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Business in Vancouver reporter Frank O’Brien reports that housing starts-the construction of new housing in the City of Vancouver has fallen by 80 per cent when compared to the first half of 2016. The figures are from the Canada Mortgage and Housing Corporation (CMHC) and show that starts have declined from 5,784 to 1,860 units.
While it is not unexpected that single family detached housing starts have declined from 708 to 462, the surprise has been in condominium apartments, which fell from 3,290 in the first half of 2016 to 880 in the first half of 2017. That is 73 per cent less. Despite very high construction levels, a report from the Urban Development Institute found that there was little inventory of unsold condominiums.
“Total housing starts across the Metro Vancouver region also fell, but by a smaller margin, to 12,200 units so far this year, compared with 14,840 in the same period a year earlier. Increases were seen in the larger suburban communities of Burnaby, Surrey, Coquitlam and New Westminster.
Eric Bond, CMHC principal market analysis in Vancouver, noted that the number of homes under construction hit a record high of 39,141 units across all of Metro Vancouver in May and remained near that level in June. He suggested the downturn in Vancouver starts may relate to developer fatigue. “The constraints on builders are very real in terms of the availability and costs of equipment and materials, which means further increasing the pace of construction is challenging,” Bond said.
Vancouver developer and architect Michael Geller said the lack of condo starts in Vancouver may be linked to a current backlog of applications. “[The developers] are probably waiting for permits.”
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There are fewer housing starts because the city governments are making it more difficult and much longer to get approvals. If the pace of sales today indicates that there will be an inventory shortage, a developer who assembles a site today and seeks a DP will be starting that project likely two and a half to three years from now. If they have to a rezoning, add two years or more.
There’s no inventory shortage, that’s all developer hype, as I expect you know. Housing starts are running well above the ten year average and what is required by demographics.
There are fewer housing starts because the city governments are making it more difficult and much longer to get approvals.
Bull.
Michael Geller is correct. There is a backlog due to the record levels of applications and a shortage of staff to process them, not because of excessive ‘red tape’ or other excuses some anti-city, pro-development advocates use to attempt to lower city processing standards. Vancouver can be excepted somewhat due to its new energy-related rules, some (but not all) of which are actually beneficial regarding lowering operating costs over the life of the housing, but your anti-municipality statement cannot justifiably be cast over all cities in the Metro. I know of at least one city with triple the number of applications with the same levels of staffing they had a decade ago, and a council reluctant to increase taxes to support a larger payroll.
You have never worked behind the counter, have you? Therefore your comments need to be taken with a big grain of salt.
I need to also add that hundreds of development processing staff all over Metro city halls are feeling the stress. To them, the carrying costs developers have to manage while they are in the long processing queues are irrelevant, just a part of doing business in a growing Metro. Some cities have the same number and value of development permits (now approaching $3 billion a year) as Vancouver, but 1/3rd the staff to process them. They are already cutting ‘red tape’ — and sometimes their principles and significant corners — just to move forward.
I have to say this is an embarrassment for the city. Permitting delays can add a ton to the cost of a project. This means that a company has to finance an asset for several years before they get any return.
That is the result of record development applications, not any “slowdown motive” city staff have. As mentioned, processing staff are stressed and cannot manage more OT. It takes time to hire and train new professional staff — if a council even agrees to raise taxes to pay them. Most councils are cutting budgets (often arbitrarily given, in some cases, their large surpluses and reserves) or letting attrition work its course with increasing levels of personnel retirement and the holding back of replacing them, even with record population growth and development.
Microgram wise, tonne foolish.
Last I checked, the development permits and CACs were a huge income source for the city. You don’t skimp on revenue positive city departments staffing unless you don’t really want or need that revenue.
Correct. But even some “revenue positive cities” have councils and management committees who are loathe to spend where it is required (adequate staffing to meet development application demand, designing and building assets with resilience to meet the spatial, energy and usage demand levels of tomorrow, and the undelayed replacement of vital older buildings to meet current seismic codes, etc.)
It’s beyond disappointing to see wealthy cities practice arbitrary million dollar cuts to vital projects in the name of “fiscal responsibility”, deferred maintenance ad infinitum, hopelessly inadequate public buildings that are overcrowded and which experience mechanical systems breaking down within three years (oh, but they’re built on time and on budget!), and burnt-out staff in several departments struggling to cope with the volume of work created by record development levels. In fact, you cannot plan around these things and their long-term aftereffects. These cities need to have audits performed on their functioning systems and action plans developed to save them from the bean counters who, as the old adage goes, know the cost of everything and the value of nothing.
Then, on top of these pressures you have comments like Bob Ransford’s and from the UDI and Fraser Institute and other organizations who really don’t know anything about what really occurs behind the counter. If they could work only one week processing the applications of their friends, they’d be shocked at the incompetence of a surprising number of them who just can’t seem to provide bylaw-conforming plans (even when highlighted in plain, simple language for them by the underpaid technicians), by the constant harassment of staff by applicants with shoddy work to place their flawed project plans at the front of the queue, or who try to pull fast ones by adding a mezzanine at the last minute, shorting the required parking, starting excavation while forgetting about the storm water control permit, and such antics. To quote one planner I know, developers are often their own worst enemies. Some get it right, but it seems the majority do not.
Wouldn’t this be thought of as a good thing? That demand is slowing down so possibly prices might not continue to rise?
How does having less of something being added into the market keep prices from rising.
Having an excess of inventory is the only way prices fall.
And how well did all the overbuilding in Marine Gateway, Cambie, Norquay, Brentwood etc work out for you in lowering prices? As long as you allow foreign buyers to purchase units trying to build your way to affordability is a fool’s game.
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Cheap money meant that as many or more locals bought units for investment purposes as foreign buyers. There are more forces at play than ‘dem dam ferners.
If the so called overbuilding of condo s did not happen there would have been the same money bidding for fewer condo s
That’s correct. One recent G&M Report on Business article on the raise in interest rates put it just like that — too much cheap money chasing real estate in key Canadian cities resulted in price escalation and deeper personal debt levels.
The housing starts data comes from CMHC. They consider a project started when it hits ground level, so major projects under construction in the City of Vancouver like Burrard Place with nearly 500 units, 8X on the park, with nearly 400 units and The Arc with nearly 600 aren’t counted yet.
The 6 month numbers fluctuate quite a bit, just because major projects like these can cause a huge jump over a single month.
The annual average housing starts in the city over the past decade is a bit under 4,500, so the 2016 numbers are the exception. 2016 saw more CMHC housing starts than any previous year on record, so it’s not surprising that 2017 will be less.
The city’s permit data doesn’t suggest they’re a major impediment. In the 5 months to May this year (the most recent data), the City approved 2,624 new dwellings. In the 5 months to May 2016 they approved 3,386. Those are building permits, which are usually issued just before construction starts. How soon those permits turn into CMHC housing starts depends on how deep the hole is, but many of the 2016 building permits should show up in the CMHC data this year. Last year in total the City approved 6,937 units, and in 2015 7,732.
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Reblogged this on Sandy James Planner.
Here are the conclusions of one of the most lucid and inclusive analyses of Vancouver’s housing affordability crisis I’ve read, with a particular focus on foreign buyers, which the Sightline Institute calls a myth:
All told, Vancouver’s unusual housing market is most plausibly explained by several compounding factors that, taken together, result in too much money chasing not enough homes. Individual foreign investors are a part of the Vancouver story, but by no means the whole story. Here’s a rundown of the pieces of the puzzle:
– Price-to-median-income and price-to-rent ratios indicate a housing bubble, and foreign dollars flowing into homes explain some part of it.
– Economic modeling suggests that foreign buyers alone could not have caused such high price inflation.
– Vacancy trends indicate that homes left empty by speculators are not a major cause of the observed price increases.
– Local income has been rising faster at the high end, creating home purchasing power not reflected in the median income. In other words, the price-to-median-income ratio may overstate the size of Vancouver’s housing “bubble,” even if it accurately reflects the housing affordability problem for middle- and low-income Vancouverites.
The bubble has snowballed as locals overextend themselves so as not to be left behind, over-exuberant flippers take big financial risks looking to make a quick buck, and parents cash in their piles of new home equity to help their kids with down payments. (In Metro Vancouver, 41 percent of owner-occupied homes are mortgage-free.)
– Lastly, evidence points to a more straightforward cause: a housing shortage driving up prices. From 2011 to 2016 metro Vancouver’s job growth of 139,000 vastly outperformed the projection of 107,500 (linearly interpolated from the 2021 projection). Meanwhile population and housing unit growth were 66,000 and 33,000 below projections, respectively. The unemployment rate is low (4.8 percent), and the job vacancy rate is high. For years Vancouver’s rental vacancy has been outlandishly low, hovering under 1 percent. (Oddly, some argue that there can’t be a shortage in Vancouver because population growth hasn’t exceeded the number of new homes built. But that’s like claiming there’s no shortage of tickets to see the play “Hamilton” because, even though tickets may sell for upwards of $1,000, the number of tickets sold continues to match the number of seats.)
But there is a caveat:
UPDATE (7/11/17): Critics have correctly pointed out that this article fails to make a clear distinction between foreign buyers—that is, buyers without Canadian citizenship—and foreign capital. I focused on foreign buyers because they are the target of the two new taxes in Vancouver. Foreign capital can enter through a variety of informal channels, such as a wealthy Chinese citizen sending cash to a Vancouver resident relative who then uses those funds to purchase a home. This form of foreign capital may be a major contributor to Vancouver’s rising prices, and may even eclipse the impact of foreign buyers. But because such fund transfers are not easily tracked, it is difficult to assess the magnitude of the effect.
NDP MLA David Eby over a couple of interviews in the Globe and Mail (notably NOT in Post Media outlets) during and after the May 9th election campaign outlined his strategy to deal with the affordability crisis, and that in part included looking into income and family trusts of foreigners and locals. No other party went into that much detail, and I look forward to seeing how that plays out now that he is BC;s attorney general.
http://www.sightline.org/2017/07/05/stop-blaming-foreign-home-buyers/
Given that Vancouver’s rental vacancy rate is so much lower than Seattle’s, the way froward for municipal and civic governments here should be clear: increase rental stock at the expense of condos, which have become a speculative commodity. Instead of granting development approval for every twisty tower geared for rich buyers that crosses their plate, mayor and council should implement condo-free areas of multifamily rental zoning.
I suggest that cities themselves must now consider building thousands of dedicated rental units. The public housing tower blocks of the 60s should not ever be considered as a model again, but low and mid-rise rental buildings on public land could work on a decentralized basis as non-profits. As long as the management is very good, there is no reason why Millennials and pensioned low-income seniors and others who cannot afford to purchase wouldn’t consider a decent, well-run and stable rental apartment in mixed use, walkable and transit-rich neighbourhoods.
The project unit division could offer 25% three-bedrooms, 25% two-bedrooms, and 50% one bedrooms (maybe with a den for couples and single seniors ). Perhaps 25% of the units in some buildings would be subsidized for income-tested tenants.
If a city geared rents to below median levels, indexed them to inflation and included construction debt retirement, depreciation and replacement reserves, and offered excellent long-term lease conditions, it would not be a burden to public budgets in the long run. If CACs are used, then tax-supported budgets would not be involved.
This model could offer a stabilising influence on the booming real estate market as thousands of units are offered “offline” throughout the Metro.