Plan for new municipally-owned, for-profit real estate development company rejected by Vancouver City Council

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This company would not only generate suitable housing for working middle-income individuals and families, but also provide the City with a new non-tax ancillary revenue stream to help fund the municipal government’s growing costs with renewing and expanding infrastructure and community amenities.

According to City staff, the revenue potential would be substantial over the long term, with the framework providing the City with higher returns and equity. This company would also partner with developers, be given the ability to borrow money without impacting the City’s debt levels and credit ratings, and leverage low-cost financing opportunities from the federal and provincial governments. A board of directors comprised of real estate industry professionals, City staff, and elected representatives would govern the independent company.

The company would also be given a one-time startup fund of $8 million over five years, providing it with a runway to hire experienced professional real estate industry staff and become financially self-sufficient.

Green city councillor Pete Fry and COPE city councillor Sean Orr particularly took issue with City-owned land being specifically used to build only market rental housing, instead of reserving such sites for affordable housing. Fry suggested the revenues should be directed toward funding affordable housing projects, while Orr insisted that the company should be provided with strong affordability targets and enhanced vacancy control and protection requirements.

“This is a housing initiative that the City is getting into the business of building for profit for market housing on public land, and that is the fundamental crux of this. Right now, as it stands, the shareholder direction is purely to generate revenue,” said Fry during the heated deliberations.

Orr similarly said, “I just have serious concerns that, that this is using a corporate vehicle to deliver market rental and generate returns rather than focusing on permanently affordable non-market public and cooperative housing, which our community urgently needs. This is intention without direction. Housing is a human, right? And it cannot be simply seen as a business venture or revenue stream. The fact that the report uses language of maximum returns is really worrying.”

“I heard reference that this is like Vienna. This isn’t Vienna. Vienna was socialism. This is neoliberalism. This is London. This is New York. This is enclosure of the commons,” continued Orr, invoking political theory.

Fry and Vancouver city councillor Rebecca Bligh criticized as hypocritical the idea of allowing the City to pursue 100 per cent market-rental housing projects to maximize profits, while at the same time requiring private developers to set aside a portion of their units for below-market inclusionary housing or a cash contribution.

In the lead-up to the decision, it was acknowledged that some experts in the development industry had argued that the City would be unfairly competing with private developers and enjoying an unfair advantage. However, when asked, City staff noted that the company’s framework involves partnering up with private developers to achieve the projects.

“We’ve set ourselves up with a scenario where we’re not practicing what we preach when we ask other developers to show up with inclusionary zoning. And yet we’re not looking at that ourselves in this development proposal,” said Fry.

ABC city councillor Sarah Kirby-Yung argued that the City is already a leader in catalyzing and supporting affordable housing projects, and has done more than any other municipal government in the region, with 13,000 below-market units currently existing across 260 City-owned properties. This includes providing significant City-owned land for affordable housing projects and providing grants to non-profit organizations.

“A long-term sustainable plan to finance our City services and capital infrastructure”

ABC city councillor Lisa Dominato and Mayor Sim emphasized the urgent need for the municipal government to develop new revenue streams to address its aging infrastructure and community amenity deficits, noting that the financially strained provincial and federal governments have not been forthcoming with funding and are increasingly unlikely to provide support toward the core responsibilities of municipal governments.

Both senior levels of government are pursuing austerity measures, leaving municipalities to fend for themselves.

“By tying our hands, by saying that any revenues generated from this initiative could only go to one thing, how on earth are we going to pay for civic infrastructure? How are we going to do it? We’re just going to continue to have buildings crumble… Let’s get back to trying to be reasonable and pragmatic and trying to deliver for citizens,” said Dominato.

“We can keep pleading poverty and go to the province and to the federal governments and ask for more money, which we do every year. We have all these conferences and conventions or we can take control of our own destiny, and it is a financial destiny we’re talking about, but it’s not only financial. The idea to suggest that this is the financial bottom line only is disingenuous at best. It is about making sure we have a long-term sustainable plan to finance our City services and capital infrastructure, and do you know what that is? That is vision, that is leadership, that is innovation, that is boldness, and I’m prepared to support that.”

Responding to the opposition’s suggestion that all revenues generated by the company should be directed back into affordable housing, Dominato painted this as inconsistent, noting that property taxes collected based on where people live do not go exclusively toward housing — just as parking fees, for example, are not fully reinvested in roads.

“I’m not ready to torpedo the chance for 4,000 new rental homes on six city lots because of politics,” said ABC city councillor Peter Meiszner — a sentiment echoed by Mayor Sim, who remarked that “politics came into play today.”

Meiszner argued that the six sites form a small portion of the City’s Property Endowment Fund, which is a portfolio of over 400 City-owned properties across Vancouver worth at least over $6 billion. The six sites are worth about $412 million.

ABC city councillor Mike Klassen shared that much of the Property Endowment Fund, formalized in the 1980s, can be traced to its origins to the 1930s, during the Great Depression, when many homes were abandoned as people could no longer afford to live in them — often leaving the keys on the kitchen table before walking away.

“Those houses went into probate and ultimately many of those properties became the property of the city of Vancouver, a part of the housing trust that we have. Now we have an opportunity to turn that back, to make sure that citizens of the city can actually benefit from the hardship that was faced by people decades ago,” said Klassen.

“The other solutions that are proposed by some members of this chamber are we live in free for land and the only thing we can do is increase property taxes by 60 per cent. We talk about housing, but every time we come up with a solution we are going to fight it not because of these ideas or great ideas that have been proven before, but because the other side has basically promoted it. I, frankly, as not as mayor of here but as a resident of the city, a person who loves the city, who wants to see us succeed, it is disappointing that this incredible project is being politicized right now.”

OneCity councillor Lucy Maloney’s pondered the idea of addressing the City’s housing affordability and revenue challenges by allowing new low-rise apartment density across Vancouver to boost housing supply, and increasing property taxes, respectively. However, the ABC majority opposes raising property taxes after facing criticism early in the term for supporting City staff’s recommendation to implement significant tax hikes.

Although some of Vancouver’s elected officials have raised concerns about the municipal government directly profiting from market housing through its role as a developer, other public entities in the region are already taking similar approaches.

Inspired by Hong Kong’s MTR Corporation, TransLink, for instance, recently launched a for-profit real estate development division to generate new long-term revenue to support the public transit system — and to boost ridership through high-density, transit-oriented development. So far, the public transit authority’s projects have primarily focused on market rental housing. Future projects even incorporate new hotels and office space.

In Surrey, the City’s wholly owned Surrey City Development Corporation (SCDC) operates as a for-profit entity aimed at stimulating economic growth. Its past projects include the 3 Civic Plaza condominium and hotel tower in Surrey City Centre, as well as industrial developments in Campbell Heights. Future projects include the Centre Block office and university complex next to SkyTrain’s Surrey Central Station, and more than 1,800 rental homes next to SkyTrain’s Gateway Station.

Similarly, the City of Burnaby’s newly established Burnaby Housing Authority is leading housing initiatives that feature a sizeable market rental component.

The proposal drew parallels to UBC Properties Trust, the University of British Columbia’s (UBC) for-profit real estate arm that develops and manages properties on the endowment lands to generate revenue for the institution. Like the Trust, the City’s proposed company aimed to leverage public land to create long-term financial returns to fund education costs, while supporting housing development.

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• City of Vancouver proposes rental housing towers up to 42 storeys next to Science World
• Over 1,100 rental homes in two towers up to 54 storeys proposed for the north end of Burrard Bridge in downtown Vancouver
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