Rental-only zoning could lower soaring land values
Right now it's almost impossible for rental builders to compete with condo developers
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Right now cities can cajole, incent and use planning targets to encourage developers to build new rental.
But with Metro Vancouver land values soaring, especially near transit hubs where many municipalities have planned for density, that approach isn’t working. As a recent Metro Vancouver study pointed out, it’s led to a situation where the people who most likely to take transit — renters who make less than $50,000 a year — are being displaced by new construction and are left out of high-density development.
It's a dynamic that's not only displacing low-income people, but challenging the region's transportation planning.
“We’re trying to find ways to make sure mode shift (away from cars) takes place while we adapt to this growing population,” Richard Stewart, Mayor of Coquitlam, told Metro.
“Mode share will only work if the people that have a high propensity to use transit live near transit.”
Metro Vancouver mayors — including Vancouver’s Gregor Robertson — are ramping up their call to the province to be able to zone for rental. It’s among the myriad of housing policy proposals that have been floated as the B.C. government prepares a new plan for housing, expected to be revealed in the February budget.
Zoning for rental would put a lid on land values if done right, said Anne McMullin, CEO of the Urban Development Institute and David Hutniak, CEO of Landlord BC. Currently, condo developers can always outbid rental developers because the return on investment is so much higher for a condo tower than a rental building.
As an example, Stewart said, a rental developer may calculate he can bid $8 million for land, while a condo builder can offer $16 million. The City of Coquitlam now offers incentives to rental builders like increased density and relaxing the number of parking spaces required. But one developer recently abandoned a Coquitlam project, Stewart said, because even with all the incentives the city offered, the builder still could not make the economics work.
McMullin warned that the idea would only work for areas that have yet to be “upzoned”: single family neighbourhoods, for instance. If a city changed the zoning to make the land less profitable, developers might take cities to court over their lost potential profits, and they would be more likely to sit on the land and not develop it as they waited for land prices to rise.
But Hutniak said the idea has real merits for areas where future transit is planned, such as Vancouver’s Broadway corridor. While condo builders can recoup their profits relatively quickly, he said rental development is “patient money.”
During a Nov. 16 press conference, Premier John Horgan and Selina Robinson, Minister of Municipal Affairs and Housing, declined to say whether rental-only zoning was under consideration. But the idea was included in the NDP's election platform, and prior to the election Horgan did say it was an idea he was interested in.