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Was Vision Vancouver ‘Addicted’ to Selling Rezoning?

The city has become increasingly reliant on developer cash, and deals are secretly made. What’s this all added up to?

By Christopher Cheung 1 Oct 2018 | TheTyee.ca

Christopher Cheung reports on urban issues for The Tyee. Follow him on Twitter at @bychrischeung.

Has city hall under Vision Vancouver’s rule become too “addicted” to the developer money it reaps from rezonings?

When the City of Vancouver approves a developer’s rezoning, it aims to capture 70 to 80 per cent of the uplift in land value created by that rezoning through “Community Amenity Contributions,” or CACs.

The rationale in part is that the developer should help pay for the amenities needed by new residents moving into the area. The contributions take the form of a park space, a community centre, affordable housing — or cash paid to the city.

Rezoning approvals should be motivated by how a project serves a changing city, from population growth to new employment opportunities, and the collection of CACs is a response to accommodating that change. Rezonings should not be approved if a project is deemed inappropriate for a site.

But the city’s increasing dependence on cash contributions to fund capital projects has drawn criticism and become an election issue.

For developers, CACs gets them the density they want and sometimes result in a more attractive project, for example, if a new library branch on-site is part of the contribution. For the public, CACs capture a share of the increased profits from rezoning to pay for amenities that would otherwise require tax dollars.

It sounds win-win, but critics of the tool’s effects in recent years come from across the political spectrum. Critics say that Vision’s desire to reap the revenue from rezonings has led to a willingness to approve projects despite negative effects on communities.

On the right, the Non-Partisan Association wants to “stop the practice of city planning based on developer cash contributions.”

On the left, mayoral candidate Kennedy Stewart says more “certainty” is needed for the tool because the city negotiates what developers pay.

On the centre, council candidate Raza Mirza of ProVancouver wrote in June: “the municipal politician and planning department often become addicted to these one-time revenue opportunities and constantly need to generate new rezoning and construction activity to raise new revenue.”

And plenty of planners over the years have echoed the word “addicted” in their discussion of city hall’s attitude towards CACs.

Density for sale?

Ray Spaxman, Vancouver’s revered chief planner from 1973 to 1989, says that CACs have become “a bit like selling density.”

Discretionary zoning was used during Spaxman’s time at city hall, given to developers who could demonstrate that a project would benefit the community and who would provide a percentage of the increase in land value to fund local services.

But in 1989, after he left, CACs were formally created and standards established.

The city decided that it would be fair for a developer to contribute 70 to 80 per cent of the uplift in land value created by the rezoning. This is negotiated between the developer and the city behind closed doors.

Vancouver is famous for its livable density — it’s part of the style of city building that came to be known as “Vancouverism” — and CACs are a major ingredient of the recipe. The parks, seawalls, community centres and childcare around False Creek and Coal Harbour downtown are CAC legacies.

Outside downtown, CACs paid for the Collingwood Neighbourhood House, the Kensington and Champlain Heights libraries and the affordable housing, park and school on Arbutus and 12th Avenue.

Vision Councillor Raymond Louie, who chairs the city’s finance and services committee, said that people who complain about CACs often forget about the amenities they paid for.

Without CACs, “it means you don’t get them, or taxes go up,” he said. “I think this ensures that the development community is appropriately paying their fair share.”

The city’s website has annual CAC reports from 2012 to 2016. Of those years, 2014 saw the largest amount of public benefits secured through additional density at $234 million, with more than half of that coming from the rezoning of Oakridge Centre.

“Let’s face it, with the downloading that has occurred from the federal and provincial governments to the cities, we ask our developers to do a lot,” Vancouver’s former planning chief, Brian Jackson, told the Vancouver Sun in 2012.

But Spaxman says the tool has become “suspect” over time.

“The formula shouldn’t be people adding density under the demand for amenities,” he said, something Brent Toderian, the city’s chief planner from 2006 to 2012, described as “the tail wagging the dog.”

The tool was not intended to be a way for the city to extract every ounce of value from a developer seeking a rezoning to get revenue or to pay for an amenity that it wants, Spaxman said.

Public amenities are traditionally paid for through taxes. But if you turn to the market to pay for them via CACs, Spaxman said, “it encourages people to build bigger to get more profits.” And because CACs are generated through rezonings, city council approves them.

That puts councillors in a “serious conflict of interest” when voting on these projects, Spaxman said, because they have to consider “millions of dollars of value that would accrue to the capital budget of the city.”

Developer cash ever increasing

The centre-left Vision Vancouver party was created in 2002 when a number of councillors (including Raymond Louie) left the civic party COPE, which is more left than Vision on the political spectrum. Vision has maintained some progressive values, but its moderate positions on taxation and development have led pundits to align them closer to the federal Liberals than the NDP.

Many citizens view the party as being too “cozy with developers” and a July 2018 survey by Research Co. found that 57 per cent of Vancouverites believe that developers have too much control over city council.

And throughout Vision’s tenure, the City of Vancouver’s capital plan has had an increasing dependence on development contributions from CACs and development cost levies, also known as DCLs (fixed rate charges collected from new developments mainly for essential infrastructure like sewer, water and roads).

In the 2012-2014 capital plan, development contributions totalled $87 million in a budget of $702 million, or about 12 per cent.

In the 2015-2018 capital plan, development contributions totalled $366 million in a budget of $1.085 billion, or about 33 per cent.

In the 2019-2022 capital plan, development contributions totalled $1.046 billion in a budget of $2.8 billion, or about 38 per cent.*

Louie said the larger dollar amount reflects the fact “there’s more development in our city.”

But Spaxman said those rezonings are supposed to be decided by council for the benefit of the people. “And when you have a strong majority [on council], you don’t really need to pay attention to the people.... It means that Vision can get very bold and anticipate what it wants to do and move things through.”

One such development was the rezoning of 508 Helmcken in Yaletown, a 36-storey mixed-use highrise of mostly condo units.

In March 2013, the city’s Urban Design Panel unanimously voted against the project, feeling that the “rather bulky” building was “dominating” the nearby Emery Barnes Park and that “there might be too much density.”

The panel reportedly “reluctantly” changed its mind the following month after an alleged “extraordinary intervention” by the planning director and minor adjustments to the project.

There was another roadblock in January 2015: a B.C. Supreme Court decision halted development of the project over a flawed public hearing process, saying that a public hearing “is not just an occasion for the public to blow off steam.”

However, three months later, council chose to approve the “dominating” building after another public hearing.

The $25-million CAC for the project went toward the construction of New Jubilee House, with 162 low-end-of-market and shelter-rate units.

For critics, 508 Helmcken highlights the risk council can be swayed to ignore the urban design arguments against a development by the prospect of funding for needed capital projects.

‘Go big and cough up lots of CAC, or go home’

The president and CEO of the Urban Development Institute, Anne McMullin, is not a fan of how the city negotiates CACs. She calls the calculation process a “deep, dark hole.”

“It’s different developer by developer,” she said. “It’s different project by project.”

For example, it has been reported that the city may use different timeframes to calculate the increase in land value from rezonings.

“You didn’t know exactly what you were getting into,” said McMullin. “The CAC process was really about ‘Let’s build the building as big as you can and extract the most money’ rather than ‘What is good planning?’.... This is the way the process has gone on under Vision.”

Patrick Condon, a professor of urban design at UBC’s School of Architecture and Landscape Architecture, put it this way in a 2014 piece he wrote for The Tyee: “The rules for development in Vancouver appear to have become: Go big and cough up lots of CAC, or go home.”

The NPA housing platform has said that the opacity of the tool has created “one-off and sweetheart deals with developers.”

Other municipalities in Metro Vancouver also have policy tools to capture land value lifts from rezonings for public benefit, but they have fixed rates — unlike Vancouver’s negotiated rates and densities in some cases — based on neighbourhood plans that outline local needs and density limits.

The majority of Vancouver’s rezonings and associated CACs are informed by areas plans and public benefit strategies that outline local needs, permissible density limits and developer contribution expectations, according to Chris Robertson, assistant director of city-wide and regional planning.

McMullin would like to see CACs go in this direction because it creates more certainty for the development process. It also creates more certainty when purchasing land because realtors often price land based on “development potential,” even if that piece of land hasn’t yet been rezoned.

The City of Vancouver communications department said via email that, over the past five years, it has indeed been moving towards more fixed rate CACs “to increase certainty and reduced processing time.” Currently there are 27 distinct areas of the city where established pre-set contributions have replaced negotiated CACs, the department said.**

But in a June 2018 interview with StarMetro Vancouver, planner Brent Toderian said that municipalities with fixed rates often leave “hundreds of millions” on the table. Low fixed rates are usually set by municipalities to ensure that developers don’t abandon projects.

Councillor Louie said that Vancouver’s negotiated approach helps the city be “more respective to the exact environment that particular development is in.”

“We get the most up-to-date information on the market and we negotiate the best deal for the City of Vancouver, which is the residents of Vancouver, the citizens,” he said.

Fans of Vancouverism would agree, because this has produced great results for the redevelopment of the downtown waterfront from industrial land.

“It does take some time and it’s complicated,” Louie added. “Oftentimes there’s a wide delta between what the city believes is appropriate and what the development community believes is appropriate.”

One side effect of this negotiated approach is the creation of a market that’s friendlier to big developers with the expertise to negotiate CAC rates with the city and the capital to wait while their land sits there.

“It reduces competition,” said McMullin. “The only ones who really can are the big ones who can hold out.... The majority of developers don’t operate in the City of Vancouver.”

The prospect of rezoning has led to land assembly and driven prices to unforeseen highs, especially around Vancouver’s arterials. Vancouver’s hot housing market helps fuel this construction.

All this shuts out smaller developers, smaller projects and erases the human-scale livability of the city as the market compels big projects.

Sold short in the name of ‘affordability’

Zachary Hyde, a PhD candidate at the University of British Columbia, said that by relying on CACs to fund affordable housing the city has made social well-being “dependent” on private, for-profit developers.

“This makes social benefits contingent upon increases in density and profitability,” he said. Hyde has been studying the increasing use of public-private partnerships to produce services like social housing in North America.

CACs played a big role building affordable housing in an era when the provincial and federal governments stepped away from the responsibility.

“With the constraints on funding for housing from higher levels of government, Vancouver City Hall has been desperate to ‘capture the value’ from extra density but have done so at the expense of design considerations and with little forethought for how the density will affect surrounding areas through increases in land value and gentrification in neighbourhoods like the Downtown Eastside,” he said.

Hyde recently published a paper in academic journal Geoforum called “Giving Back To Get Ahead”, which looks at how tools like CACs make developers look altruistic when offering the city a cut of their profits, while downplaying the symbolic or financial benefits they get in return.

Under Vision, CACs took on another responsibility in Vancouver’s crisis — creating rental housing.

Jean Swanson, the well-known poverty activist running with COPE for city council, has been speaking out about how the Vision government changed the city’s definition of “affordable housing” to include market rentals.

“They’re using the popularity of this term [affordable housing], but it doesn’t apply to lower-income people,” Swanson said.

The City of Vancouver now calls market rentals “for-profit affordable rental housing,” and creating market rental units can be counted towards a developer’s CAC contribution.

Louie defended this by saying that “market [rental] housing is certainly [a] more affordable type of housing than ownership” and that it’s an important part of the spectrum of housing needs that a “complete city” needs.

But there’s a tradeoff. Using the funds for rental subsidies, for example, means “amenities such as parks, recreation, daycare, schools and public art will need to be fully funded by capital planning,” Elizabeth Murphy, who used to work at the city’s housing and properties department, wrote in the Vancouver Sun last year.

“Generally, amenities are not being adequately implemented in areas that are up-zoned and waiving development fees will only add to that problem.”

The city also does not provide information on how much of CAC requirements were satisfied by including market rental construction in projects.

Westbank’s Vancouver House — a luxury mixed-use project designed by Danish “starchitect” Bjarke Ingels and mostly built on former city land that was sold to the developer — is one project where this question arises. The project was approved in 2013 and rezoning increased the allowable development from 276,515 to 709,477 sq. ft. Vancouver House contains 407 condo units and 98 market rental units, which are owned by the developer and not the city.

After Westbank’s contribution in creating market rental units and money towards heritage conservation, the CAC for Vancouver House ended up at $10 million. One of Vancouver House’s penthouse condos was recently re-listed for $10.899 million, raising the question of how the city calculates capturing 70 to 80 per cent of the increased land value from rezoning through CACs or whether it even reaches that target.

City of Vancouver communications said by email that the “secured market rental” had a mitigating impact on the CAC and that the “pro forma inputs” then were “fundamentally different” from now. (You can view other rezonings from that year here for comparison.)

Murphy is not a fan of this approach to encouraging rental housing construction.

“Rental subsidies are best done through provincial and federal programs,” she said. “The city’s tools are limited, and density bonusing has other unintended consequences that can make the problem worse.”

But unfortunately for CAC critics, the tool remains extremely enticing for cities that want amenities but don’t want to raise taxes.

“An alternative is hard to find,” acknowledges Spaxman. “But it needs serious and continuous evaluation, and it raises the whole spectre of what is transparency in government.”

Until the city changes its approach to CACs, the development paradigm in Vancouver will continue to be that bigger is better: bigger developers rule the game, bigger projects mean bigger profits, and this all leads to bigger revenue boosts for city hall.

*Story clarified Oct. 5 at 4 p.m.
**Story corrected Oct. 5 at 4 p.m.  [Tyee]

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