It was widely reported last week that for the first time in this country’s history, our population grew by over 1 million people, year over year in 2022. International migration is tagged as accounting for most of this total and reinforces the predictions, also widely reported, regarding anticipated growth, and the pressure this will put on the housing sector. The aggressive immigration policy being promoted by the Federal government is focused on expanding our workforce, including support of skilled trades, and boosting economic growth which will not be possible without it.
These newcomers are arriving in a housing market that is already in crisis and falling well behind the housing supply-demand curve across the spectrum of the housing continuum. New arrivals typically seek to access rental accommodation, and even if a percentage of these newcomers had the resources to purchase a home they are going to be prohibited from doing so until at least January 2025 due to the Federal restrictions on foreign ownership. Permanent resident status is required, and reaching this threshold takes time.
In a report released last week by RBC it is suggested that our national rental housing stock needs to add 332,000 units over the next three years to reach a balanced vacancy rate of 3%. Since 2021 our national vacancy rate fell from 3.1% to 1.9%, but locally we sit at a metro-wide rate of 0.9% – a full point behind. Rental rates over the last year have increased by a national average of 5.6%, for a two-bedroom unit, and higher increases have been seen in our local market. The problem is being exasperated as barriers to ownership of challenging prices and borrowing rates are slowing the rate at which households are moving from rental into ownership.
While purpose-built rental construction has increased significantly, it is clear that supply is still falling well below demand and there has been little to no relief in rental cost. It is estimated that the current deficit of rental stock is between 25,000 to 30,000 units, and in addition to adding purpose-built rentals in the volumes noted, CMHC is recommending turning condos to rental, conversion of commercial space, and adding accessory dwelling units to existing homes.
The housing sector is now at a crossroads and, as has been noted many times, all levels of government are recognizing the need to address and increase the housing supply of rental, and all ownership models. My last two MMB columns have reported on the announcements of multiple billions of dollars into the provision of more housing by the province and feds. We are seeing the most significant investment in residential construction in many, many years, but it seems the pressure being applied to streamline processes, expedite approvals, adjust zoning, and allow for higher density is being offset by many other obstacles.
The obstacles range from slow approval processes to public resistance to change, to challenging economics, to dramatic increases in permit fees and charges, to a continually evolving and increasingly complex regulatory environment, and a lack of incentives and or tax relief for purpose-built rentals. While the funding that has been announced is welcome and essential to affecting changes to the status quo it will not be effective if all stakeholders are not focused on a common goal, or those significant funds are not applied in the most meaningful way, or not subject to accountability.
The Broadway Plan adopted last year by Vancouver Council took years to evolve and creates a bold plan to intensify the use and the development of thousands of rental and market homes directly adjacent to the new transit line that has also seen billions of taxpayer dollars invested. In taking over five years to establish the “Plan”, Vancouver affected a moratorium on any significant development in the Broadway corridor which amplified demand. The area addressed by the plan has the second largest rental cohort in the city and has a local vacancy rate of 0.5% – lower than Metro, and way below the national average.
This week, on Wednesday, March 29, Vancouver planning staff will present to the council a report that speaks to the “Pace of Change” for realizing the goals established by the plan. The recommendations speak to limiting the “pace” to five (5) new proposals per annum. With over 100 rezoning inquiry applications already in the city, these would take well over 20 years to come to fruition at that pace. The Broadway Plan is very complex and extensive, and therefore all aspects should be considered carefully to arrive at balanced solutions, but setting such a low threshold for the “pace” versus a program that seeks to maximize opportunities is not in step with the direction of expediting the provision of rental and other housing that is so crucially needed to realize meaningful change.
In discussing the scope and scale of the funding initiatives being introduced by the province and federal governments, the application of those funds and timelines have been questioned as a key factor in being able to realize the goals of increasing supply and mitigating costs. In an article that echoes those concerns in Western Investor, a number of examples of government funding being applied to acquire land/buildings for the provision of homes for the homeless, subsidized housing, and rental housing are noted and shared the distinction of authorities having paid well over the market to secure them.
It would be a tragedy to see all of these efforts and the billions of dollars being advanced not being used to their full potential. Realizing these potentials absolutely needs to be a collaborative effort between the government and our industry, the culture needs to shift to one of seeking the means to maximize results and finding the first best opportunity to move things forward with all stakeholders working toward the same goals.
Creating bold plans and then crippling those plans with restrictions, funneling monies into housing without demanding tangible results, bringing in thousands of newcomers and then restricting their housing options, increasing DCC’s and CAC’s adversely affecting affordability, affecting challenging guarantees for displaced rentals, and failing to provide incentives to pursue purpose-built rental erodes the viability and opportunity for impactful engagement from industry, and allowing us to contribute effectively and efficiently to address the housing crisis.
We need to send the message to all levels of government that the best chance for a successful outcome is to provide a clear runway pointed at the common goal of more choice, and more supply in collaboration with industry and sharing the commitment to provide affordable housing solutions for everyone. Please take every opportunity to comment on, and provide input to the hearing on March 29th, or any other opportunity that presents itself. Call, mail, email, text, write, or respond to calls to action, and let’s not miss a once in generation’s chance to move the needle.
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 …
- An example of a program that can yield positive results by incenting purpose-built rental is described in the Daily Hive relative to a two-year pilot program for Vancouver’s West End. To drive rental applications, the application of CAC’s was suspended in return for 100% rental housing with a minimum of 20% below-market rental. There are also formulas related to the displacement of existing rentals that are manageable. The interim program has seen one project approved, and another four projects pending for a total of seven towers and 2,300 purpose-built rentals.
- The Federal Underused Housing Tax requires filing from many owners of property in Canada. CHBA National has been working with the Ministers of Finance and Revenue, as well as CRA to a) exclude our industry from the need to file, and b) reduce the administrative burden of filing in the interim. As such CHBA has “… secured two very important interpretations, one providing clarity and one greatly reducing the level of effort to complete the UHT tax return.” Please follow the link for the details and background. Filing deadline is April 30, 2023, with significant penalties for failure to file.
- It was reported last week that the annual inflation rate slowed down to 5.2% in February and came in under the 5.9% recorded in January. This continuing decline lends reinforcement to the Bank of Canada’s (BoC) decision to hold off on further interest rate increases for the moment. The US Federal Reserve however did raise rates by another .25% and that may influence the BoC moving forward. The federal budget to be tabled on March 28 will provide further measures to support affordability but must balance the risk of driving more inflation.
- Storeys offers some optimistic observations regarding the spring market stemming from a Royal Lepage survey “According to the survey, more than one quarter (26%) of Canadians who put their home purchase plans on hold over the last year due to rising interest rates will resume their search this spring. The survey found that nearly one quarter of Canadians (24%) were in the market for a new home this past year, but 63% of them said they had to postpone their plans due to rising interest rates.”
- Have a look at this article carried in SiteNews discussing the building of four 560 sq.ft. units in Southwest Ontario using 3-D printing technology where foundations and walls to the roof plate line are extruded in concrete by a “site-sized” 3-D printer. Still evolving, technology and technique are rapidly advancing which can dramatically reduce construction times and offset diminishing labour resources.
- If 3-D printing a home is not to your liking then perhaps buying a laneway home, or ADU from Home Depot or Wayfair is more to your liking. Prices range from $5,600 to $30,000 for 325 sq.ft. – Delivery included …
- Follow this link to a time-lapse video from Vancouver Is Awesome that shows Vancouver evolving over 36 years as ‘seen from space.’ It’s pretty cool and highlights the growth and pace of change from 1984 to 2020.