The Driving Factors Behind the Affordability Crisis in Vancouver
It’s common knowledge that exorbitant land costs and offshore buyers are aggravating the affordability challenges faced by property buyers in Vancouver.
However, according to findings by the Fraser Institute (and backed by recent claims by Christy Clark), two additional factors also have come into play in the unaffordability crisis faced by the city’s real estate market – development levies and delays linked to muncipal regulations.
The Institute’s research states “Vancouver ranks worse than the Lower Mainland average on all indicators, except rezoning requirements, and scores particularly poorly with regard to regulatory costs and fees.”
In a survey conducted by the Institute last fall, 43 home builders and developers revealed a typical residential developer in highly regulated Vancouver must spend more than $37,000 (versus $14,357 in Abbotsford) per dwellling unit before they even break ground.
Vancouver was also found to be the second-most regulated city in the region, with levies 30 percent higher than the Lower Mainland average (comprised of estimate costs across 10 municipalities).
The findings have been challenged by individuals like Vancouver’s Planning Director Brian Jackson. Not only does a city study show 2015 development charges at $12.87 per square foot for high density residential projects but the development levies pay for daycare and affordable housing in the city which is not the case in other areas of the Lower Mainland. City council has also received a report from Coriolis Consulting which states that the Community Amenity Contribution leviews paid by homebuilders are not related to rising housing prices in the City of Vancouver.
Construction approval times, compliance costs and fees, rezoning requirements, and the impact of opinionated community groups were also examined:
- In Vancouver, homebuilders have to wait 15 weeks for project approvals not requiring rezoning (West Van and District of North Van are longer)
- In Pitt Meadows, wait time is only 5 weeks
- Rezoning is required for 2/3 of residential developments in Vancouver, with rezoning taking 6.5 months
- Rezoning is required for 1/2 of developments in Port Coquitlam, with rezoning taking only 2.5 months
Why is this happening?
A) Governments generally do not make keeping costs related to building and development costs to a minimum a priority.They only want to make sure rules get followed.
B) The province benefits because higher property prices equals higher Property Transfer Taxes.
For a more comprehensive article on development costs in the Fraser Valley and Metro Vancouver, see click HERE for a great article from REIN’s Director of Research Melanie Reuter.
What do you think the leading causes of house unaffordability are? Do you agree with the findings of the Research Institute?