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Developers say Vancouver’s housing density plan won’t address the ‘missing middle’

Vinson House Cottages in West Vancouver, a project by developer Michael Geller.

Vincent Lee

Vancouver City Council recently endorsed a new program that has the potential to transform the city.

If it passes, areas currently filled with detached houses will become neighbourhoods filled with townhouses, taller laneway houses and low-rise apartment buildings. The move is part of the city’s call for 10,000 units of additional ground-level housing within neighbourhoods that are considered low-density. A staff report went to council on Tuesday.

The idea is that if we generate yet more supply, prices will inevitably come down and fill the void for affordable housing, which would benefit local income-earners that have been shut out of not just the market, but the city. Affordable housing is a crucial goal.

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However, developers who have for many years been beefing up existing detached-house properties with added density are not convinced that such a plan will generate truly affordable housing – at least not for the average income-earner. A recent Bloomberg article cited Vancouver as having the “ignominious” distinction of requiring 11 years of household earnings to afford a home of any type. That compares with 8.2 years for San Francisco, 5.9 years for New York and five years for Seattle. The median household earns $61,036 a year in Vancouver, which, as analyst Andy Yan points out in the article, is in line with Columbus, Ohio.

In other words, Vancouverites earn Columbus incomes while paying Bay Area prices.

That’s far too complex a problem to solve through more development, said Rob Chetner, a Vancouver developer who has been delivering so-called “missing middle” projects throughout his long career.

“People say, ‘Well, we’re just going to build more affordable housing.’ It’s kind of an oxymoron, because what people don’t talk about in the media, that I’ve heard, is the actual cost to build,” Mr. Chetner said. “If you gave me free land in some of these [pricey] municipalities, I couldn’t figure out how to build affordable housing.

“The cost of those units will be $400,000 or $500,000 or $600,000 per unit, [not including] cost for the land, because it’s that expensive to build these places.

“It’s a very complicated issue. It’s not an easy answer.”

The developers of Vinson House Cottages took a large lot with a prized heritage house and converted it into four generous-sized homes, while preserving the 1913 house.

Kerry Gold

Mr. Chetner partnered with developer Michael Geller and architect/developer Jim Bussey recently on a project in West Vancouver, B.C., Vinson House Cottages. They took a large lot with a prized heritage house and converted it into four generous-sized homes, while preserving the 1913 house. The two added houses on the lot are the only new homes in West Vancouver that are less than 3,000 square feet, according to Mr. Geller.

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The smallest unit, a 2,000-square-foot garden suite added underneath the Vinson House, sold before the project had completed for about $1.87-million. That’s less than a new condo in a concrete building, Mr. Geller says. They might not be “affordable homes,” but they’re “more affordable,” he said, adding they are still a risky venture for the developers.

“It’s almost more a labour of love than a traditional real estate venture,” Mr. Geller said, as he walked through the old house. “We don’t know even today how profitable it will be. We are hoping we will make money, but who knows what the market is? But we won’t lose money at the end of the day.”

He expects the 2,600-square-foot heritage house to sell for at least $3-million, most likely to a middle-aged couple. That demographic, or anyone else who has already benefited from high market prices, is the likeliest buyer of the units.

He has a policy against selling to investors who might leave the properties empty. After he developed West Vancouver’s Hollyburn Mews, a similar project, he sold one unit to a buyer who said it was for a daughter and son-in-law living in Richmond, B.C. However, after the purchase, the unit was left empty for a year. It eventually sold to a woman who’d previously put an offer on it, but couldn’t buy it at the time because she couldn’t sell her own house.

“As a result of speculation, which has resulted in lots worth $3-million or more on the west side of Vancouver or West Vancouver, these new homes won’t be low-cost or affordable for many,” Mr. Geller said. “But they’re much less expensive than the other new houses built in the neighbourhood.”

The speculator ticked Mr. Geller off. Speculators, he said, are the culprits behind high prices.

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“Vancouver is unique,” Mr. Bussey said. “I think what’s happened is that speculation has come in and distorted everything.”

All three developers involved in the project have extensive experience in maintaining the character of neighbourhoods while adding density. They know a thing or two about what it takes to create the “missing middle” housing types the city admirably aims to create. Mr. Bussey and Mr. Geller are proponents of the city’s Making Room program to rezone certain areas for greater density and diverse housing types. Affordability, they said, is a different beast.

Even if the city were to rezone to add significant density, Mr. Chetner said prices would just go up. He pointed to a standard lot in Vancouver’s Kitsilano or Marpole neighbourhoods, purchased for maybe $1-million 10 years ago, now worth around $2.5-million.

“My perception would be that a lot of these folks would say, ‘I have a development site now,’ and they would probably want more money for that site, because in their mind, you can now create four units on what was yesterday a single-family home lot.

“It would probably put upward pressure on the value of the land, which would then give somebody like myself an opportunity as a developer to purchase that. But now I’m buying this property for $3-million and I can put four units on it; so out of the gate, each unit is $750,000 for the land and another $750,000-plus into each home. Add soft costs and carrying costs, and the homes again are now at $2-million.

“So what are you creating? I don’t know if we will ever create more affordable housing, just by virtue of the fact that land is so expensive and the cost to construct anything is so expensive.”

Mr. Bussey, who designed the townhouses at the corner of West 16th Avenue and Granville Street, in Shaughnessy, as well as many multiunit projects in Vancouver’s West Side, said business is brisk for the sort of missing middle developments that he creates. The long-time architect is now a developer as well. He said he’s excited about the opportunities to build new housing types that the city’s Making Room program could offer. He has acted as an industry adviser to the city. However, he, too, isn’t confident affordable housing will result. It could be “more affordable,” he said, but not for most first-time buyers.

“Providing housing choices for people that are in that $1-million range seems to be that juicy spot that all the developers are looking for,” he said.

“I think [the market] is already correcting in a way. But whether it’s going to come back down to Vancouver’s low-income level, I don’t know.

“As soon as you throw that word ‘affordable’ into the equation, wow, I don’t know where to go any more, because it’s such a loaded word. I don’t know how the affordability thing works, quite frankly.”

Patrick Condon, an urban planner and founding chair of the urban design program at UBC’s school of architecture, said prices will “absolutely” go upward if the city quickly pushes through rezoning for more density. Mr. Condon, who withdrew his mayoral candidacy after he suffered a stroke recently, has long advocated for “gentle density” that is sensitive to the social makeup of each neighbourhood. He’s also pushed for a citywide plan that would tax land speculation to fund non-market housing, such as co-op housing.

“If the per-square-foot cost of the dwelling unit is the same, after you pack it with five or six dwelling units, it just means the land is going to inflate by exactly that amount,” he said in a phone interview last week.

“I firmly believe it has to be in the context of a very careful city plan – and a key piece of that city plan is to figure out the taxing structure you are going to deploy in order to limit speculation and provide funds for non-market housing.”

The only type of housing created that would be somewhat affordable would be a 350-square-foot microunit, he said. And even that would still cost more than $1,000 a square foot. Only the landowner would profit.

“That price is totally out of whack with what people earn. That is not a sustainable city. Urban failures start to cascade from that.

“The process is flawed because [the city] is using a very blunt instrument of vast citywide zone change without looking at the details, such as how much should a neighbourhood grow.”

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