Four Steps to Rental Affordability: Part 2 (Requiring 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 2 (Requiring It)
(City Conversations We Should ALL be Having)

By Brian Palmquist (first published on 5-Jan-2022)

This is Part 2 of the “Four Steps to Rental Affordability” series of City Conversations We Should ALL he Having. Part 1 talked about the confusing definitions of affordable housing. This Part will look at another municipality’s approach to encouraging  affordability in new rental home creation, and what that might mean for Vancouver.

Is that a Developer Headed out of Town?

“Did it surprise you,” I asked my now somewhat bleary-eyed son, “to discover that the west coast is really the Wild West when it comes to how much of what type of affordable housing is required in each rezoned project site in Vancouver?”

“Well,” my son answered, “you did run through a set of definitions that pretty much concluded that—is there an alternative that might make life less stressful for renters—all citizens, actually?”

“Maybe,” I answered. “Not in Vancouver at the moment. But the City of Burnaby is doing some interesting things. You may recall, the current Burnaby Mayor was elected in a landslide when he promised to fix his predecessor’s policies, which had led to many evictions and ‘demovictions.’ A demoviction is where a landlord decides to substantially alter or demolish and replace an existing rental building. In Burnaby this was causing major dislocations of many longtime tenants in affordable rental buildings, often in favour of strata projects.”

My son’s silence continued. I suspect he was telegraphing that ‘You may recall’ was not a likely scenario, so I continued.

“Burnaby has implemented a Rental Use Zoning Policy that seems to be working so far, but has caused quite a stir in the development community. In summary, for a project replacing rental, the policy:

– Applies to all proposed rezonings involving 5 or more rental units;

– Requires those demolished rental homes to be replaced on a 1:1 basis with homes of the same size (bedrooms) and meeting minimum area requirements;

– Offers existing displaced tenants the first right to rent the new homes, at the same rent they had when they were evicted, and with future increases kept modest, governed like they are throughout BC;

– Keeps homes affordable when tenants change. When an existing tenant leaves, the rent for the next tenant can be increased, but only to 20% less than the median rents in the area, as determined by CMHC.”

My son interrupted. “This sounds great so far. But what about a project that wants to be strata, which is what I expect would be the choice of any developer buying the building I’m renting in?”

“They appear to have that covered as well,” I answered. “For a rezoning proposal that contemplates strata where before there was rental, the policy requires that:

– Where demolished rentals are less than 20% of the total home count in the rezoning proposal, strata + rental, then rentals need to be added to get to minimum 20% rentals total—they call that ‘inclusionary rental’—so a proposed strata development will need to include 20% rental units regardless;

– The same unit size requirements and 20% below CMHC median market rentals applies to all of the rentals in the project, both replacement and inclusionary rentals.”

“Still sounds great,” my son interrupted again. “But is there any concession given to developers to help make this happen, instead of just ignoring Burnaby and doing business elsewhere?”

“Yes,” I replied, “and in my opinion their approach is much superior to Vancouver’s, where every project involves a separate negotiation with city staff, causing some to wonder what ‘deals’ are being made. In Burnaby, there are specified density bonuses awarded to rezoning projects as compensation for building lower revenue rental housing. (In the chart below, the ‘RMs’ and ‘Cs’ are existing residential and commercial zones in Burnaby—FAR is Floor Area Ratio, and the numbers indicate the offsetting bonus in exchange for creating 20% below market rental. For example, in the first column there is a bonus of 0.55 times the site area, so a 10,000 square foot site would be entitled to 5,500 extra square feet of building development.)”

Burnaby Density Bonuses to Offset Rental Replacement

“So how is that different from Vancouver, where it sure looks like density bonuses are negotiated for rental?” asked my son—no flies on him!

“The difference,” I answered, “is that in Burnaby it’s clearly prescribed, so anybody can calculate what they have to do and how much extra density they get for doing it. It’s much easier for a developer to do their project cost estimate, what they call a pro forma. And they have greater clarity about the outcome—so does the public, who know what ‘the deal’ is and that it’s with the same rules for all.”

“So how’s that working out for Burnaby?” asked my son after a few moments to ponder.

“Well, the Mayor seems very popular, probably a shoe-in for re-election. And Burnaby’s development stats seem impressive.”

My son looked at the chart I had brought up on my screen. “So I see almost 1,200 new non-market rental homes occupied, under construction or approved, and an additional 2,400 market rentals—those would be either inclusionary rentals or rentals just added to projects because they make financial sense. How does that compare to Vancouver?”

“Vancouver has a cute ‘Dashboard’ that it publishes periodically—the latest available on their website is only ‘Q3 2018’: 

Vancouver Rental Completions, from Q3 Housing Vancouver Strategy Update

He looked at the figures. “So looking at what’s happened since the current Council was elected in 2018, I see the same number for Vancouver of what Burnaby calls ‘non-market units,’ about 1,200, but less than Burnaby’s 1,800 market rentals. The time periods are not exactly equal, but just what’s publicly available. Dad, what are the comparative populations?”

“Burnaby in 2021 had almost 262,000 residents, Vancouver just over 631,000 residents. So with just over 40% of Vancouver’s population, Burnaby has developed the same number of affordable rentals as Vancouver, and one-third more market rentals.”

“So why aren’t we following Burnaby’s lead?” he asked.

“Well, the development community is unhappy with Burnaby’s approach. The Urban Development Institute (UDI), which represents the development industry, is claiming that ‘Thousands of future new rental homes in Burnaby could be cancelled.’ They’re looking for more density bonuses and other incentives to create rental housing, or threatening to build rental elsewhere.”

“Is there anywhere else they could go to build this quantity of rental or strata housing?” he asked.

“Just Vancouver for the volumes proposed, as far as I know—where it usually takes longer and there are no specified incentives, just individual, private negotiations between the City and the developers… I wonder if there’s any relationship between Vancouver’s negotiation approach and the huge volume of spot rezoning proposed in Vancouver?”

“So what is the ‘huge volume’ of spot rezoning?” my son asked.

“Nobody knows,” I answered. He looked incredulous so I continued. “The city’s chief planner admitted recently that she had no housing development statistics around housing spot rezoning in the works.” He continued staring, clearly awaiting my further explanation, but asking, “So what are the housing numbers that you’ve periodically showed me?”

“On a good day, they are called ‘aspirational,’ that is, what city staff would like to see. On a bad day, I call them ‘made up’—this in the third largest city in Canada.”

He looked dumbfounded, as am I. All I could do was give him a hug—he’s a big hugger. He asked in a timid voice, “What can we do?”

I shrugged. “Stats Canada will be releasing 2021 population census data soon—that will tell us how much Vancouver has really grown in the past five years since the last census, and what kind of growth we’ve had. Historically we’ve grown +/–1% compounded per year, which is about 6,000-7,000 new residents per year. Once we have that 2021 data, then we can better identify how much housing of what types we need, say, over the next decade. Then we can craft policies like Burnaby’s, maybe even more targeted, that can better match our affordable housing need to the ‘marketplace’.”

“What if the development industry threatens to cancel rental home construction in Vancouver, as they have threatened to do in Burnaby?”

“Then they can develop the thousands of strata and market rental homes they want to in Burnaby—in accordance with Burnaby’s policies that they’re complaining about.”

“What if they threaten to just stop building?” my son asked, echoing the development industry’s periodic warning.

“Well, if the alternative for you is that $1800+ small studio I mentioned in our last discussion, maybe we’d all be better off if development stopped for a while. Then construction and land costs would drop, without a high volume of new projects to heat up the marketplace. So long as affordable rental housing is what’s left over after expensive strata and expensive market rental, I think we are playing a fool’s game—and I for one don’t want to play that game anymore.”

He rose and gave me an even bigger hug. “That’s enough for today,” I said. “Let’s talk tomorrow about how we can prioritize more affordable rental housing until the development industry and city staff and management come to their senses.” He offered me a beer; we clinked bottles, sipping quietly in companionable silence as we contemplated what our future could be.

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.

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