The Big Real Estate Q: If We Need More Housing, Why Can’t We Just Build It?

The refrain that Vancouver needs more housing supply goes back at least a decade, when affordability entered crisis mode.

Since then, demand has only grown… and we still can’t seem to catch up.

Vacancy rates for rentals hover below one percent and home prices refuse to drop, particularly in the central urban cores. To put it bluntly: what gives? Why is the construction of housing in direct response to need so impossible to meet?

It’s a multi-headed beast, the delivery of housing to the masses—both owner-type and rental—and there is a lot of complexity in an issue that depends on private industry, the ingenuity of policymakers, the economy, financing, construction costs, labour and the smooth operation of local-government bureaucracy.

A tall order, to be sure—but is it really a hopeless one?

Hold-up #1: The journey to build is long

The solution: Simultaneous permitting

Let the cautionary tale of the nine-years-in-the-making 105 Keefer illustrate how long it can take to bring a building to market.

That may be an extreme example, but any Vancouver developer will tell you it can take around six years (!) from purchase to occupancy, largely because of the city process. That’s why the province amended the Local Government Act to prohibit time-consuming public hearings if the project already fits within an existing plan.

It also came up with a new flat-fee levy designed to remove the costly community amenity contributions (CACs) from pro formas on projects around transit hubs. (The high cost of CACs negotiated by the city are cited by the BC Chamber of Commerce as a hindrance to housing supply.)

“We need to find a way collectively to get [housing] faster to construction starts, full stop,” says Curtis Neeser, executive vice-president of residential development for Beedie Living. He knows first-hand just how slow the process can be: that nine-year 105 Keefer St. project in Chinatown is a Beedie development, and it’s still a work in progress.

“I’m not suggesting there shouldn’t be strong oversight, but we do need to find a quicker way through,” says Neeser. “To the credit of the provincial government, they seem to recognize that.”

Here’s a solution, says developer McGregor Wark, who’s VP of Headwater Projects: do what other municipalities (like Kelowna) do and streamline the approvals. Typically, Vancouver developers must go through a rezoning and then a development permit exercise, followed by a building permit, which can take years. Why not combine most of it?

We put this question to Josh White, general manager of planning, urban design and sustainability for the City of Vancouver, which is working hard on reducing permitting times. He says the city is moving towards concurrent approvals, but the timeline for that new process—much like the timeline for so many condo projects—is up in the air.

Hold-up #2: A love-hate relationship with investors

The solution: Regulate investor-driven buying

This year, the feds increased the capital gains tax on investment properties, and developers groaned.

According to Statistics Canada, about half of condos in Vancouver are investor owned, purchased via presale and rented out as secondary rental properties to avoid empty homes taxes. (This isn’t necessarily a Vancouver-specific problem, of course: Toronto rates are comparable.)

Proponents say that investor-owned units are a key part of the rental market here and chasing them away isn’t the solution.

“Investors form an important pillar of demand for residential developments,” says Jonathan Cooper, president of Macdonald Realty and former chief operating officer for developer Holborn Holdings. “Presales are needed for developers to unlock financing so that they can build more housing. With our already tight rental controls in B.C., reducing the investment value of residential units—through changing the capital gains inclusion rate—could reduce investor demand for presales and lead to less housing being built.”

Local governments have also come to rely on the model to extract a share of non-market housing from new condo developments—depending on the municipality, between five and 20 percent of the units in a project are supposed to have below-market rates.

Critics, such as UBC professor Patrick Condon and York University professor Mark Winfield, argue that it’s a business model that only exacerbates the housing problem because housing for investment leads to a glut of tiny units and drives up overall land values.

Condon supports the taxing of landowners for the “land lift,” or increased value of land due to rezoning, and using the money for social benefit. In his book, Broken City, the message is not to wish for enough affordability after an upzone, but instead to insist on it, with at least 50 percent of the project devoted to non-market housing.

“If your market is robust, you get the opportunity to use that market to leverage a proportion of that for your community building objectives,” he said in a presentation.

And other policies, such as curbing empty homes, flipping and foreign investment and speculation—all introduced in recent years by the both province and the feds—need to be maintained, says Andy Yan, associate professor of urban studies and director of SFU’s City Program.

Hold-up #3: A steady stream of new Vancouverites

The solution: Sync up immigration and  housing policies

A contentious policy that affects supply is the feds’ immigration goal of half a million permanent newcomers each year. That’s not even counting the 2.5 million temporary students and workers who drive so much of the demand for rental housing. The Canada Mortgage and Housing Corporation estimates that, nationally, 3.5 million units are needed by 2030 to address the population growth.

Australian-born David Williams is vice-president of policy for the Business Council of B.C. and a former senior economist for the Bank of Canada. A boom in the population started in 2016 and “accelerated spectacularly” from 2022, he says. “In effect, at the current pace, the federal government has decided to add another B.C. to Canada every four and a half years.”

In 2023, for the first time on record since 1961, population growth outpaced net investment in housing, also known as residential capital stock.

“We have never had a situation where the population growth is faster than the growth of residential capital stock,” says Williams. “But the federal government achieved that last year. In other words, adjusted for population and depreciation, Canada’s housing stock actually shrank.”

More Vancouverites should theoretically mean more tradespeople moving to town, too, but the vacancy rate in construction jobs is far higher than in other industries, according to a Desjardins Economic Studies report from last year.

The solution isn’t necessarily to stop the influx of fresh faces, say developers, but for the government to proactively sync up immigration and housing policies, and work harder to attract immigrants who work in construction. B

ring on the plumbers, electricians and carpenters to help build the housing that Vancouverites—new and old—so desperately need.

Hold-up #4: View corridors and new builds don’t mix

The solution: Update old policies but don’t lose the charm

Cities change. But not everybody agrees that protections of views, character homes and light and airy spaces around buildings should be given up so fast. There is something called livability, after all.

“There are a lot of people wanting to reduce or remove those view cones,” says SFU’s Andy Yan. “It’s all in play, trying to get that additional height.”

He’s referring to the many decades that Vancouver has protected mountain views at several points around the city, including lookouts from Trout Lake and Olympic Village, as well as more than a dozen other spots.

But increasing land values, and the constant cycle of razing and re-building—as opposed to repurposing old buildings the way, say, Paris or Copenhagen has done—has put a premium on land and air space. New concrete towers are especially pricey. To make up for the cost, the towers must aim for the sky. And besides, condos with a view can command top dollar.

In July, city staff recommended scrapping some of the protected views and reducing and altering others.

The view protections are just one reason why the Cohen Block in the Downtown Eastside has taken so long to get approved. The former Army and Navy store site is in desperate need of revitalization, and owner Jacqui Cohen, who partnered with Bosa Properties, says it’s a legacy project—a mix of housing, retail and office in a beleaguered area that would benefit from new development.

“Grandpa Sam bought this property over a century ago. This is the Cohen legacy so it’s important to get it right,” she says. “The process of change and development—from Army and Navy to Cohen Block—has admittedly taken more time than I expected or wanted; however, we need to nail it. It will be a driver of positive change for so many people. And I want it to stand proudly for generations to come.”

Dan Cupa, vice-president of development for Bosa Properties, has said his company would build more housing if they could go higher. “There are all sorts of different aspects within the view cones that render them antiquated, especially at the expense of housing and especially at the expense of affordable housing,” he says. “For example, the Creekside view cone was already partially obscured by vegetation and play equipment, offering minimal public benefit.”

Brent Sawchyn, principal of developer PC Urban, has about 900 rental units under construction. Sawchyn estimates that “tens of thousands of homes” have likely been lost to policies that protect view cones, eliminate shadowing from towers or dictate floor plate size. “Policies that were established 35 years ago by planning departments of the day are coming home to haunt us,” he says.

Still, Larry Beasley, former co-director of planning for the City of Vancouver and a key figure in the original implementation of the view cone policy, says there are smarter ways to tackle supply without giving up on longstanding priorities like views, character housing and sunshine. It can be done, with ingenuity and public consultation.

“One of the chief ways that has not been explored is development of the False Creek Flats,” says Beasley. “The Creative District alone, on the south side of the Flats along Great Northern Way, can yield thousands of units of housing without sacrificing the industrial capacity. The whole Flats could yield tens of thousands of units—all rental if needed—and still keep our industrial capacity.”

Hold-up #5: Outrageous interest rates

The solution: Reducing permitting times (again)

Nobody is going to purchase expensive land and sell units at reduced prices. In fact, after the downturn of 2023, there was a rash of foreclosures on projects embarked on by inexperienced developers who couldn’t pay the suddenly huge carrying costs. It doesn’t help that the lifeblood of Vancouver’s investment housing market is the Chinese buyer, and China’s housing market has tanked. The offshore spending spree lost steam.

As well, even if developers could flat-out build, they’re still constrained by interest rates, which impact everything from the cost of labour and materials to borrowing to consumer confidence.

A lot of it comes down to financing, which is controlled by the lenders, says Tom Huang, co-owner and managing director of Tera Development. “We feel like we are all working for our lenders, our banks. They will look at the pro forma and say, ‘If you are not making at least 15 percent on the cost, we are not lending at all,’” he says.

“For them to feel this particular project is safe, they need that margin to be present in order to lend it to a developer to build.”

Toronto-based Phil Soper, president of Royal LePage, says it comes back to reducing permitting times, which would help offset some of the cost and risk of borrowing for extended time periods.

Hold-up #6: For-profit developers are creating most of the stock

The solution: Senior government needs to step it up

When the feds gave up the duty to deliver affordable housing in the mid-’90s, industry experts agreed it was a massive setback for supply. Subsidized housing programs, such as cooperatives, fell by the wayside. Housing was mostly left to market cycles.

“The older stock of housing now by default has become our affordable supply because we really haven’t built [social] housing since the ’80s, since the federal government abdicated their responsibility,” says PC Urban’s Sawchyn.

But the Desjardins report says we need aggressive policies aimed at getting housing built—so maybe it’s time to take a page out of the Canadian history books.

“We are learning that the private sector isn’t as good as government could be at delivering social housing,” Sawchyn says. “We can help them out, but they have to get back in the game.”

Matthew McClenaghan, president of Edgar Development, says his company certainly needed government support for their 23-acre, $1.1-billion Port Moody master-planned Portwood community, where they’ve just started construction.

The plan is for around 2,200 units—328 of them affordable rentals—with the vast majority geared toward families. They benefited from what McClenaghan calls “reasonable” CACs, along with good financing rates from the CMHC.

“We have the province’s attention, and we have the federal government’s attention,” he says. “Housing can’t get built on the shoulders of the private sector. It’s not one person’s job alone.”