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Protectionism

5 Nov

Zoning is a protectionist measure, which much like trade tariffs, constrain supply and restrict the ability of the market to respond to real demand. In the case of restrictive zoning, the housing market experiences a rise in the price of houses due to limited supply, a situation that leads to a market becoming detached from the real economy, to the detriment of the city and the region as a whole.

In a normal balanced market, the supply of housing stock either rises with the corresponding demand so as to keep prices stable, or rises only slightly more than inflation. In the condo market in Vancouver, comprehensive zoning allows developers to build sufficient product to meet consumer demand so prices neither rise nor fall dramatically. This is a healthy situation, as it allows future and current homeowners to better plan their housing needs, while at the same time permitting developers to better project budgets and sales revenues. Another benefit of this zoning environment is the neighbourhood can grow and evolve, meeting the needs and representing the ethnic diversity of a dynamic city.

Sadly in the case of a market distorted by a protectionist measure such as zoning, the prices of the available product rise quickly and unpredictably, faster than real wage increases. This reduces the number of potential buyers, as they fail to save fast enough to access the single family home market. Families, professionals with large amounts of student debt, seniors with rising property tax bills are among those forced to move elsewhere for their housing needs. Over time the profile of residents in a neighbourhood begins to narrow and become ethnically uniform, where more established ethnic groups who arrived in Vancouver early and benefited from the modern real estate booms, start to dominate the single family zones of the city. This explains why the City of Vancouver is a mostly Caucasian and Chinese city, while Surrey, much newer, is more ethnically diverse and representative of the population dynamics of Greater Vancouver.

I do not advocate turning Vancouver into a giant comprehensive development zone similar to the downtown, since this would lead to utter chaos in the market and destroy the livability of the city. What I propose is that each area in the city be up zoned, meaning single family zones become duplexes, duplex zones become more comprehensive low rise, and so on. This will permit more people to live in and enjoy the City of Vancouver’s amenities and give home buyers more choices than either moving to the suburbs or living in a condo in the downtown. It must be noted that the stock of single family homes will not dry up under such a measure, rather the market will adjust their price and quantity to match the buying power of potential home owners – those who want a single family home will demolish a duplex or retain a single family home. Up zoning will also preserve the aesthetics of the city without overly crowding neighbourhoods – one can just look at the success of the duplex zones in Kitsilano, which have preserved character and tree cover while providing a lot more housing than Dunbar or Point Grey.

The time to act is now. Restrictive zoning is strangling Vancouver, it creating a socioeconomic divide that is not healthy for our economy, our city and the region as a whole.

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Vancouver Developing a Duplex in an RT7 Zone

19 Sep

As I’ve alluded to on multiple occasions, Vancouver suffers from a housing crisis of sorts, not uncommon to many desirable cities around the world. I am not as instructed on the complexities of cities such as Paris, Rome, or Barcelona, which are part of Europe’s “museum” cities – city centres devoid of permanent residents and almost entirely inhabited by tourists, or San Francisco, New York, or Hong Kong – city centres occupied by the creative and entrepreneurial classes, where everyone else lives on the periphery, or for that matter London (arguably the most exclusive of them all). Vancouver’s housing crisis is different to these cities because it is neither a museum city, nor is it a global alpha city with a large creative and entrepreneurial class.

In Vancouver the problem is the juxtaposition of zoning and the BANANA (1), as is evident in my employer’s most recent property development project. In the past our company has always built and renovated in North and West Vancouver, nearby upper middle class suburbs with a mixture of density and suburban development, with pockets of early 20th century Queen Anne and Edwardian period homes. Zoning in these suburbs, as well as community amiability to development has enabled the North Shore to develop some very successful mixed neighbourhoods. Despite this, I decided to make a strategic shift towards the City of Vancouver because of a better values fit – cycling, bike lanes, public transit, pre-automobile city grids – all sadly lacking in the suburbs of North and West Vancouver.

I digress, back to zoning and the BANANA. The City of Vancouver’s zoning is approximately 80% single family or commercial and condominium development, with the remainder open to duplex and other smaller medium density projects. For those not familiar with the City of Vancouver, I like to call these zones places where one can build the kinds of medium density flats and town houses typically seen in the inner cities of Chicago, Boston, London, Montreal, and Toronto – not more than 5 stories high, and everyone has street access without an elevator.

Since these zones cover such a tiny area of the city, the prices are exorbitantly high, which means developers have to charge top dollar on completed product in order to cover costs and turn a profit for the next project. In my blog I have repeatedly called from the end to single family zoning, so I’ll avoid dwelling on it here. More importantly, this is where the BANANA part of the problem comes into the equation. Residents in these zones often fight back on proposed new density, as they do not want to see their neighbourhoods undergo any significant change. They argue schools will become too crowded, street parking more scarce, libraries overused, and privacy diminished. Yet what the BANANAs fail to understand, is that the very density they fight is the density that allowed them to get into the neighbourhood in the first place. Put simply, if houses could not be converted into duplexes, triplexes, and small apartments, no one other than high income earners and those with rich parents would be able to live in these zones. One only need look at the pricing in the single family zones to see the evidence. Density brings the price per square foot down, which allows more people access to housing.

So the developer has to bend to the demands of BANANAs, who through lobbying impose all sorts of restrictions on the sorts of development that can be done in these limited medium density zones. These restrictions are reflected in the City of Vancouver’s building legislation, where blanket restrictions on demolitions force builders to restore homes of questionable heritage value, often sacrificing both housing density and neighbourhood restoration.

I am currently going through this very situation at the moment. The architect we’ve engaged has been told by city hall that the house we are planning to convert is stamped as heritage, so to demolish it would mean we would sacrifice 850 square feet of living space. Agreed, the house was built in the 1920’s; however, it has suffered from so many “renovations” inflicted on it prior to the zoning restrictions, that today it nothing more than a neglected cement block with aluminium widows, a car port addition, and a concrete front stairway.

Yet the legislation is clear, the city, directed by voters and lobbying, placed blanket measures to encourage housing retention and discourage the development of the horrid MacMansions that were built during the 1980’s and 1990’s, when waves of Chinese immigrants fled Hong Kong and Macau to park their money offshore in giant pink stucco homes devoid of any garden space. The pushback from local residents was reasonable at the time; however, the city now faces a housing challenge that can only be resolved by relaxing zoning and standing up to the BANANA.

A more practical solution to fit today’s needs would be to offer the developer the option to demolish the unit and retain the allowable building space, if they integrated a minimum amount of salvaged heritage material. This salvaged material can come from other homes or from secondary resale markets. Square feet could be rewarded to the developer for installing restored timber beams, salvaged lighting, hardwood flooring, gables, stained windows, etc. Naturally even more square feet would be given to developers who retain the house; however, at least this more versatile option would ensure heritage is retained in the neighbourhood, but not by just “saving” a building that has lost all the “heritage” value it had, apart from the year it was originally built in.

For us the next step is negotiations with city. There is a four month backlog at City Hall, so this project has a long way to go before breaking ground.

 (1) BANANA – An acronym for Build Absolutely Nothing Anywhere Near Anything, also known as the NIMBY – Not In My Back Yard. http://en.wikipedia.org/wiki/NIMBY

My Vision is not a Laneway House

21 Aug

In 2004 I moved from Montreal to London with the intention of making a career transition from sales to marketing, while setting up a life on the European continent – it was a well executed plan built on 7 years of undergraduate and graduate education. In the end it did not work out. I had made the move too late in life, I didn’t hold a EU passport at the time, and London was never a place I aspired to live in, rather a city I enjoyed to visit, a stepping stone for moving to the European continent.

2005 was a reset, a return to the Westcoast. The objective was to build a property business, which would in time marry well with the construction company our family had established. It has been a battle, the details of which are not worth repeating here. At a global level, big changes of this sort often involve deep questions, they also lead to conflict, as different parties try to marry together often incongruent visions and expectations. Nonetheless, there has been success, as what was once a tiny holding of a one bedroom condo in the suburbs has taken fruit into something considerably more substantial. My hopes and aspirations are that the upward trajectory will continue and our property business will make the next big step in becoming an important contributor to the development of beautiful, smaller, more efficient housing in this fair and so beautiful place, “The Land of the Lotus Eaters”. 

I continue to devote considerable time and thought to this endeavour, as I believe it to be a worthwhile one. People need homes to live in, just as they need hospitals for care, and schools for learning. So why not make these homes beautiful? Why not make them just the right size for a Vancouver family – one or two people a room and not two or three rooms a person? Yes, how novel, small efficient beautiful homes that don’t waste space.

The latest challenge we are finding to executing our vision is the availablity of housing stock that can be developed into duplexes. For a city that is awash in condos and single family homes, the “everything in between” is neglected. It is as if the consumer and the smaller developers are channeled to one of two options: buy a condo in a tower developed by a large developer, or demolish a single family home and build a bigger single family home to recoupe the costs. Neither of these options is particulary appealing, and neither applies to our vision. Condos don’t build communities, rather they isolate people from each other and the street scape; bigger houses house less people and are an inefficient use of space and energy.

Lane houses have been pushed as the answer to this conundrum; however, I believe they are a misguided solution for two reasons. Firstly they are short sighted, as once the infill investment is made, the lot becomes indivisible should zoning change in the future. This means the land becomes locked in with a big house and a small house, when it could have been built as a triplex or fourplex – units that in turn could be owner occupied or rental stock. Secondly, lanehouses do not increase the supply of land stock for sale, as they cannot be sold separately from the principal house, which means that one of the residents will always be in a landlord position, while the other will in perpetuity be in the more precarious role of the tenant. The reality is that most people don’t want to rent, and most people do not want to be landlords, most people just want to own their own home that they can do with as they please. 

In Vancouver there is little hope the city will abolish the single family zoning in the forseeable future. This remains the biggest obstacle to delivering our business’ vision.