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?
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. 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 firstname.lastname@example.org and encourage them to adopt a 60/40 zoning with a definition of social housing that includes people on welfare and pensions.
 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