Home Rental industry Dan Fumano: No one can live in a ‘housing unit endorsement’

Dan Fumano: No one can live in a ‘housing unit endorsement’


Opinion: As rental housing approvals surge, completions are lagging and, many fear, could soon get worse. And no one can live in approval

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A press release from the City of Vancouver this year announced that 2,956 purpose-built rental homes had been approved for construction – “the highest approvals in several decades”. And a press release last year announced “historic approval figures”.

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While welcome, approvals aren’t the only stat that matters. The city’s numbers also show that rental housing completions are lagging far behind approvals.

And looking ahead, homebuilders in both the private and nonprofit sectors are warning that current and future conditions could mean many recent approvals will never become completions.

Municipal authorities share their concerns. In a city with a chronically low rental vacancy rate and projected population growth, a lack of rental construction could worsen Vancouver’s housing problems for years to come.

Figures from Vancouver’s development permits, provided to Postmedia News upon request, show the city approved 15,390 purpose-built rental units between 2010 and 2021. But during that time, only 6,249 rental units were completed, or barely 40% of the total approved.

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This annual average of approximately 500 rental completions is more than double the previous decade. Between 2000 and 2009, the average number of rental completions in Vancouver was about 200 homes per year.

But that’s a far cry from the peak before the condo building boom. The average number of rental units completed in Vancouver between 1960 and 1969 was approximately 2,600 homes per year.

Of course, a unit approved one day will not be built the next. Construction takes years and the reasons for delays are many. The numbers show that completions started to increase a few years after approvals resumed, which makes sense.

The worry now is which direction the completion numbers might go.

For several reasons, including changing government policies and the advent of condo building, Vancouver and other Canadian cities built far less purpose-built rental housing after the 1970s. In 2010 and 2011, Vancouver didn’t build anything.

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Condos can provide good homes, either for the owner or in the secondary rental market. But purpose-built rentals offer far more security and stability than rented condos or basement suites, and Vancouver planners have developed programs over the past decade to promote rental construction. Raising rents was a major part of Mayor Kennedy Stewart’s 2018 campaign and will likely be a key issue in his re-election this year.

Cynthia Jagger at West Broadway and Granville Street.
Cynthia Jagger at West Broadway and Granville Street. Photo by NICK PROCAYLO /PNG

Recent rising rental approvals suggest the city’s policies of the past decade have had the desired effect, said Cynthia Jagger, director of Goodman Commercial, a Vancouver real estate company specializing in rental properties and development sites. .

“But then you look at the completions, and it’s so sad. … We should have built tens of thousands of units just to catch up. …. But we get 100, 500, 600 at a time.

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In recent years, with low interest rates and supportive government programs, “stars were really lined up for hire,” she said, “and we only completed 689 of them last year. , so it’s a bit scary for the future. … There are so many headwinds now.

Many of these headwinds are beyond city hall’s control – interest rates, global supply chain issues, regional labor markets.

In 2016, Ottawa unveiled a low-cost construction loan program for rental projects, which the industry hailed as vital to enabling developments in recent years.

But in this year’s budget, the federal government proposed to increase affordability requirements so much that the program is “collapsed,” said Beau Jarvis, president of Wesgroup Properties.
More accessibility seems like a good thing.

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But, Jarvis predicted, the changes would mean the private sector simply wouldn’t build these rental projects.

The low-cost loan program “was working like a charm in terms of converting transit condo projects into rental units. That’s how good the program was. And that’s what you want,” Jarvis said. “But now, just at a time of skyrocketing construction costs and inflation, you’re trying to dial the program in so far that it makes everything unviable? … They back off.

“A lot of times when you see an increase in approvals, it’s because the stars are aligned. And then when you see the actual delivery fading, it’s because those approvals take a while and the stars are drifting apart,” Jarvis said. “Even if an approval is granted, all of a sudden it doesn’t make sense to move development forward. And we’re entering that stage right now. Development projects are being scrapped.

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Some observers – perhaps rightly so – are skeptical of such claims and argue that private-sector developers are crying foul because their big profit margins might get slightly thinner.

Simon Davie, CEO of Terra Housing, outside Wilson Heights Church who created an affordable housing project in their parking lot.
Simon Davie, CEO of Terra Housing, outside Wilson Heights Church who created an affordable housing project in their parking lot. Photo by Gerry Kahrmann /PNG

But even nonprofits have to make projects financially viable to build them. And the climate looks tough, said Simon Davie, CEO of Terra Housing and vice president of Lu’ma Development Management, the leading local nonprofit property developers.

Rising construction costs reduce the affordability of finished homes, Davie said, which means fewer deeply affordable homes that everyone agrees are badly needed.

“If I’m on the side of the market, theoretically, if rents keep going up or if the selling price of condos keeps going up, I have a bit of a buffer,” Davie said. “But on the nonprofit side, revenues are pretty flat. … We can’t just turn social purpose real estate into a market condo.

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“I think what you’ll find is that projects just don’t show up,” Davie said. “Some projects will stop before they start.”

Sadly, Davie said: ‘The need is not going anywhere. … There is so much pressure.

Such concerns are “legitimate and valid,” said Dan Garrison, head of housing policy and regulation in Vancouver. “Rental projects, in particular, are very sensitive to changes in interest rates, so we are hearing a number of applicants, both private and non-profit, have concerns about the viability of building some of these projects. , even if they have been approved.

The town hall is not wrong to boast record approvals. There can be no completion without getting approvals first, so for anyone who agrees that Vancouver needs more safe rental housing, more approvals is good news.

But endorsements are only part of the picture. People need affordable and decent housing. And no one can live in an amenity.

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