misleading with the rents they put out there with these [STIR and Rental 100] projects, but I was taught years ago that any housing is good housing,” Durning said. “And I have to think that if the units were built without the incentives, the rents would probably be a lot higher.”

Both the STIR and Rental 100 programs haven’t been without their critics, with the loudest voice coming from the West End Neighbours society.

The neighbourhood group, which includes director and failed 2011 mayoral candidate Randy Helten, mounted a legal challenge arguing the city is giving away too much to developers.

In fact, the city allowed five of the 19 projects to include the construction of market condos for sale, which meant the developer could both make a profit and collect rents — on top of the incentives granted by council.

“The rezonings that council is approving through these programs are effectively licences to print money,” Helten said. “In return, communities are losing a lot of their character in place of density and height. In fact, what is being produced are very small rental units that the very top of the market will bear.”

In May, B.C. Supreme Court Justice Susan Griffin dismissed the petition, saying she found the society’s position “falls into the category of criticism of council’s political choices.”

Added Griffin: “That is not a matter on which the court ought to weigh in. Instead, the forum for these arguments is the ballot box.”

The West End group has since appealed the ruling.

Before the matter went to court, the city’s chief housing officer Mukhtar Latif responded to the petition in a report on the STIR and Rental 100 programs.

Council accepted a major amendment which now states developers interested in Rental 100 will have to build 100 per cent rental housing instead of mixing in rental units with private units.

In doing so, council said fees will only be waived where the agreed upon average rents for initial occupancy do not exceed the following specified rents by more than 10 per cent:

  • $1,443 per month for a studio
  • $1,517 per month for a one-bedroom
  • $2,061 for a two-bedroom
  • $2,743 for a three-bedroom

“[The change] is supported by the key learning from the review of the STIR program, that city incentives are more effective and provide better value when applied to 100 per cent rental projects versus mixed residential projects,” Latif wrote.

And here’s another reason city staff wanted to go this way: “These amendments to the [development cost levy] bylaws would also address a legal petition filed in the B.C. Supreme Court by the West End Neighbours, which challenges the city’s current process for determining eligibility for [waiving development cost levies] for affordable rental housing.”

The West End group’s petition challenged the city manager’s authority to select which developers are eligible for development cost levies to be waived. The petition also argued the present bylaws don’t adequately define the definition of “affordable” and “for profit.”

“The subjective nature of what is ‘for-profit’ and the relative nature of ‘affordability’ creates considerable room for disagreement, but I also find that it creates considerable room for council to exercise its judgment,” Griffin said. “I conclude that this is what it has done.”

When voters head to the polls in November, those paying attention to Vision’s campaign will have heard the candidates boast about the increase in rental units in Vancouver.

“We’re seeing new housing built that meets the needs of people who live and work in our city,” the mayor said in August in announcing that more than 50 per cent of new rental and social housing approved in the past decade was done in the past two years. “Our housing plan and programs are working and the shovels in the ground prove it.”

Voters will have also heard Vision’s talk about the need for more co-op housing and its recent move to create a housing authority, which aims to hold and use city land for so-called affordable housing.

Then there’s the surge in laneway houses and more secondary suites that are creating vacancies for those set on living in the city.

But those present at the public forum on housing affordability at the WISE Hall in May will have also heard Meggs say the city is still very much in a rental housing crisis.

“I am personally very proud of the work we have done in this area but I’m very, very painfully aware that it’s inadequate,” he said.

At that same meeting, the audience called for rent controls, placing higher taxes on the rich to pay for housing and curtailing the immigration of wealthy investors who think nothing of tearing down a million-dollar home to build a palace.

One audience member likened Vancouver to having turned into one big luxury train for the few who can afford to ride it, with the rest of the population making feeble attempts to sneak on.

In the meantime, rental towers continue to go up, so do rents and the city’s target is to have 5,000 market rental units built by 2021.

So to the question: Will they be affordable?

The answer, it seems, depends on what a person can afford or is willing to pay to stay in Vancouver.

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