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City of Vancouver – Rental Incentive Program Review

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Blog by MacPherson Real Estate Ltd | August 1st, 2019

City of Vancouver – Rental Incentive Program Review

On July 24, 2019 City of Vancouver staff made a presentation to council to lay the groundwork for the development of robust incentives for the creation of rental housing in the City.  The final recommendations are to come to council in November or December 2019.  The presentation is comprehensive and looks backwards to assess the success of various rental incentive programs and financial viability of purpose-built rental under different scenarios.  The City retained City Spaces and Coriolis to carry out much of the work.  Here are the highlights of the presentation:

Four main program have been used to incent rental
  • STIR (discontinued, 18 projects, 1,300 units, mostly 1bdm and studios)
  • Rental 100 (40 projects, 3,200 units)
  • Affordable Housing Choices Interim Rezoning Policy (7 projects, 420 units of rental approved)
  • Community plans (30 projects, 2, units approved)
  • 8,700 units approved including 1,800 through miscellaneous for the period 2009-2018
  • Rental 100 has been the most successful of these.  AHC confusing and limits the number of AHC projects within a given area
DCL Waivers
  • About half of Rental 100 projects have applied for DCL waiver
  • This works out to $8,000 of foregone DCL revenue for the City per unit of housing
  • Westside projects less likely to apply for DCL waiver due to starting rents generally higher negating desirability of the DCL waiver (conditions applied)
Post-occupancy survey of Rental 100 tenants
  • Survey sent to 30 occupied buildings, 460 responses
  • Most respondents under age 40 with mix of singles and couples
  • Themes included that tenants appreciated the neighbourhood, proximity to transit, pet-friendly buildings, having a newly constructed building to call home, rent more affordable than other options
  • Over half of respondents earned less than $80K per annum
  • Many were making trade-offs paying more than half their income on rent in order to get the benefits of secure purpose-built rental, good location – 59% paying more than 30% of their income for rent
  • 57% moved into the building from elsewhere in Vancouver.  76% of that group were moving from another rental
  • 32% of respondents said they were looking for 3 or more months before they found their home
  • Evidence of parking oversupply
  • Lengthy approval times create risk and increased cost for developers
  • Multiple city objectives create confusion and delay (eg: tenant relocation, green building, etc)
  • Competing concerns around neighbourhood integration of buildings
  • Concentrating PBR on arterials has created an inequitable environment where renters have limited choice
Coriolis Analysis
  • Development must be viable – about 15% profit margin to secure construction financing
  • Across apartment and commercial zones, even with incentives, rental is marginally viable
  • Rental is viable at many low density sites because of lower existing land values
  • Vacancy control (tying rent control to the unit) would make rental housing projects financially unviable
  • Recommended exploring rental tenure zoning used to streamline bonuses for rental rather than downzoning for condos/strata
LandlordBC will continue to work collaboratively with the City on this process.  It is encouraging that the City has commissioned external research and we’re especially pleased that this research has emphasized the significant negative impact of vacancy control.  There may well be opportunities for new purpose-built rental in low-density areas which would no doubt be well-received by renters.  We remain concerned that the City is so far off its self-imposed targets for new rental supply and projects that do come to this council via public hearing face a barrage of nimbyism and a seemingly lack of interest in the economics impacting the building of new rental housing.
Source: Landlord BC