Vancouver staff report on Transit-Oriented Development
Heavy in-kind taxes on new housing are a major barrier
Implementation of Transit-Oriented Areas (Provincial Legislation: Bill 47). On the June 26 agenda of the standing committee on city finance and public services.
The BC government passed legislation last fall requiring municipal governments to update their plans to allow multiplexes and to allow transit-oriented development near SkyTrain stations and major bus exchanges, with a deadline of June 30 (this Sunday). On Wednesday, Vancouver city council will be reviewing the changes being recommended by staff for transit-oriented development.
The affected areas are shown below: an 800-metre circle around each SkyTrain station, and a 400-metre circle around Dunbar Loop and Kootenay Loop.
Summary of changes
What the city is planning:
A policy document (“Transit-Oriented Areas Rezoning Policy”), not a change to its laws. Proposed policy. The city isn’t planning to update its restrictive zoning laws to allow projects near transit to be built by right - this isn’t required by the provincial legislation. Projects will still need to go through the slow and painful discretionary rezoning process. My understanding is that they won’t need to go through public hearings if they’re consistent with Vancouver’s official development plan (expected in two years, June 2026).
Within 200 m from SkyTrain, allow up to 20 storeys and 5.5 FSR (the province required at least 5.0 FSR). Within 200-400 m from SkyTrain, and up to 200m from the Dunbar and Kootenay bus loops, allow 12 storeys and 4.0 FSR. Within 400-800m from SkyTrain, and 200-400m from the two bus loops, allow eight storeys and 3.0 FSR, although the city expects what will actually be built will be projects up to six storeys.
The city is planning to impose a lower limit in certain areas, to preserve the history of the area. The report mentions specific historic areas in Chinatown, Gastown, Yaletown, and Shaughnessy (not the entire neighbourhoods).
The city is basically planning to tax new housing to pay for non-market housing, requiring all rental projects (even six-storey ones) to include 20% non-market housing (“inclusionary zoning”), similar to the Broadway Plan area. This seems questionable.
The city will impose the same renter protections as in the Broadway Plan area. This seems reasonable when replacing a low-rise rental building with a high-rise building, more difficult when replacing detached houses with a six-storey rental building.
Inclusionary zoning requirements are a barrier to projects
In the Broadway Plan area, there’s lot of low-rise rental buildings from the 1960s and 1970s, and displacement of renters as they get replaced with new high-rises is a huge concern. In addition, rents in the area are expected to be quite high. So requiring 20% non-market housing, with first right of refusal for existing renters, seems like a good solution: whenever an old low-rise is replaced with a new high-rise, it includes apartments for the existing renters, at their current rents.
Elsewhere, where rents are lower and there isn’t a lot of older low-rise rental stock, this seems much more questionable. This basically means that the city is taxing new housing and using the tax to buy non-market housing. But there’s other major financial needs: for example, the staff report observes that the city needs to develop a city-wide plan for financing infrastructure upgrades, especially for water and sewers.
In addition, Burnaby’s experience demonstrates that there isn’t enough land lift in a six-storey rental project to support non-market housing. (As Michael Mortensen says, margins are razor-thin.)
In fact the staff report says:
Third-party financial testing has shown that the proposed inclusionary housing requirements for the higher-density options in Tiers 1, 2 and 4 are currently feasible in some, though not all, TOAs.
In other words, these requirements mean that nothing will get built in some areas. Even when something is legal to build, if costs are too high, nothing will happen.
The above requirements are for purpose-built rental projects. For strata projects (apartments owned by individual owners), the requirement is for 30% social housing. Again, this might make sense for a high-rise project in a high-rent area (although the requirement in the Broadway Plan area was at most 20%). For a six-storey project, the cost bottleneck looks like this:
Land value is what motivates redevelopment
A comment from the report:
The proposed requirements are consistent with existing City policies and will help discourage speculative activities which can have a harmful impact on land values.
My interpretation is that the city doesn’t want land values to go up. To me, this is both backwards and infuriating. Land lift - the difference between land value for redevelopment and the base land value with whatever’s currently there - is what motivates redevelopment. Because the city is holding down land values, it’s deliberately slowing down redevelopment.
Land in Metro Vancouver is scarce and therefore expensive, because of ocean and mountains: within a circle with radius 25 km around downtown Vancouver, less than 40% of that area is buildable land. Where land is expensive, you want to allow more height and density, reducing the cost of land per square foot of floor space. What makes high land values “harmful” is that they collide with the city’s height and density restrictions, and even worse, the extremely slow and labour-intensive rezoning process.
It’s like we’ve got a slow-moving train being chased by a monster. People at the back of the train are being eaten alive. Meanwhile, the people driving the train are reluctant to go any faster.
Suggested changes
City council needs to meet the June 30 deadline, so they’re not going to be able to make changes at Wednesday’s meeting. But I’d suggest that council ask staff to report back on the following:
Do not require inclusionary zoning for rental projects up to eight storeys (“Tier 3” and “Tier 5”).
For projects which are more than eight storeys (“Tier 1”, “Tier 2”, and “Tier 4”), replace the inclusionary zoning requirement with a cash payment - low for rental projects, higher for strata projects.
Evaluate Portland’s approach of fully funding non-market housing through property tax waivers.
All tiers within the transit-oriented areas should be rezoned to allow a base density of six storeys and 3.0 FSR by right, so that six-storey projects don’t need to go through the slow rezoning process.
Because the rezoning process is so labour-intensive, time-consuming, and expensive, many people will instead follow the path of least resistance, which is currently multiplexes.
An extreme example: City Duo observes that there’s a house at 419 W 23rd that’s 200m from King Edward Station. Despite the provincial legislation passed last December, allowing for 20 storeys and 5.0 FSR, the landowner is currently requesting permission to build a 1.0-FSR six-plex.
Parking minimums removed city-wide
The city’s already removed general parking minimums across most of the city. Staff are now recommending that they be removed city-wide, which is good:
City staff will no longer need to go through the labour-intensive, time-consuming, and expensive process of enforcing the regulations.
Not having to build unnecessary parking spots will reduce the cost of building housing, and make it easier to build both market and non-market housing. The cost to build underground parking in the city of Vancouver is about $75,000 to $125,000 per stall.
Of course a project can still build parking, if it's in a location where people want it and thus are willing to pay for it. But it doesn't need to be mandated and enforced by government.
Commercial-Broadway Station
Near Commercial-Broadway Station, one of the busiest SkyTrain stations, staff are recommending that in areas within 200-400m where city policies already allow 12 storeys, the limit should be raised to 20 storeys and 5.5 FSR.
There’s a policy in the Grandview-Woodland area that says no further changes are allowed, which conflicts with the provincial legislation. Staff are recommending that this policy be removed.
The Grandview-Woodland Community Plan includes a Pace of Change policy which restricts rezoning for new redevelopment covered by the Rental Housing Stock ODP (primarily apartment areas) to no more than five proposals in the first three years of the plan, or a maximum of 150 existing market rental units (i.e., renewed/redeveloped as a component of the five sites). As the Pace of Change limits have been reached, no further applications can be considered at this time. Some of the areas subject to the Pace of Change policy are within TOAs adjacent to the VCC-Clark and Commercial-Broadway SkyTrain stations.
Some background information from Kenneth Chan, June 2022: SkyTrain Commercial-Broadway Station deserves real density.
Within the area plan’s entirety of 4.45 sq km, the Grandview-Woodland Plan as approved in 2016 will add just 9,500 residents over a 25-year period spanning through 2041. For comparison, the entirety of Senakw and its 9,000 residents will fit into a land area of 0.01 sq km. The Grandview-Woodland neighbourhood will grow from 34,000 residents to 43,500 residents over the lifespan of the Plan.
More
Previous posts: inclusionary zoning, what the cost bottleneck looks like, summary of provincial policies.
A 2014 post by Alon Levy on height limits and redevelopment. “Once we get into the realm of cities with a large proportion of their lots developed, redevelopment requires buying out the pre-existing property. If a two-floor building is replaced by a three-floor building, then the developer has to not only pay construction costs for three floors, but also buy out two floors, effectively paying for five floors. But the revenue is still only that of a three-floor building, which bids up effective costs by a factor of five-thirds. This effect is why, in major cities, we usually see buildings replaced by much larger buildings: for example, a three- or four-floor Manhattan building may be replaced by a fifteen- or twenty-story tower on a base.”
Vancouver Outlines Housing Requirements In New TOA Rezoning Policy. Howard Chai, Storeys, June 21.
City of Vancouver to enable more density near all SkyTrain stations beyond BC legislated requirements. Kenneth Chan, Daily Hive, June 22.
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