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British Columbia’s redistricting bill doesn’t go far enough to address Vancouver’s missing center

British Columbia’s redistricting bill doesn’t go far enough to address Vancouver’s missing center

In Vancouver, housing affordability is a prominent and recurring theme in both political and community discourse. Over the past year and a half, the British Columbia provincial government has passed several pieces of legislation focused on housing supply and affordability, including Bill 44, which went into effect on June 30 of this year. This ambitious legislation essentially rezoned all single-family homes for multiplex development in British Columbia (in municipalities with a population of over 5,000), allowing for three to six units per lot.

The City of Vancouver also passed its own version of this legislation in the fall of 2023. These policies are designed to address the “missing middle” of the housing continuum: the gap between increasingly unaffordable single-family homes and small apartments.

The planning rationale is simple: Let’s take a 6,000-square-foot lot in Vancouver with a 2,500-square-foot outdated bungalow. Vancouver’s multiplex zoning allows for a floor area ratio of one, meaning you can build 6,000 square feet on that lot, or four units of about 1,500 square feet each. Now we have four homes instead of one, generally with two or three bedrooms each, nestled on a tree-lined street, all significantly more affordable than a new single-family home in the same neighborhood. Sounds great! But while the rationale is compelling, the lack of middle-class housing is not without its challenges.

First, there is no clear path for how a homeowner can get from point A (single-family home) to point B (single-family home redeveloped into a multiplex). A key demographic in this discussion is baby boomers: born between 1946 and 1965, they are expected to leave behind $84.4 trillion in assets through 2045, of which $72.6 trillion in assets, including real estate, will go directly to heirs. The idea of ​​redeveloping their home into a multiplex, and possibly downsizing into one of the new units and selling, renting, or giving away the other, may be appealing. However, there is little information or guidance available on what would be a very complex process. Where would they live during the redevelopment process, especially since many cities face a lack of affordable rental options? Would they be willing to provide a personal guarantee on the development financing? Would they be willing to take on the responsibility of negotiating construction contracts? We are skeptical that many, at this stage in their lives, will ultimately choose to risk their largest investment in a speculative venture. It is more likely that they will choose to either remain in their current location, or move to an already existing unit elsewhere.

Additional challenges include having sufficient infrastructure to support the increased residential density, as well as significant costs. Both the cities of Richmond and Coquitlam requested more time to comply with the new zoning regulations. In the city of Vancouver, multiplex projects also incur costs and development permit fees that would not be required when building a typical single-family home on the same lot. The rationale for some of these costs was to ensure that land values ​​would not increase, but the result is that these extractions make missing-middle projects less feasible for the builder and more expensive for the end user. Our internal analysis at Macdonald Realty shows that less than 10 percent of single-family homes on the west side of Vancouver are financially feasible for a multiplex.

We need the government to take bolder, more direct steps. Studies in Toronto and Vancouver have shown that government fees and levies account for nearly 30 percent of the cost of building a new apartment building, so we should consider reducing the costs that the government imposes on the housing stock. Eliminating the GST on rental developments was a step in the right direction, but the federal government should eliminate the GST on all forms of housing. Many basic goods and services are already exempt from the GST, including certain groceries, medical and dental care, and basic financial services. Since shelter is a basic need, why shouldn’t it be exempt from the GST too? On a new home valued at $700,000 (about the current national average home price according to the Canadian Real Estate Association), the GST would be about $35,000.

There is so much more that can be done to improve housing affordability.