Urgent action required: City of New Westminster moves to arbitrarily downzone and devalue multi-family property

Goodman Report
January 25, 2019

The little City that could becomes the little City that won’t

Over the last number of years, we’ve been quite congratulatory in our missives in relation to the City of New Westminster. The City has pushed through some very progressive policies to help incentivize large-scale new rental buildings, knowing they’re desperately needed. As a result, percentage-wise, New West has probably seen the largest increase in new rental supply in the region.

However, in the life of every city, there are always missteps, and New West’s mayor, council and staff are about to make some serious ones. The mayor, now in his second term and having initially earned kudos for his rental housing policies, is at risk of squandering this legacy.

We urge you to pay attention, as these moves have potential negative repercussions for other areas in Metro Vancouver.

Short version: the City is moving full speed ahead on a number of potential changes through the proposed Rental Housing Revitalization Initiative. The basic points we are taking issue at present are:

  1. 6 multifamily properties being downzoned and devalued by the City now: is one of them yours?
  2. City is worried about demolition of buildings although no buildings are being demolished. What’s the deal?
  3. City hires consultant, receives findings, then appears to disregard advice.

Ironically, these missteps will result in politically indulgent policies and bylaws that will ensure the continuation of affordability challenges.
 


 

1. Strata buildings downzoned

Let’s start with the most alarming possibility, which goes to Council for Third and Fourth Reading on January 28 (3 days from now). This has been rammed through with no consultation and no warning to owners.

Background: on January 14 – with no process, meetings or communication with the owners – the City hosted First and Second Reading to downzone (and thereby devalue) 6 privately owned multifamily properties, along with 12 City-owned ones. These are existing stratified residential buildings leased to individual occupants. The City is proposing that these long-term owners, who are reputable landlords leasing their units to tenants, will be the first to receive the brush of the magic “rental-only zone” wand, immediately reducing the value of their property rights.

You would guess that a wide-ranging sell-off of rented strata units must be happening in order to justify such a heavy-handed approach, right? Nope. No such massive sell-offs.

One of these owners has written to us:

This City’s fast-tracking tactic … that is clearly intended to catch landlords off guard and unprepared is detrimental to the City’s relationships with landlords, developers and the general business community. First and Second Reading of the proposed bylaw was held without advance notice or consultation. … The security of property rights is fundamental to the business of real-estate ownership and development. Once property rights can be stripped away without compensation and in such a prejudicial and inequitable manner, the confidence and stability of real-estate ownership and development will be shaken. Lenders will either, in a best-case scenario, become more stringent with their underwriting criteria, making projects more difficult to finance, or, in a worst-case scenario, cease to finance buildings and projects in New Westminster altogether. Bottom line: development and construction in New Westminster will slow to a trickle at a time when more housing is desperately needed for supply and affordability reasons.

Stratified buildings that are owned by one group and rented out to multiple tenants provide good and safe rental accommodation. Owners should be celebrated for renting their properties out, not penalized!

Finally, it is not clear from a legal standpoint whether these measures can even prevent the selling of individual units.  Watch January 28th for what will likely be a contentious Public Hearing on this issue.

2. Imaginary demolition issues & interference in Secured Market Rental Policy

For some unknown reason, as existing rental buildings aren’t being demolished in New West, the City is coming in with aggressive requirements for replacement of rental. There are some areas in Metro Vancouver where significant up-zoning has occurred and where displacement of tenants would be an issue, but this isn’t the experience in New West as it relates to new development.  Recent sales of existing apartment buildings have proven that the highest and best use is indeed the existing use. This begs the question: why fix it if it ain’t broke?

Additionally, as part of its rental housing strategy, the City is suggesting that New West would like to require below-market units as a condition of rezoning under its Secured Market Rental Housing Policy. While this sounds well-intentioned, it will surely push many projects into the “non-feasible” category. As in the City of Vancouver, the result will follow that no new market rental and no new below-market rental will be constructed if and when these are introduced and without sufficient density increases to account for the change.

3. Why retain consultants you’re going to ignore?

As part of their rental housing review, Council and staff retained Coriolis Consulting to complete some analyses.  Portions of their report were released by the City of New West as attachments to the Council Meeting Report dated January 14, 2019. One could argue that the answers that came back may not have been what they wanted to hear, as despite their findings, Council and staff have pressed forward with “solutions” for problems that don’t exist.

Here are excerpts from Coriolis’s report, commissioned by the City and attached to the report to the mayor and Council regarding the Rental Housing Revitalization Initiative.

With respect to the risk of existing apartment buildings being demolished in New West:

“Generally, the analysis indicates these properties are more valuable as rental properties than redevelopment sites; therefore there is little risk of demolition, except in unique circumstances.”

“The City’s current Density Bonus Program is protecting the existing purpose-built market rental inventory due to the cost of bonus density.”

With respect to the Secure Market Rental Housing Policy and prospect of inclusionary requirements for below market units: 

“The financial viability of rental apartment development is marginal under current market conditions. The financial performance of rental development has been negatively impacted over the past year or so by a number of factors including:

  • Significant increases in construction costs, particularly concrete buildings.
  • Increasing financing costs (interest rates).
  • The recent changes to the rent regulations in the Residential Tenancy Act which reduced the permitted maximum annual rent increases (until unit turnover).

Because of these changes in the market and to government policy, rental projects now require increased density to be financially viable compared to earlier in 2018. Therefore, the City should be careful about introducing any policies that make market rental development more challenging.”

Ignoring the math and economics while playing political head games with residents and owners alike is unlikely to lead to success. The City of New West is potentially causing a myriad of future problems with this whack-a-mole approach to imagined issues. With a low vacancy rate to contend with, these missteps could lead to a furthering of affordability issues.

So, what you can do?

We urge you to email City Council and the mayor to call for a standstill, especially to # 1. You can also sign up to speak at the public hearing on Monday, January 28 at 6:00 pm in Council Chambers at City Hall, 511 Royal Avenue, New Westminster. To register to speak, email clerks@newwestcity.ca or call 604-527-4523.

Write to New Westminster Mayor and Council:
clerks@newwestcity.ca; jcote@newwestcity.ca; cdas@newwestcity.ca; pjohnstone@newwestcity.ca; mcevoy@newwestcity.ca; nnakagawa@newwestcity.ca; cpuchmayr@newwestcity.ca; mtrentadue@newwestcity.ca 

Write to staff:
eadin@newwestcity.ca; lspitale@newwestcity.ca; jteed@newwestcity.ca; jkillawee@newwestcity.ca