The hundreds of millions in developer “contributions” that the City of Vancouver has relied on for years to pay for housing, parks and child-care centres has dried to a trickle as builders refuse to agree to the same levels of fees in a collapsing real-estate market.
Builders say they have not been able to move projects forward because the city is still asking for the same kinds of contributions that were being negotiated at the height of the market.
That flow of money, which depends on leveraging Vancouver’s valuable real estate by allowing more density on key sites in exchange for developer payments out of their increased profit to pay for needed community services, has dried up in the past 18 months.
It dropped from $706-million in 2018 to $86-million in 2019 and a dribble so far in 2020, according to city reports and industry analysts. That includes both cash and in-kind contributions, such as social-housing units or child-care spaces that are included in a project and then turned over to the city.
What is still being collected is coming from projects where the community-amenity contribution, or CAC, is a non-negotiable amount for that area. Missing are the larger contributions that typically come from big, complex condo projects, usually downtown, where the price per square foot is set after complex calculations about the project’s finances.
As well, some developers who had contribution agreements prior to 2019 are putting those projects on hold.
The last major project with an agreed-upon community-amenity contribution, a condo tower in Coal Harbour, had its CAC set at $325 a square foot at the end of 2018. Another one near BC Place stadium was set at $315 in that pre-2019 period.
Builders say the city is continuing to ask for the same levels of contributions as it was getting in 2018, even though the market has slowed significantly. As well, the province has layered new taxes onto expensive or “speculator” homes, which is putting more downward pressure on prices.
“The city has said ‘We think you can sell for more than you’re saying.’ We say that isn’t working,” said Anne McMullin, the CEO of the Urban Development Institute, which represents most of the large developers in the region.
But the city’s head planner, Gil Kelley, said the city has to find a way to pay for growth in the city and it can’t function by just reducing or eliminating those amenity contributions in slow markets.
“We are really trying to protect the public’s interest to make sure new growth pays it share,” Mr. Kelley said.
As well, he said, the current council has made it clear it wants more housing affordability – therefore more of a contribution from developers – in every project, not the same or less.
But the tussle over what to do about Vancouver’s real estate golden goose has produced a near standoff between city staff and many developers.
Reliance Properties Ltd. CEO Jon Stovell said he has had a project on hold for a year as his team and the city’s real estate department, the group that assesses how much a developer should have to “contribute” back if its project gets rezoned to allow a lot more building on the site, can’t agree on an amount.
Mr. Kelley, who has the final say on staff recommendations about what CAC should be charged for a project, said Monday the city has just issued this week some new guidelines on how community-amenity contributions should be calculated to provide more transparency and certainty.
And he said the city is willing to consider some new approaches, recognizing that no one has a real handle on what condo prices are these days because there are so few sales.
One would be to reduce the required contribution from previous high levels, as long as that builder committed to starting construction within a certain period. “We don’t want to negotiate lower CACs than we did in 2018 and then not have them build for seven or eight years,” Mr. Kelley said.
Another option is to set a high CAC, based on the sales price city staff claim that builders will get, but delay the payment until the project has enough sales at high prices to go ahead.
The bigger conundrum facing Vancouver, Mr. Kelley said, is that many developers are switching their projects for the foreseeable future from condos, which they’re having a hard time selling, to rentals, which Vancouver never seems to have enough of. Rental-project developers typically pay much lower or no CACs at all.
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