VANCOUVER - A non-profit model for building rental housing in Metro Vancouver could deliver substantially lower monthly rents, shows new research released today by the Canadian Centre for Policy Alternatives, BC Office.
In a wood-frame construction building average rents could be as low as $1,273 a month for a one-bedroom unit, $1,641 for two bedrooms and $2,009 for three bedrooms, says senior economist Marc Lee who led the research. Deeper affordability could be supported through having cross-subsidies in place in a building or across a suite of buildings. For example, one-third of units paying market rents would allow another third to be rented as low as $750 per month for a one-bedroom.
His modeling is based on estimating the “break-even” monthly rents, over 50 years, needed to support the full upfront costs of construction plus ongoing operating expenses. This housing model would pay for itself over time through rents and not require further public subsidy.
Lee’s research shows how to drive down costs in each stage of housing development. In addition to removing developer profits from the equation, costs can come down if municipal governments waive parking requirements and reduce municipal fees. Even further cost reductions could come from waiving the federal GST on new construction.
The cost of land remains a significant factor in any housing project in Metro Vancouver. Lee says we should start with existing land owned by the public or non-profits, but over time progressive property taxation should be used as a source of funds to acquire new public land for a major affordable housing build-out.
The development costs and rent estimates in Lee’s research are based on real-world scenarios and account for actual project costs. He has modeled both concrete and wood-frame construction, noting that concrete construction is both 20 per cent more expensive per square foot and has higher embodied carbon emissions. The research also contemplates future lower costs by expanding modular housing, for example, but does not include those in his estimates.
“Local governments have attempted to shift the needle back to purpose-built rental construction through waiving development fees and offering additional density, but neither of those approaches are bringing enough truly affordable units to the market,” Lee says.
“If governments are serious about building affordable housing we need to stop relying on the for-profit development model and take a new approach by building the housing we actually need, rather than trying to cream off a few units on private mega-projects.”
Lee’s research examines the costs for the Metro Vancouver region specifically, however, the model could be applied elsewhere with similar results.