Latest cost overruns may slash social housing in Olympic Village project
About 250 social housing units included as part of the Olympic Village project for the 2010 Winter Games may face the axe due to new cost overruns, according to a Vancouver city administrative report.
The cost of the affordable housing component of the project has risen to an estimated $110 million — a 70 per cent increase over the original budget of $65 million — says the report, released Monday night on the city's website.
Between $56 million and $77 million in additional city equity would be required to sustain affordable housing in the project, the report says.
"Staff must now review a number of options that can be brought to council for a decision related to the plan for delivering on the affordable housing commitment," it says.
The city needs to maintain "careful cost control" to prevent any further cost overruns, it says.
The report says the overruns stem from higher costs for exterior finishes, a tighter construction market, the project's firm deadline and an expansion of the floor area dedicated to affordable housing units.
The report asks the city's managing director of social development to get back to council by April 15 on financial and operational options for the affordable housing component of the Olympic Village.
Series of financial woes
The cost overruns for the affordable housing are the latest in a series of financial woes for the Olympic Village project, which is being built on undeveloped waterfront land in southeast False Creek, near downtown Vancouver.
Last month, the city of Vancouver received the go-ahead to borrow up to $485 million needed to complete the Olympic Village for the 2010 Winter Games after the province passed a bill amending the city's charter.
The city has to deliver the athletes village with 1,100 units of housing by November this year to accommodate up to 2,800 athletes and officials during to the Games, a report last month by city manager Penny Ballem said.
The village was supposed to include what would become, once the Games are over, 250 social housing units, 730 market sales units and 120 rental units.
The city stepped in after the project ran into financial problems. A New York hedge fund was to lend the $750-million budgeted for the construction, but it cut off payments to the developer in September.
Since cash advancements to builder Millennium Development Corp. from Fortress Investment Group stopped, the city had been covering construction costs with a $100-million bailout loan approved during an in-camera council meeting on Oct. 14. That money ran out in mid-January, so Mayor Gregor Robertson asked the province to change the municipality's charter to allow it to borrow to fund all remaining work.
Cost overruns have pushed the project cost to $875 million. The southeast False Creek development site is on city-owned land worth $200 million, putting the value of the whole development project at more than $1 billion.