Will EcoDensity Make City More Affordable?
History, and high land values, say don't count on it.
Kits duplexes, $1.28 million each.
The EcoDensity initiative's primary economic argument is that increased density facilitates the creation of more affordable housing. It is worth quoting the argument here in its entirety:
"Density can contribute to affordability by adding more inherently affordable housing types and tenures (i.e., smaller units, rental units); if demand nonetheless outpaces supply, increasing supply helps to moderate the price increases. Density also has the potential to facilitate more affordable living arrangements (i.e., reduced car ownership, lower energy costs and mortgage helpers such as secondary suites, coach houses)."In addition, density can help provide deeper affordability through large scale re-zonings that can provide social housing. While increased supply is a necessary foundation to affordability, it cannot replace funding from the Federal and Provincial governments to achieve the most affordable units.
"In a built-up city like Vancouver, affordability is an extremely complex issue, with many factors outside City control. EcoDensity goals suggest balancing the new supply of housing with the retention of existing affordable rentals. One example is the City's recent "rate-of-change" by-law, which protects rental housing in apartment-zoned areas throughout the city where there is a large stock of older, affordable rental housing."
Based on the aforementioned points, one can see that density and affordability have a very tenuous relationship. Although it is true that density can contribute to affordability by adding a variety of denser, more affordable housing types, the issue is interdependent with many other variables -- lands costs, the housing market, construction costs, and house type, to name a few.
What drives up Vancouver prices
From the perspective of construction costs, densification in the form of low/mid-rise house types (such as duplexes, townhouses, three- and four-storey walk-ups) can be very affordable. This is due to the fact that such house types can be built using wood-frame construction and forgo the increased costs of going to reinforced concrete (almost double that of wood frame construction).
That said, in Vancouver, affordability (or lack thereof) is related more to land values than to building costs. As we all know, the densest "developed" cities in the world are also the most expensive places to live -- New York, London, Tokyo. Vancouver is no exception. In my most recent property assessment, land costs were valued at approximately 65 per cent of the overall worth of the property. Given that my home is fairly new relative to the surrounding houses, I imagine that this is within the average range -- if not slightly lower.
Vancouver's affordability slide
Locally, Vancouver has been steadily densifying since the 1970s and this has given the citizens no relief in terms of housing affordability. More affordable housing still lies outside city limits in lower-density neighbourhoods. An increase in land costs has been a large culprit of this trend as positive feedback loops regarding new construction and increased land values have created a city of $600,000 half-duplexes and given us the distinguished title of the "least affordable city in Canada." In this sense, densification seems to have exacerbated the problem of affordable housing.
This is no small deal since the lack of truly affordable housing has had many negative side effects in other cities with similar problems. For example, in Japan, families with children have been effectively forced to flee to the suburbs of Tokyo due to high house prices within the city and a lack of new housing stock that targets this demographic. Sound familiar?
Locally, it was recently released that the elevated cost of living in Vancouver is driving police officers away from the city -- with only 18 per cent living in the city -- and that keeping officers within the Vancouver Police Department is getting increasingly difficult. Not only is this keeping important service people employed in Vancouver a problem in itself, but this also has detrimental environmental effects as more people must travel farther distances into the city for work. I won't even bother mentioning the increasing homelessness problems that have developed over the past decades.
Funding is key to affordability
Historically, federal and provincial government funding has been what governs affordability, with municipal densification and land-use playing subsidiary roles. Governments and non-profit or co-operative societies build non-market dwelling units. Their operation and maintenance are necessarily assisted by government subsidies to ensure a continuing stock of affordable housing. Vancouver's "affordable housing" explosion occurred between 1947 and 1986 when potent government programs encouraged their creation. Funding has since diminished significantly and, consequently, so has the affordable housing.
Efforts by the city have had a negligible effect despite numerous attempts. For example, although the rate-of-change bylaw protects rental housing stock, it doesn't have the capability to prevent landlords from continually raising rents. This has led to a number of superficial upgrades and tenant evictions across the city. Recent issues along Main Street speak to this point.
The issue of laneway homes is frequently cited as affordable housing stock -- important as mortgage helpers and accommodating extended families. And although their usefulness can't be argued, defining these types of units as "affordable" is also troublesome because the costs of renting (or buying) such dwellings is still intrinsically tied to the land value of the lot on which it lies. So -- similar to the situation described above -- if land values continue to rise, so do the costs of rental.
'Outside city control'
As one continues down the passage, there is a diminishing sense of accountability, with the city finally conceding that affordability is ultimately "outside city control." The fact that there are no targets or definitions of "affordability" makes the argument all the more discrediting. Without targets, how can one judge if they have achieved their goals? With this in mind, having increased affordability as one of the main arguments for EcoDensity is truly a stretch and arguably one of the most troubling aspects of the initiative.
I don't think I would be doing the issue of affordability justice if I didn't address the conflict between the city's environmental and "high-quality" design agendas and the economics of lowering costs. I am the first to admit that city's desire to implement stricter energy performance regulations on new buildings is very noble. Not to mention that 'green' designers like myself serve to greatly benefit by getting more work.
But the fact is that higher performance buildings cost more money to both design and build. More specialists are required. Better systems and "eco" products must be purchased -- each at a premium. As the old saying goes, "you can't get something for nothing." Do homes perform better now than they did 50 years ago? Without question. But they are also exponentially more expensive.
Green shade of gentrified?
When dealing with development, it is naive to believe that developers altruistically take an economic loss for implementing these great environmentally-friendly systems: the costs are passed directly to those buying into their projects. This serves to directly increase construction costs -- over and above land costs, development fees, etc. -- and, ultimately, makes them even less affordable.
This is exacerbated by the fact that the regulations and codes that govern residential design and energy-performance as a whole focus exceedingly on purchasing costly mechanical technologies instead of lower cost options -- such as designing homes with windows sized and oriented to capture solar gain and maximize natural light.
This inherent conflict between "green," "high-quality" design and affordability must be carefully considered within the EcoDensity argument and clearly stated to the public. After all, what good is an "eco-city" if nobody can live in it.
Related Tyee stories:
- Vancouver Eats Its Young
City risks driving away its up and comers. - Who's Been Densified, Who Hasn't
It's time for 'equal density.' Vancouver's Westside should absorb its share. - Birth of EcoDensity Backlash
Angry residents demand voice in upped growth plans.
![[Tyee]](http://thetyee.cachefly.net/ui/img/ico_fishie.png){kind=small}
Luke Skywalker
28-02-2008
Quote:Locally, Vancouver has
It's not just a City of Vancouver problem, it's a Metro Vancouver problem.
One must be cognisant of the fact that Metro Vancouver is hemmed in by the ocean to the west, the mountains to the north, the border to the south, and the valley and the mountains to the east. Throw in tha ALR and well...
Single-family housing was relatively quite affordable for working/middle-class families post WW2 through the '70s, even in the City of Vancouver, based upon personal knowledge from my family's working class roots.
Land costs took off after the ALR was introduced in 1973, for obvious reasons, and Metro Vancouver's population also continued to grow adding further pressure to those costs.
Only during the early '80's interest rate spiral did those land prices decline due to lack of housing demand. I guess the current US sub-prime mortgage housing market is an example of what can happen to housing prices in a similar situation with oversupply and lack of demand.
Only during '85 to '90 and '92 through '93 did housing prices again spike in the region due to population in-flow. Only thereafter, until around 2002, did housing prices remain flat and decline due to a stable population base and low consumer confidence.
Heck, Metro Vancouver's first densification occurred in downtown Vancouver's West End, which was originally only single-family detached housing.
If that single-family housing zoning had continued to prevail throughout the region (with no higher density [eco-density or whatever ya wanna call it]), one could likely multiply current housing prices three-fold, or more, perhaps.
Again, land costs (as the result of the lack of availability of land) are instrumental in the price of housing, esp. in Metro Vancouver.
Grumpy
29-02-2008
EcoDensity is just another way..........
.......way to drive up housing prices, by greatly inflating land values. As it stands now, to own a house in Vancouver, one must be wealthy; inherit; or operate a grow-op or meth lab.
It will only get worse.
Luke Skywalker
29-02-2008
Quote:EcoDensity is just
Using that hypothesis, then down-zoning to single-family dwellings only will drive down housing prices, by greatly decreasing land prices!
ME2
29-02-2008
C'est la vie - particularly in Vancouver.
My uncle, who, excepting for five years overseas in WW2, lived in the same house on a Point Grey view lot for 90 years.
Inheriting the property in 1950, he paid taxes on it until 1999, at which time he had to sell it, since he could no longer afford the now exorbitant taxes.
He often noted to me that since his taxes had long ago paid for all the amenities he and his neighbourhood enjoyed - no new ones having been added for at least sixty years - it was obvious he was being taxed to finance growth so others could line their pockets.
A conservative to the bone, he wasn't so stupid as not to see what was going down.
The moral to be drawn? Get the hell out of Vancouver if you aren't rich or don't expect to become so.
Luke Skywalker
29-02-2008
Quote:Inheriting the
It's unfortunate that he was not made aware of the Land Tax Deferment Program, which would have permitted him to stay in his residence.
I know many elderly people who take advantage of same.
http://www.city.vancouver.bc.ca/corpsvcs/treasury/defer.htm
attaboy
29-02-2008
Vancouver is no London, New York or Tokyo
There are a couple of absurdities in this article. One is the comparison between Vancouver and cities that are 5 times its size or more.
Most of London has a population density twice what Vancouver's is. Manhattan's population density is 6 times what Vancouver's is. Anyone who has visited any Japanese city, nevermind Tokyo, would know that urban Japanese live in much more compact environs.
The second absurdity is that the author seems to believe that building density somehow creates demand. The fact is, if a lot of people want to live in a place because it is seen as desirable, and land in that place is scarce, then competition for that land will drive prices up.
Vancouver is a very small city geographically. There isn't much space. Outside of the downtown peninsula, density is pretty low by international standards. The factors that make Vancouver an attractive place to live -- natural splendour, a multi-racial population living in relative harmony, relatively low crime, etc -- aren't going to change any time soon. The simple fact is that the only way to improve affordability is to provide more housing to meet demand.
"Affordability (or lack thereof) is related more to land values than to building costs." Yes, and what drives up land values is that land is scarce. If you divide the land into smaller parcels, each parcel will be worth less than the original plot, thus making it more affordable.
Despite that, the author then goes on to talk about the increased costs of building "green" housing -- right after saying (correctly) that building costs aren't really a factor. Does he think Vancouver should instead encourage shoddy-quality housing that doesn't try to mitigate environmental effects?
There is no doubt that provincial and federal governments should put more money into social housing. But it's absurd to think that more social housing will come without increased density, just as its equally absurd to claim that increasing density, and therefore supply, will somehow increase demand. That makes no economic or rational sense.
There is a larger point that is unmentioned of course. Vancouver, like almost all North American cities, has suffered from a continental housing bubble. The bubble is about to burst thanks to the sub-prime mortgage implosion, and that will bring housing prices down everywhere. I imagine Vancouver's prices will remain buoyant for some time, but I would be shocked if suburban prices don't fall in the near future. That should ease demand for the urban core as more people take advantage of cheap suburban homes.
Booker
29-02-2008
Not sure about this
I suppose that if Vancouver was all single-family homes it would be just another "suburban" style town, fewer people would want to live here, and prices might be lower. It may be true that densification makes the city more appealing to those who enjoy an urban environment, and so it attracts more people to the core of the city, thus driving up prices. But, densification has been going on in the Vancouver core for 35 years and this recent upsurge in prices is only about 4 years old, so I don't really think the author has shown that densification is the cause of increased prices. As he says in the rest of the article, there are many causes of increased housing prices. Having less density certainly won't make things more affordable.
RickW
29-02-2008
Increasing Property Values......
.....is simply the market's way of encouraging people to purchase somewhere else. What skews this is a provincial government policy that actively encourages (forces?) people to move to the big city, instead of away from it.
clubofrome
29-02-2008
Blowing bubbles
When all the bills are due for this civilizations wealth creation bubble of the last few hundred years, the bubble will burst and it's the land that can grow food that will have value. The value of a home in the city will not be worth the paper it's written on. That's the track we're on as a species. The math and science don't lie. Constant growth in econmics is man made and is not sustainable and as we are now just coming to understand, not even desireable. Unless of course your bloodline dictates that your control 80% of the worlds wealth, then of course your entitled to all the fruits of our labour.
When will the light bulb go on for voters? That's unlikely to happen when were hearded like cattle into our urban feed lots and force fed a constant diet of propaganda and fear. The disease of society and all of its variations, pollution, cancer, loss of biodiversity etc puts our very existance at risk.
And you thought global warming/climate change was our top priority. It's not even on the top ten list!
smaller one
29-02-2008
eco density-Hah!
There are three basic necessities for life- water, food, and shelter. We do not allow investment and profit taking in regard to our water supply. Our food supply may have a very small component of investment(commodities). However, here in Vancouver the third necessity of life, shelter, is wide open to investment and huge profit taking. I don't know what the exact figure is, but I've heard that maybe 60% of the condo market is driven by offshore investments. This is NOT investment in Canada, as when property is flipped and the profit is taken, the money is removed from Canada. Can you imagine the uproar that would occur if we allowed this to happen with, say, our water supply?
I think that it's high time to start protecting our land, our housing, for ourselves and our children.
Unfettered capitalism IS driving our own away from Vancouver. I'm seeing this occur right now in my own family. My father, myself, my daughters, and my granddaughters were all born in Vancouver. However, my daughters, despite income levels far above what I ever earned, cannot afford housing here.
Something is wrong.
jimmy_laroux
29-02-2008
Luke Skywalker Quote:Only
Luke Skywalker
If by "stable" you mean not changing, this is false. From the GVRD website:
http://www.gvrd.bc.ca/growth/keyfacts/popest.htm
Surely the drop in interest rates had nothing to do with the rise in housing prices, right?