KELOWNA, BC – The Surrey Board of Trade is calling on the provincial government to focus on affordable rental housing and a fluid labour market at the BC Chamber of Commerce Annual General Meeting and Conference, May 29 – 31 in Kelowna. This policy was approved at today’s second BC Chamber policy session as a priority to the BC Government.
“To thrive and grow, businesses and industries look to locate in areas that provide access to resources, transportation hubs, and employees. Employees look to locate close to employment and in areas they can afford. Whether it is in the Lower Mainland or in other areas of the province, affordable housing choices are required in order to be economically competitive and to attract and keep skilled workers. An adequate supply of housing with reasonable transportation costs is critical for economic growth,” said Anita Huberman, CEO Surrey Board of Trade.
The Surrey Board of Trade’s specific policy recommendations are that the Provincial Government
- Work with the Federal Government to develop tax and other incentives for purpose built market rental housing units for low- to mid-range income levels, using innovative designs and locating near transit hubs; and
- Work to combine other social program supports to help support those in the lower income ranges to access market rentals, such as expanding the SAFER program to other vulnerable populations.
Urban centers are experiencing a rapid increase in housing costs. In a study done by Vancity, the cost of housing was determined to inhibit young workers from coming or staying in the greater Vancouver region. Similar studies have pointed out that the rise of real estate values is greatly outpacing incomes and the gap is growing. Very few workers receive salary increases of 10-20% per year. In fact, Vancity’s findings are that salary growth is slowing with the past five years averaging 1.3%. This, claims Vancity, is why Millenials are exiting the Lower Mainland labour market for greener pastures where employment and housing opportunities co-exist. It may also deter in-migration and immigration of skilled workers to locations where skills are required.
Vancity’s analysis of salaries that provide insufficient incomes for purchasing, may be enough for rental units – if available: mid-level managers, and senior administrators, computer programmers, and technicians, registered nurses and social workers, researchers, counselors, food industry workers, and contractors. The list of skilled workers unable to purchase in Metro Vancouver is long. This improves outside urban areas and into the farther regions of the province, but employment opportunities diminish.
The rental market is challenging with a B.C. average vacancy rate of 1.2%67, a decrease from 2014, and the Lower Mainland rate approaching 0; the pressure on existing rental stock is inhibiting in- migration of Canadian skilled labour, particularly where they are needed the most by BC employers. From October 2014 to October 2015, only 1,900 purpose built rentals units were constructed throughout BC (CMHC). These are either new or renovated units returned to the market.
Rents are rising on average 3.7% in response to market pressure, compared to 2.4% from the previous year – despite current rent controls of +2.9%69. The average turnover rate in the Lower Mainland is 18.8%70 providing an opportunity to substantially raise unit rents with each new tenant. Further, there is a growing trend by property managers or landlords to require tenants nearing the end of a fixed-term lease to sign a new agreement if they wish to stay. As it is considered a brand new agreement, the new rent can be set without imposed limits. With few options, most renters have no choice but to sign for a much larger rental increase.
As an incentive to developers, it would be desirable to remove rent controls, but until there is sufficient rental stock, a lack of adequate supply will cause rents to rise rapidly out of reach of all but a few with sufficient income – similar to the current housing market. Therefore, new or expanded incentives are required for developers to construct purpose built rentals in the short-term while continuing to find a more sustainable return on investment for developers in the long-term.
Historically, incentives through government programs (federal and in partnership with provinces) provided developers with low interest loans to construct non-market units, most of which were targeted to those earning less than the median income for a region. The first program under the National Housing Act in 1938 allowed for construction of low-rent housing. In 1959, the act expanded to include partnerships with provinces to fund publicly owned and provincially managed housing for low-income families, seniors and the disabled. In 1970, a $200 million stimulus program for low-income housing, culminating in a 1974 expansion to include co-operatives, public and non-profit housing for mixed styles and sizes for low to modest incomes. At the same time, the federal government encouraged private market rental development by insuring mortgages and providing direct loans in smaller communities; plus grants and taxation concessions including multiple-unit residential-building deductions, assisted rental programs and a rental supply plan.
By 1986, BC had 8% of the 253,500 public housing units in Canada, but the programs were undergoing reviews and cut-backs. CMHC focused limited funding on a maintenance program for 12,800 units per year. By 1993, all social housing programs ceased; most market rental- assistance programs had ended, and there was a shift to off-load subsidized housing to non-profits and provincial coffers. BC currently is one of few provinces that will subsidize development of social housing and provides for vulnerable populations, e.g., the SAFER program for seniors,73 which allows seniors to remain in their homes with provincial support.
There are programs to help with the development of social housing – a recent announcement from the Province of BC to partner with non-profits is an example. However, to address the projected housing needs for low to mid-income workers that BC will need to keep up with economic growth, a stimulus package will be required not dissimilar to the Federal Housing program of the 1970s – to support both non-market and market rental development: density bonusing and 20% social housing set-asides for new development are unable to provide sufficient units fast enough to meet demand.
There is a gap in the upper-low income and mid-range incomes for rental accommodation. For example, the Lower Mainland’s current median income is $63,000 (most renters fall under the median), and an average 2 bedroom suite is $1,287 requiring an income of $51,480 in Vancouver75, the problem is not affordability for Vancity’s list of skilled workers, it is a deficit of mid-range lightly subsidized to market rental units. There is opportunity for developers to reach this market.
The units that currently exist, developed with assistance of past government programs, are nearing end-of- life and require major upgrades or outright replacement. A combined federal-provincial government program to provide a combination of guaranteed loans, grants, and taxation offsets will encourage re- investment in current affordable stock.
To address the shortfall of market rental units, CMHC, in conjunction with provincial and local governments, can develop property tax, income tax, and capital gains tax incentive policies, in conjunction with other levers, to provide incentives for innovative development. It will require cooperation to develop a program utilizing current tax tools to invest in purpose built rental construction. Governments assistance is required to help overcome access to land – however, through land remediation grants, assistance in land accumulation, and the appropriate use of public land, developers, in partnership with provincial and federal governments, can begin to address the rental deficit. As Vancity pointed out, there is a market of skilled workers ready to move in.
The investment of government to incentivize rental market construction will result in increase economic development for the community and the province. The Center for Housing Policy76 collated a number of studies that demonstrate clearly the connection between the development of low- to mid-level income housing units and employment. They concluded that not only are employers able to attract the best and the brightest, there are spill-over benefits for the local economy.
The solution is for the Province of British Columbia to work with Federal and Local colleagues and find ways to create incentives and opportunities to save and increase the current rental stock, protect and expand co-op and co-housing units, and encourage innovative solutions. British Columbia is doing well economically; however, to continue to do so, we need to ensure that a lack of housing for skilled labour does not become a barrier to future economic growth.
The Surrey Board of Trade authored this policy. At this BC Chamber of Commerce AGM, Chamber delegates from across B.C. voted on this policy, among others put forward. The policy received two-thirds of votes to pass.
“The Surrey Board of Trade is proud to take this policy forward to our peers from across the province,” said Anita Huberman. “Our organization is committed to creating a more business-friendly Surrey and a more business-friendly B.C. We think this policy will help achieve that and we hope it will get the needed votes from our peer Chambers and Boards of Trade.”
The BC Chamber AGM and Conference is held in a different B.C. community each year. The event is the largest annual business policy-building forum in the province. Every year, member Chambers of the BC Chamber develop and submit policies for the consideration of their peers. This year, 54 policies were forwarded and will be voted on at the AGM policy sessions. The Surrey Board of Trade submitted 11 policies for approval.
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For further details, please contact:
Anita Huberman, CEO
anita@businessinsurrey.com
D: 604.634.0342
C: 604.340.3899
