Faced with a sharp reversal in the real estate market, the City of Vancouver is considering significant policy shifts to prevent a future housing shortage. After years of grappling with skyrocketing prices, city planners now warn that falling rents and home values, combined with high construction costs, threaten to stall new home construction entirely.
Proposed Measures to Stimulate Development
In response to council direction, Vancouver's planning department has drafted a suite of proposed changes aimed at improving project viability for developers. A key recommendation is a temporary 20 per cent reduction to the development cost levies (DCLs) that builders pay to fund city infrastructure. Staff also suggest offering more flexibility on the payment timelines for these fees.
Other proposed adjustments include softening city requirements for below-market rental units within new projects. According to a detailed 50-page staff report scheduled for council review next week, these measures are deemed necessary to keep the pipeline of housing projects moving forward in 2025 and beyond.
The Inevitable Trade-Offs and Funding Gap
City planners acknowledge these potential changes come with clear consequences. The staff report outlines that the proposed reduction in DCLs could create an estimated $320 million funding shortfall for planned infrastructure and community amenities over the next four-year capital plan.
To bridge this gap, the city might need to borrow funds or draw from capital reserves. The trade-offs, as outlined in the report, are multifaceted: future below-market apartments may be less affordable, investment in public art could diminish, and some infrastructure and amenity projects may face delays or reductions in scope.
A Necessary Step to Avoid Future Shortages
Vancouver's general manager of planning, Josh White, emphasized the urgency of the situation in an interview. He stated that without intervention, fewer development applications will come forward, more projects will be abandoned mid-construction, and ultimately, fewer new homes will be built.
"We need to act," White said. "If we don't, if we're not getting those units built, we're just going to be running into the same shortage a few years from now. We want to keep that pipeline going."
The challenging market conditions are visible across Vancouver, with halted construction on several prominent projects, layoffs at major real estate firms, and an increase in sector insolvencies. While factors like material, labour, and financing costs are beyond municipal control, the proposed changes target levers within the city's purview, including zoning and policy requirements, to provide relief.
