For several decades, the West End has remained remarkably stable for the 30,000 mostly lower-middle-income tenants, many who have lived there for years and who have seen only steady but small rent increases. (For those who ask how anyone of average income can afford to live in Vancouver, the answer was in neighbourhoods like the West End.)
Nor has there been much new development. Councils since the 1970s have taken redevelopment pressure off the district through downzonings and rate-of-change bylaws. And though there have been controversies, notably over the STIR highrise projects on Broughton and Bidwell, that’s more a sign of how little change there has been, not how much. (Priceism: “As the rate of change decreases, people’s perception of change increases.”
But there are signs now that the ground is shifting:
A shortage of rental stock and unprecedented demand in the Greater Vancouver area are creating the perfect storm for a “rent increase tsunami,” according to a veteran realtor’s report.
David Goodman, principal of HQ Commercial, says in the July edition of the Goodman Report that vacancy rates are hovering around 0.5 per cent, and rents are going up by 10 to 20 per cent whenever there is a suite turnover.
“It seems that the already severe [rental] shortages have been worsened or have been exacerbated because of a lack of new supply and again, many people are opting to rent as opposed to buying,” he told On the Coast‘s Stephen Quinn.
“The pot has been boiling for many, many years and I think it’s coming to a head right now because of the heightened demand for rentals.”
According to Goodman’s report, the average rent for a two-bedroom suite in the Vancouver area in April 2015 is around $1,352 — roughly a 5.6 per cent increase from the same time period in 2014.
Some of the usual suspects are taking advantage:
Tenants of a building in Vancouver’s West End say the owners are exploiting a loophole to increase rent by up to 20 per cent annually …
Rent increases in B.C. are regulated under the B.C. Residential Tenancy Act to protect tenants against sudden, sharp rent increases. Landlords are not allowed to increase rental rates beyond a percentage amount decided by the province each year, which has been around two to five per cent. Tenants also have to be given three months’ written notice.
The loophole in that regulation comes with fixed-term leases that have a specific move-out date. Annual increase limits don’t apply to those, as the lease is completely renegotiated when it comes to an end. …
Chris Nelson, one of the building’s owners, says his company, Gordon Nelson, isn’t exploiting anybody. He said the company is open and clear with all of their tenants about their leasing policy.
He added that they provide a valuable service and they’re simply charging market rates for the valuable renovated apartments.
“Real estate’s getting real expensive in this city and we’re all having to navigate these waters of a city that’s in high demand,” said Nelson.
The Vision council made rental construction a priority (hence the STIR program), and can point to several thousand new rental units as a result. But given the incentives, it remains a mystery why they did not set more upper limits on the rental rates. In one instance, the Lauren in the West End, what was assumed to be ‘afforable’ rental housing has become a poster child for the new high-end market:
From Sun Columnist Barbara Yaffe:
High-end rentals are latest trend
Colliers calls multi-family property “the most stable asset in major Canadian cities,” and the most sought after.
In Vancouver’s West End, the Lauren was completed last year at 1051 Broughton, exemplifying the trend. …
These types of developments, with monthly suite rents between $1,450 and $2,100 depending on size, have been prompted by municipal rental incentive programs. For example, under the 2009 Rental 100 program, Vancouver granted developers a $10-million break on city fees to encourage the construction of rental buildings.
The traditional lower-middle-income rental stock – the thousands of wood-frame low-rise boxes built in the 1940s and early 1950s – are also being seen as seams in this gold rush:.
I have a friend (Mr. X) who is one of the top minds in real estate in the city. He’s a man who has bought and sold hundreds of apartment buildings throughout North America over a nearly four decades long career. …
Over dinner one night, we got to talking about the real estate industry in Vancouver. More specifically, we were chatting about what a wealthy investor should do with a substantial sum he wanted to keep safe.
We got to talking about the West End.
“West of Denman’s as good as gold,” the tycoon said..
1847 Pendrell: “a 23-unit building West of Denman for $9.45 million”
Vancouver realtor David Goodman, who specializes in multifamily property sales, says, “We’re almost out of product.”
Goodman, a principal at HQ Real Estate Services who, with son Mark, has sold 18 properties worth more than $135 million so far this year, says: “Our product is being snapped up by sophisticated investors at a lightning pace. Owners who previously would never consider selling are now being swayed by mindblowing dollar amounts.
“Unprecedented demand is propelling selling prices past recent highs.”
Expect commensurate rent increases to follow – combined with changes in the rate and scale of new development in the West End.
While the new West End plan retains the scale of the centre blocks of the West End, allowing only small-scale infill, particularly in the laneways, there are already the beginnings of what will be a rush of highrise proposals along the outer blocks, some up to 50-storeys, and at the western ends of Robson and Davie.
As with the STIR projects, there will be blowback from residents who were either not paying attention to the planning process or who dislike change of any significance.
Small and large infill development in the centre blocks of the West End.
The Vision Council sometimes seens remarkably inept at anticipating or responding to the political consequences of change. In the West End, they had best get ready for the already-predicted earthquakes to come.