Social Housing Without Guarantees: The myth of the 60/40 ratio in the DTES Oppenheimer District

Photo by Wendy Pedersen

If you have been reading the newspapers the last week you will have heard about the City’s Local Area Plan (LAP) for the Downtown Eastside area.

At the forefront is the “60/40” rental-only policy for the DTES Oppenheimer District (DEOD), which the Courier is calling “the most controversial piece of the plan.” While the city is proposing mostly condos for the rest of the Downtown Eastside and Chinatown, this Oppenheimer rent-only plan is inspiring a heated debate.

The 60/40 clause stipulates that all future rezonings in the Downtown Eastside Oppenheimer District (DEOD) must have a 60 to 40 ratio of “social housing” to “market rental.” Developers are opposing the clause, arguing that it will hinder further market development in the area. The Carnegie Community Action Project has raised strong criticism of the overall LAP but agrees that the clause is the “only concrete and definitive measure in the LAP that addresses [community] concerns.”

While there has been an intense debate about the topic, few articles have explored the meaning and the consequences of the 60/40 commitment. What exactly is the 60/40 proposal? What does social housing mean in this context? What will be the range of rents? Will it actually hinder market development?

60% what?

There is a paradox at the heart of the 60/40 policy. All large redevelopments in the DEOD will include 40% market rental according to the LAP, while the 60% remainder of so-called “social housing” is itself two-thirds market rental. This means that the 60/40 policy is actually a 20/80 policy – 20% percent social housing and 80% market housing. Even at 20/80, however, the City has eliminated the definition of social housing, essentially leaving it for the market to decide. Let us try to highlight both of these problems.

The reason the 60/40 target is actually 20/80 is that the 60% social housing component of the LAP will consist of three main types of rental housing. The plan stipulates that “the target for affordability for new social housing for the Downtown Eastside will be one-third at income assistance, one-third up to HILs and one-third at affordable market rents.”

Housing Income Limits (HIL) represent the income required to pay the average market rent for an appropriately sized unit in the private market. In Vancouver, the HIL for a bachelor apartment is $35,000 and for a two-bedroom it is $48,000. This means that if an affordable rent is deemed to be ⅓ of a person’s income, the HIL rent for a bachelor is $875 per month. This is in another word the going market rent. For example, the Burns Block micro lofts rent for $850/month.

As for “affordable market rents,” the plan does not give any definition of what this could mean. However, the city’s recent amendment to the definition of for-profit “affordable market rental” might indicate a possible definition. The city definition of for-profit affordable rental housing is now housing whose initial rents do not exceed the following: $1,433 a month for a studio unit; $1,517 for a one-bedroom; and $2,061 for a two-bedroom.

Furthermore, the LAP does not specify requirements for the ownership and management of the social housing component. Concerningly, the new legal definition of social housing that Vision Vancouver is hoping to push through will open up social housing ownership and management to the private sector.[1] Just as the local market has already indicated that rental housing is the new engine of real-estate profitability, there is nothing in the LAP to genuinely prevent the market from extending into “social housing” provision.

Altogether this means that the proposed social housing component in the LAP is closer to 20%, if we define social housing as it should be defined: non-market housing owned and run by a government or non-profit body and accessible to those living on the lowest incomes including basic social assistance shelter rate or 1/3 of basic old age pension.

Worse still, the proposed social housing targets will be applied with “flexibility.” The LAP report notes that in pursuing its targets, “greater flexibility may be required to provide opportunities to maximize the delivery of social housing.” This lack of commitment to meeting its targets will create insecurity that’s compounded by the new misleading definition of social housing itself.

Importantly, the housing targets of the LAP are also not by-law changes, or legally binding on developers, but mere policy recommendations. The Carnegie Community Action Project (CCAP) letter to the Mayor and Council states the problem clearly: “As it stands, there is no guarantee that any unit will be available to people on social assistance and basic pension.”

Rental zone not enough to deter gentrification

Leaving aside the watered-down definition of social housing, however, let’s assume for a moment that the City will decide to adhere to the 20/80 proposal (instead of lapsing to 100% market rental). The last years have shown that the existing 20% social housing inclusionary zoning policy in place in the DEOD has not been enough to deter speculation. Several condominium project have been developed despite the inclusionary zoning. Furthermore, the Vision-led council has proven willing to manipulate the very concept of social housing even within the context of inclusionary zoning. At Sequel 138 for example, only half of the social housing units were affordable to low-income tenants.

The current LAP proposal would in effect turn the DEOD into a market rental district. If 20/80 is not enough to deter development, perhaps the enforcement of long-term rental tenure will prove enough to slow the market? Looking at recent changes in the Vancouver real estate market, the answer is uncertain. A Vancouver-based business writer recently analyzed the rising profitability of rental housing in Vancouver and a “market shift” away from condos and into private rental housing. Rental housing is today a financial growth sector in a way that it wasn’t even a few years ago. Market analysts such as Andy Yan and Bob Rennie have pointed out that more than 50% of new condos are placed on the housing market as rental housing.

Brian Jackson, Vancouver’s general manager of planning and development, stated in an interview with the Vancouver Sun that there has already been some development interest in the no-condo zone. “We have already had three or four inquiries in this area by non-profits and developers who are interested in following through with the model that we’ve identified,” said Jackson.

The last couple of years in Vancouver have been marked by a significant rise in the construction of market rental housing, heavily subsidized by the City, who has waived both Development Cost Levy (DCL) charges and Community Amenity Contributions (CAC’s) through the Short-Term-Incentives for Rental Housing (STIR) and the Rental 100 programs. At an Aquilini development near BC Place, the City waived CAC and DCL fees amounting to over $35 million dollars. With these kind of subsidies, rental housing is suddenly a lot more profitable.

If the 60/40 zoning in the DEOD proves to be a barrier to real estate development, the city will find a way to make it work for developers. Rental 100 is an integral part of the LAP and it is one of the ways the city is hoping to make rental investments in the area more attractive and lucrative for developers. However, the city also has other means to subsidize rental development including the provision of free or subsidized land and further tax exemptions – and it won’t hesitate to use their tools to satisfy the needs of the their funders.

Michael Geller’s and other developers’ fear-mongering about the 60/40 proposal is simply an attempt to maintain and expand their already excessive profit margins. Rather than a genuine fear of losing money, it is a stunt by the political right-wing to move the goal posts further into the neoliberal abyss. For millionaire developers like Michael Geller it is a win-win situation; for people holding onto their homes there is way too much to lose.

The deadline for speaking at the Public Hearing on March 12th, 2014, has passed but you can still write to City Council at mayorandcouncil@vancouver.ca and encourage them to adopt a 60/40 zoning with a definition of social housing that includes people on welfare and pensions.

Footnote

[1] New DTES LAP definition of social housing:

(a) housing in which households with incomes below core-need income thresholds occupy at least 30% of the dwelling units,
(b) rental housing owned by or on behalf of the city, Province of British Columbia, or Canada,
(c) rental housing owned by a non-profit corporation, or
(d) housing owned by a non-profit co-operative association

2Comments

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1

Ivan on March 13, 2014 at 2:54 pm

I agree that there are serious issues with the city’s plan for the DTES, including the shortcoming of the potentially anti-market interventionist 60/40 zoning policy in the DEOD, but I think this article overstates dangers in some cases and misinterprets dangers in others.

Overstatement: that 60/40 will not affect speculation or investment & that the previous 20% inclusionary zoning policy did not stop market development.

In my opinion 60/40 is a state intervention against the capitalist real estate market that we should support because, in the context of an absence of controls elsewhere, it will be a significant disincentive to market development. Zero strata ownership is a significant limitation to market developers, as is a limited number of for-profit rent units.

The 30 year old inclusionary zoning laws did have a significant effect on market development & they were far more moderate than the proposed rules. Only in the runaway real estate market of the last few years have any market developments been proposed for the DEOD. That’s why the DEOD development guidelines have to be updated.

Misinterpretation: Vision’s redefinition of social housing opens ownership to private corporations

The wording of DTES Plan’s short redefinition is short but a bit confusing. There are four clauses, and there is a mysterious “or” joining two of them. This is a bit tedious, but here my interpretation:

The first two clauses: [“(a) housing in which households with incomes below core-need income thresholds occupy at least 30% of the dwelling units, (b) rental housing owned by or on behalf of the city, Province of British Columbia, or Canada,”] are interdependent. Social housing must fulfill BOTH of these requirements. I believe this both because they are not divided by any qualifiers like “or” and because it would open up some legal problems if clause (a) were allowed to stand independent of clause (b). Suddenly any housing where >30% of residents are “core need income” could qualify as social housing regardless of ownership.

I read the second two clauses as conditions of (b), which says the “rental housing must be owned by OR ON BEHALF OF” the state. The last two clauses qualify this as “(c) rental housing owned by a non-profit corporation, or (d) housing owned by a non-profit co-operative association”.

I do not read this as leaving a gap open for ownership by private interests as private interests. A corporation could have a non-profit section that owns social housing in the above ways, but they could not transfer it into commodity circulation because they would be owning it on behalf of the state. As we know, none of that safeguards property against privatization or selling out by a neoliberal government.

Misinterpretation: ratio of social housing to market of 60/40 is actually 20/80.

While this is true from the perspective of social housing creation, it is not exactly true for the question of tenure or the character of ownership.

From the perspective of social housing creation, the total-betrayal redefinition & reallocation of social housing to majority (relatively) higher income renters is consistent with Vision’s typical capitulation to neoliberal pragmatism. The govt isn’t funding housing so Vision will fund some low-income affordable units with internally generated subsidies. The main problems as I see them are: 1) this does not come anywhere near the need 2) works harder for the state’s illusion of ‘doing something’ than it does for people in need 3) supports a tax cutting austerity discourse by working on the illusion that the free market abides, and 4) can take up resources like properties that then cannot be allocated to the low-income affordable social housing so badly needed.

Social housing creation through zoning was never the demand of the DTES low-income caucus exactly for this reason. They know low-income and working class communities need tax-based investment in social housing with regular housing programs that do not intermingle or depend on market logics.

The Caucus wanted anti-gentrification zoning to stop gentrifying developments. And from this point of view 60/40 is significant because it is a state intervention against the free market. As Karen Ward said at the DTES Plan council meeting last night, “60/40 bucks the trend of letting the market alone shape a community’s future.”

I believe 60/40 policy will disincentivize market interest in the DEOD for two main reasons:

1) No strata allowed: 60/40 will have a significant effect on the real estate market in the DEOD because it places steep qualifications on developments and sets rules that limit forms of tenure. While it does not outlaw private ownership in the DEOD (which I would favour), it does outlaw strata property development (above a simple 1-storey development, which does not typically accommodate strata divisions). So while lots can be bought and sold, there is little to be gained through massive lot combinations and redevelopment and redivision through strata – which I believe is a major threat to the DEOD because of the historic depression of property values there. And;

2) Majority social-housing-FORM of tenure. While the PRICE of social housing is paramount for low-income community concern, and for social housing to be worth anything as a solution to homelessness and the housing crisis, the property FORM is more significant as a tactic of state intervention against the real estate market. With 60/40 zoning (and even with a redefinition of “social housing” that excludes low-income people) 60% of the units in a building are still withheld from commodity markets: they are suspended from capitalist exchange and act as interruptions and obstacles within the currents of commodity exchange.

Some P-3 projects will be able to overcome these obstacles, as the Atira building at the bottle depot site seems to be doing nearly exactly (I suspect 60/40 was largely based on the Atira proposal). But that is qualitatively different than the condo development spree happening in Chinatown and which will definitely be happening in the rest of the DTES after the Plan goes through. Our attention needs to be on these other sub-areas and on the rest of the city with 60/40 held up as a positive example of a necessary state intervention against the free market. We need more and stronger versions of the same.

I believe that a primary thrust of the fed and provincial government neoliberal drives to get rid of social housing as a social and economic category is to bring all property under the logic and within the reach of the capitalist market. Alongside the Flanaganist drive to introduce (something like) fee-simple property ownership on reserves, the accumulation of socialized housing forms by the market in a general sense would amount to a great accumulation of wealth for the land owning/trading monopoly corporations.

Thanks Mainlander for offering a space for such an exchange.

Ivan
2

Nicholas Ellan on March 14, 2014 at 10:53 pm

Private owners of SROs are perfectly capable of continuing to empty out existing housing in the DEOD, especially with the ongoing cooperation of government. SRO conversion is a lingering issue in the plan and will prove an effective means of hollowing out these anti-gentrification commitments from within. This issue is compounded by the lack of protections against retail gentrification. How long does an SRO have to stand empty before City Hall endorses its wholescale conversion? Historically, five years or so. As surrounding areas gentrify, foregoing welfare-rate rents in favour of a big payday down the line will become increasingly appealing to private owners.

Social housing provided under 60/40 (assuming it provides any, and doesn’t simply block development) will not come close to replacing these continuing losses of SRO units. Is supporting 60/40 because it’s a market intervention worth accelerating the slow death of these marked-based affordable units?

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