February 8, 2018

Unaffordable Townhouses

More evidence, if any is still needed, that the move to replace detached houses with townhouses is a development play that has nothing to do with providing affordable housing. This is from Jak King, a blogger in Grandview.

I live on Adanac hill in the same block as the WISE Hall.  The north side of the street running up to Victoria used to have several crumbling old Edwardian houses that were full of very cheap rental units. They have all been  demolished over the last few years and replaced with townhouses.
You may recall that townhouses are supposed to be one of the cheap alternative to single family houses, and the Planning department are pushing them more and more into Grandview (see the recent Open House) as a solution to the housing affordability problem.
The townhouse development right next door to my building has just been completed and I happened to see one of the townhouses advertised in a real estate office this morning:

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Let’s step back a moment and remember that the median family income in Vancouver is roughly $75,000 a year.  Therefore, a normal family in Vancouver can never possibly afford this townhouse which, with a 30% down payment, requires an income double what most earn.
The minimum down payment is $265,600. No family can possibly save that much in 20 years on a median income in Vancouver. But let’s assume — as the build-at-any-cost crowd do — that the purchasers have boomer parents able and willing to assist with the down payment. It still doesn’t work.
The annual mortgage payment is $56,652 which is more than the entirety of their take home pay after tax and deductions.

 

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  1. $1.25M to $1.3M for a new 3 BR TH is more affordable than a $1.8M to $3M older single family house with not much more floor space.
    It also provides more housing, for 3-4 families as opposed to 1.
    Unless heavily subsidized by other tax payers, the affordable housing train in Vancouver has left the station at least a decade ago, despite all the hollow words spoken by far too many well meaning but ill-informed politicians, It does exist further out, in smaller sub 1000 sq ft 2 BR condos. Many sub $500,000 in Burnaby, New West, Surrey or Coquitlam.
    With the new 25% rule of forced rentals, implemented about 2-3 decades too late, we will see more rentals in time in Vancouver, but even more expensive condos for the remaining 75% that now subsidize the rentals. But that is the right strategy, after three decades of inaction on this file in Vancouver.

    1. The fact that the townhouse is less expensive than a SFH does NOT mean it is any more affordable. If I can raise, say, $400,000 based on median Vancouver income, then it doesn’t matter if a townhouse is $1.3m and a SFH is $3m, they are both equally unaffordable. And cramming three families into a single narrow townhouse sounds a lot like the slums I grew up in in postwar London. Is that really a solution we want here?

      1. Less expensive is affordable to more people, not is affordable to a particular person or set of people. A $1.3 million townhouse is affordable to maybe 30% of families in Vancouver. A $1.8 million house is affordable to maybe 15% of families in Vancouver. I’m using families here as two parent households with children, which have a median income of well over $100,000 per year in Vancouver. 5 homes affordable to 30% of families, instead of 1 home affordable to 15% of families. That’s an affordability improvement.
        It would’ve been better if it had been a 4 story purpose built rental building, which would’ve been more homes affordable to an even bigger percentage of families.
        From the looks of google street view it took something like 5 years to go from that old house to the townhouses, which is a crazy long amount of time as well. It would’ve been better if it took 18 months instead.
        Also it doesn’t help the person who might’ve been renting a very cheap room in that old house, who now has to go somewhere else.
        But anyway, the answer to the housing crisis isn’t “just keep falling down old houses in perpetuity” or “replace all old houses with townhouses”. We need lots more housing targeted at all income levels. Townhouses are one component of that.

        1. 2BR condos sub $500,000 in New West, Surrey, Coquitlam, Burnaby are affordable choice. Or renting.
          Is there a God-given right to a sub $600,000 beautiful house with a yard in Vancouver ?
          That does btw, exists in Edmonton, red Deer, Saskatoon, Regina or Winnipeg. Chose location or house. Perhaps both are not an option for some !

        2. I never once ever suggested the old houses should stay; that’s just a silly strawman argument. Moving the bar from 85% cannot afford to 70% cannot afford is no real improvement, especially in a crisis situation such as we have in Vancouver today.
          The delays in building these townhouses were primarily financing difficulties and falling out of partnerships.
          We have 25,000 expensive condos and SFHs sitting empty in the City, so there is certainly no need for those “component” to be increased at this time.
          We should be forcing developers and builders to be erecting affordable rentals by not approving their other projects until a large part of this problem is resolved. For well over a decade now, their profits have been allowed to mushroom; they can spend a little time only making a reasonable smaller profit for a while.

    2. I don’t think so. The SFH will likely also include more room that can potentially be rented out. In East Van, there are still a lot of houses just over $1M, so this is pretty much the same cost as an older house.
      Granted this will be nicer inside, but frankly I think this is about double what any reasonable person should pay. People are morons.

  2. “But let’s assume — as the build-at-any-cost crowd do — that the purchasers have boomer parents able and willing to assist with the down payment”
    Or let’s assume the buyers are trading up from a condo and have hundreds of thousands of dollars in equity. If you bought in Vancouver more than a few years ago, back when prices were “merely” expensive, you’re likely to be in this position. And so the wheel keeps turning…
    Also, I think many of “the build-at-any-cost crowd” would say we need to prioritize rentals and I don’t think this goes any way to disproving that.

  3. We could build bigger buildings that make more efficient and affordable use of land, but then those would be “out of scale”.
    We could make them rental apartments, but then they’d have “unaffordably high rents and out of scale ” as those high rents were a function of the building materials rather than the rental vacancy rate.

  4. These old cheap-rental houses are often neglected, expensive to heat, at much higher risk of catastrophic fires, are often moldy and sometimes rat infested and quickly nearing the end of their useful lives without a huge investment in safety, envelope and energy upgrades.
    Complaining about their loss is not relevant to the conversation. Older housing is part of the answer to hosing affordability but not when the building is beyond its useful life. There should be better incentives to maintain old stock so it lasts longer. But ultimately, if you want old buildings you have to build new buildings.

  5. This is one of the stranger arguments we see: housing in Vancouver is expensive – therefore we should never build any more. How do people even print this stuff?

  6. Imagine if in the 19th century, those units were never built because a mustached Jak King complained that they were more expensive than the typical housing at the time (which they almost certainly were when they were built.) Then we never would have had the affordable market rate housing today that we are now mourning.Those high priced townhomes of today are tomorrow’s moderate-income fixer upper. More buildings today -> more affordable units in the future.
    Of course, it would be better if they were cheap off the bat. But when trying to build anything other than detached SFH is a risky venture and when densely developable land is scarce, then developers can only build for the luxury market. Townhomes and low-rise apartment buildings (the missing middle) are the cheapest to construct, but if the approval process drags out for years and land prices are inflated through zoning then labour and construction materials become a shrinking proportion of the price.
    The solution to unaffordable housing isn’t to stop building housing because it’s expensive. The solution is to make it easy enough to build that it’s no longer a rare and prized commodity.

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