Do we have a housing crisis or don’t we? Has this crisis grown to a critical point where the ability to afford a home either purchased or rental is exceeding the reach of most people but especially young people and the “missing middle”? The obvious answer is yes – the situation is that serious and demands a comprehensive, ‘all hands on deck’ collaborative effort from all stakeholders, at every level, focused on balancing supply and demand to stabilize affordability.
We have very serious housing challenges.
The housing challenge needs a collaborative “laser-focused” resolve, but it seems everyone either wants their own laser or wants to influence where the laser is aimed. The goal is to produce more housing opportunities and yet despite the monies being doled out and enabling legislation being introduced, the goals are being politized, sidelined, and or obfuscated in almost every jurisdiction in favour of separate agendas, leveraging other issues, postponement of decisions, and a continuing layering of charges.
Even with the extensive initiatives announced by the BC government over the last several months including but not limited to Bill 44, 46, and 47, upon commenting on the BC Builds announcement at the UBCM Housing Summit Premier Eby saw fit for the sake of a sound bite to throw the private residential construction sector under the bus with his statement:
“The private sector alone has not been able to deliver the homes middle-class people in B.C. need. That’s why we’re taking action through BC Builds to deliver lower-cost middle-income homes, faster, so the people who keep our communities working …can find homes they can afford in the communities they love.”
With all due respect to the Premier, suggesting that our sector cannot deliver homes is both disingenuous and counterproductive. To meet the housing supply targets being specified will require every resource the private sector can offer – and it’s always been that way. The private sector is very efficient and very nimble and can adapt very quickly to market demand when working in an environment that supports the residential construction industry and its proponents.
The private sector has been sounding the alarm bells for over twenty years that authorities having jurisdiction need to significantly increase supply – applying Economics 101 it was obvious that demand for housing of all stripes was driving up price and cost and that supply needed to increase to help balance the equation.
In a traditionally cyclical industry, the curve has kept rising since the late 90’s when pent-up demand, new household formation, migration, and immigration saw demand outpace supply. These same forces are still at play today, yet it was not until the last few years that governments finally embraced what the private sector has been advocating for so long – ‘increase supply alone will not solve the housing crisis, but it is a pre-requisite.’
REGULATORY MEASURES AND TIMELINES
While the message from industry fell mostly on unsympathetic if not deaf ears of authorities at every level for most of these last 20-plus years, consistently layering on one regulatory measure after the next and adding numerous approval and permitting thresholds, often without a commensurate increase in service levels, has led to a dramatic slowing of the rate at which housing could be generated, directly increasing cost, substantially.
Extended timelines have ballooned into processes that take years to complete and it’s not just the municipalities. Provincial approvals for Water Courses, Heritage, ESA, and MOTI have all expanded their scope with extended approvals to more than double previous long-standing timeframe expectations – by hundreds of days. Federal regulations also have had their role to play with Fisheries and the environment, with issues such as the Pileated woodpecker – the presence of which on a proposed site could drive a delay of three years or more.
GOVERNMENT IMPOSED CHARGES
We also need to point out that government-imposed charges have also been universally applied to all housing forms and most directly onto private market housing. These charges based on the concept of “growth pays for growth” have become a catch-all for generating revenue often in lieu of spreading costs across the broader tax base. It is the proportion of these charges that cannot be overlooked that now constitute over 30% of the cost of a new build in the City of Vancouver. Coupled with when these charges are paid, and the associated carrying cost over the entire project, processing times are again driving cost. These charges also have a serious impact on instream projects too, when the timing and value of increases cannot be predicted, and delays or even withdrawal of the project can ensue as the financing is reevaluated.
ADDRESSING NON-MARKET HOUSING
The provision of rental has also been left too long to flounder without proper support or consideration of cash flow constraints that adversely affect the opportunity to build such housing as the margins were too thin and the risk too high. GST alone and the lack of any available rebate vs new market housing was enough to inhibit such projects. Now that many of those tax and cash flow issues are being addressed, the sector is starting to move back into that arena – hopefully, the support carries on.
When you add supply chain issues, inflationary pressures, strained labour resources, the costs of financing, and the cost of land – also in short supply, the challenges to service the “missing middle” cohort are not insignificant. This sentiment was echoed by Housing Minister Ravi Kahlon in his address to delegates at the UBCM Summit and it begs the question of why the Premier said what he did.
NEW POLICIES
There is much to unpack with all the new policies that have been announced and while these are some of the most sweeping and wholesale changes to land use and housing aimed at increasing and expediting housing supply in several generations, we are already seeing some significant pushback and unintended consequences. Various concerns range from real concerns on in-stream proposals to political posturing and exaggerating, to “approval paralysis” with uncertain staff who are waiting for provincial regulation and clarification.
BIG PICTURE TOOLS
The goal, the big picture, the thing that matters and that should be the object of our laser focus at all levels is – let’s all work together to resolve the housing crisis. All stakeholders must adopt a “find a way to make things happen” attitude. The private sector is very capable and if provided with a clear runway, and supported by authorities and regulatory bodies, our industry can effectively, and efficiently, produce all types of housing in a timely manner. The demand is there, we just need the tools.
On a personal note, I am pleased to share that my battle with Leukemia is on a positive trajectory with the recent stem cell transplant successful and charting a path to a full recovery and a new lease on life. As such I will be re-engaging with HAVAN responsibilities, operations, and events, albeit on a graduated basis, over the next few months. I must extend my sincere appreciation for all the good wishes I have received and the great backup and support I was provided by HAVAN Staff and Board. Special mention goes to Wendy McNeil, Dawn Sondergaard, and Board Chairs Dave Deamer, and Henri Belisle.
Together with the support from my partner Jill, my children, siblings, family and close friends, and many industry colleagues, I believe that this was intrinsic to my ability to maintain a positive attitude and outlook, beat the odds and hopefully come out the other side of this. I must also compliment the doctors and nurses from the BMT Leukemia Unit at Vancouver General Hospital – I could not have been in better hands! Thank you.
HAVAN continues to work with CHBA BC and CHBA to advocate for all levels of government to work together to address the challenges of the housing industry including zoning restrictions, density limits, and NIMBYism.
Looking to stay up-to-date on Metro Vancouver’s residential housing industry? Sign up for Ron’s weekly Monday Morning Briefing and other HAVAN emails here.
QUICK BITES …
- Here is the bulletin from the BC Government on their BCBuilds program from which Premier Eby’s comments about the private sector stemmed. Note that the Feds came along a few days later and kicked in an additional $2Bil to the program – there are potential opportunities for our sector to participate in this program so keeping an eye on the rollout won’t hurt.
- This past week, Finance Minister Katrine Conroy presented the 2024 Provincial Budget. Highlights include:
- New Flipping Tax – Effective Jan 1, 2025, sellers will face a 20% tax on profits from property sales within the first year of purchase, gradually reducing to zero in the second year. This tax also applies to assignment contracts. Certain exemptions will be provided, including those who “add to the housing supply or engage in construction and real estate development”.
- Property Transfer Tax Exemption – Starting April 1, 2024, the first-time home buyer exemption threshold rises to $835,000 from $500,000. The initial $500,000 of the fair market value is exempt from property transfer tax. Additionally, the newly built home exemption FMV threshold is increased to $1,100,000 (from $750,000).
- Future Ready Action Plan – $228 million allocated over three years to support initiatives outlined in the Province’s StrongerBC: Future Ready Action Plan, launched in 2023.
- CleanBC – $318 million to continue to fund grant and rebate programs for clean transportation, energy-efficient buildings and communities, and support the transition to a low-carbon economy.
- BC Builds – An additional $198 Million in funding for the program.
- Heads up for what could be an interesting panel discussion tomorrow evening, February 27 @ 7 pm on affordable housing sponsored by the Vancouver Sun. The panel includes Ravi Kahlon, B.C.’s Housing Minister, Richard Stewart, Mayor of Coquitlam, Michael Geller, architect, planner, developer, and real estate consultant, Ryan Berlin, Vice-President and Senior Economist at Rennie, David Hutniak, CEO of LandlordBC, A.J. Delisle, Vice President of Real Estate B.C. at RBC Royal Bank.
- Please follow the link to the summary report on Heritage Conservation – this could affect projects across the province and members should be aware of the implications.
- The Tyee offers this article/opinion on DCCs and other charges in the context of what was noted in my commentary above.
