British Columbia’s new strategy to acquire existing apartment buildings is well under way, with a handful of buildings on target for possible approvals by the end of the year.
The Rental Protection Fund aims to save thousands of units of housing and is part of a plan to grow the non-profit housing sector, which is nowhere near the size of its European counterparts. The province’s $500-million contribution is the initial injection of cash intended to grow the sector, which will continue to build a portfolio of properties and leverage those assets into more housing.
An independent non-profit society oversees the fund, run by recently hired chief executive officer Katie Maslechko, whose background includes working with Vancouver residential and industrial developer Beedie, as director of development.
The fund addresses the chief threat to affordable housing: for every new rental unit built, several affordable ones are lost, usually due to redevelopment, conversions and rent increases.
Ottawa-based researcher and policy adviser Steve Pomeroy says the Vancouver region alone is losing more than 10 affordable homes for each new affordable home that is constructed.
The idea is to protect some existing rentals while new supply continues to get built, says Ms. Maslechko. Her office released an interim report that says for every new unit of affordable housing built in the province, four units are lost.
“It’s a really high impact way to retain the supply we have got, extend the supply we have got, while also focus on building the new supply,” said Ms. Maslechko.
“Otherwise, we will never take that meaningful step forward if we are always losing as much supply – if not four times more supply than we already have – for every new unit that we are building.”
Trying to save existing rentals, however, will continue to be an uphill battle as the province also proposes to blanket upzone existing rental neighbourhoods, which could drive land values higher, says Andy Yan, director of Simon Fraser University’s City Program and an urban planner.
The government is looking at forcing municipalities to allow up to six units on detached-house lots. More recently they announced legislation to allow significant density around transit nodes. That legislation would allow up to eight-storey buildings 401 to 800 metres from a Metro Vancouver SkyTrain station, for example, and up to 20 storeys within 200 metres.
Mr. Yan said it puts Chinatown, Gastown and Commercial Drive neighbourhoods under threat of redevelopment, and could possibly increase property taxes. Properties are generally valued on their “highest and best use,” and taxed accordingly.
“You could save a few trees, but clear-cut the forest,” said Mr. Yan. “Given what is happening on the Broadway Corridor and the challenges around renter protection, and now these proposed transit-oriented development areas as put forward by the province, ‘highest and best use’ becomes a serious issue that needs to be addressed.”
About one-quarter of Vancouver’s rental housing stock is in the 500-block Broadway Plan area – much of it older and affordable. However, the city’s upzoning puts those buildings at risk of redevelopment. And with potential redevelopment on the horizon, there is the likelihood that apartment blocks will fall behind on maintenance, also known as “disinvestment.”
Ms. Maslechko says that disinvestment of buildings is an ongoing concern.
But so far no apartment buildings within the Broadway Plan are being considered for funding because they are too valuable to be economically viable, she says. Instead, others on the shoulder areas are under review.
“Generally, those properties with significant upzoning potential will inherently struggle. … The numbers will not work in terms of being something that is attainable for the organization, even with support from the fund,” she said.
“Because, as with any property, those acquisitions would be valued on their ‘highest and best use,’ and that is a pretty substantial gap to bridge.”
Her office’s report said that B.C. has lost nearly 100,000 apartment units renting below $1,500 per month between 2016 and 2021. The vast majority of those units – 75 per cent – were located in the Lower Mainland. Another 175,000 units that are rented below $1,500 a month in the Lower Mainland are at risk of being lost.
The rate of loss has only accelerated in recent years, said the report, due to redevelopment, disinvestment, such as lack of maintenance, conversion to short-term rentals such as Airbnb, and rapid rent escalation, which has displaced many lower-income renters.
Mr. Pomeroy has updated his findings on the loss of affordable rental stock and found that the Vancouver region lost more than 47,000 apartments with rents between $750 and $1,000 over a five-year period.
The city lost another 25,000 units renting for below $750, a smaller number only because there aren’t as many units left in that range, he said.
Mr. Pomeroy used census data from 2011 to 2021, and new housing completions data from the Canada Mortgage and Housing Corporation.
He said it is critical to slow the net loss of existing affordable rentals – a problem not addressed by the National Housing Strategy.
He applauds the B.C. government for attempting to slow the erosion with the fund, but he believes politically unpopular vacancy control would have a bigger impact. Vacancy control limits the rents a landlord can charge on a unit. If controlled, the real estate value would also level off, he says.
“Basically, you bring in vacancy control for anything older than 10 years or whatever, so you protect these lower-rent units so rents won’t go up 15 per cent, and then the values of the buildings would reflect that. And then they would be more affordable to buy,” he says.
“So buying the units is a bit of a Band-Aid. It’s a little bit of, ‘if you can’t beat ‘em join ‘em’ by trying to buy some of these assets. But the number you are losing in Vancouver is 47,000 … and with the new fund, if they are lucky, they might buy 5,000 or 10,000 [units]. So it’s a small impact. It’s not an insignificant impact, but it’s not addressing the whole problem.”
Ms. Maslechko currently has a staff of four, but said she is just getting started. Demand is strong, with applications from 70 non-profit housing groups and 25 occupied properties – mostly older buildings from the sixties and seventies that already offer below-market rents – under consideration. They plan to start with funding for 2,000 units. Nearly two dozen experienced non-profit housing providers are already in the process of acquiring the properties and securing mortgages, and upon final approval, the fund will help with the equity needed for the purchase and any upgrades. Ms. Maslechko expects to have “at least a handful of them” ready for board consideration by the end of the year, and most of the others over the next few months. Board members include CEOs from the Aboriginal Housing Management Association, BC Non-Profit Housing Association and the Co-operative Housing Federation of BC, who’ve all advocated for such a fund.
The non-profit groups are averaging about $200,000 per unit in funding, as long as they can prove the property is viable as an affordable housing project for the next 20 years. It’s key that they can cover operating costs, without government subsidies, says Ms. Maslechko.
In protecting and upgrading the buildings, she says, they can do it “at a fraction of the cost of what it takes to build new.”