Vancouver: we need more apartment buildings

The City of Vancouver is proposing to make six-storey rental apartment buildings legal in C-2 zones, shown in pink on the map. This is a good idea.

Summary

We have a major shortage of rental housing across Metro Vancouver. There’s a mismatch between jobs and housing, and that’s driving up rents.

We have limited land, but there’s nothing stopping us from building more rental apartment buildings. The more floors you have, the less land you need for each apartment.

Vancouver has a lot of new condos and not many new rentals. New rentals help a lot: they’re more secure than renting a condo, renting is much cheaper than owning, and even when rents are high they lower rents elsewhere in the neighbourhood (via “vacancy chains”).

In general, people dislike change. People who live in Vancouver like their neighbourhoods the way they are. But if you ask everyone, most people support four- or six-storey apartment buildings in residential neighbourhoods.

In the city of Vancouver, council approves rental buildings one at a time. It almost always says yes, but it’s very slow. It makes sense for council to make the decision up front.

Background

Metro Vancouver has a shortage of rentals, causing an affordability crisis

This may seem obvious, but not everyone agrees. How do we know?

In BC, rents are subject to rent control: each year, your landlord can only raise your rent by inflation plus 2% (recently reduced to inflation plus 0%). But market rents - what you have to pay if you’re looking for a new place, when you’re competing over a limited number of available rentals with everyone else who wants to live here, and you’re all bidding up rents - are 20% higher than that.

The reason people move here, both Canadians and immigrants, is that there’s lots of jobs in Vancouver. (In comparison, Calgary has plenty of housing, and housing costs are much lower, but it’s harder to find a job.)

The housing shortage is bad

Because market rents are high, if you ever have to find a new place (e.g. your landlord sells), you’re in a very precarious position. Who can afford to suddenly pay 20% more for rent? For many people in this situation, they simply can’t afford to live in Vancouver - they’re basically pushed out.

Higher rents mean lower real incomes and savings, employers can't find workers, people get pushed out of the city - for anyone who isn't already a homeowner, it's a bad situation all around. Even for homeowners it's bad: they're okay, but where are their children going to live? If hospitals can't hire nurses and doctors, what's going to happen to the health-care system?

Do more vacancies actually reduce rents?

When there’s lots of vacancies, landlords need to bid down rents in order to attract tenants.

Some recent evidence from Apartment List:

New rentals help even when they’re expensive. Whenever a new rental building opens up, high-income renters move there from the surrounding neighbourhood. This creates more vacancies in the older, cheaper rental housing, which drives down their rents.

Matthew Yglesias rounds up some empirical studies:

  • Kate Pennington’s recent study of San Francisco is very precise: “I find that rents fall by 2% for parcels within 100m of new construction. Renters’ risk of being displaced to a lower-income neighborhood falls by 17%. Both effects decay linearly to zero within 1.5km.”

  • Xiaodi Li looked at New York: “For every 10% increase in the housing stock, rents decrease 1% and sales prices also decrease within 500 feet.”

  • Brian Asquith, Evan Mast, and Davin Reed look specifically at new market-rate housing in low-income neighborhoods in eleven cities and find: “New buildings decrease nearby rents by 5 to 7 percent relative to locations slightly farther away or developed later, and they increase in-migration from low-income areas.”

A study from Germany: a 1% increase in housing completions reduces rents between 0.4% and 0.7%.

Most people support apartment buildings in residential neighbourhoods

Public support is surprisingly high. When Burnaby ran a workshop with randomly selected residents, 70% supported four- and six-storey apartment buildings in residential neighbourhoods. A poll in Vancouver found similar results.

The reason this is surprising is that whenever there’s a public hearing on a rental building there’s always vocal opposition, but of course the people who attend public hearings are not going to be representative. Typically they’re the people who are most worried about change to the neighbourhood, often homeowners who are understandably fearful of anything that could lower the value of their properties (their biggest asset).

People are also concerned about public services, like transit and schools, being overloaded. As we get more people living in a neighbourhood, we also need to build up services.

Council almost always says yes in the end

But not always. A landowner in Shaughnessy proposed building rental townhouses, and council rejected it. Three years later, they’re trying again.

Another notable vote: the proposal to build a tower at Broadway and Birch, on the site of a former Denny’s. This only passed narrowly, with a 6-5 vote.

There seems to be some confusion between cause and effect, with progressive opponents of new housing saying that new rentals are driving up rents. It’s the other way around: when rents are high, people want to build new housing. New housing isn’t the disease, it’s the cure.

On the right, there’s an argument that high land values are what makes housing expensive, so the city shouldn’t be rezoning for higher density and thus increasing land values. Again, this is confusing cause and effect. Land value is how much a developer is willing to pay for land, which is what’s left over ("residual") after you take the selling price and subtract construction costs, profit, and the cost of getting approvals. In other words, high housing prices are what’s driving up land values.

What happens next

Legalizing six-storey apartment buildings in C-2 zones is one part of the Streamlining Rental proposal. A vote is expected in September 2021.

The map is from page 1 of this city presentation. The new process - requiring development permits rather than rezoning, shortening development time by about a year (!) - is described on page 7.

There's 11 votes on council. The four swing votes are Michael Wiebe (Green), Pete Fry (Green), Rebecca Bligh (former NPA), and Sarah Kirby-Yung (former NPA).

The four consistent Yes votes are Kennedy Stewart, Christine Boyle (OneCity), Lisa Dominato (former NPA), and Melissa De Genova (NPA).

The three consistent No votes are Colleen Hardwick (former NPA), Jean Swanson (COPE), and Adrianne Carr (Green).

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