June 22, 2022

Michael Geller, The Broadway Plan & The Great Myth: Density Does Not Make for Affordability

This week the Broadway Plan will be back at Council committee.

Everyone has an opinion on this plan which impacts nearly 500 blocks of housing on the north and south sides of Broadway. It is rare to see planners who are not representing developers speak out-but several have, including the City’s former chief urban designer,  and senior policy planners.

It’s been a breathless experience  to watch Toronto based Globe and Mail not get into the weeds of why this plan kicks to the curb three decades of community planning and consensus work, and instead write editorials suggesting that more is more, the rescinding of current neighbourhood plans, affordable rental units and communities be damned.

It was very clear that the Toronto based writers did not understand the nuance and the amount of renters that would be displaced in this plan. And for the argument that this is one against detached housing owners, only 11 percent of the units subject to upzoning are in that housing form.

Take a look at the response of Michael Geller on his blog. Michael is an architect, and did a lot of foundational  work at CMHC (Canada Mortgage and Housing  Corporation) back in the day.  He has also been a successful developer.

One Toronto based newspaper architectural critic said that Vancouver did not understand that increased density results in greater affordability, and wanted to educate the Vancouver masses about our failing.

Good for Michael Geller for responding that this critic needs to walk back his comments.

Mr. Geller states:

“You can’t have affordability without density, increased density does not necessarily equate to increased affordability, especially over time. It may in the short term, but not necessarily over time.”

Michael Geller points out that prices paid for land are based on the required “end price” of condos or  purposely build rentals, the density approved at the time, and cost considerations.

When the  Cambie Corridor redevelopment  along Cambie Street commenced, Mr. Geller notes that

increased the density along the Cambie Corridor from single-family density to 2.5 FSR in many areas. Developers determined that they could sell completed product for $1400 psf and could pay $400 psf buildable for the single-family lots along the street. The property assessments along the street in turn increased in value from $3 million to around $8.5 million.”

“However, for a while the end price being paid by buyers (both investors and ‘end-users’) dropped from $1400 to around $1250 psf. Land values dropped accordingly. Some lots sold at the lower price, but many were taken off the market. Projects stalled. Eventually condo prices increased back up to $1400+ a foot.”

As well one creative architect found a way to get a higher floor space ratio approved, a 2.75 FSR instead of 2.5. But that increased density did not make prices go down, instead it raised the prices being paid for the detached houses needed for the land assembly. There were no savings passed onto the renter or condo owner.

Michael Geller points out that construction costs and interest rates have risen, and  many projects are no longer economically feasible. Purpose built rental could be done for about $200 per square foot if they were rented at $3.75 a square foot.

“A lot of sites traded at $200 psf buildable. The value of the land was site area times $200 times FSR density.If they thought they could get 3.5 FSR, they could pay $3.5 million for a 6000 sq.ft. single family lot, and many did.”

With decreasing land values per square foot, developers can’t pay $200 per square foot,and want  with more density to  reduce the cost of land acquisition. That’s why developers want bigger densities along the Broadway Corridor to make projects work.

Secondly financing costs are requiring more money from developers upfront. A project has to have a  financial upside to go ahead.

As Michael Geller summarizes,  “housing affordability is related to density, but it is also heavily influenced by the market value, (whether ownership or rental, and if rental whether a 20% below market component is required), and the other cost components. In fact, one might argue that construction cost, interest rates, and municipal fees can be even more significant than density when determining whether a housing development will be affordable.”

“In other words, you can’t have affordability without density, but increasing density does not necessarily increase affordability.”

You can read Mr. Geller’s whole article here on his blog.

 

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