Vancouver maps out plan to help the city’s renters
The Globe and Mail
Frances Bula
22 July 2017

Life in Vancouver for a renter such as Ian Martin is a tightrope walk every month across the financial abyss.

The 51-year-old makes $31,000 a year as a delivery driver for a commercial printing company. The cheapest livable apartment he has been able to find in Vancouver – a one-bedroom in the northeast corner of the city – costs him $1,050 a month. That’s a little more than 40 per cent of his gross income and well more than 50 per cent of what he actually takes home each month.

He has watched as the buildings around him are either upgraded – with accompanying rent increases – or demolished and replaced, and is resigned to the idea that he will face paying a lot more in the future.

“It’s an inevitability. The clock is ticking,” Mr. Martin said.

Now, Vancouver’s mayor and planners are promising a new initiative for rental housing aimed at helping people exactly like Mr. Martin.

lock in lower rents by requiring developers to ensure up to 25 per cent of units in new projects are rented at rates affordable to those earning $30,000 to $80,000.

The strategy, which Mayor Gregor Robertson says is the first of its kind in Canada, will aim to lock in lower rents by requiring developers to ensure up to 25 per cent of units in new projects are rented at rates affordable to those earning $30,000 to $80,000.

The city is considering a variety of options, from giving incentives to imposing the requirement on developers and offering them a fixed amount of extra density.

“We’ve put a huge focus on creating more rental supply in Vancouver for eight-plus years with some success. The next step is to ensure that some supply is locked in at lower rates,” said Mr. Robertson, who will announce more details of the policy on Sunday.

Mr. Robertson’s party, Vision Vancouver, has taken some criticism in the past eight years for its rental program, now called Rental 100, which offeres developers incentives to build rentals rather than condos.

The critics have said the rents the city defined as allowable for those units – $1,360 for a studio on the east side is the lowest—were laughably high and did not create any affordable housing at all.

Asked why his party did not move sooner on a policy like the one to be announced on Sunday, Mr. Robertson said Vision set precedents in the country with its previous incentives, which have boosted rental construction by hundreds of units a year, and with a rental-only zone in the Downtown Eastside.

As well, he says, the market changed so quickly.

“We thought we were responding with very innovative programs eight years ago.” But now, he said, he and his colleagues have realized that supply alone is not enough.

“There’s this false assumption that more supply will mean more affordability. But that hasn’t panned out in Toronto or Vancouver. We do need lots more supply, but if we don’t tie that to rents that connect to income, we’ll just be behind the eight-ball.”

“The rental market is so competitive and rents keep going up and up. This program will take forever and there will be a huge wait list.”
—Rachel Maxcy, Vancouver renter

As part of the new initiative to lock in lower rents, the mayor sent out a letter this week warning developers that new requirements are coming and they should avoid over-paying for land in the current out-of-control market.

“We are writing to express concerns about the amount of speculative behaviour in the real estate market,” the mayor wrote to the Urban Development Institute on July 20. “The purchase prices we are seeing reflect a housing market that is disconnected from local economics, and will lead to proposals that will be challenged to meet the City’s requirements for affordability.

“If you or your members are involved in buying, selling, or marketing property in Vancouver, particularly in areas near transit stations or along arterial roads, with the expectation of being able to redevelop for multi-family housing, please be aware that deeper levels of affordability will be required. This expectation needs to be factored in to land assembly considerations.”

Planners say they will run experiments this fall to see what kinds of strategies will work to lock in 20 or 25 per cent of units in any given project at rents affordable to households with incomes of $30,000 to $80,000 a year. That would mean rents as low as $750 for people like Mr. Martin, or as high as $2,000 a month.

It is not clear what mechanism will work for developers, because B.C. and Canada do not have the tools or programs for reducing rents that are available to apartment builders in the United States.

In Seattle, for instance, almost 30,000 apartments were built between 1998 and 2016 through a mechanism that gave developers a property-tax rebate in exchange for guaranteeing that a certain percentage of units in the projects would be rented out at rates affordable to households below the median income.

B.C. has no legislation that would allow a city here to give that kind of property-tax break.

U.S. builders also benefit from a long-standing federal program that offers tax credits for projects that include some apartments renting at rates that are affordable for low-income families. Canada has never had a program like that, although it did offer tax incentives for investors in apartments until the early 1980s.

Vancouver will have to try other strategies.

The city’s chief planner, Gil Kelley, said city staff will look at whether additional density, reduced requirements for parking, or lower fees can provide enough of a bonus to make the balance sheet work for a building in which as many as a quarter of the units are rented for substantially less than usual market rates.

Rental 100 offers some of those incentives, but the amounts could be bumped up.

Mr. Kelley said the significant increase in rentals produced in Vancouver since Rental 100 was introduced show those incentives are working. About 8,000 of the 42,000 housing units built in the city since 2007 have been rentals, a big jump from near zero.

The city could also demand what is called inclusionary zoning – developers are not offered incentives but simply required to include a certain proportion of low-cost apartments in any project in return for a fixed increase from the standard density allowed on that site.

Such a system has just been introduced in San Francisco, where Mr. Kelley worked most recently, with a requirement that 18 per cent of units in any project with more than 20 units be rented at affordable rates.

“We don’t know what the perfect mechanism is,” Mr. Kelley said. “We will do economic testing and see what makes sense as a density bonus, what makes sense as inclusionary zoning.”

Once some agreements have been worked out through individual pilot projects, city planners will figure out what to include as a permanent policy for creating low-cost rentals.

The city and developers will also need to work out the monitoring process for those units. If they are to be rented out based on household income, some agency will need to monitor incomes every year to determine the rents. As well, that agency will have to choose tenants from what will likely be a long list.

It’s the prospect of a waiting list that makes some Vancouver renters dubious about the effectiveness of the city’s initiative, as well-intentioned as it might be.

Rachel Maxcy, her husband and three-year-old currently live in a two-bedroom, 850-square-foot apartment in Mount Pleasant that costs almost half of the $4,000 a month Ms. Maxcy earns as a career counsellor. (Her husband has been a full-time university student for the past six years.)

She, like many renters, feels stressed about what is coming next. And she cannot see how a program with a few hundred units a year, in a city where half the population of almost 700,000 are renters, is going to make a difference.

“The rental market is so competitive and rents keep going up and up. This program will take forever and there will be a huge wait list.”

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