Effects & Effectiveness of the Affordable Home Ownership Policy

The Interim Rezoning Policy (IRP) and Affordable Home Ownership Policy (AHO) are ostensibly designed to encourage developers to build more affordable housing options for moderate income earners and families.  However, on closer inspection, these policies appear to be a response to prolonged pressure from development interests for greater opportunities to reap huge profits by upzoning residential areas for multiplexes.

 

How developers see our neighbourhhoods as commodities not communities
How developers see our neighbourhhoods as commodities not communities

The following is a letter submitted to Vancouver City Council in response to the proposed AHO. This letter from the Upper Kitsilano Residents Association outlines concerns that the policy does not address the real need to regulate the housing market in Vancouver to protect low & moderate income earners. Despite that fact that all speakers on this proposal at the public were opposed, the policy was passed by all Councillors with the exception of Green Party Councillor Adriane Carr.

April 19, 2016

Dear Mayor & Council:
Re: Report on the Affordable Home Ownership (AHO) Pilot Program

The Upper Kitsilano Residents Association (UKRA) has reviewed the staff report on the Affordable Home Ownership Pilot Program and has a number of grave concerns. We strongly oppose the goal of this program and urge Council NOT to give its approval. The following outlines our objections:

Flawed Assumptions

1) Supply and Demand
a) The unstated subtext in this report is that there are not enough dwellings and if more dwellings were built in Vancouver, prices will come down. This assumption is regularly reported in the media, but in June 2014 the CAC Policy and Housing Affordability Review, commissioned by the City stated that there is more than ample supply.Over the last 5 years, the City has approved rezonings faster than the new capacity is being used. The City has sufficient capacity in existing zoning and approved community plans to accommodate over 20 years of supply at the recent pace of residential development. This report did not consider the considerable increase in zoned capacity represented by the sale of the Jericho Lands and other lands that have come on stream since 2014.However, even though Council has approved an average of 5,068 new dwellings per year over the last five years and an average of almost 6000 for the last two full years (just about double what we actually need according to the City’s own estimates) prices last year jumped an average of 20%. These numbers indicate that supply has no effect on prices

b) UBC Geographer, Dr. David Ley’s research shows that price increases are clearly linked to foreign investment. His recent study: Global China and the making of Vancouver’s residential property market describes how massive amounts of capital have moved across the Pacific and how this capital has been the main driver for increases in real estate prices. He concludes his study by saying, “Wealth generated in asset hotspots in a deregulated globalised economy can generate huge public revenues as well as private returns. The convergence, even without collusion, of private and public sector property interests in BC creates immense momentum that preclude meaningful policy responses to inequities that include excessive housing unaffordability, precarious mortgage indebtedness and disillusioned out-migration. The default housing policy position (of both the municipal and provincial governments) has become minimal response and the cultivation of ignorance concerning actual trends. In this neo-liberal policy environment, community costs assume the status of acceptable collateral damage”.

We invite the Mayor and Council to hear more about Dr. Ley’s research at the Upper Kitsilano AGM/Town Hall meeting on April 27, 7 PM at St. James Square, Main Hall. His research shows clearly that the assumption that building greater density will cause housing prices to fall is baseless and that, unless our housing market is protected through regulations, policy responses such as the IRP/AHO will further degrade communities while failing to increase affordability.

2) Building Affordability is Possible in the Current Market

a) The second faulty assumption is that a selling price 20% below market is affordable for “moderate income, working households”. To support this assumption, the report blurs the difference between the price of new builds & existing condos. Through juxtaposition, Figure 2. Comparison of Housing Costs Along the Housing Continuum suggests that this policy will make home ownership affordable at $2000/mo, only slightly higher than the $1950/mo market rents in new buildings. But the difference between renting an average existing condo at $1500/mo & the price of buying an “affordable” 2 bedroom condo at $2000/mo is $500/mo plus strata fees, property taxes upkeep which would make total shelter costs for “affordable” condos about $3000/mo which is a large amount for low and middle income earners. And unless our housing market is protected through regulations with teeth, prices will continue to increase at 20%/year, neutralizing any discounts.

b) The IRP/AHO policy is ostensibly designed to provide a supply of new 3 bedroom units (“small house/duplexes, traditional row houses, stacked townhouses and courtyard row houses”) throughout the City to serve families.  But the economic rationale is based on average prices of existing 2 bedroom condos. So the report’s comparison of renting an existing 2 bedroom condo and buying a newly built 3 bedroom “small house/duplex, traditional row house, stacked townhouse or courtyard row house” is like comparing apples & oranges.  All 3 bedroom units in Vancouver sell for about $1.1 million or more. If they were to come under the new “affordable” rezoning policy or be sold at 20% below market price, they would still be unaffordable at $880,000. The report’s calculations are also based on buyers having a 10% down payment or $88,000, which is a lot of money to have saved for a family if it were currently paying $3000/mo to rent 3 bedrooms at current average salaries.  So average families would still pay a mortgage of $4,606/mo, plus strata fees, taxes and upkeep, for which they would need an annual income of at least $165,816/yr or more than double the average annual family income in Vancouver of $80,000.

c) While these calculations clearly show that even at 20% off, ground-oriented housing cannot be made affordable in Vancouver’s unregulated housing market, Map 1: Locations of sites that can be considered under the Affordable Housing Choices Interim Rezoning Policy shows that about 75% of the areas identified for the program would be rezoned for 3.5 story ground oriented housing.  As it will be impossible to build “affordable” ground oriented housing for moderate income, working households, especially on the West side, there is likely to be pressure for the City to allow condos instead of ground oriented housing, which is already taking place with Cressey’s development in the Cedar Cottage neighbourhood under the IRP policy.

B) Lack of Consultation

The IRP/AHO policies would bring about a radical change to residential neighbourhoods. It ignores the Community Visions that have been developed with in-depth input from neighbourhoods and imposes a draconian transformation of the City irrespective of neighbourhood character or needs. It is less a policy than a city-wide plan that is being moved forward without proper planning and in the complete absence of consultation with affected neighbourhoods. While this extreme make-over of residential areas is being carried out without consultation with affected communities, the report indicates that further expansion of the program is to allow for consultation with the development industry. This top-down, autocratic approach is one that we had very much hoped the City was getting away from and we trust that Council will put the brakes on this ill-advised initiative.

C) Conflicts with Character House Review

The proposed rezoning to allow 3.5 – 6 story multiplexes would lead to outsized developments on what are now single family lots. The areas proposed for rezoning covers a large portion of the City, including many areas where there are character houses and older apartment buildings. If this policy were to be implemented we can expect to see a massive increase in destruction of these older homes and apartment buildings. After having these areas identified in this report, there will be a lot more developer attention and interest that will further alienate older homes from retention options. We are especially concerned that the IRP/AHO policy is being brought forward at the same time as the Character House Zoning Review (CHZR) is underway. In Upper Kitsilano, implementation of these policies would eliminate over 1/3 of the older homes that might otherwise be protected under zoning changes from the CHZR. We have put a great deal of time and effort into contributing to the CHZR but the two initiatives appear to be working at cross purposes.

Summary We urge Council not to approve the goals of this policy report or to support further development of the AHO/IRP policies themselves. These policies will not prevent the collateral damage that results from massive amounts of capital that have moved, and continue to move across the Pacific: unaffordability, precarious mortgage indebtedness and disillusioned out-migration. They will only serve to further destabilize and fragment our residential neighbourhoods. Instead, staff should be directed to develop effective measures to stop the root causes of unaffordability using the City’s existing powers.Yours truly,
Marion Jamieson
Director
Upper Kitsilano Residents Association

The following is a map showing the potential impact of these policies on the Upper Kitsilano neighbourhood. This maps is typical of how these policies will ring residential areas with townhomes & condos then, over time gradually eliminate residential zones.

Map showing impact of AHO on Upper Kits
Map showing impact of AHO on Upper Kits