New Pieces of Legislation that Promise to Increase Density

Hi everyone, I’m James Garbutt. And I’m Denny Dumas. And this is the Garbutt Dumas Real Estate Podcast.

Denny: Welcome back, Denny Dumas and …

Monica: Monica Harmse.

Denny: Single mother..?

Monica: Single Mom, Monica Harmse. I am not a single mother. 

Denny: We don’t need too give much context but Realtors: be respectful of people. That’s it. Everyone you meet, other Realtors, appraisers, home inspectors, clients, be respectful. That’s all. You know who you are.

Okay today we’re talking about density. There’s been a lot of changes in a few municipalities around BC trying to address this concern, this housing crisis that we’re in right now and what is the problem? The problem is supply. 

So, they’re solutions well, we’ll kind of just list what specifically the city of Burnaby and the city of Vancouver have announced in the last couple of weeks, and then we will share our thoughts on is this actually going to do anything? Because we have opinions on that too. 

Well, let’s start with Burnaby. Burnaby will be quick and easy, I believe. Burnaby, finally, is allowing laneway homes on single family lots. So like any city, there’s going to be a number of setbacks and restrictions on what you can build and how you can build it. But laneway homes are coming to Burnaby very, very soon.

Monica: So I’m going to interrupt really quickly. Why don’t you say finally, do you know how many years it’s been since Vancouver started allowing laneways?

Denny: Listeners, do you know how many years it’s been since Vancouver allowed laneways because we knew the answer is…

Monica: 16.

Denny: 13. 

Monica: Oh 13. 

Denny: But still, more than a decade. New West allows laneway homes, what other cities? North Van allows laneway homes. They are, we’ll talk about cost of laneway homes too, but like they are an interesting idea that sounds really good on paper. But in actual practicality, does it really add a lot of density? It takes a long time for laneway homes to start popping up, Because in most cases, in most cases it is too expensive for most homeowners to build a laneway home in their existing single family home.

Monica: Well it’s too expensive when it’s the purpose of it is for a rental. 

Denny: Yeah.

Monica: Yeah. It makes sense if the family wants to use it. And oftentimes that’s what we’re seeing. We’re seeing it be used for the family that lives there. But when it comes to making, you know, you’re spending hundreds of 1000s to build a laneway house that you’re, you know, it’s probably a bachelor or one bedroom.

Denny:  With the increasing cost of construction recently, in the last few years. I saw a stat the other day that said the average laneway home in Greater Vancouver costs between five and $600,000 to build. 

That’s a lot of money. And a lot of people don’t just have that lying around. So even in Vancouver we’re seeing them more so pop up in North Vancouver with new construction homes. Not just out of the blue is now that Burnaby is allowing laneway homes are there going to be 20,000 laneway homes next year. No, it’s not practical. But they’re allowing them so I would say steps in the right direction but this is not necessarily solving housing problems. 

There’s single family allowed laneway homes in Burnaby and then duplex zoned properties currently so that is our four or five or six or 12 RM6 and not all of these zonings are duplex-abull, meaning they can put a duplex on them. But the ones that meet all these criteria, I believe it’s up to or has to be over 6000 square feet. The lot size, they now can have suites in them as well. So you can have duplex, two units, plus a suite in each side. So now those can be up to four units versus they were two. Those are the big changes in Burnaby.

Monica: Burnaby, putting themselves on the map. And this all has to do with obviously the increased demand and people are getting flat out irate about the fact that nothing’s happening. And we’ll get to this a little bit later. But there was a naughty list that was released yesterday. 

Today’s September 26 was released yesterday September 25, the naughty list.

Denny: This leading up to Christmas. 

Monica: Oh yeah, well, there’s some, there’s some cities that are on the naughty list. Surprisingly, Burnaby was not one of them. But that’s because there’s a lot of development happening.

Denny: Burnaby is such an interesting municipality and that is run really well. They have a huge surplus every year. They are quite progressive in terms of density around like city centers around Brentwood around Metrotown around Lougheed coming up. But so they’re, they’re building a ton of big towers that are 60 plus stories. But in terms of single family, they’re like so far behind in terms of more suites, like we just said duplexes with suites adding laneways and all these like density things outside of the city center. It’s either single family for two and a half million dollars or 500 square foot condo. Those are the options in Burnaby.

Monica: So, if you’re listening and you’re not from Vancouver and you don’t know where Burnaby is, it is right up against Vancouver. It’s smack dab against Vancouver. It’s like most of the areas when you drive outside of Vancouver you hit Burnaby first before you hit anywhere else and Burnaby has done a pretty good job and this is definitely a step in the right direction. 

Which brings us to our next point Vancouver. How’s it going? Vancouver? Denny, is there any other stats that you want to talk about before we move on? 

Denny: No. 

Monica: Okay, so Vancouver, Vancouver. We had originally wanted to talk about laneways in Vancouver and duplexes in Vancouver but again in the last weeks and even few days, a lot of things have changed in Vancouver. City Hall met on September 14, and they finally voted unanimously to basically completely change the way that density is brought to areas of single detached.

So all the RS zoning before you could just do one house, now, sometimes one house sometimes a house and a suite will then a duplex and it’s kind of like slowly, slowly progressed. And now they’re combining nine different zonings all into one and they’re allowing what they’re calling multiplexes. 

Now the council doesn’t believe that this multiplex situation is an answer. They think that it will maybe add 200 units in the next 12 to 18 months, they said. And they’re opening up permits for multiplexes starting in December of this year, so we’ll see how it goes. 

But what a multiplex is, is a you could do row homes or a small strata of six townhomes up to eight, you could do eight if they’re rental. But who’s gonna build these? Who’s gonna buy these little multiplexes?

Denny: I mean, there’s a lot of issues. One that they haven’t given us any detail about like, minimum lot requirements because a lot of, especially the east side of Vancouver, is 33 foot lots 33 by 122, which is just over 4000 square feet. Are these going to be eligible for for five units? TBD. We don’t know.

Monica: They haven’t really said, yeah. 

Denny: The biggest issue I see with this is we overnight, land value has gone up. So the problem in Greater Vancouver is affordability and the things that we’re implementing are actually making real estate more expensive. 

Yes, it will be awesome. In 5-10 years when there are a lot more units in Greater Vancouver because developers have started and gone through the process of building these six-plexes for example in different parts of Vancouver, but we’re so far away from that actually existing. And I don’t know, I mean I think it’s a good step in the right direction. I do think developers will start building these because the individual units, I haven’t done the math on the financials, but I would believe they probably make sense.

Monica: Yeah, what they’re worried about really moving forward is speculation which has always been a problem. In Vancouver, they’re worried about people scooping up these lots and taking their sweet time to build these multiplexes, waiting for interest rates to go down so they they’re worried that small developers are going to start scooping up into their lands now and just holding them until interest rates go down, which is not helping helping a supply at all. 

So that’s one of the downsides that we’re talking about in terms of what this multiplex situation can do. But interest rates are an important part of it when it comes to development. That’s one of the reasons why development right now has been at such a standstill. It’s really expensive to build. Really, really expensive. 

There was a lot that happened yesterday also when it comes to rentals in terms of development. The CMHC who lends to builders has decided to pump another 20 billion into mortgage bonds for rental only development. So that’s something that’s coming down the pipe too.

Denny: Is that incentivizing builders?

Monica: Well, yes, they’re also saying that they’re taking away GST as well, for the builder. So it definitely is going to add some incentive, but that’s just like huge projects.

Denny: So these CMHC bonds is a fund that developers can access to build, purpose built rental. 

Monica: That’s right. 

Denny: And I would assume this is that of lower than market interest rate?

Monica: It is. So before it was at, like there was 40 billion kind of circulating that they were selling to provide this lower lending opportunity to people who are just building, to developers or just building for rentals that went up to 60 billion yesterday.

Denny: Where’s that money coming from? We don’t know. But inflation is a thing.

Monica: So when it comes to Vancouver density, we’re going to kind of have to wait and see what happens. Wait and see as they roll out more information. About this new multiplex, duplex, you know, who’s going to be policing these rentals and all that kind of thing because some of the ones that can be up to eight on one piece of property have to be rentals, and then the owner can live inside them but I don’t know many people who have the cash to build a multiplex that are then going to turn around and live inside one of the units. 

Denny: No.

Monica: This doesn’t seem realistic to me.

Denny: Have they said anything about how long they would have to be rentals for?

Monica: No.

Denny:  Have they said anything about FSR for these?

Monica: No, but but they did say that, they did say that? Well, the short answer is not really. Yeah, the short answer is: not really.

They were talking about parking though. Like parking had, had to come with it. So you have to make room for parking for every unit. 

Denny:  Every unit??

Monica: Yeah, which is going to be interesting

Denny: Holy! None of these are gonna get built. This is a problem. 

Monica: Yeah. 

Denny: So like these are steps in the right direction. I really like this idea. Like you look at any major city in the world. How many of them have single family like 20,000 square foot lots like Shaughnessy?

Monica: Yeah, it’s gonna be a scavenger hunt. It’ll, it’ll be it’ll take somebody that’s just really interested to see how this process goes. An eager builder that wants to maybe get started, they’re gonna have to, it’s gonna be a scavenger hunt, find the right properties that you can somehow fit the parking, that you can somehow fit the units that you want. 

But like they said, they’re not expecting this to change a whole lot. They’re saying maybe 200 units maybe. And if you think about 200 units, that’s not that’s nothing that’s not even a building that’s not even one that’s like they’re adding one building to Vancouver. Right? It’s you know, most buildings now that are getting built have 350 doors. This is going to add maybe 20 and cause a lot of chaos.

Denny: My mind is just absolutely racing. Where are these parking spots gonna go Karl? Are we allowed to do underground parking? No? For single family lot?

Monica: I’m guessing, I’m guessing they’re going to build them up and put the parking underneath is what I was guessing like carports.

Denny: For five or six spots? Like how wide would the lot need to be?

Monica:  You just have to get a car elevator. You drive the car on and lift it up and then when the next guy comes home you get to go on.

Denny: I heard there’s a sale on car elevators right now. Perfect!

Monica: It’ll be interesting. I mean, I’m sure a lot of this is going to change. They said they’re only going to start granting permits in December, which means that they still have a little bit to work out I’m guessing. I’d love to, I’d love to be there on the first developer walks and it’s like I want a permit for a multiplex. I want to know what the heck they’re building and where they’re building.

Denny: I do like the idea. I like that some changes are being made. They’re finally acknowledging that we have an issue which has been probably two decades in the making. I like the idea of like, Main Street, young families being able to buy you know 900 to 1200 square foot quadplex unit around Main Street for you know, a million bucks rather than entry level single family right now is what $2, $2.2 $ 2.3? Like it’s just unaffordable for so many people at the moment. So I like, I like the direction they’re going. I jus,t I just see a lot of road bumps along the way.

Monica: Yeah, I was reading the Vancouver plan yesterday, the Vancouver plan you can find online very easily. It’s just the plan for the city. They released it last year and it had so many interesting numbers in there. 

Vancouver has 25% of the population of BC just in Vancouver, right? And it has 35% of the jobs. So there’s 10% of the population that works in Vancouver that can’t live. 10% is a lot. And they’re expecting to bring something crazy like another 600,000 jobs bringing it up to 990 thousand or something.

And it’s an incredible thought. It’s an incredible thought but we’re not moving fast enough to accommodate what they’re saying they wanted to have. They wanted to be able to house all of those people by 2041 it said and I think that yeah, the report was released in 2021, the Vancouver plan. 

So we’re creeping closer and closer and I just don’t see I don’t see an end in sight. And they have, the government has lately done a lot of things that have shown that they are acknowledging that there’s a major problem with rentals, like there’s just not enough and they seem to be passing a lot of that burden on to small time investors like me and you. 

Small time investors that own one or two units, rent them out. They’re passing a huge burden on to small time investors and they’re giving major breaks to big investors. For example, the 20 billion they’re pumping in for developers. It’ll be interesting to see what happens.

Denny: The, it’ll be interesting to see what restrictions and lot sizes and all that kind of stuff come out. And we’ll share that once we find out but my initial thought is the neighborhoods that are primed for this type of development. This type of project is East Vancouver, is around Main Street, is Mount Pleasant, is around Commercial in Victoria. 

And those are, those are the neighborhoods with small lots. And so if there are restrictions like 5000 square foot minimum lot to get five units or whatever. A lot of these lots are not going to they’re not going to be able to do it. 

Monica: They’re just not there. They’re gonna have to assemble, we’re gonna see some like land assembly for multiplex.

Denny: The cost is too much at that point for a developer to buy two lots, now you’re spending instead of spending $1.6 on land, you’re spending $3.2. And you’re gonna get six units out of it?

Monica: Cost, cost wise it doesn’t make sense. It just doesn’t make sense at all. So on the naughty list is Vancouver of course, Vancouver’s on the naughty list. They need to add 28,900 total units within the next five years. 

Denny: Good luck.

Monica: Says BC housing okay. And then they really broke it down so they want 17,459 one bedrooms. They want 5,200 two bedrooms. They want 6,209 three beds. Here’s the, here’s the fun number. They want 20,886 rentals.

Denny: 20,886. 

Monica: In the next five years. They want 7,894 below market rentals. Don’t know who’s gonna build those. And they want 12,992 of those to be market rentals. So those, so 12 almost 13,000 can be market rentals, almost 8,000 have to be below market rentals and then they need almost 600 more supportive rental units. So people with special needs,

Denny: So they want, let’s summarize here. They want 29,000 New resell units.

Monica: Within the next five years.

Denny: And they want another 20,000 rental units. 

Monica: Yes. 

Denny: So they want 50,000 new doors in the next five years?. Karl, do you think that is realistic?

Monica: I mean they’re not going to, sorry, it’s the total units is 28,900. And this is how they’re breaking it down. So the rental units makes up the majority of that. 

Denny: Okay.

Monica: So it’s 9,000 resale.

Denny: Got it. 

Monica: 9000 resale. Yeah. So of that 20,000 is they want to be rental and of the, of the 20,000 that they want to be rental almost half they want to be below market rental.

Denny: Seems, I’m very doubtful.

Monica: Yeah. So that’s, that’s means increasing the amount of doors that Vancouver has by 9.47%. In five years.

Denny: We’ll do a podcast in exactly five years. We’ll let everyone know how short they are. Because if they’re asking for 29,000 my guess is it’s more like eight or 9,000 that actually get built in the next five years.

Monica: It’s, it’s pretty funny. I mean, like Sean Fraser tweeted yesterday he’s the Housing Minister. Sean Fraser tweeted this yesterday: 

“In light of a proposed development cost charge increased by Metro Van I’ve postponed today’s announcement of housing accelerator fund deals with two cities who are members of the Metro Van board. We’re studying the impact of the proposal and I hope to have more info soon.” 

So this came right after them announcing this. So basically, he was like, Oh, I was going to announce something but now I can’t anymore because of this new change. And then later, later yesterday, he tweeted this: 

“If you’re a home builder, we want you to build. We’re changing the financial equation for builders by increasing the annual limit for Canada mortgage bonds and removing the GST on rental construction. This is going to get projects off the shelf and shovels in the ground.”

He says. So really, really encouraging. Sean Fraser is really excited for developers to be taking advantage of this Canada Mortgage bond situation and then removing the GST on rental construction and hopefully that will promote this 20,000 rentals. 7000 almost 8000 under market rentals coming.

Denny: Time will tell. I think in this interest rate environment, I think something will need to change. The 5% sure, not paying GST on rental properties, building rental properties I think is an incentive. It’s something. Is it enough to get a developer to switch a resale project into a, that maybe they put on hold because of interest rates right now? Is it enough for them to switch into rental purpose built rentals? I don’t know.

Monica: We’ll see. We’ll have to update you guys. 

Denny: We will see.