Economic and Financial Implications
Lack of Community Amenities
The project at 1401 Comox Street is not proposing a Community Amenity Contribution (CAC). The City staff appear to view the land lift on the proposal to be zero so the applicable CAC is nil.
Some evidence about another STIR project suggest the contrary. In 2009, the property at 1142 Granville Street sold for $3.47 million. In July of 2010 the City rezoned the property under the STIR program to accommodate 106 rental units. The building has been under construction since then and is now close to completion.
BC Assessment information for the property shows these land values at the site:
May of 2010: BCAA Land value was $3,465,000
July of 2011: BCAA Land value was $6,435,000
This represents an increase of $2,970,000 in land value on the site. At the City’s standard 75% expectation for land lift, the CAC (had it been levied) would amount to over $2.2 million.
But no community amenity contribution was collected for this project because as noted in the Report to Council at the time of rezoning:
Staff reviewed the applicant’s development proforma to identify whether the rezoning generated a sufficient increase in land value or land lift, to warrant a Community Amenity Contribution (CAC) offering. Staff concluded that after factoring in the costs associated with the development of market rental housing units, there was no land lift and, therefore, no CAC offering applicable.
The project at 1401 Comox Street proposes an even larger density bonus, again with no CAC to be collected.
The provision of new, expensive rental units in West End, where 80% of units are already rental tenure, is not an amenity that should be traded for a massive increase in density.
Further, this project will not help to address housing affordability. The 234 new market rental apartments currently coming on-stream at the “Pacific Palisades” site (Jervis and Robson) are listed at a starting rent of $1,500 per month for a one bedroom unit. These units do not include in-suite laundry like the units at 1401 Comox Street, which would be expected to drive the rents even higher.
For the proposal at 1401 Comox Street:
Site area: 17,292 sq. ft.
Price paid for land: $4.25 million
FSR under existing zoning: 1.5
Existing permitted floor area: 25,938 sq. ft.
Proposed FSR: 7.19
Unit Count: 186
Total buildable sq. ft.: 124,330
Cost of land per sq. ft.: $246
Cost of land per buildable sq. ft.: $34.20
Summary: Developer paid $246 per square foot of lot area, or $164 per “buildable” square foot under existing zoning. Developer requested a density bonus of 5.69 FSR or a 479% increase in density to accommodate STIR rental housing, lowering land costs to $34.20 per “buildable” square foot of floor area (almost exactly half of the price paid at 1142 Granville).
What is the Alternative?
A revised development proposal similar to the last rezoning of a West End RM5 site – a 9 storey affordable seniors’ rental building with 2.75 FSR at 1175 Broughton Street, would allow a reduction in the proposed FSR to an approximate doubling of the existing permitted and allow for far more flexibility in creating development that has some chance of respecting West End character and the quality of life of nearby residents. This project had the same sized parcel, and has been a welcome addition to the neighbourhood.
Proposed Temporary Seniors’ Housing
The six proposed “Safer” units should be presented for what they are: a $300 per month subsidy on six units for a five year period. This amounts to a $100,000 cost to the developer, with essentially guaranteed occupancy for the five year life of the offer. It is unclear what becomes of the residents of these units once the five year period expires. The developer should neither determine housing objectives for the neighbourhood nor decide the type of benefits that should be included in the building.
Financial Review and Alternatives
The City and developers have argued that the creation of rental housing faces some economic challenges; however, there has been minimal information provided to the community about the economics of this or any other rental redevelopment project. While there are other ways to achieve a financially-viable rental project on this site at less than 7.19 FSR, it appears that the larger building allows a greater opportunities for profit by the developer. The drive to maximize profit on this site should not be the over-riding objective, and should not be facilitated by the city at the expense of quality of life of nearby residents.
The City is comparing STIR projects to condo projects and trying to ensure that the financial performance of the STIR projects is equal to condo projects. But they are different types of investments – long-term, secure rental revenue vs. short-term condo profits. So there needs to be recognition that a smaller profit “up front” is acceptable for the rental projects.
Many housing experts use the term “affordable housing” to mean housing that requires an expenditure of not more than 30% of gross household income, however the term “affordable” was never actually defined in the changes to the Vancouver Charter.
Canada Mortgage and Housing Corporation (CMHC) defines “affordable housing” as follows:
Affordable housing costs less than 30% of before-tax household income. Shelter costs include:
For renters: rent and any payments for electricity, fuel, water and other municipal services;
For owners: mortgage payments (principal and interest), property taxes, and any condominium fees, along with payments for electricity, fuel, water and other municipal services.
“Affordable” is a relative term so it is up to the local government to establish an objective definition that can be applied fairly. Metro Vancouver’s housing definitions indicate an “Affordable Housing Cost” at not more than 30% of gross income. This means that a median renter household should be able to spend up to $872 per month to be defined by Metro Vancouver as having access to “affordable housing.”
Median Household Income, by Tenure (2006)
|Vancouver Municipality||All Households|
|All Households||Total Dwellings||253,380|
|Median Household Income||$47,299|
|Renter Households||Total #||131,515|
|Median Household Income||$34,872|
|Affordable Housing Cost||$872|
|Ownership Households||Total #||121,830|
|Median Household Income||$66,087|
|Affordable Housing Cost||$1,652|
* Affordable Housing Cost is equal to 30% of median household income, shown as a monthly cost.
Source files: Metro Vancouver Housing Data Book (April, 2011) / Customized data tables, based on 2006 Census
In the West End, the median household income is even lower than for City of Vancouver as a whole. The median income for all households (renter and owner) in the West End is $38,581 (circa 2006 – Source: City of Vancouver, Community Statistics).
The lack of a working definition of “affordable housing” is one of the core problems with the City’s STIR program that creates challenges in resolving housing needs.
The City’s approach to evaluating affordability under STIR and SMRH has been to compare rental units against the costs of home ownership. By this definition, a $3,000 per month waterfront townhome under the STIR program is deemed an “affordable market rental unit” because the costs of owning such a residence would exceed $3,000 per month.
STIR rental projects are deemed by the City to “provide an affordable alternative to homeownership.” In fact such a comparison is that of “apples and oranges” as they rental and ownership are completely different housing products. Such a comparison is similar to suggesting that renting a vehicle is more affordable than owning one.
True “affordable rental units” would be those that meet the test of rents that consume not more than 30% of the median household income of the target market – and with a West End household income of approximately $35,000 in 2006, this means rent than should not exceed approximately $900 per month.