Exasperation and impatience vs. fear and complacency
A sketch of housing politics in Vancouver for Josh White
Josh White starts as Vancouver’s new director of planning on May 1. A profile in the Calgary Herald: City of Calgary's director of planning departs for similar role in Vancouver.
Welcome to Vancouver, and thank you for taking on the role of Vancouver's director of planning! I thought it might be helpful to provide a quick sketch of the political picture here, focusing on differences between Calgary and Vancouver.
I'd describe the battle over Vancouver's housing policy as “this is too little, too late” vs. "this is too much, too soon." The city of Vancouver has a long-standing tradition of quality ("livability") over quantity, with a slow and labour-intensive approval process, amounting to co-design. There's a similarly long-standing tradition of putting high up-front charges on new housing, to pay for amenities: "Growth pays for growth."
More polemically, we regulate new housing like it’s a nuclear power plant, and we tax it like it’s a gold mine.
The result is that housing is both scarce and expensive. Because we don’t have enough housing, prices and rents have to rise to unbearable levels to force people to leave, matching those remaining with the limited supply of housing.
Long-time homeowners are insulated from high prices and rents, but for anyone moving to Vancouver (or for younger people trying to move out on their own), it's like you're being charged insane amounts of money to live in an increasingly fancy country club. Vacancy rates are near zero. When talking to politicians I describe the situation as “all the lights are flashing red, all the sirens are going off.”
There's lots of younger people making six-figure salaries who can't afford to stay here. Whenever I'm talking to older homeowners, I point out that we all depend on the healthcare system, and when younger people can't afford to live here, hospitals are going to have a hard time hiring nurses and even doctors.
In Vancouver, land is both limited (by ocean and mountains) and underused (because of the maddeningly slow and labour-intensive approval process). It's like the city is slowly strangling itself, in the name of "livability" and "growth pays for growth." The Covid-induced surge in remote work has aggravated the shortage: total demand for residential space is up sharply (people working from home need more space), and the housing shortage in Metro Vancouver and the GTA has spilled over to the rest of the country. A recent news story noted that a quarter of people in Metro Vancouver are planning to leave in the next five years.
Key political players
The political winds have shifted quite dramatically. In the 2022 municipal election, the mayoral candidate who appealed directly to "too much, too soon" voters (TEAM's Colleen Hardwick) got only 10% of the vote; ABC's Ken Sim got 50% of the vote, and ABC elected seven out of 10 councillors. Two of the most consistent No votes on council from 2018 to 2022, Colleen Hardwick and Jean Swanson, are now gone. Whenever there's been a vote on housing (with a single exception), the ABC majority has voted Yes.
At the provincial level, David Eby (premier since November 2022, attorney-general and housing minister before that) is pushing hard to speed up approvals and reduce costs. Ravi Kahlon, the housing minister, has passed legislation requiring municipalities to legalize multiplexes, to allow transit-oriented development, to focus on city-wide official community plans instead of holding a public hearing for each and every multifamily project, and to replace negotiated CACs with fixed ACCs.
BC is unusual in that there's no treaties ceding the land to the Crown. The Supreme Court ruled in 1997 that Aboriginal title continues to exist in BC. The First Nations in Metro Vancouver are major landowners and developers. The exact boundaries for each First Nations land claim have yet to be settled; in the city of Vancouver, the Musqueam, Squamish, and Tsleil-Waututh Nations (the MST Nations) have formed a partnership. Major First Nations-led projects include Senakw (on Squamish reserve land), the Heather Lands redevelopment, and the Jericho Lands redevelopment.
Greater Vancouver is politically fragmented compared to Calgary. There's a regional government, the Metro Vancouver Regional District, with a board consisting of elected officials from each municipality, which oversees major water and wastewater infrastructure. Unfortunately MVRD staff also believe in the "growth pays for growth" assumption. The MVRD board is planning a major increase in development charges on new housing (effective January 2025) in order to keep property taxes from going up, negating the effect of the recent federal GST cut on new rental housing.
Municipal politics in Vancouver
Unlike Calgary, city councillors in Vancouver are elected at-large, to represent the city as a whole, not a smaller ward. In municipal elections, there are many, many candidates on the ballot. We do have municipal parties, which makes it somewhat easier for voters: you can look at a small number of parties rather than 70-odd candidates.
The Non-Partisan Association (NPA) was the dominant party for a long time. More recently, Vision Vancouver (a centrist spinoff from the left-wing COPE) was in power from 2008 to 2018. In 2018, Vision lost all their seats; the NPA (with Ken Sim as the mayoral candidate) took five seats, one short of a majority, with the independent Kennedy Stewart narrowly defeating Ken Sim. The NPA board was taken over by an ideological faction, and Ken Sim set up a new party, ABC (A Better City). Every one of ABC's candidates was elected in 2022.
The most intense resistance to new housing is in the northwest part of the city, particularly Kitsilano. The neighbourhood associations are primarily concerned with livability. They accept the need for more housing and more density in principle, but not in practice: they're willing to admit that we need more housing, but they'll object to any project that's put forward, sometimes putting forward alternatives as a reason to say no.
Politicians sometimes say that their hands are tied because homeowners don’t want to see property values go down. I think this factor is greatly exaggerated. What housing opponents fear is the unknown impacts of change to their neighbourhood, not falling property values.
Over the last few years, a pro-housing community has formed to counterbalance the opposition to new housing. Abundant Housing Vancouver has been around since 2016, and more recently there's a loosely organized but very active community centered around a Discord server. When we hear that there's a project facing intense opposition (typically hyperlocal), we'll mobilize to support it, both sending in written comments and speaking at public hearings. We have a group called the Vancouver Area Neighbours Association which exists specifically to counterbalance the traditional neighbourhood associations.
"Growth pays for growth" vs. "there's no free lunch"
My understanding is that Alberta municipalities don't put high development charges on new housing, as is common in Metro Vancouver.
Around here, it's commonly (and wrongly) believed that municipal development charges are paid by landowners, and that they don't affect prices and rents. Municipal development charges act as a second barrier preventing new housing from being built: even if something’s legal to build, if costs are too high, nothing will happen.
It's true that cost increases are first absorbed by land lift, and thus paid by landowners. But when that's mostly gone, they end up being paid by homebuyers and renters, because the landowners are no longer interested in selling, and projects have to wait until prices and rents rise further.
This doesn’t just affect prices for new buildings, it also affects prices for existing buildings, since they compete with each other.
And municipal governments haven't left money sitting on the table. They have a strong incentive to maximize the amount they can extract from land lift, so as to keep property taxes low. The MVRD is also raising its DCCs. Basically, everyone's taken too many bites out of the apple: there's not much left.
A visualization of a May 2022 analysis by Coriolis, for a six-storey purpose-built rental project in the city of Vancouver:
Calibration is difficult, because land prices are volatile. Land prices are a residual (expected selling price minus all construction costs), so a small change in either selling price or construction costs results in a much larger swing in land prices. To walk through an example, assuming that profit is 15% of construction cost plus land cost (over the three to six years of the project):
Suppose new homes are selling for $805 per square foot, and construction costs are $600 per square foot. Then the land cost is ($805 - $600 * 1.15) / 1.15 = $100 per square foot, and profit is 0.15 * ($600 + $100) = $105 per square foot.
If sale prices drop by 3% ($25 / $805), that translates to a 20% drop in land prices (roughly $25 / $100, minus a bit because profit is a fixed proportion of costs).
Similarly, if construction costs increase by 7% ($40 / $600), that translates to a 40% drop in land prices ($40 / $100).
So when Coriolis does its analysis and says that the city can extract a certain fee, it's important to note that small changes in either selling price or construction costs can wreck the calculation. When the city of Vancouver is aiming to extract 70-80% of land lift, there's not much room for error.
A second observation is that it's easy for politicians and the public to assume that high prices and rents must mean that land lift is rising. But land lift actually peaked around 2018 and has been falling since then, according to someone who works in land acquisition.
Rising prices for single-detached houses reduce land lift, because they reduce the premium that a landowner gets for selling. Hard construction costs (which aren't very visible to the general public) have risen sharply. Financing costs have risen sharply. Higher interest rates put downward pressure on the value of both strata buildings and rental buildings (because the cap rate needs to be higher to compete with GICs). The only countervailing factor is the federal tax changes to remove GST on new rental housing and to accelerate depreciation (10% instead of 4%).
What the shortage feels like
A comment from Ontario, on Reddit:
Ontario, get ready - you’re going to lose your professionals very very soon
Partner and I are both professionals, with advanced degrees, working in a major city in healthcare. We work hard, clawed our way up from the working class to provide ourselves and our family a better life. Worked to pay off large student loans and worked long hours at the hospital during the pandemic. We can’t afford to buy a house where we work. Hell, we can’t afford to buy in the surrounding suburbs. In order to work those long hours to keep the hospital running, we live in the city and pay astronomical rent. It’s sustainable and we accepted it- although disappointed we cannot buy.
What I can’t accept is paying astronomical rent for entitled slumlords who we have to fight tooth and nail to fix anything. Tooth and fucking nail. Faucet not working? Wait two weeks. Mold in the ceiling? We’ll just paint over it. The cheapest of materials, the cheapest of fixes. Half our communication goes unanswered, half our issues we pay out of pocket to deal with ourselves.
Why do I have to work my ass off to serve my community (happily) to live in a situation where I’m paying some scumbag’s mortgage when there is zero benefit to renting? Explain this to me. We can’t take it anymore. Ontario, you’re going to lose your workers if this doesn’t change. It makes me feel like a slave.