Enough is enough when it comes to the obstacles facing the Lower Mainland housing market, say a group of real estate and development leaders who have released a list of issues they say must be addressed immediately.
Despite the efforts of various levels of government to tackle the housing crisis, the situation continues to deteriorate, particularly impacting developers who are working to increase the housing supply, the group said in a release.
The group includes Rachel Lei, president of Keltic Canada Development; Derek Lee, president at Prospero International Realty; and Lin Li, CEO of Create Properties. They say they’re voicing their concerns knowing that it could have consequences on the future approvals of their projects.
The high price of building, buying and renting a home in Metro Vancouver is well known to everyone who lives and works in the region, but most people don’t understand the root causes of the price escalation and what needs to be done to disentangle layers of taxes, costs, bureaucratic delays and jurisdictional overlaps to make development (and finding a home) easier on everyone, Keltic’s Lei said.
“I feel as one of the developers, it’s our responsibility to reveal more facts to help people to find the solution to cure those issues,” Lei told RENX in an interview last week.
“Of course, even the reasons and causes identified by us may not be 100 per cent (of the issues), but we are hoping that we contribute to this process to find a better solution, or quicker solution,” Lei said.
Lei said the region requires about 50,000 to 55,000 new homes annually to keep pace with population increases. Currently, the development community is only able to build between 26,000 and 30,000 units per year.
The developers’ list of concerns
“We are significantly under-supplying, and compounded with huge issues, more and more projects are on hold, cancelled or sold because they are running into deficit and bankruptcy.”
Among the issues listed by Lei and her peers are:
- Financial Burdens: They say developers face significant financial hurdles, with financing costs reaching nine to 12 per cent and city fees comprising 12-15 per cent (potentially up to 30-35 per cent) of total development costs. These expenses make it increasingly unfeasible to undertake development projects, ultimately leading to higher prices for homebuyers.
- Delays and Red Tape: Rezoning and permitting processes are prolonged and unpredictable, adding further financial strain as delays inflate costs and reduce project feasibility.
- Shortage of Professionals: Despite significant increases in government spending on salaries, there is a shortage of planning and development professionals, exacerbating delays and hindering progress in addressing the housing crisis.
- Ineffective Policies: New charges like Amenity Cost Charges (ACC) have been introduced, with Development Cost Charges (DCC) increasing by up to 300 per cent in some cases, exacerbating the affordability problem.
- Bureaucratic Hurdles: Bureaucratic requirements, such as those imposed by CMHC loans, hinder the development of rental units, making it even more challenging to address the housing shortage.
- Developer Struggles: High interest rates, construction costs, and city fees have forced many developers to cancel or postpone projects, leading to a reduction in housing supply and pushing up home prices.
- Rental Market Challenges: Rental projects become less viable as costs remain high, discouraging developers from building much-needed rental units.
“It’s across the whole Lower Mainland”
“I definitely do not think the issues (are) with only one particular city,” Lei said. “It’s across the whole Lower Mainland, every municipality.”
However, Lei added there are jurisdictional overlaps that could add to the costs of a development. In particular, developers are worried about the province’s implementation of Amenity Cost Charges and the implications for city-level Community Amenity Contributions (CACs).
ACCs will be adopted by cities on an optional basis and are meant to standardize development costs, replacing Community Amenity Contributions that are typically negotiated between cities and developers on a case-by-case basis. The City of Burnaby has been one of the first adopters of the new ACC program.
Lei said, however, there is a lack of clarity on how ACCs will be allocated and what amenities they will fund. This raises questions about overlapping charges. She said this underscores the importance of revisiting and potentially reducing development costs imposed by cities.
All of those costs eventually end up in the price of a home, she stressed.
Moving forward, it’s crucial to assess whether the sum of new charges imposed by both provincial and municipal governments will surpass or fall below previous totals.
This assessment will provide insight into the overall impact of these policy changes on development costs and housing affordability in Vancouver, the group said in its release, adding: “This group believes it’s essential to raise awareness of these issues and collaborate with policymakers and stakeholders to find sustainable solutions to Vancouver’s housing crisis.”
High borrowing costs an ongoing challenge
Elevated interest rates are also an obvious part of the challenge in buying land and building new homes, and Lei and her peers hope rates will soon ease.
Lei said there are longstanding developers in the market pursuing developments that will produce only a five or six per cent profit. At that rate, the opportunity cost becomes too high for developers to launch projects and housing starts will fade.
Ultimately, what’s at stake is people’s sense of happiness and stability in the Lower Mainland, Lei said. “We’re already starting to see signs of migration . . . from B.C. to Alberta, because it’s more affordable there.”
When people leave, jobs and investment leave, too, reducing livability and creating a feedback loop of more challenges in the region, Lei said.
