Housing Bubble II: The Quest To Build Enough Homes Where People Actually Need Them

[casper]

I think the factor that was missed in the CBC reporting was the airbnd market. Many of those ultra-small condos are not designed for people to permanently live in them. They are about the same size of what you get in an all-suites hotel. They are ok for a week or so. If your a student or even single with modest income they are probably better than having roommate.

In BC they have cracked down on airbnb and many of those units are being put up for sale. Have not been following Ontario, but I though they were going down the same route.

Vancouver and Victoria has a major shortage of hotel rooms. Toronto as well. My preference would be to see more purpose built hotels instead more of these airbnb oriented condos.

[jonny24]

Originally Posted by YOWetal

I think this is very under appreciated. I was a bit surprised how mild the correction was when rates adjusted but there seems to be a delayed reaction as people realize the math doesn't make sense. I am in the reduce immigration camp but we have to admit how bad it would be if we didn't have 1 million plus fake students supporting the rental market and keeping landlords afloat. Even with them rents are falling. Inflation helps disguise it somewhat. Some 2018 pre-con buyers are able to sell for what they bougth for which seems like breaking even but most of my investments, income, and costs have nearly doubled since then so even breaking even is a big loss. The vaunted leverage that let;s you turn a $150,000 downpayment into $450,000 when a Condo goes up 30% all the sudden turns into a 100% loss when it goes down by 20% vaporizing your down payment.

Following relative to when, is a very important detail.

[YOWetal]

Originally Posted by jonny24

Following relative to when, is a very important detail.

Sure rents aren't dramtically affordable all the sudden but it indicates equilblrium. Removing a million temporary residents could cause a Covid like crash in rents. It's worth the risk in my opinion but it's not 100% clear.

[whatnext]

Originally Posted by casper

I think the factor that was missed in the CBC reporting was the airbnd market. Many of those ultra-small condos are not designed for people to permanently live in them. They are about the same size of what you get in an all-suites hotel. They are ok for a week or so. If your a student or even single with modest income they are probably better than having roommate.

In BC they have cracked down on airbnb and many of those units are being put up for sale. Have not been following Ontario, but I though they were going down the same route.

Vancouver and Victoria has a major shortage of hotel rooms. Toronto as well. My preference would be to see more purpose built hotels instead more of these airbnb oriented condos.

Great so investors are selling their badly laid out, unlivable units.

For our gentle forumers from outside Vancouver behold starchitect Kengo Kuma's building commissioned by Westbank.
https://www.dezeen.com/2023/06/20/ke...per-vancouver/

A posterchild for the type of building casper mentions. Check out the listings for some truly horrendous floorplates like this one (yours for just $1.5 million)

[IMG]kengo by bcborn, on Flickr[/IMG]
Credit: rew.ca

[YOWetal]

Originally Posted by whatnext

Great so investors are selling their badly laid out, unlivable units.

For our gentle forumers from outside Vancouver behold starchitect Kengo Kuma's building commissioned by Westbank.
https://www.dezeen.com/2023/06/20/ke...per-vancouver/

A posterchild for the type of building casper mentions. Check out the listings for some truly horrendous floorplates like this one (yours for just $1.5 million)

[IMG]kengo by bcborn, on Flickr[/IMG]
Credit: rew.ca

WTF? Is this a joke? I thought that curved part was a window at first and was thinking they just reveresed the living room and bedroom. Except of course there is only one window and put the bedroom where it needs to be and there is no natural light in the rest of the apartment. Just wow!

[whatnext]

Originally Posted by YOWetal

WTF? Is this a joke? I thought that curved part was a window at first and was thinking they just reveresed the living room and bedroom. Except of course there is only one window and put the bedroom where it needs to be and there is no natural light in the rest of the apartment. Just wow!

But it's starchitect designed, living there is a privilege!

It is literally the poster child for what happens when your housing market gets driven by offshore buyers looking for a crashpad not a home. Sucks for them AirBnB'ing this nightmare isn't allowed any more. Probably why there are so many for sale.

The worst thing is that the site is literally a few minutes walk to all the office jobs downtown and some of Vancouver's busiest shopping streets. It could have been hundreds of rental homes instead of this pretentious mess.

[someone123]

To me the high-end starchitect condos make sense. If you are a billionaire you can afford a nice condo that is contorted into a sculptural shape with expensive decorations and the fees that come with that. The lower-end unappealing $1-2M ones only seem to make sense if marketed as bitcoins or maybe to very pretentious people or modernist architecture fanatics with semi-modest budgets.

These buildings don't really bother me because if Vancouver were zoned properly and new supply were healthy and competitive they wouldn't be in competition with affordable housing. The BC government could say they are rezoning 2x2 km of East Van for 40 storey rental towers and will be flooding the market with them for the next 20 years for example. But instead Vancouver is still full of underused land, like around False Creek, even in the middle of a housing crisis.

Rezoning a large swath of the city for apartments also fits with the federal program of low productivity and poor infrastructure. Maybe it will be better for everyone if we accept that the future here is to be a miniature lower crime Sao Paulo.

[Changing City]

Originally Posted by someone123

To me the high-end starchitect condos make sense. If you are a billionaire you can afford a nice condo that is contorted into a sculptural shape with expensive decorations and the fees that come with that. The lower-end unappealing $1-2M ones only seem to make sense if marketed as bitcoins or maybe to very pretentious people or modernist architecture fanatics with semi-modest budgets.

These buildings don't really bother me because if Vancouver were zoned properly and new supply were healthy and competitive they wouldn't be in competition with affordable housing. The BC government could say they are rezoning 2x2 km of East Van for 40 storey rental towers and will be flooding the market with them for the next 20 years for example. But instead Vancouver is still full of underused land, like around False Creek, even in the middle of a housing crisis.

Rezoning a large swath of the city for apartments also fits with the federal program of low productivity and poor infrastructure. Maybe it will be better for everyone if we accept that the future here is to be a miniature lower crime Sao Paulo.

The BC government has told all the municipalities that they have to allow up to 20 storeys (rental or condo) with no parking requirements around every transit station, and 12 storeys in another ring beyond that, as well as 12 storeys at bus exchanges. (There's a third ring out to 800m, where 8 storeys have to be permitted, although they'll probably be built as 6-storey woodframe projects - 400m around bus exchanges). Municipalities have until next week to adopt the changes.

The City of Vancouver already had a plan from two years ago that encouraged rental redevelopments to up to 40 storeys at the stations, and 20 storeys for rental developments across the entire Broadway Corridor where the new Broadway extension of SkyTrain is being built. There's a greater density allowance for rental buildings, but 20% of them have to be leased at specified below-market rents. Generally the City's plan exceeeded the province's requirements, but there are a couple of tweaks as a result of the provincial legislation that allow slightly more development. That area is over 6 sq km in total - around 500 blocks, spanning both the west and the east side.

In the past year, since the plan was approved, there have been 36 applications for 41 towers and 7,500 rental units, and 238 strata units. There are at least 20 more proposals with around 5,000 more rental units that are in preliminary review, and over 10,000 more associated with sites acquired by developers.

It's a huge change, and there are similar policies coming to other under-developed station locations. Other municipalities have had to make similar changes to their plans, where necessary. (Not all of them were happy to have to do that, but so far the province has said 'no exceptions'.)

[GenWhy?]

Originally Posted by YOWetal

WTF? Is this a joke? I thought that curved part was a window at first and was thinking they just reveresed the living room and bedroom. Except of course there is only one window and put the bedroom where it needs to be and there is no natural light in the rest of the apartment. Just wow!

It's a studio / bachelor apartment. New units typically have one window depending on the width of the unit, orientation of the building. Older ones were typically wider, rather than deeper and most ones I've seen from the 60s and 70s had 2 windows on the same wall.

[lio45]

That Kengo Kuma building is really nice, though I’d be wary of any top-heavy design when the next Cascadia Megaquake inevitably happens. Wouldn’t get an unit in there, even though I know it meets current construction standards.

[whatnext]

Originally Posted by GenWhy?

It's a studio / bachelor apartment. New units typically have one window depending on the width of the unit, orientation of the building. Older ones were typically wider, rather than deeper and most ones I've seen from the 60s and 70s had 2 windows on the same wall.

It's billed as a one bedroom and, ahem, costs over $1.5 million. People should expect better for that.

[casper]

Originally Posted by whatnext

It's billed as a one bedroom and, ahem, costs over $1.5 million. People should expect better for that.

Recently stated at a Hyatt House - All suites hotel in Texas. It is on par with that. Actually thinking about it the Hyatt had more windows.

There are fancy hotel rooms being sold as condos. I just can't see that staying at $1.5 M.

[someone123]

Originally Posted by Changing City

In the past year, since the plan was approved, there have been 36 applications for 41 towers and 7,500 rental units, and 238 strata units. There are at least 20 more proposals with around 5,000 more rental units that are in preliminary review, and over 10,000 more associated with sites acquired by developers.

I know about this and it's good but we will have to see how it translates into new supply. According to Statistics Canada metro Vancouver added about 120,000 people in the past year. Rents have increased in recent years and I would guess that the housing shortfall continues to worsen.

I wonder how much developers will actually compete to lower rents or whether we'll see the traditional dynamic where they hoard land and get lots of approvals but meter new supply to maximize profits. If you look at the big mall developments, they didn't press forward and flood the market, they carefully sold phase by phase and they are taking their time. The government could break this dynamic by pushing new supply even as rents drop.

The median 1 BR rent here is around the $3,000 range while median income per person is in the $50,000 range. The old 30% affordability rule would work out to $1,250 in rent for people with median incomes.

[P'tit Renard]

Originally Posted by lio45

That Kengo Kuma building is really nice, though I’d be wary of any top-heavy design when the next Cascadia Megaquake inevitably happens. Wouldn’t get an unit in there, even though I know it meets current construction standards.

At least Kengo Kuma is an expert in working with Japan's super strict earthquake standards in regards to their national building code, and I assume his studio would carry the same world class practises in designing this Vancouver building.

If the starchitect was American or European I would cast a very wary eye, as I don't think they have the know-how to build anything that could withstand the Megaquake.

[Changing City]

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Originally Posted by someone123

I know about this and it's good but we will have to see how it translates into new supply. According to Statistics Canada metro Vancouver added about 120,000 people in the past year. Rents have increased in recent years and I would guess that the housing shortfall continues to worsen.

I wonder how much developers will actually compete to lower rents or whether we'll see the traditional dynamic where they hoard land and get lots of approvals but meter new supply to maximize profits. If you look at the big mall developments, they didn't press forward and flood the market, they carefully sold phase by phase and they are taking their time. The government could break this dynamic by pushing new supply even as rents drop.

The median 1 BR rent here is around the $3,000 range while median income per person is in the $50,000 range. The old 30% affordability rule would work out to $1,250 in rent for people with median incomes.

I have no idea how 'the government can push more supply' unless they started building apartments themselves, which would be a huge policy change, (and would push deficits even higher). (Several municipalities have housing agencies, but the number of projects they can build is relatively modest). Government can obviously get in the way by not zoning, or approving housing, but that's not applicable in most of Metro Vancouver these days.

According to rentals.ca City of Vancouver 1-bed units rent at $2,646, and have fallen 5% in the past year. Surrey is $2,097, but 8.7% higher than last year.

The only larger city in the whole of Canada where you can find a rent of $1,250 is Saskatoon, and that's up 8.4% in a year, so it'll probably pass that amount quite soon. Obviously newly leased units will tend to rent at more than most established tenants pay, so plenty of tenants pay 30% or less of their income, but not too many first time renters will be in that situation, and I suspect that's been true for many years (unless they're in Saskatoon).

[someone123]

Originally Posted by Changing City

I have no idea how 'the government can push more supply' unless they started building apartments themselves, which would be a huge policy change

For decades, the feds and provinces did contribute to social housing. They could build it themselves, contract it out to developers, or simply subsidize, maybe with underused government land (Jericho is an example, or was at one time, and sat empty for many years).

[Changing City]

Originally Posted by someone123

For decades, the feds and provinces did contribute to social housing. They could build it themselves, contract it out to developers, or simply subsidize, maybe with underused government land (Jericho is an example, or was at one time, and sat empty for many years).

Absolutely - I wasn't suggesting that federal and provincial shouldn't have supported the housing market, especially the social housing and low-end-of-market parts, but they didn't. (There were some social housing projects when the BC Liberals were in power, but barely enough to replace the private SROs that were becoming 'urban micro-lofts' at $1,000 a month when the welfare housing allowance was $275).

I was questioning how realistic it is to play catch-up after those many years of nothing much happening to encorage more homes. The feds are now loaning construction funds to build rentals, like the 6,000+ in the Sen̓áḵw project the Squamish Nation are developing on their Reserve on the west side of Vancouver.

Last week the BC Government announced that rather than allowing ICBC (the provincial insurance agency) to sell the old headquarters in North Vancouver, the government are buying it to develop it themselves as rental housing. So there are now projects moving forward that will help.

There are also at least 500 non-market apartments under construction in the Downtown Eastside, and 231 were completed last week, on a site bought by the City from Concord Pacific, where there could have been condos. BC Housing has paid for most of those units, with the City of Vancouver giving some of the sites. That's more housing intended to address homelessness than we've seen built in decades.

[YOWetal]

Originally Posted by Changing City

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I have no idea how 'the government can push more supply' unless they started building apartments themselves, which would be a huge policy change, (and would push deficits even higher). (Several municipalities have housing agencies, but the number of projects they can build is relatively modest). Government can obviously get in the way by not zoning, or approving housing, but that's not applicable in most of Metro Vancouver these days.

According to rentals.ca City of Vancouver 1-bed units rent at $2,646, and have fallen 5% in the past year. Surrey is $2,097, but 8.7% higher than last year.

The only larger city in the whole of Canada where you can find a rent of $1,250 is Saskatoon, and that's up 8.4% in a year, so it'll probably pass that amount quite soon. Obviously newly leased units will tend to rent at more than most established tenants pay, so plenty of tenants pay 30% or less of their income, but not too many first time renters will be in that situation, and I suspect that's been true for many years (unless they're in Saskatoon).

If we are blaming the federal government, and given our problem is nationwide that's reasonable, it's all about demand not supply. Immigration, Immigration, Immigration.

[BaddieB]

Originally Posted by Changing City

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I have no idea how 'the government can push more supply' unless they started building apartments themselves

Really? You have no idea? I can share a few:

• Massive upzoning. Cities like Vancouver and Toronto should be zoned for 6 storeys at the minimum everywhere residential, and allow development by-right
• Eliminate development charges and fees, or replace them with a system where new developments don't pay property taxes for a few years after paying these fees, so the upfront cash can be provided but it doesn't hurt the economics of a project
• Promote increasing quarrying for materials like aggregate and cement (how you do this can vary a lot) to reduce costs
• Legalize developments that don't require land assemblies. These include legalizing single-stair apartments, fee-simple row homes, etc

Originally Posted by Changing City

Government can obviously get in the way by not zoning, or approving housing, but that's not applicable in most of Metro Vancouver these days.

A lot has changed in the past year, but the fact of the matter is that fees on new developments are only increasing, which will kill many projects from happening because they will be unprofitable.

[MonkeyRonin]

Originally Posted by Truenorth00

And yet sales are hitting record lows in some segments. Why do you think that is?

• Video Link

This is something I've been saying for years, so this certainly brings me some vindication (and at least a little bit of schadenfreude). But this is the result of investor-driving housing development where homes aren't actually designed with the end user in mind - we've done a really poor job at building livable, high-quality housing that people actually want to live in. It's particularly problematic with the phenomenon of "inboard bedrooms" in Ontario - ie. bedrooms without an exterior-facing window. So you get 1-bedroom, or even 2-bedroom condos where the bedrooms have no windows. At least in BC, by code a bedroom requires an external window. This is where some level of regulation is needed to ensure that decent housing is being built.

There's of course a place for smaller, studio apartments within the wider housing stock; but half a million dollars for a hallway with a kitchen ain't it. And studios can still be well designed with efficient layouts - which most of these are not. Either way, in the context of a housing shortage it makes the problem even worse than it seems at first glance: it means that a significant share of the ~250,000 housing units we do build each year (if not the majority in places like Toronto) aren't actually meeting people's needs. It also creates a bit of a caveat in the supposed price drops we've heard about it in the market, as the biggest drops are in the worst units. Anecdotally, of the houses, townhomes, and larger/better-designed condo units I've looked at, prices still seem to ticking slowly upwards.

On the bright side, there's probably about to be a whole bunch of relatively affordable homes on the market in the not-too-distant future. Zero sympathy for the investors who lose their shirt in the process. I do feel bad for the buyers who were duped into thinking these were a smart investment, but from the sounds of it they're probably in the minority at least.