This article was written and published in the 2016 Year-End Goodman Report.
For the record, the Goodman Report is very supportive of responsible efforts by various levels of government to provide assisted or social housing for those in need. It’s clear to us, however, that the program put forward recently by the City of Vancouver for providing temporary modular housing is a reactive, poorly conceived solution to a deeply rooted problem.
Here’s what’s happening. To address the chronic non-market rental shortfall, Vancouver is currently installing on valuable City-owned land 40 temporary modular housing units of 250 SF each. While our politicians congratulate themselves on finding an approach to housing shortages and unaffordability, the manner in which they’re executing this program represents a misguided, wasteful use of high-density land and taxpayer money.
The site is located at 1500 Main Street (the corner of Terminal Avenue), a prime FC-1 zoned, 25,583-SF partially vacant property, strategically chosen for its adjacency to SkyTrain. From a walk-by, it appears that the modular housing is going up only on a portion of the site, with an approximate remainder of 16,000 SF sitting idle (okay, well, there’s a tree farm of sorts). For the sake of this argument, we’ll estimate that the modular housing occupies about 9,000 SF (around 35% of 25,583 SF total).
The cost of these units together (construction plus the land’s market value, or opportunity cost) is potentially in the $15-million range. This is actually much higher than purchasing a conventional rental building on the basis of price per unit and price per SF, especially when one considers the unit size of only 250 SF.
Looking at the math, you have to wonder why the City is using extremely valuable taxpayer-owned land in this way. Check it out:
Examining the numbers above, we note that the density is only 1.65 FSR (or 0.58 FSR on the overall site), whereas current zoning allows for 5.0 FSR (approximately 45,000 SF versus 14,875 SF on the portion of the site currently improved with modules). Furthermore, the efficiency ratio for the modular building at 67% is very low (i.e., inefficient) when compared to that of a well-designed project at 80–85%. Additionally, across the street, new market condos are starting at approximately $1,000 per SF, and this modular project appears to be effectively costing $1,488 per SF based on net rentable area!
The attempt of our politicians and planners to play developer by building expensive new temporary housing that costs more than buying existing properties is a stopgap measure, noble in intent, that represents but a drop in the bucket in terms of providing permanent relief. Once again, Mayor Robertson has shown knee-jerk and optics-driven reactivity, poor business acumen and limited consideration for long-term policy ramifications. Let’s also keep in mind that if the City hadn’t taken steps a few years back to exclude the private sector from owning social housing, we’d have plenty more privately built and financed new units available today for those who need them.
On the open market, this entire prime parcel could conceivably fetch in the range of $30+ million and could be used far more meaningfully. For example, a developer could build as many as 200–250 permanent units of non-market social housing. Alternatively, the City could elect to be the developer and own it on behalf of its citizenry.