Opposition to Metro Vancouver DCC increases
The fight continues
“Land lift” (shown in green) absorbs the impact of cost increases and lower prices. (Both costs and interest rates have risen a lot since 2019.) When the land lift is gone, projects come to a halt: it doesn’t make sense to build something that’s going to be worth less, after subtracting costs, than what’s already there.
It looks like the fight over Metro Vancouver’s decision to increase development cost charges on new housing, starting January 2025, is heating up again.
Metro Vancouver developers link arms, take aim at DCC increases. Howard Chai, Storeys, September 17. Wesgroup and other major developers are asking Metro Vancouver to delay the planned increases by two years. Text of the letter from Wesgroup.
Housing starts in Metro Vancouver have plummeted, dropping by over 20% year-over-year in the first half of 2024 according to CMHC. In addition, many multi-family projects are not moving ahead. Pre-sales for projects in the first half of 2024 are 29% below the average of the past 10 years and of the 8,593 units released, only 1/3 have been pre-sold signalling that many of these projects won't move ahead as they may not hit a financing test to meet the requirements of the Real Estate Development Act.
To illustrate this point, in the City of Vancouver there are 14,600 units which have an approved Rezoning or Development Permit that have not started construction. In Surrey, there are 34,000 units approved and not yet built. The viability of these projects is questionable given the Metro Vancouver DCC increases were not known at the time of the application. There are also 48 projects in Court Ordered Sale, CCAA, Foreclosure or Receivership in Metro Vancouver. An additional 10 projects are notably not moving ahead, which means over 10,000 proposed housing units in Metro Vancouver are not proceeding due to viability issues.
These figures point to a direct consequence of rising costs and increasing financial barriers to development, exacerbated by the Metro Vancouver fee increases. As this trend continues, it will severely limit new housing supply, further driving up prices and reducing affordability for residents over the next decade.
Metro Vancouver board chair responds to developers seeking relief from fee hikes. Jami Makan, Business in Vancouver, September 19. Mike Hurley, mayor of Burnaby, who’s replaced George Harvie as Metro Vancouver chair, says that the alternative is higher utility fees for residents, which is unacceptable.
“Unfortunately, senior government funding for infrastructure hasn’t been nearly enough to support affordability for residents,” said Hurley, who also serves as Metro Vancouver’s chairman. “Without increasing DCCs, households would need to pay for the vast majority of the cost of new infrastructure through their utility bills.”
This is exactly what Frank Clayton and Benjamin Dachis have proposed: use long-term bonds to fund water and sewer infrastructure upgrades, and pay off the bonds using full-cost water fees, similarly to how we pay for electricity. Paying for infrastructure upgrades through up-front DCCs on new housing means that homebuyers are financing these upgrades by borrowing at higher rates (in the form of larger mortgages) than Metro Vancouver can borrow at.
Construction firms, builders join developers in tussle over fee hikes for new homes. Joanne Lee-Young, Vancouver Sun, October 2.
Construction companies and building associations have joined several big-name developers in calling on Metro Vancouver to reconsider proposed development fee increases for building new homes.
The opposition has prompted the regional authority’s mayors committee to call a meeting on Oct. 17 with about 20 concerned groups.
Mike Hurley pointed to the escalating cost of materials, such as concrete, developers having paid too much to acquire land, the absence of federal government funding and banks’ rates to finance rental housing.
“To ask us to fix these issues is unfair,” said Hurley.
Cost increases add up: they all matter. If municipalities really place a high priority on building more housing, they could reduce their fees to offset the headwinds from increasing costs elsewhere. But they’re counting on that money!
Previously
Metro Vancouver board plans to hike development charges on new housing
Surrey, Burnaby, and Richmond vote to proceed with hikes to charges on new housing
Two requests to the Metro Vancouver board, to soften the impact of the hikes on rental housing
Unsold condos - the market-clearing price appears to have dropped below costs