Renderings of the upcoming 2,587-home Port Moody Inlet District by Wesgroup.Wesgroup
Not so long ago, developers were transforming old shopping malls into master-planned communities in B.C. suburbs such as Burnaby and Coquitlam. Those days are over, says a prominent developer.
“There have been tons of shopping malls redeveloped in this market. Those are worth more to stay as shopping malls than they are to be redeveloped under the new, provincial [transit-oriented development] policy,” says Brad Jones, senior vice-president of development for Wesgroup Properties, and an urban planner.
Wesgroup has major developments under way including the River District in south Vancouver and the upcoming 2,587-home Port Moody Inlet District, which involved the assembly of 59 detached houses. It is one of the largest assemblies of detached houses in B.C.
The companies responsible for building housing are raising alarm bells that all is not well with B.C.’s real estate industry – responsible for about 20 per cent of B.C.’s GDP, including rental and leasing, according to Statistics Canada. It’s routine for developers to complain about regulations getting in the way, but the tenor of complaint is more frantic these days. They’re watching Toronto’s capsizing preconstruction condo market – taking on the burden of high costs – with a wary eye. They say profit margins are shrinking in B.C. as well, and many projects are either stalled or disappearing. Wesgroup even released an educational-looking video on YouTube to spread the message, called Housing Crisis 101: Homes Don’t Just Happen.
“When we’re seeing housing starts decline, fall off a cliff like we’ve seen particularly in Toronto, and here as well – just not to the extreme extent that we’ve seen it back east – you have to wonder,” says Mr. Jones. “You would think with such a housing supply shortage, it would be really easy to build a lot of housing. And it’s really, really hard to build housing.”
Mr. Jones counts 62 residential projects by other developers in Metro Vancouver that are in financial distress – and more than 10,000 housing units that won’t get built as a result. As of March 31, there were 14,600 units in Vancouver proper that had been rezoned or received development permits but had not started construction, he says.
Why is housing so expensive? The causes, developers say, involve high construction and material costs, an increasingly demanding building code and mounting fees and regulatory policies coming from all levels of government.
The project at the Port Moody Inlet District is one of the largest assemblies of detached houses on record.Wesgroup
Materials have skyrocketed for reasons not always related to supply and demand. For example, every housing unit needs gypsum, or drywall. The cost of that material doubled almost overnight due to a tariff introduced before any pandemic supply chain issues, or inflation costs, says Steve Youngblut, general manager of CGC Inc., formerly known as Canadian Gypsum Co.
“I would say the highest increase price we’ve seen in the market has been in Western Canada, probably specifically the Vancouver market,” says Mr. Youngblut.
“That is a byproduct of the gypsum tariff that was introduced in 2016. There are primarily three manufacturers in Canada … all three of those parties were shipping in material from the United States into Canada. And essentially the ruling that came out shut that tap off. … That’s the equivalent of completing 50,000 homes, taken out of the market.”
Gypsum is made from either natural rock or from the byproduct of coal-fired plant scrubbers, which used to be the cheaper source, he says. But coal-fired plants are shutting down across the U.S. The now in-demand crushed rock travels long distances from around the world, from places such as Spain and Turkey, and freight is expensive. Gypsum is also made from paper. During the pandemic, online retailers put huge demand on paper packaging. Who knew that Amazon indirectly helped drive up the cost of housing?
And manufacturers can only do so much to keep up. Mr. Youngblut’s company is building a plant in Alberta, for about 50,000 homes. But Canada Mortgage and Housing Corp. is calling for an additional 3.5 million new housing units by 2030 – enough to house Calgary’s population each year for seven years, according to a new Canadian Urban Institute report.
At the peak in 2021, Canada saw 271,200 housing starts, says Mr. Youngblut. Add to the problem an aging work force and labour shortage.
“Some of these numbers thrown out there as long-term goals by the federal government, they’re obviously very challenging,” he says.
But the one area where prices could come under control is by curbing policy changes, say developers. Stop changing the rules and adding fees, adding extra time and cost that trickle down to the consumer.
Eric Carlson, founder and chief executive officer of Anthem Properties, a large B.C. development company, makes a similar case.
“It’s just harder,” he says of the current climate, after 40 years in the business.
“It’s not because the developers don’t want to go ahead. It’s because they can’t make their numbers work.”
Mr. Jones gives his Port Moody project as an example. The costs on that project are as follows: more than $8-million in community amenity contributions; $6-million for a new pedestrian overpass; $4.8-million for public art; $44-million for infrastructure upgrades; $33-million for municipal development cost charges; $58-million for Metro Vancouver development cost charges, and the untold costs of changing designs to keep up with new national building codes and new requirements.
“Every building we build is a different version of the last one that we did.
“We need a couple of years where fees and charges don’t go up, and we need a couple of years where the code doesn’t change.”
Municipalities are increasing their costs for a reason. The Canadian Urban Institute’s new A Jump Start report says that more than 60 per cent of all public infrastructure is the responsibility of municipal governments. In Canada, infrastructure costs add around $100,000 to the price of each home, according to the report.
“They are finding it difficult to navigate,” says Mary Rowe, president and chief executive officer for the CUI, referring to the current development climate.
“And I think the dilemma you have there is if you’re a council member or you’re a municipal staff member, you’re dealing with so many competing demands and it’s got to be low carbon this or it’s got to be that. And don’t forget we’ve got this population that’s disadvantaged and they’re trying to juggle that.
“I think this is a time of real transition.”