With so much in the media about foreign investment and its link to affordability … the municipal approval process and its link to supply and the cost of that supply is often overlooked.
In 2017 the Fraser Institute attempted to investigate the building permit approval timeline in the Lower Mainland. Vancouver “had the longest building permit approval time with an average of 21 months, with West Vancouver and Surrey trailing behind at 18.3 months and 13.2 months respectively.” “In contrast, the City of Langley had the shortest approval time with an average of less than two months,” followed by Pitt Meadows (5.4 months), Richmond (6.5 months), and Burnaby (6.8 months). – Daily Hive
What troubling about this research is the correlation between the time for approval and the increase in compliance/development costs, ie; the longer the approval processes the more the developer will pay. “Vancouver’s regulations add $78,000 for every unit of housing built which is five times more than neighbouring Burnaby at $15,000 per unit” – Fraser Institute. “Such approval processes are delaying the creation of new housing stock, and the cost of construction and design regulations that must be adhered to are passed on to the consumer.” – Kenneth Green.
In addition to compliance and permitting costs, cities require a cash-in-lieu Community Amenity Contribution (CAC) to be made by the developer or applicant which is based on the value of the additional density achieved. These funds are allocated exclusively for the future provision of a community amenity and/or affordable and/or special needs housing.
Ben Williams is a senior broker of development land & investment properties; through his work in land assembly, he has gained extensive experience with the municipal approval and rezoning process throughout Metro Vancouver. “The argument from the City’s perspective is that Developers are paying for future community amenities and affordable housing projects. That sounds good – but we should also be asking the question – are lengthy approval timelines in conjunction with increasing approval costs actually increasing the cost of housing?” – London Pacific’s Ben Williams.
“City staff and politicians believe not” – Vancouver Courier, but developers disagree, as they must include these costs in their development proforma – re-iterating that the cost is ultimately passed onto future buyers.
As of September 2018, the City of Vancouver will be increasing their rates. “For a six storey building along the Cambie Corridor, the CAC will increase from $68.18 to $115 / each SQFT of additional floor space approved by rezoning” – Vancouver Courier.
Image credit evening_tao/Freepik