May 17, 2016

Teardown: No good intention goes unpunished

This just in from Business in Vancouver:

BIV 2

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Single-family lots in East Vancouver are gradually densifying through city bylaws that allow legal suites and laneway houses, but builders say the ever-increasing cost of Vancouver real estate is making it harder to find properties and turn a profit. …

Properties increase in value by around $900,000 when a builder tears down an older bungalow and replaces it with a larger house with a legal basement suite and a laneway house. 

The trend pushes the price of the built-out property into the $2.4 million range, the kind of hefty price tag once reserved for Vancouver’s west side.  …

The rapid price acceleration, combined with the City of Vancouver’s lengthy permitting process, has led to another layer of deal-making: it’s common for builders to buy a house, tear it down and begin the permitting process. 

They then sell the lot with the permits in place, but not yet paid for, to another builder. Selling the lot with the new house not yet started allows the second builder to avoid paying GST on a new home. …

The densification trend is largely not happening on the west side, Atwal said, characterizing buyers in neighbourhoods like Dunbar as wealthy people who would rather use the garage to house an expensive car than build a laneway house.

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More intriguing details here.

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  1. Mixed messages here. Is densification now a bad thing if you tear down an old dog and build a new one with a laneway house and a basement suite? Is it unexpected that the price of a property goes up if a builder puts money into a new house? Does it matter if a builder doesn’t pay GST given that GST is a flow through tax until the final buyer? Is it a bad thing or a good thing that developers can’t find lots?

  2. This is a tough one.

    The implication here is that taking a single detached home and making it into a single detached home with three separate units, at minimum two of which are rental, is a bad thing because some people made money off the difference?

    Certainly not saying it’s the ideal situation, but converting a single detached into three units, with overall a higher number of occupied bedrooms, seems like not a bad thing.

  3. It seems like it would be a lot more simple and affordable for everyone involved if lots could just be flexibly divided and sold as multiple independent lots.

    1. But the real value of the laneway home program, and specifically NOT allowing subdivision, is it fosters a substantial increase in rental units.

      There are give and takes for all of this, but there’s a pretty huge give when it comes to allowing further subdividing, since it makes it harder and harder to stitch together sections of detached homes into more sustainable development models, like mid-rise housing.

      1. For reference, there were 500 laneway house permits issued in 2015, which means nearly 500 new rental units built out in Vancouver, many of which are 2 or 3 bedroom.

        That’s a pretty important part of the affordability puzzle.

      2. let’s get real,

        500 new laneway house/year is a drop in the bucket of the rental units (>300,000 dwelling in Metro Vancouver, with half of it in Vancouver proper), and so can hardly make a dent on the rental market prices.

        However, as illustrated in the article, it has a huge incidence on the house prices (now, the entry level for a detached property is no less than 3 units).

        the argument on further densification joepardized by subdivision is well taken, but then why we allow duplex?

        There is certainly a middle ground to be find, starting by treating laneway house as duplex (that is allowing strata ownership)…at the end a “one size fit all” is not the single approach…the area for densification potential are well identified and can be the object of a more resstrictive policy for the laneway house.

        At the end, I notice cities such as Boston, Toronto, Montreal …(to keep in NA) are able to achieve pretty high density (at least equivalent if not more than the one with townhouse here), using a very fine grained land ownership pattern:
        http://smartwomen.realtechpro.com/wp-content/uploads/sites/77/2014/12/annex2-e1418453370505.jpg

        So here not a real an excuse to do nothing else than a policy conductive of higher house price.

        1. Exactly. Allow subdivision of the lot – make the new lot lane-facing (and give the lane a name). Allow both the basement suite and laneway house to be sold off as strata units. A finer grain will allow further options for that “elusive middle”. Montreal triplxes regularly get divvied up into three units -affordable at that. The entire triplex might be worth more than $1 million, but a $450K 3 bedroom unit in the triplex is achievable. Lots of work to pull all this off, but it’s not like we’re trying to land a re-usable rocket on a barge here, everything that needs to be done in Vancouver is pretty straightforward and already being done elsewhere.

      1. Excessive subdivision ? We’re talking about 4000+ sq/ft lots here with archaic setback rules. I lived and owned a fee-simple row house in Montreal with zero setback and zero lot line. <1600 sq ft of land. Back yard patch of grass AND a garage. Totally do-able in Vancouver. Affordability would skyrocket. it's only political will preventing it here. Why NOT have 1000 sq/ft lots ? Wanna see something crazy? Check out this laneway house in Revelstoke of all places. http://tinyurl.com/zhysfkx It's on it's own micro lot and contains a mortgage helper suite with 3 bedroom unit above. A family of 4 lives upstairs and a couple lives downstairs. Tokyo density in a small town in BC. We can build these in Vancouver. The owner told me his total construction cost was $300K. Add in Vancouver land prices and you could put 4 of these on a 33' lot for a sale price of under <$800K each. New. And for profit.

  4. This is not a way to address one of our primary challenges: efficient land use.

    The subdivision of single family lots has been occurring for over a century. Yet, since enacting the zoning bylaw in or about 1950, there has been so much land locked up in the setbacks of RS zones that it has, along with speculation, foreign money (often one & the same) and unsustainably low interest rates and debt loads, conspired to create our current housing affordability crisis.

    Just doing some of the math. A typical front yard setback is ~74 m2. That’s 74,000 m2 (18.3 acres) of land consumed for every 1,000 RS lots. And 1.85 km2 (457 acres) consumed by every 25,000 RS lots. Remember, that’s only land contained in the front yard setbacks. About 70% of all private land in Vancouver is zoned RS, and around 45% on average of each lot consists of open land. It doesn’t take a Director of Planning to see what a tremendous waste that is in the context of a shortage of developable land and single-family housing types. And how facile it is for some prognosticators to lay our housing problems at the feet of foreigners alone.

    Subdividing two lots crosswise into four half lots will create four detached structures containing eight homes, if each house had a suite. Subdividing them into five lots will create 10 homes. Subdividing two singles into seven attached row houses (hopefully freehold) will create potentially 14 ground-oriented homes with private (albeit small) backyards. And we haven’t even approached low rise walk-ups yet.

    As for the price, the market will support the highest price under limited conditions, but a smaller home on a smaller lot will always be cheaper than a full lot, and more expensive than an average condo, no matter what the ceiling ends up being.

    What will it take for our city councils (every city in the Metro has to address this problem) to rewrite their zoning bylaws with the expressed purpose of creating more single-family homes in several alternate forms over the entire RS-zoned areas? Where is the courage? The planning studies? The latest Vancouver policy, though a commendable start, falls too short and eventually, with wisdom, must address the supercharged land located between the arterials.

  5. The type of density you’re looking for seems to be allowed in the Cambie corridor.

    Here’s what’s being built across from a friend’s place on 63rd near Cambie.
    Note that this pic is 1 of 2 buildings on the site (formerly 2 50ft detached single family houses).
    The one shown fronts 63rd Ave, w th little front yard, while the 2nd building is across a rear courtyard and is on the alley.
    There will be 16 townhouses in the project.

    http://i.imgur.com/ImLdAbc.png

    1. From two 50-footers to 16 townhouses. That’s a decent gain. And Formwerks is a pretty decent firm, though I tire of the pseudo-traditional architecture and the developer-ordered cost cutting OSB, vinyl windows and other inferior materials.

      I have some thoughts on the rowhousing form and what could inspire a non-strata approach. Same with low rise. I’d have to draw them up, though. Perhaps later, on another site ….

    2. There are probably other similar projects in the area, but I don’t think they need a rezoning (?) so they don’t have as much prominence. There are some small scale condo buildings by GBL (who else?) right on Cambie, too, but this one is half a block away from Cambie and seems tall for townhouses (vs condo).

  6. I don’t believe banning demolitions outright is an answer. Any policy that heads in that direction will likely have to call for a case by case justification.

    Too many older homes that once had architectural character have rotted out to the point of structural instability, or have been abused by a parade of tenants for 40 years. Perhaps there have been poorly done major renovations that compromised the character or structural integrity during the “modernization” craze of the Disco Decade. Stucco and false ceilings can hide a multitude of sins.

    Whatever the policy, there should be options from complete preservation to dismantling and recycling, with demolition as a last resort. The policy should allow the economic flexibility to recoup the often high costs of saving homes or recycling materials by allowing an extra new unit or two to balance costs with sales. There shouldn’t be a blanket ‘no-demo’ policy because of the sheer quantity and breadth of conditions the existing housing stock presents. Most importantly, a new demolition bylaw would ideally accompany policies to assemble and up-zone all RS lots. Moreover, the tree bylaw needs more teeth to protect the abourocultural heritage of our older neighbourhoods. Houses are not the only form of heritage.

    I suggest a house to be saved outright must have justifiable reasons (e.g. high quality architecture and millwork, structural soundness, historical factors, etc.). Once that’s established, then several options present themselves from moving a character house to the edges of a development parcel to free up more land, to extensively renovating existing structures in place or dismantling and denailing the studs and joists of existing houses for re-use in the new.

    There may not be a simple answer to this one, despite the genuine grief over the lost houses in established neighbourhoods.

  7. I’m not sure I understand the anti-demo craze. Replacing one home with three sounds like progress on affordability and housing diversity to me. People do realize that, out of the other side of its mouth, City Hall has mandated that any reno over a certain $$ threshold has to balloon into an even bigger reno in order to meet green energy efficient standards, right? That would seem to be a thumb on the scale for more demo / rebuilds rather than fewer, no? We can’t freeze the city in amber, nor should we try. Let’s pick the ~5% or so of structures that are truly special to preserve and stop crying about the densification of the rest. It’s not Rome we’re talking about here — this city was built from scratch in the 1880s! Let’s allow breathing space for the heritage homes of the future.

    1. There is a layer of anti-demo which isn’t inherently ‘historic preservation’ … its simply anti waste.

      Or in other words ‘the greenest building is the one that already exists’.

      There would be a great deal gained if there was an incentivization of renovation without having to go the historic preservation route. I’m dealing with one now which is existing non conforming, and can’t fit a laneway house because its too long – but if those rules were able to have flexibility, more could be done without having to hire heritage consultants/etc.

      There is a bit of an incentive now that renovating gets you a .7FSR, while building new gets you a .6 … maybe there’s call to make this more generous, as well as the form and shape of the infill laneway, so that there isn’t a need to blow up the house to fit in a new laneway.

    2. Ok, fair point, thanks. I guess the question remains whether this is an untrammeled free market issue that requires some kind of regulation (like a blanket ban) or if the paring back of existing regulation would better address the problem. As usual, there’s probably some of both but I don’t think we should just ignore the latter.

      Also, maybe neither here nor there, but there is another pretty major incentive that is implicitly mentioned in the article: GST only applies to the sale of a new home.

      1. GST is effectively a non issue. When property values rise 30% in a year, 5% is too small for most buyers of new houses over 2M to worry about.

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