An almost laboratory study in stark contrasts:
Seattle built 17,450 rental homes in 1 year, while Vancouver only counted 1,364
Jan 10 2020, 2:21 pm
An academic at Simon Fraser University (SFU) is urging officials with the City of Vancouver to pick up the pace in building purpose-built rental homes, and look to the region’s southern neighbours for inspiration.
In a recent blog post on the website of Goodman Commercial, SFU finance professor Andrey Pavlov with the Beedie School of Business compares Seattle and Vancouver’s achievements with building new purpose-built rental housing.
In 2018, there were 17,450 new rental units in Seattle, compared to just 1,364 new rental units by Vancouver over the same year. With the flood in new supply, landlords are now competing fiercely for tenants, with many listings offering up to months of free rent and gift cards of up to $2,000.
While Seattle is larger than Vancouver, it is not 13 times bigger — it comes down to municipal policy.
The City of Seattle has a population of about 745,000 over a land area of 368 sq. km, within a regional population of 3.94 million and a land area of 21,202 sq. km. In contrast, the City of Vancouver has about 650,000 residents on a land area of 115 sq. km, within a regional population of 2.5 million and 2,900 sq. km.
Pavlov describes Seattle’s surge in new rental housing as the “normal and expected free market response to rising demand,” with the city increasingly facing housing pressures from the rapid growth of its tech industry.
“So instead of asking how Seattle has built so much rental housing, the Mayor should be asking what we have done in Vancouver to prevent the same outcome,” he wrote.
“It’s not rocket science. When the demand for apples goes up, normal people plant more trees. It takes a few years, but sooner or later there’s enough apples to meet the higher demand. Perhaps even enough to ship some to China and add capital to the local orchard. But when the demand for housing, especially rental housing, in Vancouver increases, we don’t build more. On the contrary, we do everything we can to sabotage new supply.”
He lists rent control, rental-only zoning used to downzone, and the 12-year-old moratorium on the demolition of rental buildings for the city’s slow growth with building new rentals.
He cited a recent paper in American Economic Review that zeroed in on San Francisco’s housing issues and the impact of rent control: “In the long run, landlords’ substitution toward owner-occupied and newly constructed rental housing not only lowered the supply of rental housing in the city, but also shifted the city’s housing supply toward less affordable types of housing that likely cater to the tastes of higher income individuals… Taking all of these points together, it appears rent control has actually contributed to the gentrification of San Francisco, the exact opposite of the policy’s intended goal.”
When it comes to the provincial government’s introduction of rental-only zoning powers for municipal governments, Pavlov asserts cities like Burnaby and New Westminster have used the new zoning tool for its opposite intended effect. Rental-only zoning was enacted on existing properties without the permission of the owners and without an appropriate density bonus.
“This has exactly the opposite effect of the intended goal — it turns rental housing into a toxic asset. Most investors like to keep their capital away from such assets. The companies which seek them out are called ‘vulture funds.’ As the name suggests, they do not make for good landlords,” he continued.
“Rental-only zoning, even just the possibility of it, not only expropriates from the current owners but also ensures that we will not get a rental building on any property that does not already have one. Why would anyone in their right mind risk such a severe down-zoning of their land?”
The possibility for an increase in rental supply is restricted by the inability to redevelop existing, ageing rental buildings due to a 12-year old moratorium on demolishing rental buildings cover over 95% of Vancouver, he adds.
Pavlov then sums up the resulting situation: “In other words, we can neither add new rental buildings nor redevelop existing ones.”
For acquired sites that are suitable for new market rental housing, applications face a years-long development review process, followed by hostility from some current Vancouver city councillors over the proposals.
“So you wait two, three, or more years for your development application to get reviewed, during which time you’re paying interest on the land purchase, property taxes, and even the so-called School Tax on the entire property. Sooner or later, usually much later, you get to city council for final approval. That’s when you get yet another insult. Your project gets questioned, and possibly denied, because market rents are too high,” he wrote.
“You read that right – we block new rental housing because we don’t have enough rental housing. This doesn’t just defy basic economics; it defies basic common sense.”
Source:
https://dailyhive.com/vancouver/seat...sing?auto=true
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