Posted Apr 16, 2010, 6:12 PM
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Join Date: Jul 2006
Location: Vancouver, BC
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Not sure if this has been posted yet.
http://www.vancouversun.com/sports/Time%...lage%20market%20rates/2791270/story.html
Quote:
Time for the city to make a tough decision: Rent the Olympic village at market rates
By Miro Cernetig, Vancouver Sun April 12, 2010
Now that the Olympics are over, minds at Vancouver city hall are turning to their post-Games migraine: Time to reassess the mess at the Olympic village.
At the top of the agenda is what to do with the 250 units of social housing in the village. You might recall, they were supposed to be built at $65 million. They came in at a whopping $110 million.
That's $45 million over budget, a bill now being supported by Vancouver taxpayers. It probably makes these units -- at about $500,000 apiece, excluding land and future operating costs -- the most expensive social housing ever built in Vancouver. Whoever gets to live there is in for some great, taxpayer-subsidized digs.
But the political question being fought out behind the scenes is whether the Olympics units should ever be used as social housing at all. While there's plenty of ideological rhetoric that the city can't turn its back on the needy, there isn't much of a business case for this social housing palace on the edge of the waterfront.
Here's the reality. At a construction cost of about $500 per square foot, the Olympic housing project is wildly out of whack with what social housing usually costs governments to build. You can usually build social housing at a third to half the price, which means with the same money you could have built two or three times as many units.
But we're stuck with them.
Real estate experts and city staff don't believe the city's initial investment could be recovered in a sale anytime soon. And even if you did take these green-plated units to market, the city would be in a pickle. It would in effect be competing with the other Olympic village condos that will soon be coming on the market, which need to be sold at a high price if the city is going to recoup the $750-million plus interest it has loaned to the developer, Millennium Properties.
So what can be done with those social housing units?
One creative option that's been on the table is to set up the social housing as an institution that can give out charitable receipts. Find some well-heeled investors to put in $110 million, it's been argued, and the investors would get an immediate charitable deduction. The city would be absolved of the debt.
Those units could then be rented out at market rates -- or perhaps slightly lower, to allow Mayor Gregor Robertson to claim he's providing affordable housing -- and turn a profit. The investors would get a share of those profits, much like a landlord, and would even be able to gift it back to the institution, in return for more charitable receipts.
It's some fancy financial footwork. The problem here, however, is that it's complex and could take months to set up. There's also no guarantee the money exists in the city for such an investment. At the moment, philanthropists are being hit up for donations for a Children's Hospital expansion and a new art gallery, and both organizations are finding that pretty slow going.
That leaves only one smart option for the city. It can play landlord itself. Use the city's credit rating to get a preferential mortgage to cover the city's exposure in the investment and rent out the 250 units at market rates.
Those units, in one of the city's coolest areas, would easily net about $1,500 an apartment a month, or about $4.5 million annually for the city. That would likely be enough to service the mortgage, which the city could get at preferential rates, thanks to its Triple A credit rating. It might even make Vancouver taxpayers a small operating profit.
Many in the city's leftish circles, who are led by the mantra that the waterfront shouldn't just belong to the rich, won't like this option. Playing Olympic landlord would need some heavy selling by Robertson, who it should be said inherited this headache from past administrations.
Yet it's easily defensible, even to that element of his political power base.
First, there may be profits from the market rental scheme from the very start. And when the city's investment and cost overruns are paid off in a few decades, the units could certainly be sold off free and clear at a handsome windfall for the city. Or they could be held onto, to supply a steady income stream for decades to come.
Robertson could then create a truly sustainable Olympic legacy with one bold idea: Once he resuscitates the Olympic village social housing project, declare that every dollar of future profits be dedicated to building the homeless shelters and the social housing he correctly tells us the City of Vancouver needs.
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© Copyright (c) The Vancouver Sun
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