GUEST SUBMISSION: When a local government adopts a new land use policy, it would be reasonable to think it has been financially tested and, on some level, offers a viable path to creating the type of housing it purports to allow.
After all, what would be the point of spending time and scarce staff resources on plans that are largely pointless, or categorically counter-productive?
Unfortunately, this logic doesn’t prevail across vast parts of Metro Vancouver. Too often we find ourselves gifted with new policies that are entirely unfeasible, or that actually reduce the viability of building in areas previously designated for growth.
Consider, for example, the City of Vancouver’s response to B.C.’s new provincial Transit-Oriented Areas (TOA) legislation. To their credit, the planners in B.C.’s largest and most complex city responded to the province’s tight timeline with what is so far the most comprehensive – if necessarily broad – set of TOA rezoning guidelines.
Nevertheless, upon questioning from councillors, planning department staff admitted that, based on financial testing, the proposed policies were sufficiently restrictive that new development would only be feasible in select locations of the city. By their own analysis, making development viable in the rest of the TOA-designated areas would require “significant height and density” beyond what was being proposed.
So, the new rules are window dressing. As we have seen over and over across the region, slapping a higher-density land use designation on a property does not make it a viable development site. Details matter.
To quote Councillor Lenny Zhou: “What about those areas that are not very viable? Basically there will be no applications, no development. So what’s the point?”
Burnaby’s below-market housing requirements
In Burnaby, the councillor/planner roles were reversed, when staff recommended reducing a below-market housing requirement that has become a barrier to new supply. Staff pointed out that while the requirement had worked in a hot market, changes were necessary to keep up with Burnaby’s housing needs and allow developers to continue to deliver below-market homes in current conditions.
Councillors apparently knew better. Without any financial analysis of their own, they amended the motion to push the below-market requirements back up, a result Burnaby’s general manager of planning and development described as “creating a bylaw which does not have financial viability.”
These “inclusionary housing” rules so often seem noble in their intent, requiring developers to include a set percentage of below-market housing. But for any of the desired housing to be built, the overall project needs to be profitable. If the percentages are set such that no project pencils out, well, 20 per cent of zero is – as it’s always been – zero.
Again – what is the point?
Development cost charge increases loom
These examples highlight ineffective decisions arrived at when sound analysis is ignored – a waste of staff time and resources on policies that are likely to see few projects move forward.
Metro Vancouver’s development cost charge (DCC) increase set to take effect on Jan. 1, 2025 and ratchet up over the next two years, on the other hand, is punishingly destructive.
The regional government’s own third-party analysis concludes “the financial viability of market rental apartment development is marginal under current market conditions in most locations throughout Metro Vancouver at the current DCC.” Increasing DCCs, the analysis shows, is anticipated to reduce the number of projects that are viable, slow the delivery of new rental supply, and trigger higher rents for projects that do make it to occupancy.
These are crippling outcomes for a region already facing a severe rental housing shortage.
Yet, even knowing the negative effects of their intervention, a disturbing number of planners and politicians seem happy to rationalize regulations that work counter to the stated goal.
As Storeys reported recently, a high-ranking official within Metro Vancouver’s policy and planning department explained the negative outcomes of the DCC financial analysis apply only to a specific point in time. As we know, the market can change – what is not profitable today, may at some point become viable – presumably after rents rise and affordability worsens.
It’s a baffling response in a crisis, where all three levels of government espouse their desire to see more rental housing get built.
Deja vu, all over again
We have learned these lessons before, with many examples of failed community plans that, after decades, are still not creating anywhere near the level of supply originally anticipated (Grandview-Woodland and Marpole are easy examples).
Still, instead of adopting policies that work – today – and adjusting in the future as conditions change, this group of politicians and bureaucrats are knowingly creating unviable programs and hoping at some point, possibly years down the road, market conditions will turn in their favour.
So … what is the point?
This article is also being published in The Goodman Report, an instrument of Goodman Commercial. It is republished on RENX by permission of the authors.