Governments, developers can play a part, expert says

Derrick Penner
Sun

Vancouver’s property developers could provide modest, $500-a-month apartments to help ease the city’s housing-affordability crisis, the Urban Development Institute (UDI) contends.

Governments, however, would have to cut the costs they extract from the building process to achieve that goal. Development cost charges and requirements for amenities such as parking need to be dropped for low-cost housing, UDI executive director Maureen Enser said.

The issues of homelessness and affordable housing have come to the fore this week at the year’s Union of B.C. Municipalities convention in Victoria. Activists have occupied abandoned buildings to protest what they see as a lack of action in providing affordable housing.

Enser offered the development community’s perspective on how governments could make modest-rent housing an attractive enough investment opportunity for developers to get involved.

Enser said land and construction are the biggest costs in building new housing.

So, to get modest-rent housing, land-owning governments, both at the municipal and provincial level, could lease land to developers at nominal rates with covenants that ensure rents would remain low.

Municipalities could also waive development cost charges, the fees builders pay to hook up to municipal services, Enser added. And cities such as Vancouver could reduce their requirements for parking.

Enser added that the federal government could also add incentives. The Canada Mortgage and Housing Corp., for instance, could insure loans for modest-rent projects, which would reduce developers’ financing costs.

And federal politicians could consider reintroducing tax incentives, such as allowing developers to write off financing costs and allowing them to roll capital gains over into new investment in rental housing, which spurred previous rounds of rental construction.

Currently, Vancouver requires that new multi-family developments contribute to the supply of social housing, either within their projects or contributions to the city’s social housing fund.

“The bottom line is that [the current system] hasn’t produced a lot of new [housing units],” Enser said. “So we need a much broader approach than just one solution.”

Cameron Gray, director of the City of Vancouver’s housing centre, which is charged with implementing the city’s affordable housing initiatives, said Vancouver has turned over land in similar circumstances before.

He added that doing so in today’s environment is “not an inexpensive option” for city council to consider.

Gray said Vancouver does provide land for subsidized, non-market housing at cut-rate and sometimes nominal lease rates, and does not levy development cost charges on such social housing projects.

Greater Vancouver Regional District levies, however, do apply to social housing developments.

The city has also used zoning as an incentive for developers to add social housing to their developments. Adding density to sites is one example.

Gray is also skeptical that reducing development charges would reduce housing prices.

“In reality, prices are driven by demand,” Gray said.

Vancouver Mayor Sam Sullivan said council is considering many different options for affordable housing.

Sullivan added that city staff is working with developers on getting up to 10 per cent so-called modest-market housing in the Olympic athletes village project on southeast False Creek.

“We’re very motivated to provide more affordable housing, so we’re certainly interested in looking at [Enser’s] proposals,” Sullivan said. “We want to ensure that we have adequate housing for people of all incomes.”

Rich Coleman, B.C. Minister of Forests and Range, and minister responsible for housing, said the province is looking for solid cooperation between governments and the private sector in the initiatives the province supports.

The province has recognized the need for more affordable housing with its recently announced new housing strategy.

“We’re looking for ways to be innovative with [local governments and the private sector],” Coleman said.

THE $500-PER-MONTH APARTMENT

Property developers could build rental housing in Vancouver that lets for $500 a month if they had government help in reducing costs. An Urban Development Institute estimate of current costs shows what makes such housing prohibitive, and offers suggestions to reduce expenses:

objective: A 320-square-foot suite renting for $500 per month, providing a long-term return of six to seven per cent to the developer. To build it, a developer couldn’t spend more than $150 per square foot.

Current costs

$380 per square foot, which would rent for $900 per month based on:

– Land: $100-$140 per square foot

– Construction: $210-$240 per square foot

– Soft costs: $65-$70 per square foot (Including development cost charges)

Cost cuts required to meet objective

– Land: $100 per square foot

– Construction: $110 per square foot (by eliminating parking requirements)

– Soft costs: $25 per square foot (by eliminating development charges)

New total: $145 per square foot

© The Vancouver Sun 2006

 

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The following are the questions that we are most often asked by our clients, and the answers that we provide. If your question is not answered below, please give us a call or email [email protected] When is G.S.T. paid? Goods and Services Tax (“G.S.T.”) is payable on the purchase of a new or substantially renovated home. What is a substantial renovation? A substantial renovation is defined in the legislation as the removal or replacement of most of the house construction components except for the foundation, external walls, interior supporting walls, floor, roof and staircase. How much must be paid? The amount payable is equal to 6% of the purchase price of the property. Do I qualify for a rebate? In certain situations, a rebate is available to reduce the amount of G.S.T. payable. These rebates are set out below. What is the rebate if I am moving to the new home? For purchasers who intend to make their new home their “primary place of residence”, a rebate is available which reduces the amount of G.S.T. paid to the federal government. This is called the New Housing Rebate and it reduces the G.S.T. paid by 36%. For example, assume the purchase price of the new home is $300,000.00. G.S.T. is 6% of $300,000.00, which equals $18,000.00. The rebate is 36% of $18,000.00, which is $6,480.00. The net G.S.T. payable would be $11,520.00, which equals $18,000.00 less $6,480.00. In order to qualify for this New Housing Rebate, the purchaser must certify that they will be moving into the property and using the property as their primary place of residence. Further, the purchase price must be under $350,000.00 to qualify for the entire New Housing Rebate. A partial rebate is available for homes between $350,000.00 and $450,000.00 as set out below. The New Housing Rebate is generally given at closing which means the purchaser usually pays the net G.S.T. to the Vendor. What is the rebate if I am not moving to the new home and am renting the home to a tenant? For purchasers who intend to make their new home a rental unit, the Residential Rental Property Rebate allows for the net G.S.T. to be paid, but with a few differences from the New Housing Rebate. In order to claim this rebate, certain conditions must be met. These include: The purchaser must not be entitled to claim input tax credits in respect of any part of the tax payable on the acquisition of the property. The rental unit must be a “qualifying residential unit” which means the person applying for the rebate must be the owner of the unit and the unit must be a self contained residence as defined in the Excise Tax Act. The unit must be held by the owner for the purpose of making exempt supplies (for example, a residential lease). The unit must be used as a primary place of residence by the tenants and must be so used for at least one year. The Residential Rental Property Rebate must be applied for after closing so the Purchaser must pay the full G.S.T. on closing. Supporting documentation will be required when applying for the rebate from the federal government, and includes the Statement of Adjustments, the Contract of Purchase and Sale, the lease/rental agreement and the insurance policy that the purchaser has on the property. In order to claim the full Residential Rental Property Rebate, the value of the qualifying unit must be under $350,000.00. A partial rebate is available for rental units with a fair market value between $350,000.00 and $450,000.00 as set out below. What is the rebate if my home is priced between $350,000.00 and $450,000.00? For homes valued between $350,000.00 and $450,000.00, the rebate is gradually reduced and is calculated by using the following formula (get ready to brush up your high school math): $7,560.00 X ($450,000.00 – B) / $100,000.00 “B” is the fair market value of the home being purchased. For example, assume the value of the home is $400,000.00. The rebate would equal: $7,560.00 X ($450,000.00 – $400,000.00) / $100,000.00 Assuming our math is correct, the rebate would equal $3,780.00. The G.S.T. payable would be $24,000.00 (6% of $400,000.00) less $3,780.00 which would equal $20,220.00. What is the rebate if my home is priced over $450,000.00? No rebate is available and the full G.S.T. is paid for homes over $450,000.00. What is the transitional rebate and how do I apply for this rebate? G.S.T. was reduced on July 1, 2006 from 7% to 6%. For the reduced rate to apply, two conditions must be met. The first is that the contract of purchase and sale must have been entered into on or after May 2, 2006 and second is both the completion and possession date must be on or after July 1, 2006. Where the contract is entered into before May 2, 2006 and the completion and possession occur after July 1, 2006, G.S.T. at the rate of 7% will apply. There is a Transitional Rebate available to the purchaser to account for the rate reduction. This Transitional Rebate is separate from the New Housing Rebate. Therefore, even if the purchaser is not eligible for the New Housing Rebate because the purchase price is over $450,000.00, the purchaser can still apply for the Transitional Rebate. In order to ensure the reduction in savings is being given to the consumer, the government is requiring that the full G.S.T. be paid on closing, and the buyer apply for the Transitional Rebate after closing. This is done through a government form that Bell Spagnuolo Legal Offices will provide to the purchaser at their closing appointment. Disclaimer Please remember that the rules regarding G.S.T. frequently change. While we try to keep our website up to date as much as possible, please do not rely upon the information without talking either to one of our lawyers or your financial advisor. EMAIL US The information you obtain at this site is not, nor is it intended to be, legal advice.  You should consult a lawyer for individual advice regarding your own situation. Copyright © 2006 by Bell Spagnuolo Legal Offices.  All rights reserved.  You may reproduce materials available at this site for your own personal use and for non-commercial distribution.  All copies must include this copyright statement. Phone: 604-461-2024 | Fax: 604-461-8976 | Outside Lower Mainland: 1-888-873-2829

Martin Crutsinger
USA Today

WASHINGTON — Sales of existing homes fell for a sixth straight month in September and the median sale price dropped on an annual basis by the largest amount on record, further evidence of a soft housing market.

The National Association of Realtors said sales of previously owned homes fell 1.9% in September to a seasonally adjusted sales pace of 6.18 million units, slowest sales rate since January 2004.

The median price of a single-family home fell to $219,800 last month, a drop of 2.5% from the median price in September 2005. That was the biggest year-over-year price decline in records going back nearly four decades.

Housing, which had set sales records for both new and existing homes for five years, has been rapidly losing altitude this year, as consumers were hit by rising mortgage rates, soaring energy prices and a slowing economy.

But economists with the Realtors say they believe the housing decline could be hitting bottom.

“The worst is behind us, as far as a market correction — this is likely the trough for sales,” said David Lereah, the Realtors’ chief economist. “When consumers recognize that home sales are stabilizing, we’ll see the buyers who’ve been on the sidelines get back into the market.”

But analysts say the weakness in housing could last several months more, with a real upturn in sales not coming until spring.

Sales were down in all sections of the country except the South, which posted a small 0.4% rise. Sales fell the most in the Northeast, a drop of 3.7%, followed by the West, where sales were down 3.1%, and the Midwest, where sales fell 2.8%.

The inventory of unsold homes, after climbing to all-time highs, fell for a second month, decreasing 2.4%, to 3.75 million unsold homes at the end of September, which represents a 7.3 month supply at the September sales pace.

Sales of single-family homes dropped 1.6% to an annual rate of 5.42 million units while sales of condominiums fell 3.2% to an annual rate of 763,000 units.

Condominium prices fell 3.2% to a median price of $219,800, matching the median for single-family homes.

Fund it with property-transfer taxes, municipal politicians say

Frances Bula, with file from Jonathan Fowlie
Sun

Some B.C. municipal politicians have urged the provincial government to use the hundreds of millions of dollars it collects in property-transfer taxes to help fund a housing program that will create housing.

However, at least one mayor said Tuesday it’s not really housing that’s needed. Instead, the province needs to put more into mental health and addictions treatment to get people off the street.

Whichever approach was argued, homelessness and housing dominated conversations at the Union of B.C. Municipalities annual meeting in Victoria this week. The meeting has attracted 1,900 councillors and regional district representatives from around the province.

“[Monday], we had a session on health that turned out to be about homelessness. A second session on affordable housing turned out to be about homelessness,” said New Westminster Mayor Wayne Wright, as he spoke Tuesday at a session for delegates from large urban centres.

Homelessness continued to be the theme of Wright’s day as he went to the washroom at the Empress Hotel, next to the convention centre, and found himself sharing it with a homeless man who was using it as his wash-up facility for the day.

Wright, along with many others, said the province has a crisis on its hands and no one is tackling it.

“We spend billions on cancer research. Yet here we have a disease that’s in the middle of us that we’re not attacking the same way.”

Many politicians criticized, for the second day, Housing Minister Rich Coleman’s recently announced housing strategy, which will provide money to build shelters and transitional housing, along with giving housing subsidies to poor families living in private apartments who are spending a lot of money on housing in relation to their income.

Councillors like Dean Fortin of Victoria and Heather Deal of Vancouver argued that with vacancy rates near zero in those cities, housing subsidies won’t solve any problems, but will just raise rents.

Several politicians, including Alan Nixon from North Vancouver, Vic Derman of Saanich, and Al Hogarth of Maple Ridge, urged the provincial government to create a funding mechanism similar to the one now used for transportation, where part of the gas tax goes towards transit projects.

The property transfer tax, created in 1988 to discourage speculation, and which generated $830 million for the province last year, could be used to create a housing fund that others could add to.

That recommendation was echoed Tuesday afternoon, when delegates heard recommendations from an “economic opportunities” task force, which made the same suggestion.

But Mayor Gord Robson of Maple Ridge said his municipality doesn’t need housing, it needs treatment for its mentally ill and drug-addicted homeless people.

Robson said a recent survey of all 177 homeless people in the Tri-Cities area showed that 98 per cent of them were either mentally ill or drug-addicted or both.

“We don’t need housing, we need help. We can’t put them in jail. We can’t take them outside of town and shoot them. What do we do? They’re sick, it’s an epidemic, there’s thousands of them.”

The housing minister’s new assistant deputy minister, Mary Freeman, said the ministry wants to hear from communities about what is working and what isn’t so it can make adjustments.

The issue of affordable housing was once again addressed on Tuesday when Vancouver police arrested six protesters from the Downtown Eastside who had occupied an abandoned hotel.

The protesters moved into the empty North Star Hotel at 5 West Hastings St. on Sunday, demanding it be converted into social housing.

On Tuesday afternoon, VPD spokesman Const. Tim Fanning said the six people — three women and three men — were arrested and charged with assault by trespass. Fanning said the arrests were made without incident.

“It went very smoothly. We kept the lines of communication open between the people running the protest and the leadership of the police operation and that helped keep things civil,” he said.

© The Vancouver Sun 2006

 

Southeast False Creek project has been exempted from the city’s noise bylaw

William Boei
Sun

VANCOUVER – People who live near the Olympic Village development site on southeast False Creek can look forward to peaceful Sundays. The rest of the week, not so much.

The project has been exempted from the City of Vancouver’s noise bylaw, and that means construction can go on 24 hours a day, from midnight Sunday until midnight Saturday.

That comes as no surprise to Brenda McNeil, who lives in the CityGate condo complex on Quebec Street, a few hundred metres away.

Noise from the construction site has startled her from sleep nearly every night for more than a week.

“Eight days ago, it woke me up at about 20 after four in the morning,” McNeil said Monday. “There was a huge crash that startled me awake, and it just carried on the rest of the night.”

The crash sounded like a truckload of large rocks being dumped, and it probably was. The next morning, driving her son to school, she noticed a big pile of rocks dumped on one corner of the site.

The noise hasn’t stopped. During the day, it often blends into the sounds of the city, but at night, when the city falls silent, it skips and bounces off the water of False Creek and keeps her awake.

“It’s continual,” McNeil said. “Last night, I didn’t sleep from 10 past two on.

“I’m accustomed to noise. I’ve lived here a lot of years. Buildings have gone up and I don’t complain. We had the Indy and don’t complain. But in the middle of the night? My family has to sleep, you know?”

McNeil said she went to city hall Monday morning to complain. Someone took her name, but she was told Mayor Sam Sullivan had allowed the bylaw exemption.

A city representative couldn’t immediately supply details of the exemption.

“There’s a fair bit of work going on there,” said public affairs director Paul Heraty. “I understand there is a noise bylaw exemption, but I don’t know the details of it.”

However, a notice to residents from JJM Construction of Delta said the bylaw exemption covers 24 hours a day except Sundays and statutory holidays.

City council documents reveal JJM Construction has a contract for about $265,000 to remove collapsed pilings and old wharf decking from the site, and another for $5.5 million for foreshore construction.

The notice says some of the work, such as excavation and material placement, has to be done at low tide, which this fall means mostly late at night and early in the morning. Unloading of aggregate barges can be done only at high tide, which varies from week to week.

Another CityGate resident, Patsy McMillan, said her condo is partly sheltered from the noise, but dust from the site is a problem.

“I tend to sleep with my windows closed now, since they’re pile driving at 2:30 in the morning or dredging or whatever they’re doing,” McMillan said. “Depending on what side of the building they’re on, the noise has been difficult for some people.

“And there is a dust cloud over that area all the time.”

She said most residents are not complaining because they realize nothing can be done about it.

“They can do whatever they want at whatever time they want. Some work has to be done at low tide or at high tide. So it depends on the moon, I guess.”

© The Vancouver Sun 2006