Vancouver’s affordable housing ‘pilot’ limited but worthwhile, experts say

Theglobeandmail.com
April 18, 2016
By Frances Bula

The city’s proposed plan to create an affordable home-ownership program will likely serve only a tiny minority of people in this expensive city, but anything is worth testing out at this point, housing and development-industry experts say.

The city’s housing planners have proposed that Vancouver do a pilot home-ownership program to create 300 condo units in three years that could be sold at below the market rate.

A draft proposal being debated at council on Wednesday would require buyers to have at least one member of the household working in the city, to have been residents for five years and to have a household income under a certain limit.

“We may need to even add additional screens,” said Councillor Raymond Louie, suggesting people who work in key city jobs such as nursing, policing or firefighting could be given priority, as other cities have done. “It is a pilot. This is an attempt by Vancouver to see whether it will work.”

He acknowledged it will not solve affordability problems, but the city felt it had to act, given the increasing concern over who will be able to stay in Vancouver as housing prices have skyrocketed and rental vacancies are near zero.

“What we’re seeing now is a great anxiety and need,” he said.

In Vancouver’s proposed plan, the units would be part of projects built by private developers, who would hand them over to the city as their required contribution in a rezoning.

Although the exact mechanisms still have to be worked out, along with a change in provincial legislation to enable the idea, the basic concept is the city would retain some of the equity in the units or put a limit on re-sales to keep the units at below-market rates for future generations.

The region’s two major universities have forms of this kind of ownership. Faculty or staff at Simon Fraser University can buy townhouses or condos for 80 per cent of the normal market value. When they sell, they get the profit on that 80 per cent. The university holds on to the remaining equity and profit.

But experts say the program will likely attract only a niche group of buyers.

Many people will likely prefer to stretch as much as possible to buy a unit without a limit on their future profits, said Anne McMullin, the CEO of the local Urban Development Institute, which represents builders.

As well, given the way the city’s program is being set up, units will be available only in buildings where the city has negotiated with a developer to provide them.

That is different from affordable-housing programs in some other cities, Ms. McMullin said, where the buyer can choose from any project and work out the subsidy with the city or other partners.

“We’re supportive of anything that allows people to get into home ownership, but this can get complicated.”

Penny Gurstein, the director of the University of British Columbia’s planning school, said the program will likely mainly serve a small group of better-off buyers.

The maximum household income level the city is setting for the program is $96,000. With that income, a family could commit only $33,600 a year for housing under typical bank-financing rules.

After taxes and strata fees, that family could likely afford only about $2,300 for mortgage payments, which would limit them to a condo worth around $500,000. Although people making less than that could theoretically qualify for the program, it is increasingly difficult to find new condos for less than $400,000 in the city.

“It’s going to be a narrow range of people, but it will still be attractive to some,” Ms. Gurstein said. “I think it’s worth trying and assessing. I think we have to try as many things as possible.”