Social Housing at what cost?: Allen Garr in the Courier

The following story appeared in the Friday March 26, 2010 Vancouver Courier headlined Social housing at what cost? by Allen Garr, Vancouver Courier

No matter what Mayor Gregor Robertson and his Vision council decide to do with those incredibly costly 252 social housing units at the Athletes Village, they'll be left with a political problem.

Their own supporters are already at odds over solutions. And, come the next election, you can be sure COPE and the NPA will feast on all of this. A project that started at $65 million is now north of $110 million; this could be the most expensive per unit social housing development on the planet.

How did we get here? One significant decision took place under COPE and former mayor Larry Campbell. But many of the decisions that drove the cost up happened while ex-mayor Sam Sullivan and the NPA were running the show.

It was Campbell's council that decided to accept a recommendation from their law department that the title to the land would rest in the hands of the city throughout the development. The argument was that, because the city had an Olympic deadline, this arrangement would allow them to jump in to finish the project if the developer faltered.

I'll get back to that in a minute.

When the NPA swept to power they dramatically reduced the social and low-cost housing components, arguing they were too expensive.

But it was with council's unanimous selection of Millennium as the developer that they really drove a stake into the heart of the social housing option. And that happened before even one yard of concrete was poured.

Three proposals were considered by staff. Based on the "assessment matrix," Millennium was last. Then staff decided to include the price Millennium was offering for the land --$193 million and far more than the other two--as part of the assessment. Millennium jumped to the head of the queue. And council grabbed its offer.

Other developers were stunned at the price. Longtime Vancouver architect/developer Michael Geller figured it came in at about $225 a square foot, double what land was going for in Vancouver's downtown core. There was no way, he now agrees, that starting with that land price you could ever produce social housing.

Then there was another problem. The other two bidders were apparently prepared to self-finance the project. Millennium had to go to the market for money. And with the decision the previous council made about holding on to the title, conventional Canadian lenders were not interested. Enter a very costly New York hedge fund.

Added to the high land cost and high interest rates was a red-hot construction market. The costs of labour and materials were escalating almost daily. Then the project was fast tracked to make the Olympic deadline.

Geller says poor and inexperienced management at both the developer level and the city aggravated matters in terms of cost. The green elements of the building could have been done for a lot less money. The architects had Champagne tastes. The change orders to the social housing portion of the project were dutifully followed by a developer who was working on a cost plus basis. Costs on the Athletes Village were running over projections to the point the city had to step in to shore up its investment, which is about the time of the last election. Welcome Robertson and Vision. This problem was dropped into their laps.

Now for some options: If they keep the units as social housing they will have to dump another $55 million in to subsidize it. But that would score them points on their left wing. If they sell the units and use the money to build social housing elsewhere--an option preferred by Geller and some Vision folks--they will be denounced as traitors to the original concept of an economically diverse neighbourhood. Builders for the rich.

Holding on to the units and renting them out at market rates will satisfy neither the left or right. A staff report with recommendations for council is expected next month. It should come with two Aspirins.

agarr@vancourier.com

While I don't always agree with Allen Garr, (and he doesn't always agree with me), we have been having a dialogue regarding the cost of the Olympic Village housing for years. He called me immediately after the Millennium bid was announced and I said at the time that I thought they had bid too much money. I was quoted as saying it was the highest price ever paid for a residential property anywhere in Canada; although Al Poettker of UBC Properties Trust phoned me afterwards to correct me...he said someone had offered slightly more on a price per square foot for one of his UBC sites, based on 'present value' calculations.

While I question Garr's statement that the other bidders Concord Pacific and Wall Financial would have 'self-financed' the project, (they too would have borrowed money, but both had very substantial assets that could have been pledged) and I can't verify the estimated $55 million additional subsidy requirement....that number didn't come from me...

Garr correctly notes that this is an extremely important issue, and whatever Vision councillors decide, it will be wrong. For this reason, I hope they will do the right thing.

A few more details that I shared with Garr:

1. The 'social housing' was never intended to be all social housing. That's right. In order to ensure a broader income mix and reduce subsidy costs, only half the 252 units were to be leased to 'core needy' income tested-households...the remainder were to be leased at the lower end of market rent to anyone lucky enough to get in line;
   
2. On this basis, the cost works out to about $800,000 per low income social housing unit, plus land;
3. The social housing units were never intended to accommodate homeless people. They were designed for low income families with children, and seniors on Province and City wait lists.
   
4. My proposal was not to just sell the units. It was to sell the units as 'FETTERED' AFFORDABLE OWNERSHIP HOUSING, so as not to compete with the market units to be sold by Rennie on behalf of Millennium. This is was what Vancity and SFU did with Verdant, on Burnaby Mountain.
   
5. What does this mean? For one thing, the land would be leased, not sold. Secondly, units would not be sold to investors; they would be sold to 'end-users' with priority given to Vancouver firefighters, police officers, emergency workers, teachers and others who work in Vancouver, and would like to live here.
6. There could be 're-sale controls' which keep the units more affordable over time, and give the city the right to buy them back;
   
7. Not all the units need to be sold....Some less desirable units could be retained as social housing from the get go...
8. Replacement social housing units could be built on lands immediately adjacent to the Olympic Village. This would ensure the desired social and income mix.

I appreciate Allen Garr's efforts to provide a spotlight on this issue. It is very complex, and politically challenging. When I spoke on CBC last week, Rick Cluff commented that if Council votes to sell the units, they will be seen by some as having lied. He's right.

But as Garr points out, Councils of all political stripes have contributed to the current mess. I think it would be financially and socially irresponsible to keep these units as 'social housing' when the need for housing for the homeless and others who are truly desperate are so great.

One last thing. The suggestion that the city hold onto the units and rent them out seems logical, but is the worst of all worlds. For one thing they would still have to be heavily subsidized and could compete with Millennium's rental units (assuming they stay rental units)

Furthermore, the city needs the money. There is no guarantee it will get the money promised by Millennium for its loans and land payment. It has also gone millions of dollars over budget on the South East False Creek shoreline works, community centre, parks and other facilities...but that's another story.