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An Affordable City

The 10th Annual Demographia International Housing Affordability Survey: 2014 (http://www.demographia.com/dhi.pdf) rating for metropolitan markets worldwide was recently released. The subject of the survey; Urban Planning and Housing Affordability.

The survey ranks 360 metropolitan markets in 9 countries. It provides important comment on the various soft and fuzzy objectives employed by urban planners resident in those various Cities in pursuit of the aforementioned objectives, and the survey opines:

“Urban planners have been inventing all sorts of abstractly worded objectives to justify their plans for our future cities – smart growth, livability, sustainability, are among the most recent fads.

There is nothing wrong, of course, for a city to try to be smart, livable, or sustainable.

But for some reason these vague and benign sounding objectives usually become a proxy for imposing planning regulations that severely limit the supply of buildable land and the number of housing units built, resulting in ever higher housing prices. In the name of smart growth or sustainability, planners decide that density should be lower in some places and higher in others. Population densities are not a design parameter whose value depends on the whim of planners but are consumption indicators which are set by markets.”

“As a city develops, nothing is more important than maintaining mobility and housing affordability.

Mobility takes two forms: first, the ability to travel in less than an hour from one part of a city to another; and second, the ability to trade dwellings easily with low transaction costs.

Housing mobility allows households to move to a location that best maximizes their welfare. Affordability is the ability for any urban household to be able to rent a dwelling for less than 25% of its monthly income, or to buy one for less than about three times its yearly income.

The mobility and affordability objectives are tightly related. A residential location that allows access to only a small segment of the job market in less than an hour commuting time has not much value to households, even if it is theoretically affordable.

For instance, the government of South Africa has been building several million units of heavily subsidized “affordable” housing in areas that require a long and expensive commute – transport costs representing in some cases more than 50% of a worker’s salary. In this case, affordability without mobility is only a poverty trap. Affordability and spatial mobility are therefore inseparable objectives.”

So, how has Metro Vancouver faired in a global comparison on the subject of affordability? The answer, not to well. In fact, awful!

The survey just released ranks Vancouver as the second least affordable City studied, and by inference, the second least affordable city in the developed world. We are second only to Hong Kong. And based on a recent split decision by North Vancouver City council, which reduced the minimum square footage for a 3 bedroom condo unit to only 400 sq/ft, it appears to be the city of Hong Kong that our current City council seeks to emulate.

affordable_graph

So if the City is not achieving increased affordability as a result of all this growth, then what exactly is this growth achieving? The answer, nothing good!

We have so many empty and/or unsold condos in North Vancouver City that those who have taken the plunge, made what is arguably the single largest purchase in an average Canadians life, namely buying a home, are now underwater with their mortgage provider, principally because the excess in available condo’s in North Vancouver specifically, and Metro Vancouver generally, has caused condo prices to fall dramatically. So those who must sell are compelled to take a loss, selling out often at prices well below the level of their equity. This in turn can then cause mortgage lenders to refuse the release of mortgage security, thereby inhibiting the free flowing sale of condo units. By this measure the ability to trade dwellings is inhibited by the inability to recover investment dollars, and so, Vancouver’s affordability standing loses ground, as the survey findings conclude.

On the other hand, in those instances where sales do occur at levels well below the original purchase price, the BC Assessment Authority records the sales value of those depressed transactions, and adjusts condo property values accordingly. The result, the residential single family (“RS-1”) home owner, whose house need only maintain a constant year-over-year assessment, like all other categories experiences an increase in the municipal tax “mil-rate”. This is required to recover the taxable income losses of the City from declining condo value assessments versus an ever increasing City operating budget.

Alternatively, as is the case in 2014, the growth in RS-1 assessed property values, coupled with Neptune’s expansion, without any increase to the “mil-rate”, and despite the declining assessment values in the condo market, has delivered the City a real tax revenue increase of $1.4 million. Meaning that without any “mil-rate” increase whatsoever, RS-1 homeowners will pay a larger tax bill to the City in 2014 than ever before, transferring a larger percentage of the City’s tax burden onto the RS-1 homeowner. The result, RS-1 homeowners are under attack by the City as a direct result of densification, and this attack will only worsen with the adoption of the City’s newly minted “Draft” Official Community Plan (“OCP”).

Further, the wholesale redevelopment of the Lonsdale corridor is destroying the older eclectic larger affordable commercial spaces in favour of glitzy new towers, each having small “cookie-cutter” like commercial units at ground level, at rental rates 300% greater than the previous much larger commercial spaces no longer available.

The increased cost of commercial units is driven in part by the cost of new capital, and in part by the City’s demand for ever increasing amenity contributions from the developers who seek to expand the air-draft (building height) claimed as city property. These monies must come from somewhere, and in the end, it is the commercial renters who must pay. Developers are not commonly known for their benevolence, and so the finished “triple-net” lease rates demanded of the businesses seeking to occupy these new spaces, is driven ever higher. These City driven initiatives further harm affordability, and as has been said elsewhere in this website, this harms the general health of the City’s business community, many of whom are now on the ropes.

When you have a 40% vacancy rate in numerous commercial real estate units throughout Lower Lonsdale, the last thing you need to do is flood the market with even more new high cost units. The smart play would be to reign in further expansion until market demand found better balance, unit values stabilized and then recovered, and residential and commercial investors recovered some or all of their lost equity.

The City has no business pursuing goals and objectives, the implementation of which costs City residents, commercial business operators and landlords, their net worth and places them in financial jeopardy of foreclosure by a bank nervous over the loss of equity and the potential of foreclosure without full recovery.

During a recent presentation to council, a well known real estate agent, appeared before council and identified that the inventory of empty commercial space on the North Shore was sufficient to meet the next 5 to 10 years in forecast demand. He urged the City to reign in commercial space development until the market could return to a better supply/demand balance.

IT IS MY POSITION THAT the City should slow the pace of condominium and commercial redevelopment by reigning in the City’s density bonusing activities. The City should limit density bonusing activities until a definitive OCP reflective of the community’s wishes has been finalized and adopted. Therefore;

  1. I would support development of a methodology to determine and monitor the volume of vacant real estate inventory for all types of housing (RS-1 residential, basement suites, coach houses, rental apartments, Condo’s, Commercial – Retail, Commercial – Office, and Industrial), to ensure the pace of redevelopment is consistent with the markets ability to absorb that redevelopment, at the rates necessary to make it affordable and viable.
  2. When it can be determined that the market has achieved a reasonable “supply/demand balance”, I would then support further redevelopment in accordance with the new OCP objectives, as established by City residents through an expanded and inclusive OCP process.
  3. I would support a process to investigate the feasibility of social and affordable housing initiatives as described in those sections of my platform.

When I find myself in a position to affect these changes, the policies and initiatives setout above will guide my decision-making.

***Please take the time to examine the following sections before voting on these policies and objectives. ***

  • A Stable And Secure Rental Apartment Inventory
  • A Better Social And Affordable Housing Program

What do you think?

What do you think about my position on An Affordable City?

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One Comment

  1. Housing affordability is a complex issue that is driven by population growth and based on land scarcity, having a desirable location and the availability of housing types to meet demand. Property values are high in North Vancouver because of this. I agree that Metro Vancouver as a whole is unaffordable to many people who would otherwise love to live here but to isolate North Vancouver as somehow being assessed differently makes no sense. Any smart developer will slow down when unit sales slow. When there is too much product on the market, the prices will come down. We need to have a better strategy for maintaining cheaper rental units. This is the type of affordable housing we need. Secondary suites and coach houses are one prong that will take some of the pressure off the demand for rental units. What about others? Whats your strategy?

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