The City of Vancouver under Mayor Gregor Robertson has adopted “Rental 100″as part of the Vision platform to provide rental housing. What this does is give developers higher buildings and densities if they build rental housing. Developers can also get away with not paying the development cost levies which do provide funding for parks, daycares, social and non-profit housing and engineering infrastructure, like sewers and water.
As Carlito Pablo writes in the Georgia Straight this rental incentive program was seen as a key to housing and homelessness by strategizing for “secured rental housing“. But is it affordable? The Council report on 1812 Cook Street near Olympic Village proposes rental units be leased at $1,496 a month for a studio, $1,922 a month for a one bedroom, $2,539 for a two bedroom and $3,333 for a three-bedroom. As the Council report states “When compared to average rents in newer buildings in the westside of Vancouver, the proposed rents are equivalent. In terms of the comparison to home ownership costs, the proposed rents in this application will provide an affordable alternative to homeownership, particularly for the larger units.”
To produce 104 rental units City staff is prepared to forget the 2.1 million dollar Development Cost Levy that would normally be associated with a project of this size. The Council report also includes the table below to illustrate the proposed rent, the average market rent on the west side, the average rent that would be paid if the housing was provided through the Development Cost Levy, and the “clanger slide” what the monthly cost of actually buying that unit would be.
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1715 Cook Street Proposed Rents
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Average Market Rent in Newer Buildings –
Westside 1 (CMHC, 2016) |
DCL By-Law Maximum Averages – Westside (CMHC, 2016)2
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Monthly Costs of Ownership for Median- Priced Unit – Westside (BC Assessment 2016)3
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studio
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$1,496
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$1,480
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$1,496
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$2,088
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1-bed
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$1,922
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$1,828
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$1,922
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$2,762
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2-bed
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$2,539
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$2,320
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$2,539
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$4,494
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3-bed
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$3,333
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”
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$3,333
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$8,092
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The report also states “Rental 100 units are targeted to moderate income households and the program extends throughout all parts of the city, thereby providing options that are more affordable than home ownership” and contribute to a “diverse and sustainable community“. The proposed rezoning will go to public hearing on December 12th.
Why be forced to indulge in giveaways to build rental units? Just give cities the power to have rental-only zoning. You want to build on Site X, then you have to build rental.
Rental buildings cost about the same as average condo buildings. As such, rents will be very high. ONLY if theer are government subsidies (via land grants or best, free land, cash or reduced financing costs) will there be below market rental available !
Then we’re back to managing demand. It has been a complete failure of all levels of government to manage demand (especially speculation) that has led us to such outrageous land prices. It also might be time to consider a capital gains tax on all residential resales.
It is the other side of immigration no one wants to talk about. If you introduce more taxes on personal residences people will expect tax relief elsewhere. Governments by and large tax too much in BC (or it is about right)
Besides immigration the key issues are
a) zoning (needs to be higher)
b) approval cycles (need to be far quicker and less expensive)
c) enforcement of taxation of foreign money (needs to be strengthened)
d) enforcement of taxation of multiple property ownership (needs to be strengthened)
e) land (we need more of it to build on, incl mixed use eg on top of schools, industrial buildings, in harbors, on mud flats, ..)
f) reduced immigration or higher fees for immigrants to pay for education, healthcare, roads, transit, police services etc ie not a free for all
g) reduced expectations (i.e. government can only do so much, i.e. rents will go up or units have to be far smaller)
h) excessive wages and benefits of too many civil servants leaving no money for affordable housing
i) not enough incentives for developers to build rental units ie more subsidies or loan guarantees or free land required to make it work
As you can see, many highly controversial topics often utterly avoided by politicians.
Rental building costs about same as average condo buildings Costs of RENTAL zoned land would be much LESS
Yes in theory but we have no land left in Vancouver. It is all occupied except a few city or province owned parcels.
If you rezone say arterial roads to “ rental only “ the current market value of properties would not change. A SFH in E-Van would still be $1.5M on 6000 sq ft and if you assembled 4 of them to build a six storey rental building it would still be $7M to $9M by the time you own all 4 and have permits in place. So now you own 24,000 sq ft build able space with an FSR of say 3 and you could build roughly 72,000 sq ft or 50 1400 sq ft condos or 60 1200 sq ft condos or 72 1000 sq ft condos on average. With build cost at $500/ft leaves land as:
The per foot land price would be roughly $8M divided by 72,000 or over $110/sq ft so maybe $650 per sq ft all in. Still $650-700,000 per unit. Cheaper than today: yes. Cheap: no
So with land cost of $100/sq ft and construction cost with efficiency (say pre-built, container or modular based, or wood frame) and no soft costs of say $300 a 1000 sq ft 2BR can likely be built for $400,000. With a required yield of say 5% that is $20,000 in net rent per year plus all costs like property taxes, utilities, elevator & property maintenance plus insurance and management fees of about $250-300/month it could indeed be profitable for around $2200/month in rent.
HOWEVER, keep in mind the cities all love their CACs ie 75% of the land lift. If the land lift is about $300 from $100 to $400 per buidable sq ft for market condos, then 72,000 times $300 or $21M value lift. If there is no land lift as it is “suppressed” being forced rental the city cannot collect their 75% times $225 times 72,000 or roughly $15M ! That is one of the main reasons why cities are reluctant to grant “rental only” zoning. Pure city budget economics !
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Reblogged this on Sandy James Planner.
Hmm. Affordable? To the fortunate few perhaps.
40 hour week x $16/hour = $2400 a month – before taxes. Annually $28,000.
A 1 bedroom at $1900/mo, assuming one third of income for rent, would require an annual income of at least $68,000.
or more persons per household working and contributing to rent.
I don’t think it’s affordable if it requires 2 incomes to rent a one bedroom or studio.
Single low income folks have it tough indeed. Better with 2-4 income .. as shown by many (relatively poor and relatively uneducated but hardworking) immigrants that come from nothing into something in Canada after a few years ! Take a drive through E-Van or Burnaby for proof of that.