Herb Auerbach is a long-standing real-estate development consultant in Vancouver – and the nstructor (with Michael Mortensen) for the SFU City Program course Real Estate Development from the Inside Out.*   This op-ed has also been printed in The Sun.

ACHIEVING AFFORDABLE HOUSING IN VANCOUVER

One cannot open a newspaper in Vancouver without seeing an article about the housing market and the lack of affordable housing, including complaints about the influx of foreign money, unoccupied apartments, profiteering by ruthless developers, unethical behavior on the part of brokers, and the lack of government action.

In Vancouver many of these are real issues that are doubtless affecting the real estate market, and often negatively. Addressing these complaints, however, will not produce “affordable housing” and very little is written about why we need it in Vancouver and how we can provide “affordable housing”.

There is no magic bullet.

If affordable housing is not available in the market place then it must be provided through government subsidy, either subsidizing the buyer or subsidizing the seller. All the legislation aimed at regulation of the real estate industry, taxing foreign ownership and vacant apartments, won’t produce affordable housing but it does help produce money for the government’s coffers and those monies could, if earmarked to do so, contribute, to providing some of the funds needed for the production of affordable housing.

Why do we need affordable housing in the City:

Some have argued that those who cannot afford to live in the city should seek housing elsewhere, in the suburbs, or even other cities. Encouraging more housing in the suburbs increases sprawl, and requires governments to spend more funds for expensive infrastructure, transportation and services. Besides, cleansing the city of the less affluent will not render it more secure, or more socially or culturally viable.

The need for affordable housing, in the city, has been understood by the earliest city builders and placemakers. Alexander the Great said of Alexandria that it would “nourish men of all races” and that it would thrive by virtue of its diversity, not in spite of it. His view, as was the view of Emperor Augustus when building Rome and Napoleon III when re-building Paris was that men and women of all stations and all ethnicities are needed to create and maintain a vibrant urban environment, In its own way Vancouver is attempting to emulate these great placemakers of history, by assuring the vitality, diversity and quality of its urban life is achieved. To achieve this goal Vancouver needs not only high end condos but affordable housing.

What is Affordable Housing?

The CMHC (Canadian Housing and Mortgage Corporation which insures mortgages) defines affordable housing as housing (rent or purchase) that costs no more per month than 30% of a family’s before tax gross monthly income. In Vancouver, apart from the 150,000 or so who are seeking housing, there are approximately 150,000 households paying well in excess of 30% of gross income for housing.

Market Rental and Affordable Rental Housing

Sufficient affordable rental housing is indeed the real issue and the real challenge.. Private real estate developers will not build rental housing if it is significantly less profitable than building and selling condominiums. Rental properties have been less profitable because they require more equity, are riskier, because you cannot pre-rent apartments where as the developer you can pre-sell condos. So how can a city like Vancouver encourage the development and construction of affordable rental housing?

The Affordable Housing Solution

The provision of affordable housing in the city must be the responsibility of the City, not the Federal Government or the Province, and the City must be given the authority, the funds, or the ability to secure the funds, and be able to develop for itself the administrative and organizational capacity to deliver affordable housing stock. The solution requires organizing a variety of funding sources and mechanisms, applying a number of legal tools and tax incentives as well as the application of professional and entrepreneurial skills, with the “power” to act aggressively,
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In addition to requesting tax reform as an incentive to developers the City should take the following steps:

1. Funds realized through extraordinary fees on real estate, including but limited to foreign ownership tax, land transfer tax, vacant unit tax, and CCAs should be earmarked for affordable housing;
2. Land should be made available by the City to developers for non-market rental should never be sold, but be leased for $1 or at affordable rates.
3. All new condos should include a percentage (up to 15%) of affordable rental;
4. Request the federal government to increase the depreciation rate for affordable housing projects, and return to making soft costs for non market rental housing tax deductible;
5. Request the federal government to provide the Cities with new taxing power and the ability to tap new sources of revenues, including tax free municipal bonds.
6. Demonstrate long term profitability to induce and encourage pension funds and privately owned REITs to invest in market and non-market rental;
7. Establish an effective robust housing department under strong leadership (a Housing Tsar) with the human and financial resources to meet housing demand and set higher goals ie; to deliver 10,000 – 20,000 units per year, through both public and private mechanisms.

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