The Vancouver Business Thread

[misher]

Originally Posted by GenWhy?

I would also caution on assuming those that own homes or households that are strata (doesn't mean they are not rented out) that their inhabitants have been here on average longer than renters or are less entrenched or tied to their local communities. Stats and data can be read many ways, and I always take this with a grain of salt. Read between the lines - don't be a fanatic, but be cautious in the wording (or lack of wording).

Notice in the Metro report that mostly all new rentals are "expensive" (too high for the average renter's wage), and that rents have greatly outpaced wage increases. In my work this is largely explained by land cost, and that's the issue as well with the bonus of large gains off selling property recently that it makes all new homes (bought or rented) more expensive. Good and bad. No one tool in the tool box. A few of my friends rent here and bought property in their hometowns for "cheap".

I agree rents are crazy high. But I don't see this as being caused by land costs but rather by crazy costs put on new development by the government. In the end you need to make about 5+% of the value of your unit in rent yearly to break even which works out to $5,000 a year for every $100,000 a home is worth. Lets say the average new condo at 600sqft costs $400,000 to build before the government steps in. Then you add in $375 a sqft in DCE ($222,000), DCE can be higher depending on where. Then you add in another $200 in taxes, permits, fees, etc ($120,000). In total that condo now costs $742,000. Rent then goes from 5% of $400,000 ($20,000 annual) to ($37100 annual). The government of course then blames speculators, developers, etc for the high rent and gives some of that money back to renters to buy them.

In the end we can build gigantic rental towers with comparatively low land costs when you spread them out over all the units. But the government contributions you pay per a sqft are a killer for making rental profitable.



To get around this we have two options, to either reduce the government contributions, or to reduce sqft of units. I strongly support both, we should be making buildings that are massive with many studio units similar to Japan and New York. This would greatly reduce rent although the units people rent would get smaller.


With rising interest rates rental will just become less profitable so we need to take quick action now.

[GenWhy?]

As I've stated before, most rental projects being built forego paying DCL's if they uphold renting at the City cited market rents (Rental 100 program), and they do not pay CAC's. If they don't want to start rents at an average "market rate" per unit size/type, as defined by the City, then they can charge whatever they want (usually due to construction and land costs) but they have to pay the DCL, which funds civic improvements.


I could agree CAC's and DCL's are too high on new projects (penalizes new product and homebuyers) and overall city costs should be funded by either a combination of higher fees and property taxes (funded by long term/new citizens city-wide).

[Changing City]

Originally Posted by misher

I agree rents are crazy high. But I don't see this as being caused by land costs but rather by crazy costs put on new development by the government. In the end you need to make about 5+% of the value of your unit in rent yearly to break even which works out to $5,000 a year for every $100,000 a home is worth. Lets say the average new condo at 600sqft costs $400,000 to build before the government steps in. Then you add in $375 a sqft in DCE ($222,000), DCE can be higher depending on where. Then you add in another $200 in taxes, permits, fees, etc ($120,000). In total that condo now costs $742,000. Rent then goes from 5% of $400,000 ($20,000 annual) to ($37100 annual). The government of course then blames speculators, developers, etc for the high rent and gives some of that money back to renters to buy them.

In the end we can build gigantic rental towers with comparatively low land costs when you spread them out over all the units. But the government contributions you pay per a sqft are a killer for making rental profitable.



To get around this we have two options, to either reduce the government contributions, or to reduce sqft of units. I strongly support both, we should be making buildings that are massive with many studio units similar to Japan and New York. This would greatly reduce rent although the units people rent would get smaller.


With rising interest rates rental will just become less profitable so we need to take quick action now.

You're posting about the economics of building rental units in the Business Thread, which is a bit odd as there's a thread about Rental Housing.

You quote a series of unsourced and apparently very inflated numbers for permit fees and Development Cost Levies and Charges (assuming that's what DCEs are) - but those relate to condos, not rental units.

You then call for governments to reduce the cost of those fees. You seem to be unaware that if you're developining purpose-built rental units in the City of Vancouver (where nearly half of Metro Vancouver's rental stock already exists) you don't have to pay any DCLs or DCCs, and you don't have to build as much expensive underground parking. That's been true for many years.

[GenWhy?]

I know it might take a while (I read them for work and also find them interesting), but I'd look into more rental guidelines and policies in the City of Vancouver:


- Rental 100, the MIRHPP (pilot), and Interim Rental Housing Rezoning Policy.
- DCL and CAC applications and increased rates and excemptions.
- Rezonings in Vancovuer , I'd read up on what programs these fall under and the areas they are "restricted" to and the unit counts/heights.
- If you can't make it to open houses or council and ask City Staff questions, check out Darren's blog for he visits almost all of them it seems.

And just a recap on land costs... a SF home we are looking at changed from RS-1 to C-1 in the East End and doubled in price. It's almost $3 million for a 44' wide lot. With CAC's we can't build condos (you can't sell luxury in the East End and not in today's market), but we can make a project work for rental without paying DCL's, barely.

Sure we could make more units and profit off a taller building, but anything over 5 or 6 storeys the City and neighbours say no and then you're dealing with concrete... ($$$)

This is a slow democratic system and unfortunately we can't snap our fingers to allow 8 storey buildings next to SF homes in "quiet" neighbourhoods. It's something many people are working on to allow more density in SF neighbourhoods that are not towers to save costs for everyone. It's a multi-tool effort that is very slow, unfortunately.

[misher]

Originally Posted by GenWhy?

I know it might take a while (I read them for work and also find them interesting), but I'd look into more rental guidelines and policies in the City of Vancouver:


- Rental 100, the MIRHPP (pilot), and Interim Rental Housing Rezoning Policy.
- DCL and CAC applications and increased rates and excemptions.
- Rezonings in Vancovuer , I'd read up on what programs these fall under and the areas they are "restricted" to and the unit counts/heights.
- If you can't make it to open houses or council and ask City Staff questions, check out Darren's blog for he visits almost all of them it seems.

And just a recap on land costs... a SF home we are looking at changed from RS-1 to C-1 in the East End and doubled in price. It's almost $3 million for a 44' wide lot. With CAC's we can't build condos (you can't sell luxury in the East End and not in today's market), but we can make a project work for rental without paying DCL's, barely.

Sure we could make more units and profit off a taller building, but anything over 5 or 6 storeys the City and neighbours say no and then you're dealing with concrete... ($$$)

This is a slow democratic system and unfortunately we can't snap our fingers to allow 8 storey buildings next to SF homes in "quiet" neighbourhoods. It's something many people are working on to allow more density in SF neighbourhoods that are not towers to save costs for everyone. It's a multi-tool effort that is very slow, unfortunately.

Ty for correcting me a bit. And ty for some insight on these issues.

[whatnext]

Originally Posted by Changing City

You're posting about the economics of building rental units in the Business Thread, which is a bit odd as there's a thread about Rental Housing.

You quote a series of unsourced and apparently very inflated numbers for permit fees and Development Cost Levies and Charges (assuming that's what DCEs are) - but those relate to condos, not rental units.

You then call for governments to reduce the cost of those fees. You seem to be unaware that if you're developining purpose-built rental units in the City of Vancouver (where nearly half of Metro Vancouver's rental stock already exists) you don't have to pay any DCLs or DCCs, and you don't have to build as much expensive underground parking. That's been true for many years.

Thank you.

[misher]

Originally Posted by Changing City

You're posting about the economics of building rental units in the Business Thread, which is a bit odd as there's a thread about Rental Housing.

You quote a series of unsourced and apparently very inflated numbers for permit fees and Development Cost Levies and Charges (assuming that's what DCEs are) - but those relate to condos, not rental units.

You then call for governments to reduce the cost of those fees. You seem to be unaware that if you're developining purpose-built rental units in the City of Vancouver (where nearly half of Metro Vancouver's rental stock already exists) you don't have to pay any DCLs or DCCs, and you don't have to build as much expensive underground parking. That's been true for many years.

I don't want to get in a flame war so I will just quote facts and the link to them below. The city always gets its cut, and they are doing their best to get money from rentals now too, with some exceptions.
Along Broadway density is very restricted so if you want more than around 3 levels of rental expect to pay bigtime

Prioritize affordable rental housing. Do not
consider additional development rights for
market strata residential.
DCE for rental projects seeking additional
density: maximize below market rental housing1

https://vancouver.ca/files/cov/devel...y-planning.pdf

[Changing City]

Originally Posted by misher

I don't want to get in a flame war so I will just quote facts and the link to them below. The city always gets its cut, and they are doing their best to get money from rentals now too, with some exceptions.
Along Broadway density is very restricted so if you want more than around 3 levels of rental expect to pay bigtime

https://vancouver.ca/files/cov/devel...y-planning.pdf

What you've linked to shows that in a very limited part of the city, while new plans are being prepared, in order to limit speculation the City have identified Development Contribution Expectations that apply. They haven't removed existing zoning, but they can add temporary policy for rezonings. The 'Prioritize affordable rental housing. Do not consider additional development rights for market strata residential. DCE for rental projects seeking additional density: maximize below market rental housing' only applies temporarily in RM/ FM Zoning Districts and the Mt. Pleasant IC-3 Focus Area.

In the rest of the city - which is most of the city - where the zoning allows it the existing Rental 100 policies (and other programs) apply, including offering DCL and CAC waivers provided the rental levels proposed for initial leases meet the City's guidelines. GenWhy? understands it in greater detail, because they develop those projects, and continue to do so.

Just go to the City's Rezoning Page and see how many projects are proposing rental buildings under the Rental 100 Program, or the Affordable Housing Choices Interim Rezoning Policy (like the recently proposed 6 storey building replacing houses on Fraser Street).

[misher]

Originally Posted by Changing City

What you've linked to shows that in a very limited part of the city, while new plans are being prepared, in order to limit speculation the City have identified Development Contribution Expectations that apply. They haven't removed existing zoning, but they can add temporary policy for rezonings. The 'Prioritize affordable rental housing. Do not consider additional development rights for market strata residential. DCE for rental projects seeking additional density: maximize below market rental housing' only applies temporarily in RM/ FM Zoning Districts and the Mt. Pleasant IC-3 Focus Area.

In the rest of the city - which is most of the city - where the zoning allows it the existing Rental 100 policies (and other programs) apply, including offering DCL and CAC waivers provided the rental levels proposed for initial leases meet the City's guidelines. GenWhy? understands it in greater detail, because they develop those projects, and continue to do so.

Just go to the City's Rezoning Page and see how many projects are proposing rental buildings under the Rental 100 Program, or the Affordable Housing Choices Interim Rezoning Policy (like the recently proposed 6 storey building replacing houses on Fraser Street).

I admit that there are areas where this does not apply, but those are older policies while this is the newest one where the DCE for rentals is the same as market strata which is a huge shift in city policy. This is an indicator that newer plans may also do the same. Plus this applies to most of the Broadway corridor which is a huge area in need of rentals, especially given the upcoming skytrain.

[GenWhy?]

Originally Posted by misher

I admit that there are areas where this does not apply, but those are older policies while this is the newest one where the DCE for rentals is the same as market strata which is a huge shift in city policy. This is an indicator that newer plans may also do the same. Plus this applies to most of the Broadway corridor which is a huge area in need of rentals, especially given the upcoming skytrain.

Hence the new area plan coming down the pipe... soon. The intent of the interim policy is to protect existing rental to maintain the rent rates they provide to slow the coming tearing down and removal of older rental buildings, lower rents and their tenants (in certain areas and under certain zoning districts). The new policy will then open up housing, more density, etc. on other zoned areas. You're still reading the interim policy as a long term plan.

[misher]

Originally Posted by GenWhy?

Hence the new area plan coming down the pipe... soon. The intent of the interim policy is to protect existing rental to maintain the rent rates they provide to slow the coming tearing down and removal of older rental buildings, lower rents and their tenants (in certain areas and under certain zoning districts). The new policy will then open up housing, more density, etc. on other zoned areas. You're still reading the interim policy as a long term plan.

True true, but isn't the point of the interim policy to indicate the direction they are going? Plus I understand they said that they want to maintain existing rentals but much of the area covered belongs to lowrise commercial zoned properties.

In the end I guess I'm just annoyed the city decided to freeze development in an area we need to have rapidly developed due to the upcoming skytrain.

As an added plus, they mentioned there stopping speculation after all the expensive land deals occurred (Denny's, Ihop, etc) which is hillarious.

[GenWhy?]

Originally Posted by misher

True true, but isn't the point of the interim policy to indicate the direction they are going? Plus I understand they said that they want to maintain existing rentals but much of the area covered belongs to lowrise commercial zoned properties.

In the end I guess I'm just annoyed the city decided to freeze development in an area we need to have rapidly developed due to the upcoming skytrain.

As an added plus, they mentioned there stopping speculation after all the expensive land deals occurred (Denny's, Ihop, etc) which is hillarious.

I must be firm in this statement - and I don't intend it to be read as an attack on your post - but the area covered is NOT "mostly covered by low-rise commercial zoned properties". The plan and documents clearly show the majority of the area is currently zoned for RM and RT and thus lots of rental and residential homes: https://vancouver.ca/files/cov/broad...ng-program.pdf (Figure 8, pg 19).

The need for rapid development in this area can be a valid opinion, and for one I could agree with and hence the pause on rezoning in preparation for a Plan for the future with SkyTrain. Again, Misher, there is no FREEZE on development in the study area. I can respect your arguments, opinions, and conversation, but only without generalizations that are untrue. In fact we are as of yesterday working on preparing a development permit for a small 6-storey residential building just within the study area!

The interim policy does in no way shape or form dictate, or show direction that the actual Plan will execute (which I think you understand as 100% social housing or below market for rezonings not within "C" zones). Don't let me put words in your mouth and I do not intend to either.

There will be increases to density and height in in RM and FM districts for below market rental (whether that is a portion of a building or 100%, I don't think we know), C districts will allow more height and density to include market strata, RT will be maintained, and office will be increased.

In addition the Making Room Housing Program will be executed for most RS and RT zones (there is a lot of RT in the Broadway study area) and this will bring new building forms for market rental and strata in height and density.


On initiating this after a few expensive deals went through... it takes time to get policy in place, of any kind, and the main purpose of this policy is to protect existing rental stock while it allows in tandem new below market units to be built, which I think it's so far achieving. The Denny's site is under the Rental 100 program and had its rezoning open house back in April 2017 with a filed application in January 2017, meaning pre-application and a land deal were done years ago... I personally don't know of any other rezonings along Broadway study area that have not already been mentioned (4 total?) and I'm unaware of the IHOP deal/development, or if it is in fact at all a rezoning.

[GenWhy?]

Current rezonings in the area within the last 2(ish) years are very few and can be found here.

[GenWhy?]

Again not wanting to appear condescending or negative in any way, I'm just wishing to be clear on some issues and topics of what I deal with day to day and with my job.

Please feel free to ask more questions and continue the dialogue.

[misher]

Originally Posted by GenWhy?

I must be firm in this statement - and I don't intend it to be read as an attack on your post - but the area covered is NOT "mostly covered by low-rise commercial zoned properties". The plan and documents clearly show the majority of the area is currently zoned for RM and RT and thus lots of rental and residential homes: https://vancouver.ca/files/cov/broad...ng-program.pdf (Figure 8, pg 19).

The need for rapid development in this area can be a valid opinion, and for one I could agree with and hence the pause on rezoning in preparation for a Plan for the future with SkyTrain. Again, Misher, there is no FREEZE on development in the study area. I can respect your arguments, opinions, and conversation, but only without generalizations that are untrue. In fact we are as of yesterday working on preparing a development permit for a small 6-storey residential building just within the study area!

The interim policy does in no way shape or form dictate, or show direction that the actual Plan will execute (which I think you understand as 100% social housing or below market for rezonings not within "C" zones). Don't let me put words in your mouth and I do not intend to either.

There will be increases to density and height in in RM and FM districts for below market rental (whether that is a portion of a building or 100%, I don't think we know), C districts will allow more height and density to include market strata, RT will be maintained, and office will be increased.

In addition the Making Room Housing Program will be executed for most RS and RT zones (there is a lot of RT in the Broadway study area) and this will bring new building forms for market rental and strata in height and density.


On initiating this after a few expensive deals went through... it takes time to get policy in place, of any kind, and the main purpose of this policy is to protect existing rental stock while it allows in tandem new below market units to be built, which I think it's so far achieving. The Denny's site is under the Rental 100 program and had its rezoning open house back in April 2017 with a filed application in January 2017, meaning pre-application and a land deal were done years ago... I personally don't know of any other rezonings along Broadway study area that have not already been mentioned (4 total?) and I'm unaware of the IHOP deal/development, or if it is in fact at all a rezoning.

Totally understood Gen I enjoy our discussions and am not making this personal, I learn alot!

When I said low zoning I meant the C-2, C-3A, and a few other properties. Sure you can apply for a higher FSR and get it but the actual zoning only allows for 2-3 stories in areas where 10 is warranted. These properties I think should be the focus of the Broadway expansion as they don't change existing rental stock and it makes perfect sense to have commercial on the first few floors and condos up above. Also few people will complain they block the view or about noise since they are beside other commercial properties.

When I mentioned Denny's and Ihop I meant that the city said that the interim policy was to prevent land speculation (properties changing hands before a final plan was out) and criticized this as the speculation has already taken place with many sales having already taken place. I feel the anti-speculation flag is waved too often these days and I was criticizing it as in this case it was waved incredibly late to have much effect.

I know the initial plan, at least when I talked to Gregor a few years ago, was to have high density zones around each station similar to Metrotown & Brentwood and I feel its taken a largely different direction than what he let on.

Also if you've looked at the RM zoned properties South and North of Broadway between Granville and Cambie they are falling apart. Either the Strata ones are too broke to afford to repair them or the Owners of the rental ones are not maintaining them. The high construction costs means no one can afford a new roof, exterior remediation, a new elevator, bringing the fire system up to code, etc. I know a lot of them were counting on developer buyouts and now they are going to be quite disappointed. I most most of them cannot afford the levies that will be required to maintain their buildings and will be forced to move out of the city.


I was hoping for something like Brentwood where we have giant rental & strata towers with commercial on the ground floors around each station with mid-rise condos in the surrounding neighborhood similar to whats going down Cambie. Downtown is pretty maximized while traffic down Broadway, Granville, Oak, etc. is still very open, it makes sense to build a 2nd downtown down Broadway and make it a neighborhood with great sidewalks and bike lanes. A giant building with a mall and towers ontop similar to whats being planned for Lawnsdowne and Oakridge makes sense around the Cambie or Granville stations if we can plan the traffic out properly.

Instead I feel that we've become unambitious and scared of change.

[GenWhy?]

For the current C zones, exactly, you can only build so high and dense, and to curtail guessing from going on the City is going to put forward max densities and heights so that rezoning and haggling with the City is not needed. A win win for developers and the City. Yes, some transactions were made, and that's business, but it's also the City's business to execute plans in a democratic and data-driven process. Which is what they're doing, for good and bad - it'll take lots of time and lower density usually wins in public forums.

Also, the sole solution to your perceived RM zoned lots on their upkeep and looks is not to have them bought out, torn down or massively renovated, have the tenants evicted, and / or replaced with much height densities at this moment. The issues around RM are very delicate at the moment, highly due to high land costs and the price to build new rental and rental at decent rates, as well as the low vacancy rate. There are many tools being used in the tool box and preventing older RM buildings from being torn down is one. We're renovating a few older ones and have in the past along Cambie and you simply have to buy out and evict the renters to initiate a whole-building reno and then you can have nice new rentals and change higher rent (which is perfectly fine). The issue is that if you trigger development of the RM in Van and relax the existing and new policies... you'll have a lot of Vancouverites out of the City and out of luck and worsen the rental situation and land prices won't come down... etc etc etc - as the City sees it and is dealing with it. I don't see one solution, but I am positive land prices need to come down for me and my clients, contractors, to make projects work and for us to do our end of the bargain.

On rental, maintenance is deferred due to the tight market (largely) and / or owners waiting for a magic buyer. We don't deal with strata post-build, so as far as their upkeep and operations go and strata fees and management, I cannot comment, and it might be unfortunate but waiting to be bought out is not a real City Building solution or Housing solution.

For my line of work nothing is worse than a rezoning, but it can be very beneficial in most cases as long as you follow precedence and area plans in place. Metrotown is unsuccessful in many cases due to the unaffordability and mass evictions and displacement of locals that due to the current rental issues, will have a hard-assed time finding a home - especially those with kids and seniors. To prevent such a catastrophe the City is going ahead with this plan.

[Changing City]

Originally Posted by misher

When I said low zoning I meant the C-2, C-3A, and a few other properties. Sure you can apply for a higher FSR and get it but the actual zoning only allows for 2-3 stories in areas where 10 is warranted. These properties I think should be the focus of the Broadway expansion as they don't change existing rental stock and it makes perfect sense to have commercial on the first few floors and condos up above. Also few people will complain they block the view or about noise since they are beside other commercial properties.

You seem to be confusing density and height. C-3A on West Broadway (without a rezoning) allows 3.3 FSR, and generally (but not always) that ends up as roughly 10 storeys. The most recently approved is on the corner of Spruce (see below). It'll be close to three others with similar density. Once you add in tower separation (for light and privacy) and setbacks from the street, you end up with towers like this. Brentwood is a totally different context, as it is a huge site where you can put much larger floorplate towers at greater separation. Overall the residential density of Brentwood is almost the same as is allowed on West Broadway, 4.1m sq ft of residential space on 28 acres = 3.36 FSR.

[source]

[GenWhy?]

Was the Spruce development you posted above simply a DP (C-3A zoning maximum height is 9.2m with conditional relaxations) and this building is going through DP for a 37m tall building which is a HUGE conditional increase for more height... or had done through rezoning earlier? I thought it was a rezoning due to the extra height.


NVM here's the answer and hence the update to the area plans: https://guidelines.vancouver.ca/C013.pdf

Old plans quite vague.

I mean, hell, we're fighting on one project to get 4 feet but the City budged only on 1 foot in a DP, and we have provided precendents that exceed that greatly.

[Changing City]

Originally Posted by GenWhy?

Was the Spruce development you posted above simply a DP (C-3A zoning maximum height is 9.2m with conditional relaxations) and this building is going through DP for a 37m tall building which is a HUGE conditional increase for more height... or had done through rezoning earlier? I thought it was a rezoning due to the extra height.


NVM here's the answer and hence the update to the area plans: https://guidelines.vancouver.ca/C013.pdf

Old plans quite vague.

I mean, hell, we're fighting on one project to get 4 feet but the City budged only on 1 foot in a DP, and we have provided precendents that exceed that greatly.

Proposed to zoning - not a rezoning, just a DP (3 FSR plus 10% heritage bonus purchase). Two more from seven years ago, similar density, similar massing, also on west Broadway here.

[officedweller]

Couple of Vancouver tidbits in this article on Hyatt rumoured to be locating Andaz brand at Toronto's The One.

"The thing with luxury is how many markets can you put luxury in? Three or four in Canada," said Richer, noting there are barriers to entry in Vancouver because of pricing that has seen some product trade for 3 per cent cap rates.

"You almost have to sneak into the Vancouver market. You have to find [deals] off the market, and in most cases, you are tying yourself to a much vaster development. That's why so much mixed-use is driving hotel growth around the country."
...

Across the country, Hyatt has only publicly said the 12 new hotels would be Hyatt Place and Hyatt House-branded facilities.

In 2018, the Hyatt Place Calgary Airport will open with 127 guestrooms and the Hyatt Place Mississauga Centre will open with 126 guestrooms. In 2019, Hyatt Places are set to go in Brampton, Ontario; Kelowna, British Columbia; Moncton, New Brunswick; and Winnipeg, Manitoba. Hyatt Houses are also set for Hamilton, Ontario, and Winnipeg next year.

In 2020, the company will open Hyatt Place Toronto International Airport, Hyatt Place Toronto Airport Corporate Centre, Hyatt House Toronto Airport Corporate Centre and Hyatt Place Vancouver Airport.
...

http://www.costar.com/News/Article/S...e-Tower/203612

This article says the Hyatt Place Vancouver Airport will have 97 rooms:
https://www.hotelnewsresource.com/article100170.html

EDIT: Found it:


http://www.vancouvermarket.ca/2018/0...-for-richmond/


http://www.vancouvermarket.ca/2018/0...-for-richmond/