Greater densities needed to better realize rental-only zoning: report

Dec 11 2019, 3:48 pm

Municipal and provincial policies are inhibiting the full potential of residential rental tenure zoning’s (RRTZ) ability to catalyze new much-needed rental housing.

A new technical report by the Partners for Rental Housing — consisting of organizations that include the Urban Development Institute, BC Chamber of Commerce, BC Rental Project, Landlord BC, and the Surrey Board of Trade — concludes that rental zoning powers alone do not encourage the supply of new rental housing.

And in some cases, based on how the new RRTZ has been used by certain municipalities since it was introduced as the newest tool for cities by the provincial government in 2018, the policy has had the opposite of its intended positive effect.

In these instances, the way rental zoning has been introduced by municipal governments has significantly devalued properties to the extent that it has greatly compromised the property owners’ ability to obtain financing to cover the construction cost of future new rental projects or even repairs and upgrades of structures. Financing is also particularly important for extending the lives of the aging rental buildings in Vancouver, where rental structures have an average age of 61 years.

The challenges with creating new rentals persist when municipalities do not provide additional density that allows for an increase in the number of rental homes.

Woodframe buildings are ideal for rental housing given the significantly lower costs compared to concrete construction, especially for low-rise and mid-rise structures.

However, for transit-oriented rental housing developments around SkyTrain stations that see a higher construction cost from the concrete built form, a significant increase in height and density would not only efficiently create more rental units but also leverage the arterial transit network to support new developments. Such density increases should be free density and not subject to density bonus costs akin to the City of Burnaby’s recently approved rental zoning policy of topping off future multi-family projects with a 20% rental housing component.

The report makes it clear that these projects could be cost prohibitive if insufficient density is not permitted.

Based on examined rental housing scenarios developed on a land assembly of single-family dwelling lots, tower heights of 18 to 20 storeys would be needed to feasibly redevelop a site in East Vancouver with 400 market rental homes, while 24 to 27 storeys would be required for a site in Burnaby with 520 rental homes. A floor space ratio density of over nine times the size of the lot is necessary for these types of SkyTrain-adjacent sites to be converted from their existing uses to rental.

In conjunction with additional density working within the constraints of RRTZ, other incentives should be offered such as decreased parking requirements and reduced municipal development fees, such as the City of Vancouver’s incentives under the Rental 100 Secured Market Rental Housing Policy and the Moderate Income Rental Housing Pilot Project. Such incentives provide developers a better business case to choose a rental housing development stream that requires a long-term timeline and more effort to see returns, instead of the condominium development stream that provides a short-term timeline and quick returns.

As well, the report suggests rental housing growth should be permitted beyond the “obvious areas,” such as SkyTrain stations and arterial routes. Such developments, especially market rental housing, should be permitted in single-family dwelling areas.

“Due to the limited availability of new land for development in urban centres, infill developments, redevelopments and site intensifications will become more common and indeed essential,” reads the report.

“In order to provide more rental homes, without displacing existing tenants,┬ámunicipalities could use RRTZ to designate a portion of the density for rental-only, allowing a builder to construct an additional building on the site which would be secured purpose-built rental housing. Since many older multi-family residential sites have low densities with large open spaces, there may be many opportunities for this type of intensification. For example, building on top of an existing above-ground parking lot.”

Additionally, analysts suggest municipalities should provide developers with the option of allowing the rental floor area from a mixed-use project to be shifted to a 100% rental building in the same area, rather than requiring a mix of residential tenures within the same structures. Such mixed uses are inefficient for operating costs and create management challenges.

On the part of the provincial government, the report states recent restrictions to the allowable annual rent increase are making aging rental buildings financially unfeasible to operate, with steadily increased operating, maintenance, and repair costs and a reduced income stream.

Moreover, according to the report, the provincial government should provide new and enhanced guidance, direction, and monitoring for the rental-only zoning powers it provided to municipal governments to ensure the “well-intentioned” policy does not continue to see “flawed implementation,” which “can actually inflict more harm on the very people this was supposed to help.”

Upper government guidance is needed, given the rental-only zoning tool is the first of its kind in North America.