Market forces alone are not going to rebalance housing availability and affordability in Metro Vancouver and other real estate hotspots around B.C. New ideas and innovation are needed to address those issues on a number of fronts. BIV has therefore compiled the following list of housing innovations and initiatives from other regions and other eras as an inventory of alternatives to the prevailing wisdom of how to address the ongoing housing crisis in this province.
Background: Cohousing originated in Denmark in the 1960s and involves a community of private homes clustered around shared space. It has started to gain traction in Vancouver in the past decade.
Vancouver’s first such project, Cedar Cottage Cohousing, had residents move into 31 homes on East 33rd Avenue between Victoria Drive and Knight Street in 2016. Two of those units are rentals, while the others are privately owned.
A more recent project is Little Mountain Cohousing (LMC), where residents moved into 25 privately owned units on Quebec Street last spring.
Pros: Amenities include common spaces, such as kitchens and dining areas, co-working spaces and shared rooftop decks.
LMC resident Lysa Dixon told BIV that the shared space makes all units more efficient.
Cons: LMC took six years to build, after the first future residents formed a housing corporation. One resident told BIV that the time-consuming process tied up capital for much longer than he would have liked.
One solution to that is in the evolving cohousing project, on Main Street, near East 41st Avenue. It is what some call “cohousing lite,” because instead of all the residents forming a development company and voting on incremental decisions, a developer manages the construction process and then sells units to future owners.
Vancouver’s Making Home proposal
Background: Vancouver city council passed a motion on January 26 directing staff to analyze a “making home” proposal, which would allow developers to build up to six homes on up to 2,000 single-family lots.
The expected proposal is that people who own the 2,000 designated lots would have the option of converting or redeveloping their large detached houses into up to six stratified homes.
Allowable building heights would rise modestly, while some new density would be incorporated into basement suites.
Pros: Mayor Kennedy Stewart said the initiative could lead to developers building 10,000 new homes.
Homeowners in the process could redevelop their properties to include the six units, sell five of the new units and live in the remaining one.
“This is a very important piece of creating middle-class housing options across all neighbourhoods in the city,” said Coun. Christine Boyle.
Academics also like the proposal.
“I just don’t see a case against this,” said Thomas Davidoff, the director of the University of British Columbia’s Centre for Urban Economics and Real Estate.
He said the program would be most attractive to someone wanting to tear down an old house.
Cons: Homeowners who like living in low-density neighbourhoods will have to adjust to having more neighbours. More density will require more nearby amenities.
Quentin Wright is executive director of the Mole Hill Community Housing Society. In the mid-1990s, advocates persuaded the City of Vancouver to save homes and add affordable housing in an area south of Nelson Park | Chung Chow
Mole Hill housing model
Background: The City of Vancouver started buying homes in the 1950s on Pendrell and Comox streets to eventually expand Nelson Park.
In the mid-1990s, advocates persuaded councillors to save the structures and add affordable housing.
The Mole Hill Community Housing Society now oversees 102 subsidized homes for people who are on welfare, 68 homes that are called market rentals but tend to have rents below current asking prices and eight residents in a group home for young people recently diagnosed with mental illness.
The site on Pendrell and Comox streets also has three daycare centres.
Pros: The initiative enabled Vancouver to preserve heritage-status housing on a full block on two streets. It also provides affordable housing for residents struggling to survive.
Cons: The innovation required public funding in the form of a nominal initial lease rate to the society, which then took out a mortgage to finance renovating the homes to heritage status. The society gets money from rents, but also needs annual provincial government top-ups to balance its budget. The alternative of selling the land and providing incentives for the private sector to upgrade the houses would have generated capital to invest in affordable housing on a different site.
UBC Professor Paul Kershaw wrote a report urging governments to annually tax home equity that is more than $1 million | Chung Chow
Taxing capital gains on primary residences
Background: Proposals to tax capital gains on homeowners’ primary residences have been around for years.
The federal Liberal government in 2018 considered and rejected a proposal to tax those gains.
Pros: The tax could help reduce home prices, University of British Columbia (UBC) professor Paul Kershaw told BIV.
This price correction is needed, he said, because housing accounts for about 20 per cent of B.C.’s gross domestic product, but produces only two per cent of the province’s jobs.
High home prices can also make it more challenging for businesses to recruit workers.
Cons: Kershaw said his biggest concern is that the tax would be unfair to some.
“If you say, ‘We’re only going to do a capital gains tax going forward,’ then you ignore all the wealth windfalls that have been baked into the system for everybody who has been an owner for the last several decades.”
Kershaw added that a capital-gains tax on primary residences would also be complex. New exemptions would likely be instituted to allow homeowners to exempt home-improvement costs.
Those kinds of exemptions, he said, “tend to be the way that capital gains are calculated.”
Annually taxing home equity valued at more than $1 million
Background: Kershaw is proposing that homeowners be charged a tax based on the value of their homes.
The concept is to apply the tax to home equity above the $1 million threshold in all owner-occupied homes.
The starting surtax would be 0.2% on home equity between $1 million and $1.5 million, 0.5% on equity between $1.5 million and $2 million and 1% on equity that is more than $2 million.
Taxes would be levied annually, with homeowners able to defer paying taxes until their homes are sold.
Those thresholds and surtax amounts could be tweaked, Kershaw told BIV.
Rented investment properties would be exempt because owners would have to pay capital gains taxes on the homes’ values when those units are sold.
Pros: Governments would have more tax revenue to allocate to building affordable and co-operative housing.
Kershaw also pointed out that most Canadians would not have to pay the tax.
His data holds that about 9% of Canadians owned a home valued at more than $1 million at the end of 2020, and that figure crept up to 13% by the end of 2021. Figures are higher than that in Metro Vancouver.
Too many people are using their homes as the equivalent of a pension, he said.
The value of Kershaw’s home value shot up by about $500,000 last year, while his pension at UBC from teaching for 17 years at the university is valued at $540,000, he added.
“In one year, my home wealth produced almost what my pension accumulation has been over 17 years,” he said.
“We can’t as a society want people’s pension planning through homeownership to be yielding that kind of return for their savings down the road – when it comes at the expense of people being able to have homes.”
If the federal government does not implement this tax, provinces could, Kershaw added.
Cons: It could be hard for governments to harness the political will to enact that tax, given what would likely be strong resistance from homeowners.
The company town
Background: In the 19th and 20th centuries, North America saw the rise of the company town: whole towns built by a company to house workers. Many were mining towns.
Some employers in cities with a scarcity of affordable housing are again starting to assume some responsibility for housing their workers. When Telus Corp. (TSX:T) built its new Telus Garden headquarters in Vancouver, it included a residential tower and offered employees discounts to buy condos. More recently Telus announced plans to develop a vacant property it owns in Nanaimo into 197 residential rental units.
In Kitimat, where LNG Canada built Cedar Valley Lodge, which will accommodate up to 4,500 construction workers, discussions are underway with local stakeholders about potentially repurposing the temporary work camp into permanent or emergency housing once the construction project is finished.
In the U.S., Amazon (Nasdaq:AMZN) announced it would provide $2 billion in loans and grants to “preserve and create” more than 20,000 affordable homes in American cities where Amazon employees work, and Microsoft (Nasdaq:MSFT) has committed $750 million to preserving or creating affordable housing.
Pros: There are already models where employers work with local housing authorities to address housing, said Penelope Gurstein, director of the Housing Research Collaborative at the University of British Columbia.
“You can look at the model of Whistler Housing Authority, which did that,” she said. “They brought together all the major employers in Whistler, and they’re contributing to the Whistler Housing Authority, where they’re building both rental and home ownership housing.”
Cons: If employers provided housing directly to employees, Gurstein said, there could be a risk of “creating a paternalistic relationship with their employees where employees will be afraid to voice concerns in case they are fired and lose their housing.”
Public housing for all
Background: In the early 1960s, when newly independent Singapore faced a chronic shortage of housing for a growing population, it took on the job of building homes, not just for the poor but for everyone. Today, more than 80% of Singapore’s population – rich and poor alike – live in government-built apartments, with Singapore achieving home ownership levels exceeding 90%.
While there is some limited private development in Singapore, most residential housing is built by the state’s Housing and Development Board. Singaporean homeowners buy government-built homes on 99-year leases.
Pros: Because the profit motive is removed when government builds housing, prices Singaporeans pay are estimated to be 20 per cent to 30 per cent less than what they would pay for comparable housing built by the private sector.
Cons: Singaporeans are required to contribute 20 per cent of their earnings into a special savings account; employers are required to contribute 17 per cent to be used towards the purchase of a home. Singapore’s universal housing approach may work in a state capitalist system, but might not work in a free market economy.
Purpose-built rental housing
Background: Canada’s housing policies have been largely designed to promote home ownership. But one-third of Canadians and more than 50 per cent of Vancouver residents are renters. Many Canadians will never be able to afford to own a home or will choose not to. Yet government policies and incentives continue to skew towards home ownership. As a result, less than 10 per cent of new residential developments in the last 15 years were rental units, according to a Queen’s University School of Urban and Regional Planning study.
Between 1961 and 1987, 267,000 purpose-built rental housing units were built in Canada, using tax incentives. Most of the three-storey walk-ups in Vancouver’s West End were built in that period. While municipal and provincial governments have developed policies intended to promote more purpose-built rental housing, Gurstein said the real push needs to come from the federal government in a national policy.
Pros: A national housing strategy geared towards purpose-built rental housing and based on tax policies and incentives has proven effective in the past in Canada in getting multi-unit rental buildings (MURBs) built.
Cons: The cities where MURBs are needed most, like Vancouver and Toronto, have the biggest barriers to development in the form of high land costs, property taxes and development cost charges. The program might not serve those in the greatest need of rental housing.
Publicly funded housing for the missing middle
Background: Publicly funded housing projects in B.C. have historically been aimed at low-income earners and supportive housing. But the shortage of affordable housing is so acute in Metro Vancouver that even middle-income earners are finding it next to impossible to live in or anywhere near Vancouver.
In the last provincial budget, the B.C. government earmarked $2 billion to build 9,000 units for the missing middle. The funding is to flow through BC Housing’s HousingHub. It will be used to provide low-interest loans to developers and community groups to encourage them to build new homes for middle-income earners.
Pros: By providing them with low-interest loans, the B.C. government expects developers will save on construction costs. Developers would be expected to pass on development cost savings in the form of lower rents or more affordable home ownership options.
Cons: The Fraser Institute says costly red tape is the fundamental problem in Vancouver’s inability to keep up with the demand for housing, and that adding 9,000 units to Metro Vancouver will not make a dent in affordability or vacancy levels. “Moreover, these units will be subject to the very barriers that prevent market rate housing construction in the first place.”
Background: Much of continental Europe – including, most notably, France and Germany – follows a model in which a plan at either the provincial, federal or even municipal level (through a public development entity) clearly outlines what can and cannot be built at a specific location.
Pros: “I wanted to double the size of my home in France, and it took me 14 days,” said Paul Cheshire, emeritus professor of economic geography at the London School of Economics in the U.K. “I looked at the plan to see what I can do, and then asked to do what the plan said was possible. They looked at it, said it is in accordance with the plan, so I can do it.
“In London, the same process going through permitting would take me as long as seven years.”
Cheshire noted that a document that clearly defines the goals and rules of housing development has been the foundation of continental European housing policy for centuries – allowing countries like Germany to largely bypass the elevated costs, delays in growing housing stocks and NIMBYism that permeate a permit-based system favoured by Great Britain and the Commonwealth, including Canada.
Cons: Cheshire noted that such a document would take time to draft and that the complications during a usual permitting process would have to be taken into account in creating the master plan itself.
In addition, he said, such a fundamental shift in housing-policy thinking would be hard to sell to a public used to a system based on permitting – which means the barrier to innovation is both psychological and political .
“Land policy is often so local and colloquial that often, only researchers understand that systems vary greatly around the world,” Cheshire said. “Some of them are working greatly; some aren’t.”
Removing parking barriers
Background: While the move has been pondered by many countries, the most notable comparison for Canada may be New Zealand. Starting in August, municipal planners in this fellow Commonwealth member must eliminate all requirements for builders to provide off-street parking in buildings.
Pros: The move applies to all communities with a population of more than 10,000 and eliminates a factor in boosting the cost (and lowering the supply) of new housing, said Alan Durning, executive director of the Sightline Institute in Seattle – a think tank that focuses on sustainability in the Pacific Northwest.
“[The off-street parking requirement] limits how much building you can put on a piece of land,” Durning said. “So what New Zealand did is a striking example of what’s being done in Portland, Seattle and Vancouver on a smaller scale.… It doesn’t say a building cannot have parking – that’s entirely up to the builder. Builders will do what they think customers want, and the result is they can build more units, fitting more apartments on a lot. Costs of construction will be lower, as well.”
Cons: The move would result in drivers paying more for parking – as the existing system is akin to “builders subsidizing drivers” – and Durning said a restriction on building off-street parking is most effective when compounded with a carefully managed street parking plan.
In theory, he added, such a development of density would shift people’s habits away from driving and toward walking, biking and public transit. The support network is needed to maximize effectiveness of the concept.
Shifting government jurisdiction over housing
Background: The elevation of housing development decisions beyond the municipal level to either public development corporations or a federal government agency. The detached public developer can then either directly build housing to societal needs or use budgetary incentives tied to a municipality’s population and housing unit stock.
Again, this approach is common in France and Germany. In France, development corporations owned by municipalities or provinces have the authority to select sites for redevelopment, which allows for densification in key urban locations that would maximize a city’s housing availability.
Pros: Yonah Freemark, senior research associate at the Metropolitan Housing and Communities Policy Center at the Urban Institute in Washington, D.C., said countries like the United States had many urban renewal authorities that would oversee adjustments to housing stock availability – and therefore keep high prices at bay.
Those institutions, however, fell by the wayside in the 1970s – although the current trend indicates it may be time to bring them back, Freemark said.
“I think there’s an opportunity here to do things differently. But we haven’t chosen to go in that direction. In France, it works; they have these developers than can go in and make investments on a large scale at the places where they are needed.… In the United States, there’s large disparity of where housing investments go.”
Cons: Again, with many ideas born elsewhere, the challenge is changing people’s thinking – both on a social and political level – according to Freemark. He noted, however, that the trend appears to be shifting. He said recent rulings in California’s courts that developers of affordable housing are exempt from local zoning restrictions are a sign that there’s more appetite for such moves.
But any major shift towards public development would be heavily opposed by developers, who would argue that government should allow the market to adjust and rebalance itself.
Retooling retirement real estate
Background: Any realistic solution, one leading analyst says, requires a delicate balance of different factions in the local housing issue debate.
“I think you are at a phase where you have to separate ‘use’ from ‘price,’ because all the folks who entered this market at this price will not be happy to see prices plunge by 20 per cent,” said Andy Yan, director of Simon Fraser University’s City Program and one of Vancouver’s top urban planning voices. “And yet there are all these people who can’t afford these prices, just to find a place to live.”
Pros: Something like a guaranteed old-age standard for return on home sales – which many people are using as a foundation for their retirement money – may cool down buying activity driven by the insecurities of how to pay bills after retirement, Yan said.
“A part of home ownership is based on how you finance your retirement. It used to be pensions, savings and house. For a lot of people now, the pension is gone, savings can be sketchy, so all you’ve got is the house…. Fundamentally, it may be going into an idea that everyone has a guaranteed retirement. Once you reach a certain age, you will be taken care of, and you will have a place to live.”
Under such a move new retirees selling their homes would be entitled to only a portion of the selling price – say, around $1 million, Yan suggested – but that amount is guaranteed.
“It may not fix [housing] prices, but deals with the outcome everyone buys their homes for,” he said.
Cons: Yan warned there is a slippery slope in the proposal. The current capitalist system, with enough regulatory intervention and redistribution of wealth, becomes socialism – which may not appeal to everyone.
But the alternative, he added, may also not appeal to people.
“It comes back to, what type of society are you building? Because where you are going isn’t that great.”
Expropriate Deutsche Wohnen
Background: A majority of Berliners voted last year in favour of a referendum that would force large landlords to sell their properties to the city government in a bid to reduce the cost of rent. This non-binding referendum proposed expropriating properties from landlords holding 3,000 or more units, representing as many as 240,000 apartments. The name of this initiative comes from the largest such landlord, Deutsche Wohnen, which holds more than 100,000 units in Berlin. Organizers want the government to pay below market rates for the properties and then rent the units at much lower prices.
Pros: The initiative, backed by strong public support, would drastically lower rental prices in one of Europe’s largest cities at a cost organizers say would amount to €8 billion ($11.6 billion), or €34,000 ($49,000) per unit.
Cons: It’s unclear whether the initiative is even legal under Germany’s constitution. Meanwhile, Berlin’s government has said the organizers’ cost estimates are unrealistic. Instead, the government pegs it as high €36 billion ($52 billion) or €150,000 ($217,000) per unit.
Background: The initiative from Australia’s federal government was introduced in 2018 to encourage retirees to sell their homes, downsize and free up housing stock for younger families. People 60 and older can sell their homes and make a AU$300,000 ($274,000) contribution to their superannuation, the Aussie equivalent of the Canada Pension Plan. Couples can make two contributions, which must be made within 90 days of the home’s sale.
Pros: Larger families looking to move into larger homes that might have unused bedrooms can gain access to more of the country’s housing stock amid low inventories.
Cons: Demand for housing still far outweighs supply even four years into the plan. Retirees have been benefiting from the program, but home prices still remain high in Australia.
Urban wealth fund
Background: Berlin and Copenhagen have been pursuing separately a strategy of consolidating publicly owned assets into a common investment and development mechanism, or what advisers at the Boston Consulting Group have described as an “urban wealth fund.” This innovation is meant to help cities manage their public assets better by tapping professional experts who are kept at an arm’s length from city politicians while at the same time follow the guidance of city mandates for housing. In Hamburg, this resulted in 12,000 new residential units in the city’s harbour district without having to tap taxpayers for support. Copenhagen’s urban wealth fund resulted in 33,000 new homes and generated a surplus that helped fund the extension of a subway line.
Pros: Such urban wealth funds do not require taxpayer dollars to support the development of new housing. Instead, they operate similar to private firms but are able to use municipal assets such as unused land or buildings.
Cons: City governments can issue general guidance on the funds’ mandates, but their arms-length nature means politicians may find themselves in less control of certain city assets.Heritage homes line 10th Avenue near Fraser Street in Vancouver. The city’s Making Home proposal would pave the way for greater density on single-family lots | Rob Kruyt
Kiwi zoning ban
Background: The New Zealand government introduced legislation last year loosening restrictions on densification within areas zoned for single-family housing in five of its largest cities. Zoning for detached homes that has kept larger buildings out of some neighbourhoods is essentially banned in cities like Auckland and Wellington. Instead, cities must now allow any existing parcels of residential land to be redeveloped into apartments or row houses. Local councils are not able to decline developments on most residential plots that include as many as three dwellings and up to three storeys. The initiative could result in the construction of 48,200 to 105,500 new homes in five to eight years, according to PricewaterhouseCoopers.
The move follows the 2020 enactment of a national policy that requires housing densification along public transit corridors. Under the New Zealand model, all cities would be required to zone for residential structures of up to six storeys within walking distance of rapid transit stations, a Brookings Institution report states.
Pros: This initiative passed with bipartisan support from New Zealand’s national government and is set to tackle the NIMBYism that has often stopped the redevelopment of some neighbourhoods.
Cons: The effort may not have much of an impact on surging house prices.
Background: The City of Los Angeles passed a new law in 2018 allowing for the conversion of motels into housing for the homeless, regardless of the property’s zoning. Earlier this month, an affordable housing developer earmarked US$25 million to convert a 119-unit motel in Anaheim into a social housing centre. The plan is tapping into funds provided by California’s Project Homekey initiative, which has so far awarded US$325 million to create 1,200 such units, allowing municipalities to buy and convert empty motels into housing.
Pros: The infrastructure already exists for the building themselves, lowering potential costs and requiring minimal renovations.
Cons: Neighbourhood groups have said before any such conversions are approved, the city government should be obliged to consider earmarking additional funds to cover an increased police presence, cleanups and other services in the surrounding area.
Background: Small clustered groups of houses or apartments around shared outdoor space like a communal garden, courtyard or a series of joined backyards.
Pros: Reduced carbon emissions, smaller footprint, lower costs and a stronger sense of community.
Cons: Shared spaces means reduced privacy and smaller living spaces.
3D printed houses
Background: Houses built primarily using machines that deposit material (concrete for example) layer by layer.
Pros: Reduced construction costs, rapid construction, minimal material waste and increased design flexibility.
Cons: Limitations on material that can used, a lack of regulations and building codes, and incompatibility with traditional engineering practices and blueprints.
Regulations, restrictions for short-term vacation rentals
Background: Many jurisdictions have limited short-term vacation rentals like Airbnb (Nasdaq:ABNB) or outright banned them to ensure that rental stock is used for housing and not tourism.
Pros: Increased availability of rental units, which should put downward pressure on rents.
Cons: Could reduce demand for new units, ultimately reducing the housing supply.
Increased federal control over zoning bylaws
Background: Federal jurisdiction over local zoning bylaws, and federal programs to encourage cities to increase housing density. Hierarchal zoning allows lands available in commercial and industrial zoned areas to easily convert to residential use but not vice versa.
Pros: Eliminating local zoning bylaws that limit housing through height and density restrictions increases housing supply, reduces housing prices and condenses construction time. Multi-use zoning allows for more flexibility and better city designs.
Cons: Reduced local control, high supervision costs.
Rental accommodation scheme
Background: Under a program in Dublin, Ireland, local authorities negotiate 10-year agreements with property owners in exchange for an eight per cent discount on market rents. In return, local authorities take responsibility for letting property and collecting rents. Rent is then determined based on tenant income.
Pros: Creates low cost affordable housing.
Cons: Requires public money to supplement private landlords. •