The non-market housing approach | Vancouver Sun


Part 2 of the rental housing shortage debate in Vancouver

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One thing housing experts on both sides of the political spectrum can agree on is that Vancouver is in dire need of rental housing to cope with the expected wave of new immigrants, as well as millennials, to looking for a place to live in the city. The question that divides these same experts is how these rentals should be constructed and by whom. In the first installment on this topic, private enterprise champions suggested that specially designed rental housing (PBR) could be built quickly and efficiently by the for-profit sector if the government could simply pave the way for industry. to do its job.

But others, including economists and progressive left-wing public sector advocates, say it was precisely this free capitalist approach to housing that created the affordable housing crisis in this city. They say the crisis could be ended with a dramatic increase in the construction of affordable non-market housing for a much larger percentage of the population.

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Marc Lee, senior economist for the Canadian Center for Policy Alternatives (CCPA), said in a recent research paper, “How to Build Affordable Rental Housing in Vancouver,” that there is some truth to the explanations that building affordable housing costs too much. , Vancouver land prices are too high, and high development costs and bureaucracy are choking projects. The ultimate solution, however, is to stop relying on the current “for profit” approach of building whatever the market will support in British Columbia and Canada.

“To achieve the public goals of affordable housing – and the associated social and economic benefits – we need to expand the stock of non-market and cooperative housing with public approaches and non-profit development,” he wrote in the statement. Politics. note published in March by the ACCP. Non-market housing is government-subsidized housing or non-profit housing that rents below the market. Lee said the federal government played a much larger role in housing in the 1960s and 1970s, with very generous federal tax credits for investment in rental housing. It has also invested directly in housing co-ops through its federal agency, the Canada Mortgage and Housing Corporation. But by the 1990s, he had largely abandoned the field of housing. There followed a period when the rental market was primarily fueled by an unprecedented boom in condominium construction, with condominium owners acting as owners.

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But Lee argues that while the modus operandi of private enterprise is to build what the market will bear, the real solution is to start with the actual costs of building housing, and then consider how rental income flows over roughly. 50 years can pay for the construction and ongoing maintenance and operating costs of this dwelling. The for-profit model adds excess costs, such as underground parking fees. “It costs a lot of money to dig these giant holes in the ground, and what we find is half of this underground parking lot that we don’t even use. It is the excess capacity that goes directly to the bottom line. “

What remains clear is that with the rise in property prices in the city, the share of renters, now 53 percent, is likely to increase, as young people wanting to own their own homes are forced stay longer in rental units to continue saving for a down payment.

Lee argues that a non-profit model for building rental housing could offer significantly lower monthly rents than those provided by the for-profit sector. His research found that with the construction of wood-frame PBRs, average rents could drop as low as $ 1,273 per month for one-bedroom units, $ 1,641 for two-bedroom units, and $ 2,009 for two-bedroom units. three bedroom – rates significantly lower than current market rents. Breakeven rents, he said, projected over 50 years, could support initial construction and ongoing operating expenses.

Lee said other possible savings could be realized by using existing land owned by the public or nonprofit organizations. The cost of rentals could be further reduced, he said, by a system that cuts developer profits out of the equation, by city governments waiving parking requirements and reducing city fees, and by the federal government. waiving the GST on new construction.

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The co-op housing industry, represented by the Co-operative Housing Federation of BC, has its own suggestions for creating affordable housing in Vancouver. “Private sector PBR developments do not meet the full range of accessibility that we need in the new supply, and the need for increased government investment in the supply of affordable housing is more urgent than ever.” said Thom Armstrong, chief executive of the federation, which represents more than 260 nonprofit co-ops housing thousands of people primarily in Metro Vancouver and Vancouver Island.

Although CMHC’s Rental Construction Finance Initiative, which provides low-cost federal funding to eligible borrowers, has helped increase rental stock recently, Armstrong said the bottom line is that there is no has not enough PBR or cooperative developments entering the market to meet demand.

The most important benefit of supporting nonprofit co-ops, explains Armstrong, “is that housing is developed and operated at cost, which means housing costs (rents) only increase to cover the cost. debt service, operating costs and reserves necessary to support long-term asset management needs. There is no incentive to realize a capital gain on the sale of co-op properties.

Andy Yan, director of the City Program at Simon Fraser University, said the time when condominiums served Vancouver well for rental was in the 1990s, when renters tended to be younger, single and more mobile. “Once you start having kids and wanting to have a place for the long haul, that’s where the challenges lie. Part of the difficulty with the current PBR construction boom is that what gets built doesn’t necessarily match what the tenant population needs and can afford.

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“What kind of PBR is being built these days? Mostly studios and one-bedroom, although the city typically specifies that 20-30 percent of projects must be two-bedroom and three-bedroom. What has not been calculated is not what we gain, but what we lose, which is affordable housing for a larger segment of the population. (PBRs) fit the profile of the tech worker, but they don’t fit the typical service worker who earns less, ”Yan said.

What remains clear is that with the rise in property prices in the city, the share of renters, now 53 percent, is likely to increase, as young people wishing to own their own homes are forced stay longer in rental units to continue saving for a down payment. In this context, PBR takes on a whole new meaning, especially if renting should always be seen as a “step on the road” to homeownership.

Rob Carrick, a national personal finance writer, has actively challenged the widely held notion that every Canadian should own their own home. He began to question the ideal of homeownership right after the 2008 financial crisis. “You could see the housing market take off because of the low interest rates. I started to think, “How do people afford housing when prices are rising at rates much higher than incomes?” It made me think there is a disconnect here.

Carrick said the dream of homeownership has driven some young couples into a crippling debt spiral where, as house prices rise, they spend more on housing while struggling to pay recurring costs like daycare or borrowing to take a vacation. “Housing is going to crowd out everything else in their budget,” he said, noting that increasing PBR construction is a good thing if it helps fill the gap in rental markets, the gap between older rentals requiring repairs. and upscale luxury homes for rent.

“I think we need a wider range of good, purpose-built rentals,” he said, adding that this would provide Canadians with alternatives to owning their own home.

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