As we look forward to the fall, the pending provincial election is top of mind. HAVAN, with our 1,100 members across the Lower Mainland’s 21 municipalities, collectively represent a powerful voice that can be leveraged to ensure the issues our industry faces in delivering housing are front and center.
The issue of supply is crucial, but as those in this industry know, there are many complexities behind bringing housing to market. Whether for sale or purpose-built rentals, the average consumer does not fully understand the true complexities, often quick to blame the builder and or developer as housing affordability prevails.
A recent video shared with me by our Government Relations department is a great example of highlighting the real issues behind our housing crisis. Released three weeks ago by @Homes Don’t Just Happen and already garnering 167,000 views, this two-minute video provides a simplified but comprehensive perspective on why housing is not being built as fast, and as affordable, as people want.
As the video points out, closing the housing supply gap is the solution, but it’s far from a straightforward task and requires a collective effort from all stakeholders.
The Challenge of Building Multi-Housing Developments
One of the most significant hurdles in addressing the housing shortage is the complexity of building multi-housing developments. These projects are not quick or easy; as the video points out, from land purchase to project completion, the timeline can stretch anywhere from 6 to 9 years. Developers must navigate a maze of stakeholders, bureaucratic processes, and government approvals.
Even when approvals are secured, the financial challenges are immense. Banks are reluctant to finance these projects unless a significant portion of the units are pre-sold, which, given current cautious consumer confidence, is often difficult. Meanwhile, construction costs frequently escalate during this time, further increasing the financial risk for developers. The result is delays, cost overruns, and sometimes even project cancellations when the numbers no longer pencil out.
The Impact of Changing Policies and Regulations
Adding to the financial complexity are the ever-changing policies and regulations that govern the housing industry. Updated building codes, including the BC Energy Step Code, and requirements for non-market housing add layers of cost and uncertainty for builders and developers. Case in point, DCC charges adopted by the City of Langley in April represent a whopping 60% increase for apartments, with the Langley Township up 46% as of January 2024.
Government policies often conflict with market realities. There’s a clear mandate to build more affordable housing, faster, but constant – and inconsistent – changes to policy and additional fees make it increasingly difficult for developers to deliver on these goals, especially when working with timelines that span over half a decade.
Case Studies: The Reality on the Ground
The challenges facing the housing sector are not theoretical; they are being played out in real-time across various projects in the Lower Mainland. Take, for example, the development at 1807 Larch Street in Kitsilano. This project, a partnership between BC Housing, the City of Vancouver, and a private developer, aimed to provide affordable rental homes for middle-income families. Despite receiving $31.8 million in low-interest loans through the HousingHub program, only 14 of the 68 units are rented at below-market rates, with studio apartments going for nearly $2,600 per month and two-bedroom units listed at $4,200. The blowback from local residents and media suggests this is far from the affordable housing that was planned.
Another example is the 104 Plaza project in Surrey. Initially, this development was set to include over 400 affordable homes through BC Housing’s Affordable Home Ownership Program (AHOP). However, due to rising construction costs and economic changes, the developer was forced to withdraw these units from the program. A project that was once a beacon of affordable housing has now become another missed opportunity.
In Burnaby, two below-market rental developments have seen costs soar by over $105 million, doubling the original budget estimates. Despite receiving grants from various government agencies, the financial burden has become overwhelming, forcing the regional housing authority to tap into its reserves and seek additional financing.
The Way Forward: Collaboration and Innovation
So, if projects backed by government low-interest loans and programs are struggling, how can a developer or builder bring housing to market under such challenging conditions? When faced with added regulations, fees, and increasing construction costs, it’s crucial to focus on the costs we can control.
First and foremost, there must be greater stability in the policy environment. Frequent changes to building codes, fees, and regulations create uncertainty, making it difficult for developers to plan and execute projects. A stable, predictable, transparent regulatory framework that incentivizes rather than hinders housing development is essential.
Second, collaboration among all stakeholders—government, developers, financial institutions, and the community—is essential. Everyone has a role to play in addressing the housing crisis, and no single entity can solve it alone. By working together, we can find innovative solutions that balance the need for affordability with the realities of construction costs and market dynamics.
Third, we must also reevaluate our expectations. Building new housing is inherently risky, and not every project will go as planned. However, by embracing a more flexible approach and being willing to adapt to changing circumstances, we can ensure that more projects succeed without sacrificing livability.
Conclusion: A Call for Collective Action
As we approach the provincial election, HAVAN will look to leverage our collective voice to promote greater stability in the policy environment. We aim for an approach that is flexible, adaptable to market conditions, and inclusive of all stakeholders to help close the gap in our housing crisis. Sharing the Housing Crisis 101 video is one example of how we can disseminate industry knowledge. With 1,100 members in HAVAN, representing over 20,000+ employees, all of whom are residents, homeowners, or renters with a vested interest in solving the housing crisis, we have a powerful voice. By continuing to share our ideas and knowledge, we stand a better chance of being heard. Please continue to share your boots-on-the-ground knowledge and experience with HAVAN, as we work to amplify our collective voice this fall, wendy@havan.ca.
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 Wendy’s weekly Monday Morning Briefing and other HAVAN emails here.
QUICK BITES …
- Housing supply alone will not fix the crisis according to the Financial Post Chief Economist Carl Gomez, who points to raising our productivity standards – improving households’ ability to purchase housing by promoting household income growth, for people to be able to afford homes.
- BIV reports on a precedent-setting court case that sides with the landlord raising rent 23.5% in response to increase in variable mortgage.
- Rennie reports on the relation of the resale and pre-sale market, and the overall impact on the housing market: Activity in the Vancouver Region’s markets has been rather subdued through the first half of 2024, with a suite of challenging economic conditions limiting buyer demand. In addition to that, an unfriendly investor climate and REDMA’s restrictive early marketing period have further challenged the development industry’s ability to launch and pre-sell homes (especially concrete). Many developers have projects that they are eager to launch, but can’t justify doing so with so much uncertainty and just 12 months to reach their pre-sale thresholds.
- Bosa Properties recently sent a letter to Burnaby council saying it was abandoning its plan to acquire a site to build 1,200 rental units because of city policies that were making it financially undoable. “The cost to build each affordable unit was $350K greater than the value of the unit, which translated to a $90M loss over the entire phased development,” explained Kyle Wright, Bosa’s senior director of development. “This loss in value ensures the rental project overall can’t achieve a satisfactory profit margin / yield on cost, meaning builders like Bosa Properties can’t justify the investment in new rental housing.”
- GREEN SHEETS ON THE GO!HAVAN member Green Sheet Construction Data tracks the Metro Vancouver construction market. Their online searchable database provides clients with a powerful tool to see past, current, and future construction projects across the Lower Mainland. Visit Green Sheet Hot Tips to view this month’s featured projects.
- Registration is now open for CHBA BC’s Conference: Building the Future: Innovation and Sustainability in Homebuilding. Schedule on October 2-3, 2024, in Whistler, featuring guest speaker Biz Nasty, moderated by Bob “the Not” Marjanovich, highlights of the conference include:
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- Artificial Intelligence for Homebuilders
- Designer Insight on Construction
- Digital Innovation and Prefabrication
- BC Energy Step Code
- Housing Panel with Industry Experts
- A Celebration of Life for Ron Rapp is scheduled for Tuesday, September 10th from 3pm to 6pm at the Vancouver Rowing Club. The program is scheduled to commence at 3:45pm, and will include an open mic for those who wish to share a memory . Canapes will be served. Cash bar. Ample parking is available in the parking lot located within Stanley Park, (directly across from the venue). Please share this notice with those who knew Ron, as we look to gather together to toast a great leader, and friend.
