The City of Vancouver on May 30 approved a motion to expedite approvals and permits through a triage and prioritization process that will provide the most units in the fastest time period. This followed an earlier proposal from staff that suggested the same process of triage and priority but focused specifically on social, below-market, and purpose-built rental effectively excluding housing applications directed to other segments of the housing spectrum. The motion also called for the suspension of the Policy Enquiry Process (PEP) that would consider projects that did not fit into standing zoning, by-laws, or policies, which staff themselves described as “time-consuming.”
The PEP could have been a forum for considering alternative and or innovative housing solutions that are in fact needed in the effort to address the ongoing housing challenge. The “innovation” or “out of the box” thinking should be encouraged in every facet of our industry not just housing form, but construction technologies and techniques from 3-D printing, modular construction, mass timber, as well as alternative tenures, and gentle densification initiatives. One of the reasons that the PEP was “time-consuming” was the layers and layers of complexity, fragmented and overlapping processes, conflicting goals, and an underlying culture that seeks to find ways to frustrate fresh ideas and proposals.
While the changes being contemplated in Vancouver are welcome and align with the stated goals of the provincial and municipal leadership to dramatically advance the supply of housing through streamlining approvals, without a broadly adopted culture of seeking the means to “find ways to make things work” it will be difficult to affect meaningful change that delivers meaningful results. It is necessary to foster and reward a “culture of yes”, or “yes we can” rather than the status quo which too often, per HAVAN member Smallworks is an “… approach [that] seems to be ‘what is wrong with this’, rather than ‘how can we make it better.”
The proposals to expedite approvals we are hearing about from the province and the movement taking place within most municipal halls are welcome and long overdue, but they must be vertically integrated into the entire process, and include all departments, and referrals from internal to external agencies. The process must be “triaged” to determine if the multiple and complex layers of policy, by-laws, guidelines, financial contributions, and climate goals are in fact effective or even warranted. All these layers contribute to delays and adversely affect costs.
The C.D. Howe Institute recently released a study that supports these conclusions and while the study is comprehensive here is a brief overview:
- Provincial and municipal governments should cut excessive regulations on new housing development projects and lower the upfront costs on homebuyers to help Canadians …
- The author estimates the gap between the marginal cost of construction for new housing and the market price in major Canadian city areas. This gap shows the extent of the housing market dysfunction, which can be caused by factors such as upfront development charges, a lack of land for development for regulatory reasons, a lack of available transportation options to new land sites, or potential other factors that restrict competition among developers and builders.
- Over the period studied, 2011 to the end of 2021, a single-detached home in Vancouver cost homebuyers nearly $1.3 million more than what it would physically cost to build in a market without barriers to supply. Homes in the Toronto area now cost homebuyers $350,000 extra over the cost to build.
- To help bring market prices more in line with the cost of construction, provinces should: (i) enact provincially mandated minimum targets for municipal housing construction, and delegate enforcement of these targets to neutral, adjudicative bodies with the power to impose fines on laggard cities; (ii) reform the upfront development charges on new housing by changing them to utility-based user fees for services like water and wastewater once the infrastructure is in place; and (iii) along with cities, set a broad province- or city-wide target for increased density, say 50 percent, rather than impose a minimum level on locations regardless of their existing densities, which vary greatly. This would allow for a gradual increase in densities across the province.
The study reinforces some initiatives being proposed by the Province through the Housing Supply Act but also specifically touches on the volume and extent of development charges that can inhibit or impede the opportunity to accelerate supply and address affordability.
In a recent HAVAN white paper Development Cost Charges; A Metro Vancouver Perspective, prepared by our Government Relations team, the DCCs applied in four metro jurisdictions, Township of Langley, Vancouver, Coquitlam, and City of North Vancouver were reviewed and it is seen that DCC’s, plus Translink, Metro Water, and Metro Sewage charges amounted to 20-30% of overall building costs. These cost burdens applied to new residential construction are intended to ensure that growth pays for growth, but the order of magnitude, the many questions surrounding attribution, and the uncertainty and unpredictability of these levies are adding barriers to the delivery of expanded supply and affordable price points.
In a recent tweet, Jennifer Keesmaat, Founder, Markee Developments, Former Chief Planner, Toronto, Distinguished Visitor in Planning Emeritus, University of Toronto cites that Quebec has delivered the highest number of rental completions, exceeding BC by double, and enjoys the lowest rental costs in the country.
Now review the next graphic that compares government charges in Vancouver, Toronto, and Montreal, where we see a dramatic difference in the charges applied in our two most unaffordable cities versus Montreal.
Jennifer’s conclusions are straightforward: “We have a disincentive built right into the system – a disincentive that is easy to fix. In Toronto, we have absurdly high government fees (Vancouver, same). Supply lags significantly behind demand. Why? The math doesn’t work on many sites.
Montreal has low fees and builders are building. Trust me, if the math worked the industry would be fully engaged here too. But many are sitting on the sidelines despite the astronomical demand. Between interest rates, construction costs (which are rising again due to inflation) and government fees, it is tricky to make many projects pencil. Municipalities serious about building housing will reduce these fees.”
We have seen reports of projects being postponed or canceled as the cost of money, and escalating construction costs in the face of lengthy approval streams and uncertain and potentially prohibitive charges are applied. Projects that 2 or 3 years ago presented a viable proforma now no longer pencil out as costs have risen to the point where the business case for financing cannot be supported by the lenders. This erosion of viability is causing a reduction in starts at the very moment we need to seriously amp up the supply of new housing.
The Globe and Mail in an article presented on June 16 points out that in the last six years, the City of Vancouver approved 43,000 housing units, but less than 28,000 have been completed in rental and for sale tenures. As noted by Hani Lamman, Executive VP of Cressy Developments ‘… higher interest rates and additional costs such as city fees have pushed up how much it costs to build new housing. People can only pay so much, particularly in rent … what has happened over the past couple of councils is the city got really aggressive with negotiating community benefits, to the point where these projects became not feasible. So it only took a blip in interest rates to throw everything off …”
The initiatives being undertaken both provincially and municipally are directed specifically at streamlining approvals and permitting and this is vital to creating a pathway to more supply, but this will not actually ensure that projects can be delivered unless the financial challenges can also be addressed, with all levels of government working collaboratively to make this happen.
The Canadian Press quoted CMHC saying that coping with our housing challenges will require a “Team Canada” approach where all levels of government cooperate to address our systemic shortage of housing. The time for deflection and assignment of blame should be behind us and while much criticism has fallen on municipalities (much of it well earned) per Mike Moffat, Assistant Professor at the University of Western Ontario: “No one level of government controls all the policy levers that affect both the demand and supply for housing. And it’s one of the things that’s made this such a tricky problem is there’s been a lot more finger pointing,”
The Honourable Ravi Kahlon, BC Minister of Housing, has stated many times we need to take politics out of the provision of housing and certainly, we would agree. The actions stemming from the Housing Supply Act in focusing on municipalities that are not keeping pace with the delivery of all types of housing may start to unlock the throughput of approvals. While the Act provides for a “carrot and stick” approach the focus must be on a collaborative effort that engages with all levels of jurisdiction and has everyone involved focused on the goal – not the process.
The housing targets to be presented by the province to the first ten of the “naughty municipalities” need to be realistic and consider the significant financial barriers that have been levied across all levels of jurisdiction that are creating barriers to supply and eroding affordability. Vast sums of money are being allocated by the feds, the province, and many municipalities to affect solutions and improve performance but in many ways, it is still a piecemeal approach to a layered and multi-faceted challenge. The underlying issues of too much complexity, conflicting goals, and using development charges of all kinds to offset local or regional tax burdens are still at hand.
Recent examples of such conflicting issues are seen in the uneven application of Code changes intended to increase energy performance and reduce the impact of climate change which have resulted in much confusion and disparity in costs, as well as, straining available capacities; or the proposed changes in making all new homes accessible-ready that will affect all new construction in requiring additional area or compromising living spaces yet will only serve a small single-digit percentage of renters or purchasers. Both goals must be embraced – in a measured and focused manner that still supports affordability and increases availability and choice.
The need for a comprehensive forum that involves all stakeholders and embraces all levels of government has never been greater, and while we engage at each level to provide input and raise concerns of members, we are doing so separately and trying to ensure continuity as the industry is the common denominator in all those consultations. But we need a roundtable or forum that brings all jurisdictional entities onto a common path. The housing issues facing us today are not exclusively municipal, regional, provincial, or federal, however, they are issues that affect everyone in the country. The time for defending separate silos, fiefdoms, programs, and policies that work against supply and affordability must be set aside. We need to come together and apply the monies, time, effort, and experience of all stakeholders toward the common goal of ensuring everyone has an affordable place to live.
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.
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QUICK BITES …
- The City of Vancouver 2022 Housing Progress Update highlights the types and number of approvals that have been affected by the City applying the Housing Vancouver Strategy Implementation. With significant detail and colourful graphics the efforts being applied by the City to approve projects are well presented – but no one can live in an “approval” and what really matters is how many have been started, and how many have been completed. Cities may suggest that they have provided approval for many units that the industry has not delivered but if the timeframes, applied charges, layered conditions, and conflicting or fluid requirements conspire to shelve projects then the cities do play a part in why such projects cannot proceed.
- Ontario’s apprenticeship registrations have increased 24 percent in the last year.
- The second year of the province’s skilled trades career fairs for students will see the program expand into more cities.
- Officials say recruitment is key as Ontario will need over 100,000 new skilled trades workers this decade if it hopes to achieve its infrastructure goals.