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The Globe and Mail

Vancouver developers must guarantee ‘average rents’ under new housing rules

Vision Vancouver has struggled to show that it is helping to alleviate expensive housing issues in the city, one of the most expensive cities in the world to live in.

John Lehmann/The Globe and Mail

The city is bringing in new rules to make sure it is not giving developers bonuses to create luxury rental units.

In ongoing efforts by the Vision Vancouver council to create affordable rentals (and show it is doing so), a new report spells out that developers who want city incentives for creating new apartments must build them small, prove they do not have expensive finishes, and guarantee they will go for "average rents" for new units.

Under the city's Rental 100 incentive program, developers that build apartments to be long-term rentals are exempted from the standard fees.

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The average rents defined in the report, which goes to council on Wednesday, are a maximum of $1,443 a month for a new studio and up to $2,743 for a new three-bedroom apartment.

That's less than some swisher condo units, but far above the $800 to $1,600 a month many renters are currently looking for on Craigslist – all of which illustrates how difficult it has been for council to demonstrate it is solving affordability problems in what is frequently called one of the world's most expensive cities for housing.

The West End resident group that has raised questions about the incentive plan says the report clarifies nothing and that its "average rents" are not affordable.

"The only people who can afford them are not who they say their target market is," said Virginia Richards of West End Neighbours (WEN), whose recent lawsuit against the city prompted some of the rule changes. "We recognize it's difficult [to figure out how to do this], but it's something they have to address."

A housing plan council developed two years ago specified the city would target people making $21,000 to $86,000 a year. In policy circles, affordability is defined as 30 per cent of a household's gross income. So to be affordable for that group, rents should be $525 to $2,150 a month.

The West End Neighbours' lawsuit claimed the city manager was improperly given the power to decide whether developers should get the fee waivers without proof of what rents they would charge.

Now there are guidelines for the rents (and the city manager's powers have been changed), WEN is still not happy.

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Vision Councillor Raymond Louie acknowledged he and other councillors frequently have a hard time making the case that they are creating affordable rentals. "Is it a problem explaining it? The short answer is yes."

But he said that the units being created through the incentive program will become a valuable part of the city's low-cost housing stock, just as the three- and four-story walk-up apartments of the 1960s and 1970s are now the cheapest rentals in the region.

Those apartments were built with federal government tax breaks that encouraged developers and landlords to invest.

Those breaks disappeared in the 1970s. At the same time, B.C. and other provinces created laws that allowed selling individual apartments. Condos quickly became almost the only form of multiunit construction.

When Vision was elected in 2008 amid the U.S. housing-market collapse and worldwide recession, it proposed giving developers incentives to build long-term rentals.

But many say developers are getting huge freebies for little in return.

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Mr. Louie called that a short-term view.

"Despite the fact that it's initially expensive, we expect they'll become more affordable," he said. "In comparison to the other rentals, these are not those with high-level finishes. Over the life of these units, they will become more affordable."

City reports say the incentive program produced 1,330 units in the first three years up to 2012, and another 660 are in the approval or application process.

Council is trying another experiment to create affordable housing – providing free land to non-profit and co-op housing groups.

That's a more cautious approach than what previous councils took with plans for affordable housing at the Olympic village. There, the city provided free land, with the eventual goal of being able to rent out units at rates far below market cost.

However, construction costs soared in the pre-Olympics years and the units cost far more than projected. As a result, the city had to rent many out at market rates and is subsidizing fewer than planned.

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