Kerry Gold, The Globe and Mail
Vancouver explores ways to increase rental housing
For 50 years, Vancouver has been a predominantly renter city, and with the price of real estate what it is, that demographic will only grow bigger. That means government needs to step up its game in order to supply a growing region with the affordable and secure rental housing that it needs.
That will be the topic of a virtual panel discussion held jointly by Simon Fraser University (SFU) and the City of Vancouver, called Towards a More Equitable Housing System: Is Vancouver a City for Renters?
One of the event panelists is Evan Siddall, president and chief executive officer of Canada Mortgage & Housing Corporation. The CMHC, Mr. Siddall says, has helped reverse the significant decline that B.C. had seen in rental housing construction in the past several decades, since condominiums became more profitable when they started coming online in the 1970s.
With real estate prices closing the door to home ownership for many, policy makers are keenly aware that the economy will rely on increased rental housing for the growing renter demographic. Mr. Siddall also sees that the idea of home ownership “at all costs” is risky business.
“Let’s face it, we all want to own a home. I get it. But putting people further into debt — especially young people - to make that happen is not good financial policy,” Mr. Siddall said in an interview.
Other speakers at the Jan. 21 event include Squamish First Nation Councillor Khelsilem, Barbara Steenbergen, member of the executive committee, International Union of Tenants, William Azaroff, CEO of Brightside Community Homes Foundation, and Ottawa-based lawyer Leilani Farha, who until last year was the United Nations special rapporteur on adequate housing and is now global director of the housing rights group The Shift. I will be co-moderating the event with SFU Urban Studies professor and director, Meg Holden.
Andy Yan, director of the city program for SFU, will supply his usual serving of compelling data, including the fact that more than 50 per cent of the city has rented on a consistent basis, going back to 1971, according to Statistics Canada census data.
Mr. Siddall is particularly proud of a low-interest rate construction program given for development of rental properties, which has proven so popular that the federal government has significantly expanded the size of the program, called the Rental Construction Financing Initiative (RCFI). The program, which started three years ago, is now at $13.75-billion for loans given until 2028. The federal government recently announced possibly adding more funding to increase RCFI lending to $25.75-billion.
“To date, 27.7 per cent of that program has been spent in B.C.,” Mr. Siddall said. “I know some people are running around saying, ‘CMHC doesn’t care about B.C.’ and I’ve got to tell you, we spend more time in B.C. than any other province.”
One of several requirements is that at least 20 per cent of units built must include rents that are below 30 per cent of the median total income of families in the area.
The loan agreement has a condition that requires the developer to maintain the affordability component for a minimum of 10 years, after which time the project can become market rate. And there is always the concern that landlords will be motivated to bring in tenants who can pay market-rate rents over those who can’t. At present, rent can be increased when a tenant moves out.
For decades, about half the population of Vancouver has rented, and 62 per cent of the rental housing comes from investor-owned properties, such as condos, according to Mr. Yan. In the 1960s, Vancouver was enjoying a boom in purpose-built rental construction, but when condominiums came along in the early seventies, developers saw they could turn a much faster profit by building condos instead. The rate of new purpose-built rentals fell off substantially.
As a result, the purpose-built rental buildings of today are mostly older three-storey walk-ups that now need maintenance and upgrades. But in recent years market conditions have made condo development less lucrative while government has increased incentives to build rental. Purpose-built rental apartment buildings are a thing again.
Big institutional investors from Ontario, the United States and China are developing multitower, highly dense rental complexes around the Lower Mainland and in Victoria. Aoyuan Group — one of China’s largest property developers — is a newcomer to the region. In Burnaby, the company is including rental in its eight-acre, 2,500 home development, Alpha Gardens.
Squamish First Nation and Westbank Corp. are developing the 6,000-unit Senakw project in Vancouver, which will be mostly rental, and which could start construction this year.
Because they already owned the land, their project is essentially a Crown corporation model, Khelsilem says. They are merging market and non-market housing development.
“I would say we are modelling a new approach that other governments might want to consider,” he says.
But the shift toward condo that happened in the 1970s could happen again, he adds.
“Theoretically, at some point, if those underlying incentives are still not there, the market will start to shift back towards condo, and then again we get the problem we have had for the last 10 years happening again, without any kind of plan to prevent it.
“It’s a short-meet-long term play. The condo market isn’t going to yield the results that we want, so let’s put our investments into rental to diversify our revenue streams, and we will wait out the market to shift again. And in time it will shift back to condo and we will switch back over, and during that period of time they have invested in the development of an asset that will yield long-term results.”
Lawyer Robert Patterson, who advocates for tenants as a member of the Tenant Resource Advisory Centre, says that several government policies have had positive results in protecting and expanding rental housing, but government needs to start building housing. The city of Vancouver and the B.C. government both brought in empty homes taxes that incentivized owners of secondary properties to rent their empty homes instead. The city’s Moderate Income Rental Housing Pilot Program (MIRHPP) allows rezonings for taller buildings if they are entirely rental, with a minimum of 20 per cent of the building reserved for moderate income households, earning between $30,000 and $80,000.
Mr. Patterson wonders whether taxpayers are getting enough bang for their buck when the taxpayers subsidize private developers to build affordable housing. He also questions how government will enforce that these developments maintain the below-market units in the long-term.
“It sounds like government is going to go and directly invest in public housing. But what we are seeing instead is indirect, ‘let’s pay other people to do it or give them low interest rates to try to get them to do it.’ We are tinkering with the market and playing with the levers and hoping the machine that we don’t entirely know how it works, and we can’t entirely control, will create the exact product we want. MIRHPP, for example, doesn’t deliver that many affordable units per unit built.
“If you want to create affordable units that you know will be affordable long term, you can build the affordable unit and shoot it into the market, but now you don’t have full control over it any more. If you want to ensure rents stay affordable, then keep them non-market units.”
It might be the more expensive approach, at least initially, he adds, but the cost of giving subsidies, as well as having to emergency house people, costs more.
“If you want to build housing and make sure it’s affordable forever, don’t hand it over to another landlord.”
This was published by The Globe and Mail on January 13, 2021.