Four Steps to Rental Affordability. Part 1 (Defining It) (City Conversations We Should ALL be Having, by Brian Palmquist)

Brian is a guest writer for CityHallWatch. An architect whose career in Vancouver has spanned four decades, with projects ranging from first proposing the laneway-housing concept to serving as the managing architect on major multi-building development plans, personally designing more than 1,000 social and co-op housing units, and consulting on thousands more. Please visit this page for a list of all his articles.

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Four Steps to Rental Affordability. Part 1 (Defining It)
(City Conversations We Should ALL be Having)

By Brian Palmquist (first published on 4-Jan-2022) (Note: After publishing, some corrections/clarifications were needed, mostly to change from “secured” to “below” market rental. Changed text is underlined below.)

January 4, 2021—Affordability is probably Vancouver’s #1 challenge—to paraphrase a friend: “Nothing else matters if you can’t make rent!” This multipart City Conversation aims to explain the complexities in (somewhat) simpler language, together with proposals that will improve affordability for the majority of Vancouverites who are, in fact, renters.

Rental Housing—Swimming Upstream? Photo Credit Brian Palmquist

Introduction

“Okay, Dad, I know you started a long academic series of discussions with me about affordable housing but I need something quicker and more concise! And hopefully more riveting!”

My son was playing the part of his younger generation—faster and simpler, please and thank you.

Affordability is not a simple challenge. If it was, it would have been sorted long ago. But I get his confusion and impatience—I’ve read lots on the subject, frequently tire of it all, but know it’s essential to the future of our city.

“All right, “ I answered him, “I think I can summarize affordability in four steps, but they’re complicated enough that we need to separate rental from ownership. Those steps are: Define it; Require it; Prioritize it; and Support it.”

He shrugged in a “Whatever” way, waited quietly for me to continue, in itself no small concession when facing his verbose Dad.

Affordable Rental Housing—Confusing Definitions

“Your mother and I arrived on the west coast during the hay day of affordable housing, the mid-1970s. In fact, my first several projects as as an intern architect were what was then called social housing—both housing co-operatives and rental housing projects. They were principally funded by the federal government, although cities like Vancouver often contributed leased land, as with False Creek South, or non-profit societies contributed land, or money, or both.” I continued.

“Even private sector housing benefited from government largesse. The Multiple Unit Residential Building (MURB) program used subsidies and relatively cheap mortgage money to support private sector projects, both strata and rental. So we had social housing as an umbrella name for affordable strata, housing co-operatives and rental, whether private or public. Buying or renting a home was always more expensive here than elsewhere in Canada, but affordable compared to today, a fact many folks of my generation don’t get when they complain that ‘these young kids don’t know how hard we worked for what we own,’ etc. In any event, in the early 1980s the federal government wound up its social housing funding programs, leaving a funding vacuum.” 

“Various provincial and metro-level efforts tried to fill the federal void for several years, led by the BC Housing Management Commission (BCHMC), which focused on rental rather than co-op housing. But their money tap eventually ran pretty much dry as the provincial government got tired of funding what the feds had previously done. Into this void, the former Vision Vancouver civic government inserted a new meaning for social housing without bothering to disabuse all those folks who felt it must mean affordable because it always had before.”

“Vision’s definition of social housing applied to projects owned by government (BCHMC) or non-profits (*1), and was satisfied if only 30% of the homes in a development met a lower average rent based on Canada Mortgage and Housing Corporation (CMHC) data. These 30% are now called below market rental homes. The other 70% of rental homes had no lower rent or other thresholds.” 

“But with the dramatic reduction of government money to support housing, a recent Vancouver staff report(*2) in support of the Streamlining Rental (*3) initiative changed the below market rental homes numbers from 30% to 20%, even as low as 10% for mixed commercial/residential projects—this smaller number would have rents 10–20% less than market (*4). The other 80–90% market rental homes could be at whatever market rent the developer/owner could obtain, although the recent MIRHPP pilot program (*5) suggests there would be an as yet unspecified restraint on allowable increases for the remaining rental homes.”

“Sounds very confusing—how does it work in practice?” my son asked. 

“In a social housing project in this somewhat fluid environment, the 10–20% of below market rental have initial rents set, say, 10–20% below current market rates, and rents are NOT readjusted up when a tenant leaves and is replaced by a new tenant. So over time, the gap between the 10–20% below market rental and the 80–90% market rental grows and the 10–20% remain somewhat more affordable while the remaining 80–90% reflect market conditions. The current City Council apparently feels this is an equitable way to keep the 10–20%’s rents lower, by subsidizing them from the other 80–90%.” 

“Still confusing—how does that work for, say, my studio?”

“These days, every ‘deal’ is separately negotiated between the City and the applicant.” He raised his eyebrows at that. “Remember when you moved out of your studio some time ago, the rent immediately went up a few hundred dollars for the next tenant? And when you returned to the building sometime later, your rent was substantially more than for the person who preceded you?” He winced, remembering the financial hit he had taken, even on a small studio in an older walk up apartment building. I pressed on.

“Your studio is market rental, meaning like the 80–90% of rental homes mentioned above, each time it is vacated, the landlord can adjust the rent to whatever the market will bear. But after you move in, your rent increases are limited by provincial legislation, basically set to inflation.” He nodded, remembering his own more recent modest increase.

“As for the private sector projects with 10-20% below rental, located in projects city staff calls secured market rentals, what it really means in Vancouver is that such projects must remain rental for at least 60 years, with the below market rentals at lower rents than market, may not have those rents reset each time a tenant leaves so will always remain below market, and must be 320 square feet or larger. (*6)”

My son raised an eyebrow. “320 square feet seems very small—that’s about one third less floor space than my current studio!” 

I nodded, continued. “And with existing market rental like your building, there is nothing preventing your landlord from selling the building for redevelopment as strata or anything else.”

“You mentioned your building was for sale a while back, but is now off the market.” He nodded. “And you mentioned most of the tenants had been there for a long time, so have much lower rents than you because they haven’t been reset.” He nodded again. “So your nightmare scenario is, the building is sold to a developer on the basis of a lower value because most of the rents are low. The developer then goes to the city saying they will rehouse all the tenants in the building in a new secured market rental building ten times higher, including 10–20% secured market rental homes.”

“Ten times higher! That’s ridiculous!”

“That exact deal is happening all over the city, in anticipation of the Vancouver Plan, the Broadway Plan and other plans that are calling for 30+ storey buildings near future rapid transit stations…which is where you are” He was now sullenly silent.

“Let’s go back to a new 30 storey secured market rental building on the site of your current building. You and all the other tenants will have been out for probably 2–3 years during the redevelopment process. You won’t be able to move back into a studio at your old rent—it will be reset to whatever the market will bear at that future time, probably much more than you were paying when you were evicted. You’ve mentioned some of your neighbours are on limited, fixed income. So assuming they come back, and are considered candidates for below market rental housingthey will find they are offered apartments at whatever the City agrees with the developer is 10–20% below market rate for new apartments two or three years hence, not what they are currently paying—of course, noticing your building is all studios, their new homes forming part of the 10–20% may now only be 320 square feet. Your income is too high for you to qualify to be part of the 10–20%. A recently approved secured market rental project closer to where I live would want to rent you a smaller studio for $1800+ per month in today’s dollars (*7) —way more than you tell me you currently pay—and that project only has 20% below rental homes, not even the 30% suggested by the Vision Vancouver definition.”

“I missed how the 30% became 20%?” He was starting to look somewhat indignant.

“Well, politicians like to tinker. The private development community was reportedly uninterested in secured market rental projects so long as the incentives were only modest. So the current City Council decided to reduce Vision’s 30% social housing target to 20% in a pilot program (*8), to as low as 10% in their Streamlining Rental initiative, which just got passed over major neighbourhood opposition.” He waited for me to continue explaining this apparent giveaway.

“In exchange for making 10–20% of the homes in a privately owned rental housing development somewhat more affordable, and having the rents of those 10–20% not reset each time a tenant leaves, the city now allows much greater height and density, dramatically reduced parking requirements and reduced fees paid to the city for community amenities such as schools, community centres, etc.”

Summary

“In summary,” my son intervened, “it seems like social housing was a 70s–80s co-op and rental initiative that Vancouver has pretty much aged out of, so anybody using the term social housing is just sewing confusion. Market rental housing is what I and most other Vancouver renters live in—rents set at whatever the market will bear, with some rent control while you are living in a place, but none between renters. Meanwhile, higher, denser, spot-rezoned secured market rental projects are to remain rental for 60 years, based on whatever a developer negotiates with the city, currently including about 10–20% (also negotiable) below market rental homes that are cheaper but likely smaller than the market rentals and cannot have their rents reset between tenants, unlike what happened to me?” I nodded, smiling at his clueful synopsis of my complexity.

“All thisseems like a good deal for the developer,” my son responded after a few more moments of reflection. “So much more height and density for a small percentage of tiny, more affordable homes. Why doesn’t the city require a better deal for all projects over a certain size looking for additional height and density? And maybe not give away so much of that height, density, reduced parking and community amenity fees?”

I smiled. “At least one Metro Vancouver municipality is doing just that, much to the chagrin of the development community. I think we need a break—then we can talk about the second step to affordable rental housing—requiring it.”

Brian Palmquist is a fully vaccinated Vancouver-based architect, building envelope and building code consultant and LEED Accredited Professional (the first green building system). He is semi-retired for the moment, still teaching and writing, so not beholden to any client or city hall. These conversations mix real discussion with research and observations based on a 40+ year career including the planning, design and construction of almost every type and scale of project. He is the author of the Amazon best seller “An Architect’s Guide to Construction.” He is also a member of team for a livable Vancouver, a new political party dedicated to restoring a livable Vancouver starting with the 2022 civic election.

*1 https://cityhallwatch.files.wordpress.com/2021/04/cov-memo-to-council-on-definition-of-social-housing-5-mar-2021.pdf , page 2

*2 Link: https://council.vancouver.ca/20211005/documents/spec1.pdf , pages 9-10

* 3 City Conversations Rental—Streamlining or Steamrolling? Link https://brianpalmquist.substack.com/p/rentalstreamlining-or-steamrolling

*4 Link: https://council.vancouver.ca/20211005/documents/spec1.pdf , pages 9-10. This seems at odds with the MIRHPP program.

*5 MIRHPP: https://vancouver.ca/files/cov/mirhpp-public-faqs.pdf

*6 Link: https://vancouver.ca/files/cov/secure_market_rental_policy.pdf 

*7 Link: https://council.vancouver.ca/20201006/documents/rr_5.pdf 

*8 Link: https://vancouver.ca/files/cov/mirhpp-public-faqs.pdf

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