Metro Vancouver says rising construction and financing costs have doubled the anticipated budgets of at least two affordable housing projects since being approved in 2020.
The 122-unit The Steller apartment in Burnaby has seen its anticipated costs rise from $45.5 million to $93.9 million since the Metro Vancouver housing committee approved the original concept in October 2020. Meanwhile, the 174-unit The Connection apartment, also in Burnaby, is now estimated to cost $120.8 million, as opposed to $63.8 million.
As such, Metro Vancouver needs the approval of the committee (and ultimately the board) at a meeting on Friday to proceed with the projects.
“The project cost increases (from the 2020 project budget) are attributed to market conditions causing significant cost increases across the construction industry, increased lending rates, as well as design changes from the concept phase,” states Lori Gray, housing construction manager in two project reports.
The bulk of the increases are due to construction costs, followed by financing and some design changes.
For The Steller, there will be a nine per cent increase in gross floor area and 21 per cent increase to parking areas to accommodate bike storage and locker rooms. For The Connection, there is a 12 per cent increase in floor area and addition of bike lockers and storage areas.
The Steller now needs approval for a $26.6-million mortgage and $22.5 cash contribution from Metro Vancouver. The project has confirmed $29.3 million in funding from BC Housing, $8.3 million from the City of Burnaby and the loan will come from Canada Mortgage Housuing Corporation (CMHC).
The Connection now needs a $43.5-million mortgage and $17 million cash from Metro Vancouver, following a $41.8-million contribution from BC Housing and $12.1 million from the City of Burnaby. Likewise, the loan will come from CMHC.
Those loans are more costly with the Bank of Canada’s interest rate hikes, from 0.25 per cent when the projects were approved to 5.0 per cent today.
Neither report states if the higher costs will impact renter subsidies or the anticipated rental rates.
In a separate report to the committee this Friday, Director Financial Operations Linda Sabatini states four housing complexes — Manor House (North Vancouver), Regal Place Hotel (Vancouver), Cedarwood Place (Richmond) and Crown Manor (New Westminster) — require re-financing this spring of mortgages that had been renewed for five years in 2019, when the bank’s rate was 1.75 per cent.
In order to save on commercial bank rates (prime rate is 7.2 per cent), Sabatini is proposing to renew internal financing but at a rate of 4.1 per cent.
The total balances outstanding for the four mortgages, at their renewal dates, is $4.8 million.
Sabatini has provided the board with the option to renew with outside lenders but warned of administrative fees and higher interest rates. Sabatini said the internal borrowing will not impact Metro Vancouver’s financial positions.
The committee will also consider a report from Jessica Hayes, acting program manager for housing policy, who outlines how Metro Vancouver staff are working with municipalities to cut approval costs for non-market housing.
Reducing development costs through grants and fee waivers continues to be a key objective, stated Hayes, as is more efficient rezoning, or “batch” rezoning, for multiple projects. Planners are also “exploring” standardized zones and guidelines, pre-reviewed designs for rental apartment development and incentivizing the off-site pre-fabricated construction industry.
