Sunday, May 27, 2007

How's the Planning?

Victoria has a long-held and aptly-earned reputation of a community catering to the newly-wed and nearly-dead. In a recent (how?) Q&A published by the city, officials tried to dispel that "myth" with this response:
"Newly wed and nearly dead" no longer accurately describes our city. Slightly more than 43% of residents are single; the average age of all residents is 42.6 years.
If that truly is the case, are city planners and politicians making good choices when it comes to building housing for residents already here? Or are we building housing meant to attract the kind of residents we want to come here for the long-term sustainability of the city?

This city has some long-standing chronic issues that will not go away. Namely its fixation with homelessness and harm-reduction drug strategies. Granted, in the big scheme of things, these are relatively minor statistical issues with a ridiculously loud footprint. I do not mean to downplay the significance of these issues, I'm simply suggesting that the true number of individuals that these strategies serve is relatively small compared to the number of people who go under-served by the city to which they pay taxes to. Or more accurately, the city to which their landlords pay taxes to.

Victoria is fixated on density right now. Geographically, it is a relatively small parcel of land. And accurately too, they just aren't making any more of it. So buildings must go up and not out. Fair enough. But we do have height restrictions, and we should. We also have a fixation on urban dwellings and revitalizing the north end of downtown. As we also should. But are we building the right dwellings for the type of people we have here?

I think its important to assume that the old adage, if you build it they will come is patently false. The reality is people are attracted to living in Victoria. It is the mildest climate in Canada without question. We also have one of the lowest unemployment rates. But what kind of jobs are we offering? Or more importantly, how much are they paying? And are we actually building places for people who come here to work, or just people who come here to retire?

The city itself continues to publish this number as the average family income in Victoria: $56,179. It's a 2003 number that is lower than the provincial average and the CRD average. Let's assume that number has grown with inflation by about 2.5% per year. Now its just a few pennies over $60,000. That's average, not median too. And it includes those rich retirees that developers seem so fixated on.

Housing. Given the current costs, few people can afford more than a condo in Victoria. That's what they're building though, so we should be good right? Except there isn't a new condo development in Victoria available for under $300K. $60K does not a new condo buy. So these "average" people will have to rent. Good thing that Victoria doesn't approve any developments with rental restrictions anymore.

Again the city uses dated numbers, in this case 2004, for its publication. We'll factor rents went up with inflation: now that $750 for a 2-bed apartment is $787. I question this. I doubt very many people have this rent anymore. Rents are limited to 4% increase per year. My guess is most landlords in town, in this market run up have increased their rents to that limit, but much more if their suites became vacant in that time too, because there are no limits to vacant suite rental increases.

This town is not building housing for people here. It is building houses for people there. Where "there" is, is anyone's guess, because I don't think the city has a clue when they approve a development. Developers hire marketers, marketers figure out where to advertise, but in the end, it's the buyer that decides where "there" was, and no one else.

If this town wants sustainable growth, then it needs to address housing affordability issues. This means we need to densify, but it also means we need to demand developers drop the "luxury condo" bullshit and return to building the types of buildings that went up in the 70s and early 90s, minus the leaks. But until the buyers stop demanding the granite counter tops and gold-plated fixtures in their 485 SF condos, this trend will continue with death and taxes, and may only get worse and not better.

5 comments:

JMK said...

Hi HHV

Interesting topic!

I like Baro's comment in this thread over on vibrantvictoria.ca. He argues that affordability should not be mandated. The market will tend to make older buildings cheaper than newer shinier ones. For instance, compare the price-per-square foot of Sutton East or West to the Belvedere or Astoria. What should be done is that new buildings be held to strict building codes that ensure their durability so they are not torn down in 50 years. If properly done, there will be more availabilty at all affordability levels. I don't think the best approach is to tell developers they must take a loss on a certain percentage of the buildings they put up in order to incorporate "affordable" units. That just discourages development of quality structures, and in the long-term reduces the number of units, driving up prices.

Ditto for rent control. Sounds nice, but simply discourages people from making rental units available.

Anonymous said...

Its funny but living where I live there are many retirees. I have heard many say they moved here thinking the weather was better and were shocked that it rains 6 months of the year.

Interesting...you would think people would do their research.

I still don't think retirees can hold the city together. What will it be? You will have the wealthy retirees and the people that serve them?

hhv said...

I don't disagree with much of Baro's statements. I do think though that the focus of developers on selling condos as opposed to building rental units has nothing to do with profits. Developers build and sell. Few build and rent anything. REITs would buy units, nay whole buildings if the rental income made off of residential made it economically feasible to do so.

The problem is that the city is fixated with the developer rather than the REIT (or private RE developer on large scale with rental buy and hold attitude). If say incentives for those said investors existed in non-peak periods to come in and develop/build rental units we would see an increae in the availability of affordable rental units.

Would this take the pressure off of the low-end stuff we're looking to buy? Not likely. The rental markets and RE markets are different beasts. Sure they're slightly interconnected, but real rents are not related to real property values in a dollar for dollar kind of way.

I also think the current BS of the city forcing devlopers to build 'mix' into their developments will only create problems for homeowners of these stratas down the road. What is needed, is genuine FTB-type condo/townhouse developments that provide quality without the bells and whistles that drive-up prices.

Ask a car salesman what he'd rather sell: a BMW or a Kia... the commissions are better on the Beamer lot I'm told.

The problem is, it's an economy of scale thing... if developers had incentive to create purpose built projects aimed at FTB, maybe they'd do it?

Anonymous said...

hhv

When we bought our BMW here in Victoria the salesman was on salary only, no commissions which is probably why it was such a pleasant car buying experience.

I don't know if that is still the case though.

Anonymous said...

It comes down to supply and demand. Supply is restricted through various means. ie: 1) The city, through its zoning and bylaws restricts supply artificially (or at least is a bottle neck) 2) the shortage of trades makes construction more expensive (this is due to booming alberta, lack of interest in trades for maybe a 10 year period, immigration's focus on skilled immigrants with a univ. degree instead of a trade (unlike in 60s and 70s)).. 3) neighbourhood associations too concerned with keeping the status quo in their area and shoot down many new higher density developments...
4) you get the idea, there are many reasons.

Once the market get's more supply than demand, prices SHOULD flatten or drop a little .. (or many a lot like many here would like) rents should follow the same trend too. So it is a waiting game that Economics 101 can explain (supply & demand) but no one can predict when it will turn.



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