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Builders are stepping up to meet huge housing demand in Greater Vancouver. In the first quarter of 2016 there was a record level of more than 7,000 housing starts, and new home construction is expected to remain above recent averages through 2016 and 2017. But even with a steady climb in residential building, the supply of available homes has been dropping. And ongoing population growth will make this an even harder curve to bend.
Home sales have been growing much faster than new listings in Greater Vancouver - pushing this ratio up well above the range that is considered balanced. In some areas, sales have actually outpaced new listings, depleting already very low inventory.
While the City of Vancouver has a relatively high density by Canadian standards, most if its landbase is set aside for single-family and low-rise residences. This suggests lots of potential to creatively fit in more housing.
The cost of a new housing unit in Metro Vancouver includes, on average, close to $30,000 in project approval and regulatory compliance costs. And regulatory delays and uncertainty further strangle off growth in the housing market.
A recent survey assessed total costs relating to project approval and regulatory compliance on residential developments. On average in 10 Lower Mainland municipalities, regulation adds more than $28,000 to the cost of a home. Regulatory costs and fees are also highly variable and don’t correspond with density – strongly suggesting room for improvement in many municipalities.
Residential construction in the City of Vancouver has and continues to become more complex, costly and drawn-out - as the following experiences of an individual property owner trying to build a home illustrate.
Service providers required:
• Land surveyor
|• Structural engineer|
• Certified Energy Advisor
• General Contractor
• Interior Designer
|• Geo-technical engineer|
• ISA Certified Aborirst
• Landscape Designer
Red tape and regulation are big contributors to Lower Mainland housing costs. Costs and delays are two of the key issues we should insist local elected officials focus on.
It’s clear that fees and regulatory compliance make up a significant proportion of the total cost of a home. One recent study found that direct municipal fees and charges alone average about $375,000 for a 22-unit development in Metro Vancouver.
Metro Vancouver Townhouse Development – Average Direct Municipal Fees and Charges
Delays drive up residential construction costs. Debt servicing and other carrying costs on development sites climb higher with every week of regulatory delay, with materials and labour costs also edging up. Yet municipal approval times demonstrate very little sense of urgency.
Regulation is cutting into supply
When approval processes and costs become as onerous as they are, they inevitably impact hosuing affordability and even availability. Among homebuilders recently surveyed on their responses to municipal fees and regulatory delays:
All of which means that - unless we reduce the regulatory burden - even less new housing may be coming online in the years ahead.
Vancouver’s aggressive “greenest city” goal entangles homebuilding in yet more red tape. And many homebuyers would likely say ‘no thanks’ to various requirements and costs. For example, a new house in Vancouver has to be built to accommodate possible:
Many people are unlikely to use such technologies, but the choice has been made for you in Vancouver. And the on-the-ground experience of ICBA members confirms that the costs of ‘green’ requirements can be significant, and sometimes with little if any offsetting benefit.
LEED building standards on condos include a requirement for “multipoint metering” to collect data on specific uses of electricity. While data might identify relatively high use for, say lighting or elevators, other regulations usually prevent strata corps from making big enough changes to recoup the metering cost.
Typical cost: $75,000
Typical benefit: Minimal at best
Heat and energy recovery ventilators – designed to recover heat being vented by bathroom fans, for example – are mandatory in condos. While this might make sense in a cold climate, in our mild region very little heat and energy is recovered – likely less than the electricity needed to run the second fan required.
Typical cost: $1,500 - $2,000 per suite
Typical benefit: Minimal at best
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