Government’s Responsibilities for Affordable Housing

In our previous post (The Barriers to Build Social Housing), we described the need for a completely new mindset when it comes to building and funding affordable housing at every level of implementation – the government, the NPOs, and developers like us at ENM. In the next few posts, we want to lay out what we see as wise courses of actions for each of these sectors based on our own experiences and on recent studies and interviews with professionals. Today, we start with government.

The recent swings to the left at both the federal and provincial level have brought a definite increase in political will towards addressing the housing crisis. The NDP came to power in BC because of their affordable housing promises, and the release of their ambitious budget in February gave us some concrete policies to back up the campaign talk. They’ve pledged $6 billion to build 114,000 homes over the next decade, all targeted to renters and low-income people. This includes $378 million over the next three years alone for rental housing. While it’s always optimal to push citizens at any income level towards homeownership, the reality is that millions of people will remain renters throughout their lives. It is essential that government both builds and incentivizes the creation of new rental-only properties. We at ENM are currently building 191 new rental units.

The NDP has also created a new “HousingHub”, designed to bring together NPOs, developers and the government to find and develop available land for affordable housing. This is a very welcome development for addressing the lack of communication between these sectors in increasing the supply of new housing.

But that remains the key problem – we must increase the housing supply. If not, the prices simply have nowhere to go but up, especially in metro Vancouver. Housing prices increased 48% between 2010 and 2016 in Vancouver, and much of that is due to the age-old impact of supply and demand. After absorbing the new budget and thinking about its potential impacts, we’re skeptical that it will have a meaningful impact on developers like ENM’s ability to contribute to this huge demand.

The new measures do little to nothing to address the extreme difficulties developers face in funding development in new areas. Our project manager Daniel Greenhalgh has a lot of experience with these kinds of new developments, and he described these difficulties well. “When we propose to build in a brand new area, we’re required to provide not just the housing, but a lot of the services as well – the septic systems, the roads, as well as five acres of land for the school, the park, the pond. This is all just gifted to the township as part of the development cost. It comes out to about 12% of the total cost, which we have to lay down up front. These kinds of costs make it virtually impossible for mid-size developers like us to take on the kinds of socially conscious developments that the province needs. There are really only three developers in the Lower Mainland that are capable of dealing with that kind of cost for a residential development.”

For affordable housing developments to be feasible for companies like ENM, these kind of costs must be substantially met by the federal or provincial government. A recent survey by BC Housing of professionals in all relevant sectors suggested that the federal government create an investment fund to enable financing multiple projects. Perhaps part of this fund could be used towards helping developers meet municipal costs for affordable housing projects. Another option which is already being used by some municipalities in BC is to levy a small fee on all applications that could be put into a fund for the fees associated with affordable housing projects. Or better yet, these kinds of onsite and offsite costs could be waived or reduced to make it possible for developers like ENM to build affordable housing in new areas.