Results of Short Term Incentives for Rental (STIR) Program - - PowerPoint PPT Presentation

Results of Short Term Incentives for Rental (STIR) Program Presentation to City Council March 27, 2012

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Presentation Outline

Background and Objectives STIR Results Lessons

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What is STIR?

Council approved the Short Term Incentive for Rental (STIR) Program on June 2, 2009

2.5 year pilot to increase purpose-built market rental during the economic downtown Incentives offered

• DCL Waiver
• Parking Reductions
• Density Bonus
• Expedited Processing

Why is Rental Housing Important?

E ssential to a healthy and vibrant economy Essential workers and new workers from other parts of Canada or the world are often renters Allows modest income households to live in Vancouver Median income of renters is half that of owners Meets the needs of diverse populations Accommodates people at different stages of their lives (e.g. young people, unmarried, seniors, and recently moved)

Why is Rental Housing Important?

“ Vancouver’ s economy depends on attracting and retaining talent. Affordable housing of all types, including market rentals, is essential to the City’ s current and future competitiveness.”

John Tylee, Director of Policy and Research Vancouver E conomic Development Commission

Need for Rental Housing 1,500 new units of rental housing needed every year

Source: City’s Rental Housing Demand and Existing Supply, 2009

S

• cial housing

500 units Purpose-built market rental 500 units S econdary rental 500 units

(e.g. laneway houses, rented condos)

Need for Purpose-Built Rental Housing

Why purpose-built market rental?

 Long-term stability  Becomes more affordable over time

What about rented condos?

Rented Condos are important but have limitations

• 32%
• f condominiums (22,000 units) are rented
• limited security of tenure

– Owner can decide to sell at any time

• Uncertainty around future supply

– Dependent on condo supply and investment climate – S trata-bylaws and rental restrictions

• more expensive compared to purpose-built market rental

– 37% higher rent for 1-bedroom

Source: CMHC Rental Market Report, 2011

Rental Housing Challenges

rental units Market-rental Apartment Completions by Decade (occupied)

Limited new supply of market rental housing in recent decades

Notes: Rental units in the 1980s, 1990s, and 2000s includes both stratified and un-stratified rental units

Source: CMHC

50 60 117 192 196 4 50 100 150 200 250 2006 2007 2008 2009 2010 2011

rental units

Rental Housing Challenges

Market-rental Apartment Completions (Occupied) 2006 - 2011

Very limited new rental units constructed over last five years (average 150 units/ year)

Maj ority of rental units built in 2009 and 2010 were City initiatives 1 Kingsway: 98 units (City-built) Olympic Village: 119 units (policy requirement)

Privately-initiated market rental units City initiatives

E conomics of Rental Housing Why is developing rental difficult?

STIR incentives are intended to help overcome “viability gap” for rental projects

High land costs and competition with condominium developers make building purpose-built rental housing unfeasible in most cases

Land Value PSF Buildable $0 $40 $80 $120 Land Value Supported by Condominium Development Land Value Supported by Rental Development $100 PSF $25 PSF Land Value Per Square Foot Buildable for E astside Low-Rise

Viability Gap

Source: Coriolis Consulting (November 2009)

Illustrative E xample Only

Price that condo developers can pay for land Price that rental developers can pay for land

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STIR: Short Term Incentives for Rental

Purpose Purpose

• 2.5 year pilot (2009-11)
• Test City’ s ability to

enable Market Rental Housing construction without senior govt’ s

• Use opportunity of slow

construction market to attract activity to rental sector

• Increase construction-

related j obs

Incentives Offered Incentives Offered

• Parking reductions
• Density bonus
• DCL waivers
• Expedited processing

1. Increase supply of market rental housing 2. Respond to economic downturn and stimulate employment 3. S upport the City’ s sustainability goals by encouraging rental housing along commercial arterials, ‘ high’ streets, and transit centres 4. Encourage development of market rental housing for households that cannot afford to buy a home 5. Inform City’ s long-term housing policies by testing City’ s ability to enable Market Rental Housing without senior government assistance

STIR objectives

STIR Results

1142 Granville 3522 Porter 8495 Granville 1240 Howe 1650 Quebec 1215 Bidwell 2784 E . Hastings 1600 Beach 2730 E . 41st 8440 Cambie 1281 Hornby 1349 Granville 2215 E Hastings 1401 Comox 1418 E 41st 963 E 19th 3068 Kingsway 4320 Slocan 3701 W Broadway 1620 W 6th 2551 Kingsway 5656 Victoria

STIR Results Objective 1:

1142 Granville 3522 Porter 8495 Granville 1240 Howe 1650 Quebec 1215 Bidwell 2784 E . Hastings 1600 Beach 2730 E . 41st 8440 Cambie 1281 Hornby 1349 Granville 2215 E Hastings 1401 Comox 1418 E 41st 963 E 19th 3068 Kingsway 4320 Slocan 3701 W Broadway 1620 W 6th 2551 Kingsway 5656 Victoria

Increase supply of rental housing

New market rental units created

Approved 609 In Application 1,042 TOTAL 1,651 609 1042

400 800 1,200 Approved In Application

Approved In Application 9 Projects 17 Projects

rental units

New Market Rental Construction, Approved and “In Application” June 2009 – December 15, 2011

 STIR projects across the City

% TOTAL

Eastside 29% Westside 25% West End 23% Downtown 23% 100%

More market rental units achieved in concrete % TOTAL Concrete 70% Woodframe 30% 100%

 Projects in both woodframe and concrete

266 343 226 816

300 600 900 Woodframe Concrete Approved In Application 3 Projects 6 Projects 9 Projects 8 Projects

rental units

217 392 286 756 200 400 600 800

Mixed Strata / Rental 100% Rental

16 Projects 10 Projects

rental units

Significantly more market rental units created with mixed strata/ rental vs. 100% rental projects

 Two types of projects created:

Mixed strata/ rental and 100% rental

Approved In Application

2 bed 12% Studio 49% 1 bed 39% 3 bed

Less than 1% EXISTING RENTAL STOCK

• Bachelor 15%
• 1 bed

67%

• 2 bed

16%

• 3 bed

1%

Source: CMHC, 2011 Rental Market Survey

Majority of units are bachelor and one-bedroom

More bachelor and one-bedrooms compared to existing rental stock

550 units/year 80 units/year

200 400 600 1 2

Pre-STIR (2006-2011) STIR (2012-2014) Approved/In Application

New Privately Initiated Market Rental (Units/ Year)

rental units/year

E ffect of STIR on market rental housing production

Significantly more market rental units as a result of STIR

STIR Results Objective 2:

1142 Granville 3522 Porter 8495 Granville 1240 Howe 1650 Quebec 1215 Bidwell 2784 E . Hastings 1600 Beach 2730 E . 41st 8440 Cambie 1281 Hornby 1349 Granville 2215 E Hastings 1401 Comox 1418 E 41st 963 E 19th 3068 Kingsway 4320 Slocan 3701 W Broadway 1620 W 6th 2551 Kingsway 5656 Victoria

Respond to economic downtown and stimulate employment

 New jobs created

609 approved market rental units x 2.8 jobs per unit (multi-unit projects) = 1,705 new jobs created

In addition, the 1,042 market rental units in application could create an additional 2,900 new jobs

Note: Formula from CMHC

STIR Results Objective 3

1142 Granville 3522 Porter 8495 Granville 1240 Howe 1650 Quebec 1215 Bidwell 2784 E . Hastings 1600 Beach 2730 E . 41st 8440 Cambie 1281 Hornby 1349 Granville 2215 E Hastings 1401 Comox 1418 E 41st 963 E 19th 3068 Kingsway 4320 Slocan 3701 W Broadway 1620 W 6th 2551 Kingsway 5656 Victoria

S upport the City’s sustainability goals to encourage rental housing along commercial arterials, neighbourhood ‘high’ streets, and transit centres

 All projects located along arterials, neighbourhood

‘high’ streets, or transit centres

STIR Results Objective 4:

1142 Granville 3522 Porter 8495 Granville 1240 Howe 1650 Quebec 1215 Bidwell 2784 E . Hastings 1600 Beach 2730 E . 41st 8440 Cambie 1281 Hornby 1349 Granville 2215 E Hastings 1401 Comox 1418 E 41st 963 E 19th 3068 Kingsway 4320 Slocan 3701 W Broadway 1620 W 6th 2551 Kingsway 5656 Victoria

Encourage development of market rental for households that cannot afford to buy a home

Affordability was encouraged in following ways:

The City acknowledged that S TIR could not meet the needs of low-income households, who require senior government subsidies

Affordability under STIR

• Renting is inherently cheaper than owning
• “Modesty requirements” to keep unit sizes

small, finishings basic

• Limited private amenities

$1,821 $1,743 $1,050 $980 $950 $851 $1,290 $1,959

300 600 900 1200 1500 1800 2100

1215 Bidwell (West End) 1142 Granville (Downtown) 3522 Porter (Cedar Cottage) 8495 Granville (Marpole)

STIR Proposed Rents Monthly Mortgage Cost

86% higher 106% higher 118% higher 23% higher

Monthly Costs – Proposed STIR Rents vs. Home Ownership (Bachelor)

Ownership Assumptions:

• 10%

downpayment

• 5%

interest rate

• 25 year

amortization

• Property tax rate:

$3.59 per $1000 assessed value

• S

trata fees: $150/ month

Note:

• MLS

Average sales 2011 by area Monthly Housing Costs ($)

 Renting is a more affordable option than owning

$2,781 $2,430 $1,500 $1,575

600 1,200 1,800 2,400 3,000 3522 Porter (Cedar Cottage) 8495 Granville (Marpole)

STIR Proposed Rents Monthly Mortgage Cost

86% higher 62% higher

Ownership Assumptions:

• 10%

downpayment

• 5%

interest rate

• 25 year

amortization

• Property tax rate:

$3.59 per $1000 assessed value

• S

trata fees: $250/ month

Note:

• MLS

Average sales 2011 by area Monthly Housing Costs ($)

Monthly Costs – Proposed STIR Rents vs. Home Ownership (2 bed)

 Renting is a more affordable option than owning

STIR Results Objective 4:

1142 Granville 3522 Porter 8495 Granville 1240 Howe 1650 Quebec 1215 Bidwell 2784 E . Hastings 1600 Beach 2730 E . 41st 8440 Cambie 1281 Hornby 1349 Granville 2215 E Hastings 1401 Comox 1418 E 41st 963 E 19th 3068 Kingsway 4320 Slocan 3701 W Broadway 1620 W 6th 2551 Kingsway 5656 Victoria

Inform City’s long-term housing policies by testing City’s ability to create market rental housing without senior government assistance

DCL waiver Parking Reductions Density Bonus E xpedited Processing

All STIR units were created using only City-level incentives

9 approved projects 609 market rental units

DCL waiver

DCL waiver was the most popular incentive

$- $1,500,000 $3,000,000 $4,500,000

DCLs waived

$4.2 million 609 rental units

DCL WAIVER: $6,800 PER UNIT

100% take-up of DCL waiver

Parking Reductions

2730 E . 41st

Parking reductions lowered a proj ect’ s cost by $2,600 – $13,000 per unit

SUMMARY

SPACES REDUCED: 46 SAVINGS Per stall: $40,000 Total: $1.84 M AVERAGE SAVED PER RENTAL UNIT: $3,900

Parking Reductions – Savings Per Unit

Savings per Unit ($)

Over 75% take-up

$0 $12,632 $7,059 $7,000 $4,898 $3,958 $2,581

$- $2,000.00 $4,000.00 $6,000.00 $8,000.00 $10,000.00 $12,000.00 $14,000.00

1142 Granville 8495 Granville 3522 Porter 1215 Bidwell 2730 E. 41st 2784 E. Hastings 1240 Howe

Rental Units (106) (20) (49) (192) (31) (34) (40)

1 2 3 4 5 6 7

2730 E 41ST 3522 PORTER 8495 GRANVILLE 2784 E HASTINGS 8440 CAMBIE 1650 QUEBEC 1240 HOWE 1142 GRANVILLE 1215 BIDWELL

+67% +101% +43% +12% +185% +63% +39% 0% 0%

Density Bonus

Floor space ratio

Density increases range significantly depending on site, location, context, and urban design review (from 0.3 – 4.1 FS R)

 Over 75% take-up

Notes:

• 2784 E. Hastings and

1240 Howe did not request additional density

• For mixed strata/ rental

proj ects, the increase in density generated a number of public benefits (e.g. public art, heritage conservation) in addition to rental housing

FSR Existing 100% Rental Projects FSR Increase (%) FSR Existing Mixed Strata/Rental Projects

E xpedited Processing

 60% take-up by eligible projects

1142 Granville 3522 Porter 8495 Granville 1240 Howe 1650 Quebec 1215 Bidwell 8440 Cambie

2784 E . Hastings

2730 E . 41st

No Rezoning 22% ‘Expedited’ Concurrent 45% Regular Rezoning 33%

Concurrent Processing worked best for simple projects (e.g. 100% rental buildings )

E xpedited Processing

Concurrent S TIR Proj ects Processing Time

(from Rezoning Application to Development Permit Issuance)

Processing times ranged from 10 to 16 months

Months Council Approval of Rezoning

5 10 15 20 1142 Granville 1215 Bidwell 1650 Quebec 3522 Porter

STIR Projects Typical non-concurrent processing times

Majority were 100% Rental projects Rezoning at Council ranged from 6 to 8 months Time savings ranged from 5 to 8 months

What did it take for the City to make STIR projects viable?

Key Assumptions re Purpose Built Rental 100% Rental Projects

• Land value does not increase with additional density
• Rental housing is the public benefit achieved through

increased density

• Rezoning for 100%

rental would not have been permitted for a mixed strata/ rental proj ect

Mixed Strata/Rental Projects

• Land value increases with additional condo density
• Increase in land value triggers CAC
• For S

TIR proj ects, part of the CAC was used to create rental housing

E nabling rental unit creation – City role

$1.9 million (DCL waived)

100% Rental Projects

392 Rental Units

$4,900/unit

Mixed Strata/ Rental Projects

$2.2 million (DCL waived) $14 million (CACs allocated to rental) 217 Rental Units

$75,000/unit

Other CAC funded public benefits: Mixed strata/ rental proj ects

Other CAC funded public benefits

(public art, heritage, cash contribution, etc)

Rental housing 217 units $14 m 44% $17.6 m 56%

Public Benefits Mixed Strata/ Rental Projects

LE SSONS

1142 Granville 3522 Porter 8495 Granville 1240 Howe 1650 Quebec 1215 Bidwell 2784 E . Hastings 1600 Beach 2730 E . 41st 8440 Cambie 1281 Hornby 1349 Granville 2215 E Hastings 1401 Comox 1418 E 41st 963 E 19th 3068 Kingsway 4320 Slocan 3701 W Broadway 1620 W 6th 2551 Kingsway 5656 Victoria

Lessons

S TIR incentives significantly increased development of market rental housing during pilot Parking reductions work well – aligns with other City

• bj ectives (e.g. Greenest City)

Density is a key incentive – sensitivity to neighbourhood context is important Value for money in 100% rental proj ects significantly higher than mixed strata/ rental proj ects

Lessons: 100% Rental vs. Mixed Projects

100% Rental

• More rental units/ proj ect
• S

impler

• All incentives work well
• Market rental housing is

the primary public benefit

Mixed Rental/ Strata

• Less rental units/ proj ect
• More complex
• Not all incentives work
• Market rental housing

created as part of a public benefits package

NE XT STE PS

Feedback from Mayor’s Taskforce on Housing Affordability Positive feedback overall

• Continue to focus on transit-oriented development
• Recognized importance of S

TIR program on j ob creation

Suggestions

• Explore ways to encourage family units
• Ensure program parameters are clear
• Ongoing evaluation – feedback from
• ccupants and community

3522 Porter 1240 Howe 1349 Granville 2730 E . 41st

Report back with policy recommendations later this spring