Creative Financing: Vancouver and CACs

Maybe I’ve been hanging around too much with developers lately, but there’s a dark side to CACs that needs to be addressed. Here’s my BIV column on it:

At Large: Peter Ladner
Developers need community amenity contributions clarity

Some developers say that when they were negotiating with former City of Vancouver chief planner Larry Beasley, he made them feel like he was making love. Only after it was over did they realize they’d been screwed.

Beasley is gone now, working his magic on the international scene, but in his wake has come the sober realization that he brought something else to those infamous negotiations that’s missing now. He could consummate a deal and deliver on it. The city’s thrill of receiving the amazing community amenity contributions (CACs) extracted from the mega-developers in Coal Harbour and False Creek has infected today’s city staff with dreams of comparable riches, but not with the capacity to finesse the negotiations in a timely, savvy way.

Uninformed assumptions about CACs are one reason for the cacophony of insane real estate deals along Cambie Street – single-family homes going for $4 million to naïve buyers who have no idea how CACs will ultimately be extracted.

The city’s more sophisticated developers don’t know either, but they do know that today’s process is mysterious, time-consuming and unpredictable, and they have no choice but to succumb. It’s not written down anywhere. It’s illegal. It’s “voluntary.” But it’s there, a legacy from the big waterfront mega-projects where a rising real estate market drowned so many sins.

I suspect the newest buyers on Cambie think they’re going to reap the benefits of the upzoning that’s been approved and encouraged by the city. But the way CACs work, 70% to 80% of the “land lift” from any Cambie Corridor rezoning or density bonus allowance still has to go back to the city as an in-kind or cash “donation.”

The CAC might be based on the increased value of a property since 2009, or maybe since the latest sale in 2011. If the latter, it might be nothing. If the former, it might be a lot. The CAC is not related to the market for the units that will be built. Only the city planner doing the negotiating knows what the ask will be, and, post-Beasley, many veteran planners have given up on the new regime at city hall and been replaced with people who are more cautious, less experienced, fearful of leaving too much or taking too much, double-guessed by their superiors, and, since 2008, terrified of angry reprisals if someone upstairs doesn’t like the deal they’ve struck.

Wrestling CAC anomalies and frustrations to the ground should be a big commitment in this municipal election campaign, but it won’t be. Politicians (I’ve been there) love them way too much the way they are. CAC benefits come to council fully formed, a pile of treats held aloft by a wincing developer, untouched by political scrutiny, floating free of any official policy.

Unlike development cost charges, they can be used for anything that looks good politically (say, arts funding, a library, or a central food hub) and it doesn’t have to serve only the new residents.

But CACs are a hidden tax on new housing that doesn’t show up on anyone’s property tax notice. Last year they generated $27 million for the city. CACs are a reason house prices in this city are unaffordable, even though, bizarrely, they’re sometimes used to fund affordable housing.

CACs hide behind the virtuous veil of bringing greedy developers and property owners to heel. The city, not the developer or some lucky landowner, will benefit from new density, thank you very much. The downside is that these costs are ultimately borne by the new homeowners.

Site-by-site CACs have become dysfunctional and damaging to the city’s housing affordability. One prominent developer told me he had given up doing business in Vancouver because of them. If CACs can’t be standardized (perhaps by neighbourhood) in an open way, they should be scrapped.

The Larry Beasley era, alas, is over. •

Peter Ladner (pladner@biv.com), a founder of Business in Vancouver and a former Vancouver city councillor, is the author of The Urban Food Revolution: Changing the Way We Feed Cities.

This article from Business in Vancouver November 8-14, 2011; issue 1150