Protecting renters in the Broadway Plan area
Making it easy to build where there's no renters, hard where there's renters.
Image from Google Street View
Now that the Broadway Plan has passed, what does this mean for renters?
The most important problem facing Vancouver is that we don’t have enough housing to go around, particularly rental housing. Renters are terrified of losing their housing and not being able to find a new place. The only way to fix this is to build more housing.
Because Vancouver is hemmed in by ocean and mountains, this means building upward. Near the new SkyTrain stations going in as part of the Broadway Subway, the Broadway Plan allows high-rises, primarily rental buildings rather than condos.
There’s a lot of people renting in older low-rise rental buildings near Broadway. This vulnerability is exactly why the Broadway Plan includes strong measures to protect those renters.
Avoid redevelopment of older rental buildings, and provide deeper affordability
First, the Broadway Plan aims to build new rental buildings on sites where there are no renters. For example, a 39-storey rental building at Broadway and Granville replaces an office building.
New high-rises in the Broadway Plan area are required to include 20% non-market apartments at 80% of the city-wide average rent, a discount of 35-40% compared to market rents for a newer apartment. For example, based on 2021 rents, the non-market rent for a one-bedroom apartment would be $1200/month.
Condo buildings can only be built on sites where there isn’t already a rental building, and they must include 20% social housing.
Provide right of return when an older building does get replaced
80% of low-rise rental buildings in the area are more than 50 years old. Well-maintained buildings are fine, but a small number of these older buildings will need to be replaced soon, increasing over the next 30 years. What happens to renters living in those buildings?
Under the Broadway Plan, a new high-rise will include enough non-market apartments to replace the apartments in the old low-rise (plus a lot more market apartments). Renters can move back into a non-market apartment, at the discounted non-market rent, which for most people will be less than they pay now. While renters are living in interim housing, the builder covers the difference from their old rent.
This protects renters from being evicted with no place to go, and also discourages renoviction by reducing the future rental revenue from the new building.
Renters also have the option to take a buyout based on how long they’ve lived in the old building. But if they want to stay in the neighbourhood, they can.
For tenants renting in an older building for a long time, even the 40% discounted rent in the new apartment may be higher than their current rent. Mayor Kennedy Stewart is proposing an amendment to the Broadway Plan: if the discounted rent exceeds their current rent, a renter can return at their current rent (plus increases allowed by rent control), as if they had never left.
Protect against over-crowding
Apartments built 50 years ago are bigger than current units. There's old 1BR apartments which are sizable enough for a family of four people to live there. The right to return to a smaller 1BR apartment, even if it’s new, wouldn’t give them enough space.
Under Vancouver's existing Tenant Relocation Policy, a builder replacing an existing rental building must find out from each household how many bedrooms they need, based on national occupancy standards. The builder then needs to provide adequate space, both for the interim housing and in the new building, which in this example may require a 2BR or 3BR apartment.
In all cases, the builder’s Tenant Relocation Plan must be approved by the city before it will grant the development permit and allow the builder to demolish the old building.
Diving into how the Broadway Plan makes it harder to redevelop old rentals
The Broadway Plan explicitly states that the goal is to start by building new high-rises where there aren't any renters, next to SkyTrain stations (like the 40-storey rental building at Broadway and Granville, replacing an office building).
Planners are really worried about keeping the old low-rise rental buildings in the area from being redeveloped too fast. They want those buildings to only be replaced slowly, as they reach their end of life, not prematurely, so that you don't end up with a flood of displaced renters all at once. There's renter protections ("Tenant Relocation Plans"), but it'd still be tremendously disruptive.
So they're setting high height limits near stations, in places where there aren't any renters, and setting lower height limits in the apartment areas, to make redevelopment less economically feasible.
From the staff report, p. 23:
Development will likely be focused at C-3A zoned sites along Broadway in the short term, particularly in the station areas where the densities permitted by the Plan are the highest and/or in locations where sites currently have low density existing buildings.
Residential development will also occur in the existing RT and RM districts. However, the pace of development will be more modest than in the C-3A areas.
In the RM districts [multifamily zoned with existing older low-rise rental buildings], the pace of development will likely be modest as a relatively small share of existing buildings in these areas will be financially viable for redevelopment to rental (with 20% below market) at the densities envisioned in the Plan. Constraints include:
Most of the RM properties have a high value under existing use so many will not be financially attractive for redevelopment.
The required below market units have a low value in comparison to creation costs.
Rental development with below market rental units is unlikely to be viable at the eastern end of Plan area, so any development will likely be focused to the west.
The enhanced tenant protection approach proposed for the Plan area creates additional complexity, uncertainty, and risk for developers.
The need to assemble multiple properties in order to achieve the maximum permitted densities will slow rental redevelopment. It will be challenging for developers to acquire multiple adjacent properties that are all viable for redevelopment.
Because of all these constraints, it'll be difficult to tear down an old rental building and replace it with a high-rise. It should be easier to build a new high-rise on a site next to a new SkyTrain station where there isn't already a rental building, so that's what's going to happen first. The new high-rises will include 20% non-market housing or social housing.
More discussion from the staff report, starting on p. 16:
The existing apartment areas (RM/FM zones) have a mix of housing types and tenures, primarily comprised of low-rise apartment buildings and some apartment towers in Fairview, but also detached homes, duplexes and multiple conversion dwellings. Much of the existing purpose-built rental apartment and non-market housing stock was built in the 1960s.
The primary objective in these areas is to retain the existing affordability and allow tenants to remain in their neighbourhoods for the long term, while also ensuring safe, healthy, and liveable buildings.
Over time, incremental renewal of the existing rental and non-market stock is envisioned, with new purpose-built rental and non-market housing buildings up to 20 storeys. New rental buildings would be required to secure 20% of the residential floor area at below-market rents in perpetuity, as well as offer existing tenants robust protections, including right to return to the below-market units and temporary rent top-ups during the construction period. In most cases, the below-market rents will be lower than current rents in the existing buildings, representing a 36 – 40% discount from market rents in new rental building, making them affordable to household incomes of approximately $40,000 to $90,000 per year.
Throughout these areas, the Plan generally limits new development to two towers per block (street to street, including a lane). For smaller lots, options for 6-storey apartments, as well as smaller apartment buildings, townhomes, and multiplexes would be considered.
Seeing the math
An example of the calculations showing that it doesn't make much sense to tear down an old low-rise rental building and build a new building:
Consider a 35-unit rental building, assessed value $14 million, about $400,000 per unit. Site dimensions: 150 x 120. The owner probably isn't going to sell for less than 30% over assessed value.
Suppose you wanted to build a five-storey rental building, 2.2 FSR, 100% market, using RR-2B zoning. Maybe you'd be willing to pay $225 per buildable square foot (based on final value of the new rental units minus construction costs). Then you'd only be willing to pay $9 million for the site (150 x 120 x 2.2 x $225), vs. $14 million + 30% that the owner would want. The land is worth more with the existing building than with a brand-new five-storey market rental building.
What about a 18-storey, 6-FSR building, with 20% of the units non-market, which is required under the Broadway Plan? Because the building is higher, that means concrete construction, which is more expensive. So you'd want to pay more like $150 to $170 per buildable square foot. Then you'd only be willing to pay $16 million for the site (150 x 120 x 6 x $150). The owner would want something like $19 million to sell. Plus there's the cost of the tenant relocation plan.
The land is worth slightly more with a brand-new 18-storey rental building, 20% of the units non-market - but there isn't enough of an increase for the owner to sell.
The higher construction costs go, the less likely redevelopment is. As long as the existing rental building is in reasonable shape, worth about $400,000 per unit, it makes more sense to keep operating it and collecting the rent than to sell it.