Vancouver to relax rent limits to push approved projects to construction

September 2023 construction progress on Molnar Groups' Renfrew Apartments, under the Moderate Income Rental Housing Pilot Program (MIRHPP), next to SkyTrain Rupert Station in East Vancouver. (Kenneth Chan/Daily Hive)

Approving much-needed new affordable rental housing projects is one thing, but actually realizing these homes after approval through construction is a completely different matter.

For that reason, the City of Vancouver is looking to relax some of its rent limits under its 2017-created Moderate Income Rental Housing Pilot Program (MIRHPP) and the Below-Market Rental Housing Policy for households with annual incomes between $30,000 and $80,000.

In a City staff report that will be considered by Vancouver City Council next week, it is noted that 16 projects with a combined total of 2,975 rental homes were approved under the MIRHPP stream, which requires 100% secured rental housing uses, with 80% at market rents and 20% at below-market rents.

You might also like:

As a time-limited pilot, MIRHPP had a maximum intake of 20 projects, with proposals accepted between 2018 and 2022.

So far, just nine of the 16 approved MIRHPP projects with a combined total of 1,082 rental units (36% of the approved total) are currently under construction. Another four projects with 450 rental units have received rezoning approval and four projects with 1,443 rental units are still in the rezoning enquiry or application stage.

City staff state no projects approved through the MIRHPP stream have reached completion to date.

Molnar Group’s Renfrew Apartments, a pair of seven-storey rental buildings with about 180 units, located next to SkyTrain Renfrew Station, was the first MIRHPP project to be approved in late 2019. This project is expected to reach completion in 2024.

“After nearly seven years of implementing the pilot, there is a need to adjust the policy to ensure these projects move forward from application to construction and occupancy. It is also important that the projects are set up to operate successfully over the anticipated life of the buildings,” wrote City staff.

It was also stated that a total of 60 pre-enquiry applications were received during the MIRHPP intake timeline, but the vast majority of these enquiries did not proceed any further due to a combination of inability to meet program requirements — such as an insufficient number of below-market units — and challenges with securing construction financing due to the program’s rent limits.

It is further highlighted by City staff that there are nearly 2,000 below-market rental homes that follow the original MIRHPP rent model currently in application. Another 333 below-market rental homes are under construction, and 39 below-market rental units are occupied.

The trouble now with advancing these projects to construction is essentially that the 2017-created rent limits do not keep up with the escalating construction and operating costs due to inflation and the current high borrowing costs. It also does not reflect changes in renter incomes.

The provincial government’s policy since 2018 to reduce the annual allowable rent increase to only inflation — instead of the previous formula of inflation plus 2% — has also impacted the financial viability of the projects.

In fact, the stagnant MIRHPP rents are now even lower than the maximum rents for social housing.

“In addition, the original MIRHPP rents (permanently set at the 2017 rates) have become more deeply discounted relative to market rents such that they are now lower than social housing maximum rents, at nearly a 50% discount to newer market rentals. These rents do not reflect the original intent of the program, which was to serve moderate-income renters through private sector delivery with no ongoing subsidies,” continues the report.

“This raises concerns that some of these projects may not proceed through to occupancy. It also creates longer-term operational risks as cost escalation outpace rent increase allowances over time.”

Instead of the flawed 2017 formula, City staff are now looking to adopt new below-market rates that are based on a 20% discount to city-wide average rents, which are determined by Canada Mortgage and Housing Corporation. This means the average starting monthly rent for a studio would go up from $950 to $1,135, a one-bedroom unit would go up from $1,200 to $1,303, a two-bedroom unit would go up from $1,600 to $1,818, and a three-bedroom unit would go up from $2,000 to $2,447.

When the unit sees a turnover, the rent can be adjusted to 20% below the current city-wide average rent.

Other measures include streamlining and simplifying steps in both the design and application process, including removing the regulation of maximum unit sizes as it creates a “significant administrative burden with minimal impact, and so is unnecessary.”

The proposed policy changes coincide with the provincial government’s release of the final new housing supply targets the first 10 municipal governments must meet over the next five years.

For the City of Vancouver, this entails catalyzing nearly 29,000 homes to the final project stage of completion and occupancy between October 2023 and September 2028, including about 13,000 market rental units and nearly 7,900 below-market rental units. To date, the municipal government’s main metric has been the number of housing unit approvals. The policy changes to the rent limits would certainly act as an added tool in the toolbox to help the City achieve its new legislated targets.

You might also like: