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The 2109 W. 35th Avenue lot in Vancouver has been sitting empty for several years.

Kerry Gold

In the leafy Vancouver west side neighbourhood of Kerrisdale, there is a lot at W. 35th Avenue that has sat overgrown and empty for several years. There are small indications of future redevelopment, including a stack of lumber, orange fencing and a City application sign that shows a proposal for clustered white rental townhouses.

A single detached house used to sit on the 12,440 square-foot corner double lot. The old house was torn down three years ago and the property appears to have been for sale ever since. An MLS listing shows that it was purchased for $2.5-million in 2016. The lot is now for sale, for $5.88-million.

In the meantime, the owner has also gone to the trouble and expense of applying to rezone the property to allow for 12 rental townhouse units. The rezoning application is part of the marketing of the property. In July, 2018, just before the civic election, the former city council approved the project. Not surprisingly, there was neighbourhood backlash to it, says the architect who’s designing the project. But the mood for more density in neighbourhoods zoned for detached housing was strong, particularly with an affordable housing crisis. The low density west side of the city is an obvious area for more density. Critics argued that the rents were not affordable.

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Brian Billingsley, principal of B Squared Architecture, says that the expectation for affordable rental is counter productive.

“The planners were really supportive of the project, they liked it and they kind of pushed it through really fast,” Mr. Billingsley says. “We were one of the last batch to go through rezoning with the old council before the election. The only person who voted against the project was Adrian Carr for the very reason that she didn’t think it was affordable. But dealing with the City of Vancouver, nothing is affordable and everything gets taxed all through the project. And I don’t know how people think builders can absorb all the cost. It makes no sense to me.”

Kerry Gold

It is one of the few residential detached houses in the city (called an RS zone) to be spot rezoned for multifamily housing. The majority of detached houses that get rezoned are in areas that have been planned, such as the Cambie corridor.

The average starting rents for the project are $1,900 for a one bedroom and $3,700 for the three bedrooms, according to the City, which has set a long list of conditions to be met before the rezoning is enacted. Mr. Billingsley says he’s almost met those conditions and he believes that when it does get built it will provide housing for people who can afford those rents. As those people move from their less expensive apartments, it will then free up existing housing for others.

“There is a certain upward mobility being provided, right? And voting against everything because it’s too expensive, that’s not progressive either. That won’t solve the housing problem in Vancouver or anywhere else.”

However, one developer argues that the market for high-priced rental units is so small that the rental development business is not viable and his company is moving away from rental housing entirely.

Long-time developer Anthony Hepworth, president and chief executive officer of Pennyfarthing Homes, says his company has built every type of property but is no longer interested in rentals because the returns aren’t great enough to cover the high costs. As a result, they’ve sold off all their rental properties except for one.

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“Rental for the most part does not make sense,” says Mr. Hepworth, who has a PhD in engineering. He’s been with Pennyfarthing since 1980. “It’s a lousy business,” he says of rental.

He says the problems are the high cost of land as well as climbing construction costs in the past three years. Pennyfarthing developed a rental building at 1450 Creekside Dr. in 1987 and the generously sized 1,150 units rent for around $3,000 a month. After 32 years, the rents have only doubled, he says. The water view building is in a desirable location, a five-minute walk from Granville Island. But at that rent, it can take a month or two to fill an empty unit.

“We are capped out at $3,000 a month. The potential for people to pay more than that, is very, very limited.

“Theoretically there should be a lot of room for rentals to climb – and I think some people are betting on that. But there is a small market for that,” he says.

A proposal to rezone the former single-family home property to allow for 12 units of rental townhouses holds the potential to more than double its value.

Kerry Gold/The Globe and Mail

Can the market provide affordable rental housing? Not for the majority, says Andy Yan, director of Simon Fraser University’s city program. He calculates that rents for new units between $2,700 and $3,200 a month exclude 75 to 80 per cent of renter households in the city. In other words, rental is not instantly synonymous with “affordable.”

“The problem is when new market rental housing in the city is conflated and valorized, whether intentionally or not, as affordable housing that is immediately accessible for low-to-middle-income renters. It shouldn’t be.”

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Mr. Yan says that half of renter households can afford a maximum rent of $1,256 a month, at best. The median household income for renters in Vancouver is $50,250. However, 27 per cent of renter households in Vancouver earn less than $25,000. According to the Canada Mortgage and Housing Corporation, affordable housing is 30 per cent of one’s income. That means that one quarter of Vancouver renter households can afford to pay $625 a month, and that’s at the high end of what they can afford, Mr. Yan says.

“That is so far out of the financial reality that the numbers don’t work out,” Mr. Hepworth says, when asked if he could supply that kind of rental. “I think we worked out the numbers for the west side of Vancouver and you need to get about $3.50 a square foot, so a 1,000 sq. ft. unit would be $3,500, and they don’t build them that big. They build 800-foot units and you’re still looking at $2,700 or $2,800 a month for that.

“Unless there is a dramatic increase in salaries, it’s very hard to see many people who will be able to afford it.”

He points to the fact that incomes have doubled since the 1980s, but condo prices have quadrupled.

Mr. Hepworth does not believe affordable housing is in Vancouver’s future. The softened market has not translated into lower prices. The condo market has stalled and developers are holding properties until the prices return. Some multifamily developers are looking to the United States for projects, he says. His own company has four properties on hold until the market goes back up, including one in New Westminster, B.C.

He is seeing properties intended for family housing sit undeveloped.

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“I do know what has happened in the townhouse market, and people that bought townhouse sites in Cambie phase three, particularly south of 37th Avenue, all hugely over paid and all those projects are not viable. They didn’t get started, because they haven’t got the presales. They haven’t got bank financing and their land costs are simply too high. So they are sitting there.”

In order to build economically viable rental buildings, especially on the west side, you’d need to go to about 15 stories, says Mr. Hepworth, who believes spot rezonings are a solution.

But Vancouver Hospice Society executive director Simin Tabrizi would like to see more community consultation instead, especially if the spot zoning involves rental units that few can afford. Ms. Tabrizi was part of a major pushback against a rezoning proposal next door to the hospice, for 21 units of rental townhouses, at 4575 Granville St. That proposal was rejected and criticisms included the high rents proposed for the townhouses.

Ms. Tabrizi has proposed that the Society purchase the property and develop it for affordable short-term rental for seniors in the last year of life, a possible partnership with a government agency that could subsidize it. The housing would offer care to people who would normally, and unnecessarily, be placed in hospital. She says it makes more sense than expensive rental because it would fulfill a need for a vulnerable group.

“The City has imposed stuff all over the place and I don’t know how it benefits the city,” Ms. Tabrizi says. “I think the [former] city council became a partner in the whole scheme around housing and speculation of housing, so whether that direction will change with the new council, or not, I don’t know. I think the prevailing idea is that we desperately need housing, and so it’s go-go-go. But I think, really, it’s time to pause a little and do away with this spot zoning and also really engage communities around planning.”

Similar to many housing experts, Mr. Hepworth comes back to government funding as a solution, although he says it’s still complicated.

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“The only way you can get affordable housing is by subsidies. Then it becomes, who gets the subsidy and how is it applied? It gets very difficult,” he says.

“Of course, the federal government could also return to the days when it built subsidized housing for low and middle incomes,” Mr. Yan says.

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