The Province argues, based on information from unnamed industry experts, that the problem of affordability resides in part with the City:
The City of Vancouver could do more to create affordable housing through better land use planning and lower fees and levies for new homes, Premier Christy Clark said to Mayor Gregor Robertson in a strongly worded letter June 4.
Not coincidentally (and after a year), the City has just released an analysis, reported in Novae Res Urbis, that argues otherwise:
Community amenity contributions are not the cause of rising housing prices in Vancouver, a consultant’s study done for the city says.
The year-old study by Coriolus Consulting Corp., which the city has just released, was commissioned because the city wanted to know if CACs were putting upward pressure on prices. It also responds to provincial-government concerns about the impact of CACs, which are charged on rezoning applications.
Coriolus looked at the effects of CACs on affordability, and found no evidence that the charges have constrained the pace of apartment development in Vancouver or contributed to increasing housing prices. “Housing prices have clearly increased significantly in the city and the region as a whole,” the study says, noting that Vancouver continues to absorb a large share of regional development. “There are factors pushing up housing prices in Vancouver, on the demand side and the supply side, but CACs are not one of them.”
Nor does the CAC policy restrict development. “In fact, CACs have been associated with a large increase in the city’s capacity for new development, have paid for amenities that otherwise would have been funded by property taxes, and in some cases have created affordable housing units,” Coriolus’s report says. “CACs are not the cause of rising housing prices in the city of Vancouver.”
CACs, negotiated when an owner or developer wishes an increase the zoning density of a property, may increase project costs (though there is some argument that is reduces the sale price of the land to compensate for the CAC amount) – “but rezoning also creates new land value by allowing a larger development opportunity.
“The impact of CACs, then, comes down to what happens to the increased land value created by rezoning. If the CAC eats up all of the increased land value, developers and land owners will have insufficient incentive to participate in the redevelopment process. If less new development happens, housing prices would increase. “But if the CAC is calibrated appropriately so that the land value gain is shared among stakeholders there is the possibility of a win-win-win: land owners reap an increase in the value of property, developers find it rewarding to seek rezoning and develop projects, and the community obtains new amenities.”
If the City were to forego CACs (and/or Development Cost Levies, which it does in some cases, notably for rental or non-market housing), it would have to not provide the amenities and infrastructure to deal with growth, raise property taxes to make up the difference, or reduce expenditures in existing services or wages – all of which generate political blowback, possibly strikes, and, over time, rising inequity.
Unfortunately, the one thing it wouldn’t seem to provide is cheaper housing.
The elephant in the room is land. I was speaking to three home owners in the Dunbar area on the weekend. The Vancouver City charges and fees pale again the exponential rise the rapidly loss of available single family lots. Lots in the Dunbar area have risen to $1.9 to $3.5 m with no end in sight.
I was speaking to a owner of a condo in the Dunbar area who just sold his 11 year wood frame unit for less than the appraised value of the unit. The unit is in good condition and has no issues. His real estate agent was saying that the new concrete units on Cambie Street are priced similar and have access to the Canada line.
Are the supply and demand of multi-family units in balance?
Vancouver has reached a tipping point that many growing cities have experienced that as the population reaches a critical number- all future population increases will have to be housed in multi-family units.
As the total number of new single family lots disappear but demand is still increasing- large price increases. No Government program or trickery is going to lower the price of property. Lowering the City of Vancouver development fees is not going to make single family lots cheaper.
Correct.
As such we need restrictions on ownership of land or single family housing , or barring that, huge tax levies and/or capital gains taxes. It is ridiculous how much tax slippage there is as people claim this property as their primary ” residence ” but do not pay any income taxes here. Canadians are very naive ! Very very naive.
I’m not sure that they are at opposite ends of the spectrum. The province is saying that the City should look at all of the fees that they charge, of which the CAC is only one of many. If you start adding up all of the fees (rezoning fee, development permit fee, building permit, etc.) and the other requirements of the City (LEED’s, district energy, Development Cost Levies, CAC’s, GVS DCC, etc.) then you start to get something that impact affordability. You only need to compare the fees and requirements charged by Vancouver and neighbouring municipalities to see that there is an issue.
It is easy for the City, or this case Coriolus, to start that CAC’s do not impact affordability if you look at it in isolation.
The city lowering wages ? What a novel, and unlikely to happen, idea to bring public sector wages in line with private sector wages with far fewer benefits and higher layoff risk.
CACs are obviously far too low as we are being asked, via referendum, to increase PST to pay for more transit to accommodate all that growth.
Clearly, many immigrants and non-residents pay far too little in property and/or income taxes yet many of them avail themselves to expensive healthcare or education services while they obtain a passport here, or merely invest here almost tax free on their often sizeable capital gain.
We need more data on true immigration vs mere passport seekers ( aka ” fake Canadians”) vs non-resident ownership. This data is lacking to make sound policy decisions. Unclear why our cunning Premier is dismissing this basic idea so quickly..
A good start would be to do away with parking requirements. Parking requirements, while comparatively low in Vancouver, not only add significant cost to each development, but also often reduce the number of units that can be built on a given property in order to make space for parking.
Of course that means that the city needs to start implementing their residential parking policies from their 2040 transportation plan and start to charge for residential on-street parking based on demand.
These two measures together would increase capacity and bring down cost at the same time. This is not just shuffling money around, overbuilding parking costs real money and space and getting rid of this inefficiency benefits everyone. And it helps level the transportation mode playing field that is still stacked highly in favour of the car.
This is further evidence that our housing prices are unmoored from what we formerly took to be the law of supply and demand. Once upon a time the cost of a house had to do with the average purchasing power of local area buyers, and the supply of the commodity on the market at any one time: supply and demand.
But now housing is in investment instrument like stocks and bonds. Its no longer a commodity. Not at all. Vancouver housing is now just like gold or diamonds, which have no inherent worth and are not really subject to actual constraints of supply and demand. They are just worth what the world thinks they are worth.
Having said this i agree with Michael Geller. New and different supply can have an effect. But only if we figure out ways to use the real investment instrument more wisely. Its not really housing that is the investment instrument is it. Its the land under it. Row housing, stacked townhouses, and stratification of “single family” homes are the best we can do at this time. And do it with an eye towards flooding the market with the types of housing that is not seen as attractive an investment product as our “cash boxes in the sky”