Results of Short Term Incentives for Rental (STIR) ProgramPresentation to City CouncilMarch 27, 2012

2

Presentation Outline

Background and Objectives

STIR Results

Lessons

3

What is STIR?

Council approved the Short Term Incentive for Rental (STIR) Program on June 2, 2009

2.5 year pilot to increase purpose-built market rental during the economic downtown

Incentives offered•DCL Waiver•Parking Reductions•Density Bonus•Expedited Processing

Why is Rental Housing Important?

Essential to a healthy and vibrant economy

Essential workers and new workers from other parts of Canada or the world are often renters

Allows modest income households to live in Vancouver

Median income of renters is half that of owners

Meets the needs of diverse populations

Accommodates people at different stages of their lives (e.g. young people, unmarried, seniors, and recently moved)

Why is Rental Housing Important?

“Vancouver’s economy depends on attracting and retaining talent. Affordable housing of all types, including market rentals, is essential to the City’s current and future competitiveness.”

John Tylee, Director of Policy and ResearchVancouver Economic Development Commission

Need for Rental Housing

1,500 new units of rental housing needed every year

Source: City’s Rental Housing Demand and Existing Supply, 2009

Social housing 500 unitsPurpose-built market rental 500 unitsSecondary rental 500 units (e.g. laneway houses, rented condos)

Need for Purpose-Built Rental Housing

Why purpose-built market rental?

Long-term stability

Becomes more affordable over time

What about rented condos?

Rented Condos are important but have limitations

•32% of condominiums (22,000 units) are rented

•limited security of tenure– Owner can decide to sell at any time

• Uncertainty around future supply– Dependent on condo supply and investment climate– Strata-bylaws and rental restrictions

• more expensive compared to purpose-built market rental – 37% higher rent for 1-bedroom

Source: CMHC Rental Market Report, 2011

Rental Housing Challengesre

ntal

uni

ts

Market-rental Apartment Completions by Decade (occupied)

Limited new supply of market rental housing in recent decades

Notes:

Rental units in the 1980s, 1990s, and 2000s includes both stratified and un-stratified rental units

Source: CMHC

50 60

117

192 196

40

50

100

150

200

250

2006 2007 2008 2009 2010 2011

rent

al u

nits

Rental Housing Challenges

Market-rental Apartment Completions (Occupied) 2006 - 2011

Very limited new rental units constructed over last five years (average 150 units/year)

Majority of rental units built in 2009 and 2010 were City initiatives

1 Kingsway: 98 units (City-built)

Olympic Village: 119 units (policy requirement)

Privately-initiated market rental units

City initiatives

Economics of Rental HousingWhy is developing rental difficult?

STIR incentives are intended to help overcome “viability gap” for rental projectsHigh land costs and competition with condominium developers make building purpose-built rental housing unfeasible in most cases

Land Value PSF Buildable

$0

$40

$80

$120

Land Value Supported byCondominium Development

Land Value Supported by RentalDevelopment

$100 PSF

$25 PSF

Land Value Per Square Foot Buildablefor Eastside Low-Rise

Viability Gap

Source: Coriolis Consulting (November 2009)

Illustrative Example Only

Price that condo developers can pay for land

Price that rental developers can pay for land

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STIR: Short Term Incentives for Rental

Purpose• 2.5 year pilot (2009-11)• Test City’s ability to

enable Market Rental Housing construction without senior govt’s

• Use opportunity of slow construction market to attract activity to rental sector

• Increase construction-related jobs

Incentives Offered• Parking reductions• Density bonus• DCL waivers• Expedited processing

1. Increase supply of market rental housing2. Respond to economic downturn and stimulate

employment3. Support the City’s sustainability goals by encouraging

rental housing along commercial arterials, ‘high’streets, and transit centres

4. Encourage development of market rental housing for households that cannot afford to buy a home

5. Inform City’s long-term housing policies by testing City’s ability to enable Market Rental Housingwithout senior government assistance

STIR objectives

STIR Results1142 Granville

3522 Porter

8495 Granville

1240 Howe 1650 Quebec

1215 Bidwell

2784 E. Hastings

1600 Beach

2730 E. 41st

8440 Cambie1281 Hornby

1349 Granville2215 E Hastings

1401 Comox

1418 E 41st963 E 19th

3068 Kingsway

4320 Slocan

3701 W Broadway

1620 W 6th

2551 Kingsway

5656 Victoria

STIR Results

Objective 1:

1142 Granville

3522 Porter

8495 Granville

1240 Howe 1650 Quebec

1215 Bidwell

2784 E. Hastings

1600 Beach

2730 E. 41st

8440 Cambie1281 Hornby

1349 Granville2215 E Hastings

1401 Comox

1418 E 41st963 E 19th

3068 Kingsway

4320 Slocan

3701 W Broadway

1620 W 6th

2551 Kingsway

5656 Victoria

Increase supply of rental housing

New market rental units created

Approved 609In Application 1,042TOTAL 1,651

609

1042

0

400

800

1,200

Approved In Application

Approved In Application

9 Projects

17 Projects

rent

alun

its

New Market Rental Construction, Approved and “In Application”

June 2009 – December 15, 2011

STIR projects across the City

% TOTALEastside 29% Westside 25%West End 23%Downtown 23%

100%

More market rental units achieved in concrete

% TOTAL Concrete 70%Woodframe 30%

100%

Projects in both woodframe and concrete

266343

226

816

0

300

600

900

Woodframe Concrete

Approved In Application

3 Projects

6Projects

9Projects

8Projects

rent

alun

its

217

392

286

756

0

200

400

600

800

Mixed Strata / Rental 100% Rental16 Projects10 Projects

rent

alun

its

Significantly more market rental units created with mixed strata/rental vs. 100% rental projects

Two types of projects created:Mixed strata/rental and 100% rental

ApprovedIn Application

2 bed12%

Studio49%1 bed

39%

3 bedLess than 1%

EXISTING RENTAL STOCK

• Bachelor 15%• 1 bed 67%• 2 bed 16%• 3 bed 1%

Source: CMHC, 2011 Rental Market Survey

Majority of units are bachelor and one-bedroom

More bachelor and one-bedrooms compared to existing rental stock

550 units/year

80 units/year

0

200

400

600

1 2Pre-STIR (2006-2011) STIR (2012-2014) Approved/In Application

New Privately Initiated Market Rental (Units/Year)

rent

al u

nits

/yea

r

Effect of STIR on market rental housing production

Significantly more market rental units as a result of STIR

STIR Results

Objective 2:

1142 Granville

3522 Porter

8495 Granville

1240 Howe 1650 Quebec

1215 Bidwell

2784 E. Hastings

1600 Beach

2730 E. 41st

8440 Cambie1281 Hornby

1349 Granville2215 E Hastings

1401 Comox

1418 E 41st963 E 19th

3068 Kingsway

4320 Slocan

3701 W Broadway

1620 W 6th

2551 Kingsway

5656 Victoria

Respond to economic downtown and stimulate employment

New jobs created

609 approved market rental units x 2.8 jobs per unit (multi-unit projects)

=

1,705 new jobs created

In addition, the 1,042 market rental units in application could create an

additional 2,900 new jobs

Note: Formula from CMHC

STIR Results

Objective 3

1142 Granville

3522 Porter

8495 Granville

1240 Howe 1650 Quebec

1215 Bidwell

2784 E. Hastings

1600 Beach

2730 E. 41st

8440 Cambie1281 Hornby

1349 Granville2215 E Hastings

1401 Comox

1418 E 41st963 E 19th

3068 Kingsway

4320 Slocan

3701 W Broadway

1620 W 6th

2551 Kingsway

5656 Victoria

Support the City’s sustainability goals to encourage rental housing along commercial arterials,

neighbourhood ‘high’ streets, and transit centres

All projects located along arterials, neighbourhood‘high’ streets, or transit centres

STIR Results

Objective 4:

1142 Granville

3522 Porter

8495 Granville

1240 Howe

1650 Quebec

1215 Bidwell

2784 E. Hastings

1600 Beach

2730 E. 41st

8440 Cambie

1281 Hornby

1349 Granville

2215 E Hastings1401 Comox

1418 E 41st

963 E 19th

3068 Kingsway

4320 Slocan

3701 W Broadway1620 W 6th

2551 Kingsway

5656 Victoria

Encourage development of market rental for households that cannot afford to buy a home

Affordability was encouraged in following ways:

The City acknowledged that STIR couldnot meet the needs of low-income households, who require senior government subsidies

Affordability under STIR

• Renting is inherently cheaper than owning• “Modesty requirements” to keep unit sizes

small, finishings basic• Limited private amenities

$1,821$1,743

$1,050$980 $950$851

$1,290

$1,959

0

300

600

900

1200

1500

1800

2100

1215 Bidwell (WestEnd)

1142 Granville(Downtown)

3522 Porter (CedarCottage)

8495 Granville(Marpole)

STIR Proposed RentsMonthly Mortgage Cost

86% higher

106% higher

118% higher

23% higher

Monthly Costs – Proposed STIR Rents vs. Home Ownership (Bachelor)

Ownership Assumptions:•10% downpayment•5% interest rate•25 year amortization

•Property tax rate: $3.59 per $1000 assessed value

•Strata fees: $150/month

Note:•MLS Average sales 2011 by area

Mon

thly

Hou

sing

Cos

ts (

$) Renting is a more affordable option than owning

$2,781

$2,430

$1,500$1,575

0

600

1,200

1,800

2,400

3,000

3522 Porter (Cedar Cottage) 8495 Granville (Marpole)

STIR Proposed RentsMonthly Mortgage Cost

86%higher 62%

higher

Ownership Assumptions:•10% downpayment• 5% interest rate• 25 year amortization

• Property tax rate: $3.59 per $1000 assessed value

• Strata fees: $250/month

Note:• MLS Average sales

2011 by area

Mon

thly

Hou

sing

Cos

ts (

$)

Monthly Costs – Proposed STIR Rents vs. Home Ownership (2 bed)

Renting is a more affordable option than owning

STIR Results

Objective 4:

1142 Granville

3522 Porter

8495 Granville

1240 Howe

1650 Quebec

1215 Bidwell

2784 E. Hastings

1600 Beach

2730 E. 41st

8440 Cambie

1281 Hornby

1349 Granville

2215 E Hastings1401 Comox

1418 E 41st

963 E 19th

3068 Kingsway

4320 Slocan

3701 W Broadway1620 W 6th

2551 Kingsway

5656 Victoria

Inform City’s long-term housing policies by testing City’s ability to create market rental housing without senior

government assistance

DCL waiver

Parking Reductions

Density Bonus

Expedited Processing

All STIR units were created using only City-level incentives

9 approved projects609 market rental units

DCL waiver

DCL waiver was the most popular incentive

$-

$1,500,000

$3,000,000

$4,500,000

DCLs waived

$4.2 million609

rental unitsDCL WAIVER:

$6,800 PER UNIT

100% take-up of DCL waiver

Parking Reductions

2730 E. 41st

Parking reductions lowered a project’s cost by $2,600 – $13,000 per unit

SUMMARYSPACES REDUCED:46

SAVINGS Per stall: $40,000Total: $1.84 M

AVERAGE SAVED PER RENTAL UNIT:

$3,900

Parking Reductions – Savings Per Unit

Savi

ngs

per

Uni

t ($

)

Over 75% take-up

$0

$12,632

$7,059$7,000

$4,898

$3,958

$2,581

$-

$2,000.00

$4,000.00

$6,000.00

$8,000.00

$10,000.00

$12,000.00

$14,000.00

1142Granville

8495Granville

3522Porter

1215Bidwell

2730 E.41st

2784 E.Hastings

1240Howe

Rental Units (106) (20)(49)(192)(31) (34)(40)

0

1

2

3

4

5

6

7

2730 E 41ST 3522PORTER

8495GRANVILLE

2784 EHASTINGS

8440CAMBIE

1650QUEBEC

1240 HOWE 1142GRANVILLE

1215BIDWELL

+67%+101%

+43%

+12%

+185%

+63%

+39%

0%

0%

Density Bonus

Floor space ratio

Density increases range significantly depending on site, location, context, and urban design review (from 0.3 – 4.1 FSR)

Over 75% take-up

Notes:

•2784 E. Hastings and 1240 Howe did not request additional density

•For mixed strata/rental projects, the increase in density generated a number of public benefits (e.g. public art, heritage conservation) in addition to rental housing

FSR Existing 100% Rental Projects

FSR Increase (%)

FSR Existing Mixed Strata/Rental Projects

Expedited Processing 60% take-up by eligible projects

1142 Granville

3522 Porter

8495 Granville

1240 Howe

1650 Quebec1215 Bidwell

8440 Cambie

2784 E. Hastings

2730 E. 41st

NoRezoning

22%

‘Expedited’Concurrent

45%RegularRezoning

33%

Concurrent Processing worked best for simple projects (e.g. 100% rental buildings )

Expedited Processing

Concurrent STIR Projects Processing Time (from Rezoning Application to Development Permit Issuance)

Processing times ranged from 10 to 16 months

MonthsCouncil Approval of Rezoning

0 5 10 15 20

1142 Granville

1215 Bidwell

1650 Quebec

3522 Porter

STIR

Pro

ject

s

Typical non-concurrent processing times

Majority were 100% Rental projects

Rezoning at Council ranged from 6 to 8 months

Time savings ranged from 5 to 8 months

What did it take for the City to make STIR projects viable?

Key Assumptions re Purpose Built Rental

100% Rental Projects• Land value does not increase with additional density• Rental housing is the public benefit achieved through

increased density• Rezoning for 100% rental would not have been permitted

for a mixed strata/rental project

Mixed Strata/Rental Projects• Land value increases with additional condo density• Increase in land value triggers CAC • For STIR projects, part of the CAC was used to create

rental housing

Enabling rental unit creation – City role

$1.9 million (DCL waived)

100% Rental Projects

392 Rental Units

$4,900/unit

Mixed Strata/Rental Projects

$2.2 million (DCL waived)$14 million (CACs allocated to rental)

217 Rental Units

$75,000/unit

Other CAC funded public benefits: Mixed strata/rental projects

Other CAC funded public benefits(public art, heritage, cash contribution, etc)

Rental housing217 units

$14 m44%$17.6 m

56%

Public BenefitsMixed Strata/Rental Projects

LESSONS1142 Granville

3522 Porter

8495 Granville

1240 Howe

1650 Quebec

1215 Bidwell

2784 E. Hastings

1600 Beach

2730 E. 41st

8440 Cambie

1281 Hornby

1349 Granville

2215 E Hastings1401 Comox

1418 E 41st

963 E 19th

3068 Kingsway

4320 Slocan

3701 W Broadway1620 W 6th

2551 Kingsway

5656 Victoria

Lessons

STIR incentives significantly increased development of market rental housing during pilot

Parking reductions work well – aligns with other City objectives (e.g. Greenest City)

Density is a key incentive – sensitivity to neighbourhoodcontext is important

Value for money in 100% rental projects significantly higher than mixed strata/rental projects

Lessons: 100% Rental vs. Mixed Projects

100% Rental

•More rental units/project•Simpler•All incentives work well•Market rental housing is

the primary public benefit

Mixed Rental/Strata

•Less rental units/project•More complex•Not all incentives work•Market rental housing created as part of a public benefits package

NEXT STEPS

Feedback from Mayor’s Taskforce on Housing Affordability

Positive feedback overall• Continue to focus on transit-oriented development• Recognized importance of STIR program on job creation

Suggestions• Explore ways to encourage family units• Ensure program parameters are clear• Ongoing evaluation – feedback from occupants and community

3522 Porter

1240 Howe

1349 Granville

2730 E. 41st

Report back with policy recommendations later this spring