Vancouver planning staff message to developers: “Heads you win, tails you win” (Planners seek rule changes for towers in Burrard Corridor of the West End Community Plan) – Council 24-Nov-2020

(Epilogue: Council approved this staff recommendation with only Clr Hardwick opposed on the various grounds including that staff have not provided sufficient data, and that the proposed jobs would not be realized for a few years anyway, etc. One amendment by Clr Carr was approved, that staff publicly report to Council on progress to data in implementing the West End Community Plan Public Benefit Strategy and any measures needed to achieve the community benefits detailed as plan objectives. Chief planner Mr. Kelley admitted that planning staff had failed to report to the community on WECP implementation and that a team had been assembled to do so. Mr Kelley also promised to reply to Clr Hardwick’s unanswered request for housing data. Staff also reported that about 200 rental units are on the five sites affected by this report/recommendation [which we estimate could currently house 400+ tenants] and claim that once built out if this recommendation is approved, 4000 units could result on these five sites.)

Vancouver’s chief planner Gil Kelley and planning staff have submitted many reports and recommendations to City Council seeking approval tomorrow, Tuesday, November 24, 2020.

One is entitled “5. Criteria for 100% Secured Rental and Below-Market Housing as an Alternative to Inclusionary Social Housing in the Burrard Corridor of the West End Community Plan.”

On the surface, the title seems like a nice enough idea. But what does it really mean? Having looked at the fine print, we would rephrase it as a memo from the City to developers, entitled “Developers: Heads you win, tails you win.” Below we go into considerable detail with analysis and commentary.

The report concludes with no ambiguity: The General Manager of Planning, Urban Design and Sustainability (that is, Mr. Kelley) “recommends that Council approve the recommendation outlined in this report.”

In a nutshell, he is urging Vancouver City Council to allow special changes to existing policy in areas D and C in the West End (indicated with bold red lines in this map) so that developers can modify their plans on sites they already own where they planned luxury strata condos with some social housing, and instead build rental apartment towers, albeit with enormous public subsidies (unquantified but certainly worth many millions of dollars) via waivers of Community Amenity Contributions (CACs) and Development Cost Levies (DCLs).

Yes, the developers were currently planning to build strata condos there, but the market has changed and is now less lucrative for luxury strata condo development. (Other sites in those zones could be affected in the future.) According to the report, the developers approached the City to request the changes now being recommended by staff. It was not the City that approached the developers.

City Council has the option to simply “receive the report.” Or they could “reject” the recommendation outright. Or they could “refer it back to staff” for more work.

If these specific condo developments do not go ahead, that may not necessarily be a bad thing for the West End, which has seen a huge demolition and construction boom since the West End Community Plan was adopted in 2013. Maybe the existing rental buildings don’t have be be demolished and renters can stay, or move back in if they have already been forced out. If Council wants to consider the recommendation, they must let planning staff know that the report is severely lacking detail regarding the financial justification, impacts and related aspects.

The West End Community Plan was approved by City Council in 2013, and provides guidance for the section of the Burrard Corridor in question here.

To help visualize things about the current recommendation by planners, below is a slide show of the current development plans of the site owners, Strand, Intracorp, and Bosa Development.

This slideshow requires JavaScript.

Summary of current status of these projects (reference: staff report + Daily Hive):

  • 1068-1080 Burnaby St. (Strand & Intracorp, 290 feet = 30 storeys, 82 condo units) – Approved already at Public Hearing but not yet enacted.
  • 1055 Harwood St. (Strand & Intracorp, 300 feet = 32 storeys, 82 condo units) – Approved already at Public Hearing but not yet enacted.
  • 1066-1078 Harwood St. & 1065 Harwood/1332 Thurlow (Bosa Development, two towers at 300 feet = 32 and 33 storeys, total 202 condo units) – No public hearing yet.
  • 1040-1080 Barclay St. (Bosa Development, twin towers at 458 feet = 48 storeys, total 481 condo units) – No public hearing yet.

(Under the West End Community Plan and related policies, these developers are also required to build “social housing” into these projects, for which they would benefit from waivers, not having to pay millions of dollars in Community Amenity Contributions, or CACs.)

What happened is that the West End Community Plan (2013), as adopted under Vision Vancouver, unlocked billions of dollars worth of development potential in the West End. Like others that pounced on the lucrative opportunities, these developers snapped up properties with existing buildings containing hundreds of units of older, affordable, rental units. Their intention was to evict all tenants, demolish the buildings, and build strata condo towers. Yes, there was a huge uptake by developers as soon as the West End Plan was adopted. (Reference: West End Plan will spark a real estate boom here, says Business in Vancouver, https://westendneighbours.wordpress.com/2014/06/19/west-end-plan-sparks-real-estate-boom/). Incidentally, West End Neighbours asked the City for a five-year review in 2018. Two years ago. No reply has been received yet (https://westendneighbours.wordpress.com/2019/01/16/wen-calls-for-5-year-review-wecp/). Mr. Kelley did not reply. As far as West Enders know, the City’s planning department is not even keeping count of the total score. No updates have been provided to Council or to West Enders. But ironically, the Park Board revealed tangentially that it had a very good idea of what is going on (See “Keeping track: Behold the West End’s new housing unit count (via Park Board)“). 

The current report reveals that the West End has done some heavy lifting in terms of providing social housing: “So far, 567 of the 600 social housing units (95%) outlined by the West End Community Plan’s 10-year target between 2014 and 2024 have been approved.”

Now, regarding the staff recommendation (again, initiated by the developers themselves), as explained by Kenneth Chan in Daily Hive (20-Nov-2020, https://dailyhive.com/vancouver/vancouver-west-end-burrard-corridor-temporary-flexible-rental-housing), this is “a bid to move forward stalled major market residential tower redevelopments [note – this means strata condo] in downtown Vancouver’s West End that are currently mandated to include a social housing component. In a report, city staff are recommending city council to permit a temporary policy of considering rezoning applications for 100% secured rental housing ..Financial community amenity contribution (CACs) requirements that would be required for a condominium development project would not apply..Furthermore, the path of a secured market rental project with at least 20% below-market rents could qualify for a waiver of citywide development cost levies…

Links to related materials:

Below we look in details at some of the key points of concern.

MAIN RECOMMENDATION by City staff (verbatim):
THAT, to advance the delivery of affordable housing and accelerate community and economic recovery objectives, Council endorse the criteria in Appendix A, to establish conditions under which rezoning applications can be considered for
100% secured rental with below-market housing within rezoning areas D and E of the Burrard Corridor in the West End Community Plan, as an alternative option to providing inclusionary social housing.

Excerpts: This report seeks Council approval for guiding criteria to allow rezoning proposals with 100% secured rental housing in which a minimum of 20% of the residential floor area is secured below-market rental. Such an approach is an alternative to the current inclusionary social housing requirement in the Burrard Corridor (rezoning areas D and E) of the West End Community Plan (the “Plan”). Recent shifts in Vancouver’s real estate market have impacted the financial viability of strata condominium developments and consequently made it challenging to deliver social housing in the West End as part of the inclusionary housing policy. The delivery of rental housing, however, appears to be viable as demonstrated by a number of West End applicants who have approached the City seeking to switch from strata with inclusionary housing to 100% rental housing
… Staff recommend this alternative be tested as a trial in both time and scope

… As proposed, it would be available for a two-year period ending December 31, 2022 and limited to the Burrard
Corridor sub-area in the West End Community Plan. 

COMMENTS FROM CITYHALLWATCH

  1. This staff recommendation suffers from most of the same limitations of the Vancouver’s Moderate Income Rental Housing Pilot Program (MIRHPP), which we have covered already (unaccountable; windfall profits for developers; expensive for the City; smarter options exist to deliver rental housing), for example.
    – Alma and Broadway rezoning (Public Hearing Oct 28): Financial analysis shows windfall profits for developer (Westbank) https://cityhallwatch.wordpress.com/2020/10/23/mirhpp-financial-analysis-3701-wbroadway-westbank/
    – MEMORANDUM: Excessive costs of Moderate Income Rental Housing Pilot Program (MIRHPP) https://cityhallwatch.wordpress.com/2020/10/28/memo-costs-of-mirhpp/
    – MEMORANDUM: Correcting staff denial of windfall profits at 3701–3743 West Broadway (MIRHPP) https://cityhallwatch.wordpress.com/2020/11/12/memo-windfall-profits-mirhpp/
    – More
  2. The staff recommendations being proposed by planning staff now for the West End are effectively a variant from the existing MIRHP program, but even better for developers.
  3. There is an option in this proposed program to use an “Alternative Approach” to tie the rent of affordable units to CMHC rents. Under this scenario, starting rents are lower than under MIRHPP, but rent increases are not vacancy-controlled, and can increase between tenancies to the CMHC average. While the CMHC average rent is not necessarily the highest rental rate in the market, it is substantially better than the rental rates established under MIRHPP. So a developer would be far less financially disadvantaged over time.
  4. If Council wishes to entertain the planning staff recommendations, to be fiscally responsible, Council should demand a proper analysis of the implications of the two options.
  5. In fact, the incentives being proposed might, in fact, not even be required for the developers to turn a profit.
  6. The staff report is ambiguous (page 8, para v) about “Form of Development.” Staff are “suggesting” that additional density might be required. But planning staff have provided no financial analysis to Council demonstrating the need for all the incentives being proposed for developers.
  7. The staff recommendations do not make clear what public engagement process would be required if a developer goes down the proposed path to seek additional density on a site. Would there be a new Public Hearing? Since there would be change to the development, there should be? And full disclosure should be provided regarding the justification for the change and for the subsidies being offered.
  8. More transparency is need regarding the planning staff and developer methodology used to assess pro forma financial (profitability) analysis under MIRHPP and similar developer incentive programs. As written in a previous CityHallWatch post, the methodologies being used by City planning staff for Community Amenity Contributions suffer from serious limitations. The current methodology being used assumes a predetermined rate of return set by the industry and values land using the residual value approach, not the actual cost of the land. That may be the methodology used to determine if there are CACs payable when there are no subsidies being offered by the City. But any subsidies offered to developers by the City should be based on actual projected profitability, using real costs, when determining if a subsidy is required.
  9. The methodology being used by City staff to determine CAC waivers (i.e., subsidies) for housing projects implicitly assume that the developer/investor is entitled to receive the same rate of return on a real estate project, regardless of whether the project is an apartment building or a condominium. An expected return on an investment is tied to the risk investors perceive as being associated with a project. This staff report for the Nov 24 meeting suggests quite clearly that developers perceive the risk of proceeding with apartment developments as being lower than the risk of pursuing already-approved condominium projects.  Otherwise why would the have gone through the effort of approaching the City and asking for this change? The proposal is to provide subsidies to improve returns to those levels they seemingly cannot achieve for the previous condominium projects. Why is the City considering this?
  10. It is unfortunate that, while these units may be “affordable” by some definition, it is not clear the proposed below-market rental rates will match those applicable to social housing. Furthermore, this proposal will still see market rental units constructed which will feature rents well in excess of what 50% of the renting population can actually afford. Increasing affordability has has been an avowed goal of this Council, but this proposal does little to address the need.
  11. The report makes reference on page 4 to the delivery of the “right supply” of housing for its citizens. Council passed a resolution in May “Recalibrating the Housing Vancouver Strategy post Covid-19,” which required the Planning Department staff to provide detailed information to Council to facilitate an analysis of the City’s housing needs going forward. On August 14 Councillor Hardwick sent a memo to staff pointing out the substantial gaps in information provided versus that required to be delivered. Mr. Kelley and the planning staff have failed to provide a proper reply. City Council is still waiting! See “Show us the data! Planning staff failed to answer Council request for data on “Recalibrating the Housing Vancouver Strategy post COVID-19”: Memo by Clr Hardwick.” CityHallWatch has confirmed that the status is unchanged even today, November 23. https://cityhallwatch.wordpress.com/2020/09/18/planning-staff-fail-data-response-hardwick-motion/
  12. Despite still having failed to provide such critical information to City Council, the City’s chief planner expects to make a decision on this report.
  13. Real estate development profitability seems to be a one way street with developers. They come to the City, go through the Public Hearing process (in two cases in the West End zones concerned here), and get approval to develop projects on specific agreed terms, including the waivers to Community Amenity Contributions. If a developer achieves sales results in excess of what was assumed when negotiating the CAC with the City, that developer gets to keep 100% of that upside. Now, when it looks like the project won’t work out as nicely for the developer, the developer is asking the City to provide subsidies so the developer can still make its customary return. “Heads I win. Tails I Win.”
  14. If City Council rejects the planning staff’s recommendations of this report, they could instead instruct staff to pursue proposals for the construction of market rental housing, and use the CACs from those rezonings to acquire land which can be leased at nominal rates to co-ops or not-for-profits. This would make a greater number of “affordable” units available to people than the current developer-driven process provides.
  15. Alternatively, they could shelf their projects and allow the hundreds of tenants in the existing buildings to continue living there, or allow new tenants to move in. Voila, affordable rental housing!
  16. If Council wishes to consider the recommendation, they should require planning staff to provide more analysis of that actual financial impacts. What is the value of the foregone CAC’s? How much will market rental units on the top storeys of the proposed towers? What is the lost value of the social housing units that would have been owned by the City? And so on.

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WRITE OR SPEAK TO COUNCIL

West End Neighbours have written to urge Council to reject the staff recommendations. Here – https://westendneighbours.wordpress.com/2020/11/23/housing-burrard-corridor-no-to-changes/

Other residents are encouraged to provide their comments to Council about this staff proposal (see our Council contact page, and also use the City’s agenda page).

***********************

REFERENCES

When Council adopted the West End Community Plan in 2013 and did the rezoning changes a month later, they put no limits on density along the Burrard Corridor.

Meanwhile, the height limit for the Burrard Corridor (between Thurlow and Burrard, south of Georgia) ranges between 300 feet and 550 feet as as shown on page 51 of this pdf version of the WECP:
PDF – https://vancouver.ca/files/cov/west-end-community-plan.pdf

The 550 foot sites have been “expressed” as 60 storeys based on the “Butterfly” project and recently-approved project at 1059-1075 Nelson Street:

Here – https://dailyhive.com/vancouver/1059-1075-nelson-street-vancouver-tower-rezoning-approved

The 300 foot sites have been “expressed” as 32 storey towers:

Here – https://stranddev.com/en/the-thurlow

Height limits are also subject to the constraints of the view corridors, and informed by Vancouver’s “Higher Buildings” policy.

STAFF RECOMMENDATION

Click to access r5.pdf

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