British Columbia

Does giving developers breaks to build rental units work?

To the wealthy developers, a sum like $1.5 million likely seems a pittance. But a $1.5 million discount, apparently mistakenly-awarded to one of Vancouver's best-known developers, has raised questions about a program touted for its ability to create rental housing in a region short on supply.

Critics argue Vancouver program creates tiny, expensive units; but supporters say Rental 100 works

Vancouver has adopted a program which provides developers with incentives to build market rental housing. Critics say it has resulted in tiny homes at exorbitant rates. (Ben Nelms/Bloomberg)

To the wealthy developers charting a course for Vancouver's future, a sum like $1.5 million likely seems a pittance. It's a figure that barely buys you into the city's red-hot multi-billion dollar real estate market.

But a $1.5 million break, apparently mistakenly-awarded to one of Vancouver's best-known developers, has raised questions about a program touted for its ability to create rental housing in a region short on supply.

'A very unusual experience'

The lawyer who flagged the irregularity — Nathalie Baker — argues the problem is symptomatic of a much bigger issue: the handing out of cost breaks to developers who deliver tiny units rented at exorbitant rates.

How will taxpayers see that as a victory?

"It needs to be overhauled to ensure that it's actually creating rental housing with some degree of affordability. And that doesn't mean it has to be subsidized housing," Baker said.

"It can still be for profit, but you're getting some measure of affordability and liveability out of these units."

The program in question — Rental 100 — gives developers incentives to build projects fully dedicated to rental housing.

Like many of Vancouver's planning programs, Rental 100 has its roots in an approach which sees the city attempt to use the financial mechanisms within its control to achieve its social goals.

That begins with development cost levies, fees charged to developers to offset public infrastructure — like roads, parks, day-care and community centres — needed to keep up with the pace of new building.

In 2009, the city introduced the Short Term Incentives for Rental (STIR) program. But STIR allowed developers to build a mixture of rental and strata units in their buildings.

In 2011, the city decided that new development had to be completely devoted to market rental units. Hence Rental 100.

'In politics, that's as good as it gets'

STIR was subject to a lawsuit from a group of West End residents who claimed the city was using bylaws to "override existing zoning guidelines, violate the Vancouver Charter and give exceedingly sweet incentives to developers — to construct what turns out to be very expensive rental housing."

Baker was one of the lawyers who represented the group.

Councillor Geoff Meggs argues the program has served its purpose, creating thousands of new rental units.

He says he also wants to know why the city apparently gave developer Onni a waiver on construction fees for a 43-storey tower which wouldn't seem to qualify for Rental 100.

In statement, Onni has said it is reviewing the matter and will rectify an error, if one is found.

But Meggs says critics should be careful not to damn the whole program on the basis of one mistake.

"It's a very unusual experience, and I hope a review doesn't demonstrate a larger pattern here," Meggs said.

"We've increased the number of rental units we've built in a given year four or five-fold. And given the soft rent controls we do have under provincial legislation, those units become more and more affordable over time."

Meggs says he shares concerns with critics who claim the rental units being created are too expensive and too small, but says the city works with the tools it has: lowering parking requirements for rental units secured for 60 years and forcing a first rental price close to market rates.

But he also claims Rental 100 is generally well respected, if not beloved — "and in politics, that's as good as it gets."

He says it's important to note that the city is creating market rental units, not subsidized housing.

"This is where we really need a massive increase in supply," he says. "So when people are critical of that, I think they're making the perfect the enemy of the good."

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