Can Burnaby just… fund its own housing?

The City of Burnaby is considering launching a housing corporation of its own, marking a departure from previous comments from the mayor that the city cannot finance housing on its own dime.

And an economist with a left-leaning think tank says such an endeavour could effectively fund itself.

In an interview with the Beacon, Mayor Mike Hurley said the city is looking at models done elsewhere, including the Whistler Housing Authority, which was launched by the resort municipality in 1997.

Burnaby is facing similarly tight vacancies in the rental market and skyrocketing rents. The average one-bedroom unit in the city was up by 16.5% year over year in March of this year, according to one study.

As such, Hurley said the city is eyeing any and all options to make housing more affordable.

A city-owned housing corp?

And with few investments from federal and provincial governments coming to the city, Hurley said Burnaby is now looking at creating a housing corporation.

“We’ve been talking about that amongst council for a while. … We look at all options,” Hurley said.

“When our finance people get around to putting all that together, then it’ll come back to us to have a look, to see if it’s something we could explore or not.”

Hurley has previously responded to questions of financing the construction of housing through municipal coffers by pointing instead to the federal and provincial governments, as those levels of government have a far greater ability to borrow money.

He noted the Metro Vancouver Housing Corporation, which operates some non-market housing in Burnaby and noted rental housing costs don’t stop after construction.

“It takes a big infrastructure to look after housing. Metro Vancouver Housing has got around 60 employees just looking after that portfolio,” he said.

“You’re taking on a big animal once you get down the road of operating [housing], and you need the expertise to do that.”

Housing can fund itself

But Alex Hemingway, senior economist with the Canadian Centre for Policy Alternatives’s (CCPA) BC office wrote recently that public funding of housing doesn’t have to be a net loss.

“There’s been under-investment in [public and non-market housing] over the past few decades. We’re starting to see some reinvestment over the past few years provincially, and a little sprinkling of federal money as well,” Hemingway said in an interview.

“That helps, but the scale is far too small, and it’s happening too slowly to address the extreme unaffordability of housing.”

“For [developers], building new housing is not a ‘cost,’ but rather a way to generate substantial profits."

Photo: Shutterstock

In a recent piece for Policy Note, a publication run by the CCPA, Hemingway argued for a “large expansion” of public funding of affordable rental housing, and he said it could be done without taking on greater public debt.

“While this might sound too good to be true, it simply follows from the basic logic of rental housing development,” he wrote.

He noted that the cost of building housing is built into the business model of the housing market, and it’s recuperated—and then some—through rental incomes.

“For them, building new housing is not a ‘cost,’ but rather a way to generate substantial profits,” Hemingway wrote.

Savings without the profit motive

But he noted one could shave 15-20% off of rents simply by taking away the profit motive that fuels the vast majority of the rental housing market.

He pointed to other Crown corporations, like BC Hydro, which is able to take on large loans for projects like Site C without incurring more taxpayer-supported debt.

“That’s booked separately. That’s booked under the heading of self-supported debt,” he said. “All the borrowing costs are covered by this dedicated income stream—in Hydro’s case, it’s electricity customer payments.”

The argument is quite simple, but he said it’s one that often goes missed in discussions around public funding for housing.

Given the increasingly high cost of construction and quickly escalating land values, Hemingway noted that alone isn’t a “complete solution” to self-financing affordable housing—but it’s a start.

He pointed to other ways governments could increase affordability in public housing, though some apply specifically to senior levels of government. In terms of borrowing, he noted the provincial and federal governments have access to cheaper interest rates than the private sector and can amortize the costs over a longer period of time.

But he also suggested using the potential of building on land that is otherwise zoned for low density. Because zones like single-family neighbourhoods legally exclude larger developments, like townhouses or apartments, the land is worth significantly less per square metre.

Density leniency for non-profits

Hemingway said he’s in favour of ending exclusionary low-density zoning altogether, but while it remains, giving certain groups—governments and non-profits—the ability to build up on single-family lots would offer savings on land acquisition costs.

One controversial example locally is the BC General Employees’ Union headquarters, which advanced in the zoning process this week for Palm Avenue in Burnaby.

A similar-sized lot in the Metrotown community plan which was already marked for similar use proposed by the BCGEU had sold for more than 72% over the price the union had paid for its properties.

Opponents of the project suggested it appeared that council was giving the union a sweetheart deal on the property, which will, on top of office spaces, include 292 units of housing.

"But at the end of the day, … there’s very few non-profits that can just go and build housing; they need to be supported by some level of government."

Photo: Dustin Godfrey / Burnaby Beacon

But the union argued that all of that money is going into housing affordability—the aim of the project is for at least 50% of the units to be at below-market rents.

Hemingway noted there are ways for cities to conditionally zone properties for higher density, particularly to ensure only non-profits and governments can take advantage of the extra floor space.

“Vancouver did this in a small way, recently, on a pretty small set of sites and at a sort of moderate level of density—I think it was only up to six stories,” Hemingway said.

Coun Christine Boyle later brought a motion to allow those properties to go as high as 12 stories for non-profit housing, but council voted against it.

“A lot of it comes down to NIMBYism. Sometimes that’s dressed up as an argument against unaffordable market housing, but then you see it happens again, even when the density is going to be dedicated to non-profit housing as well,” Hemingway said.

“Certainly, in my view, cities should move on that type of conditional zoning themselves, and if they won’t, the province should consider imposing that, just given the scale of the housing crisis we’re in.”

Non-profits still need funding

He noted David Eby, BC’s attorney general and minister responsible for housing, has been “making some noises in that general direction.”

“I will be very curious to see what, if anything, they come forward with, and if there’s teeth to it, if they’re willing to take on the municipalities in that way,” he said.

In the past, Hurley has said eliminating exclusionary single-family zoning on a broad scale could come to Burnaby in the long-term, but he said he doesn’t believe the city is ready for it yet.

Asked about doing such a thing specifically targeted at non-profit housing, he said it’s “worth having a look at.”

“But at the end of the day, … there’s very few non-profits that can just go and build housing; they need to be supported by some level of government,” Hurley said. “That still remains the issue.”

He pointed to the lots owned by the city, which have been pre-zoned for density to allow governments to fund housing on, but little funding has trickled this way.

“The one at 3800-block Hastings [Street] … has been sitting for five years waiting for funding, and it still hasn’t come through,” he said.

Hemingway noted one more way in which affordable rental housing projects can fund themselves: cross-subsidies.

He pointed to the BCGEU project, in which market rents will help to pay for the below-market rentals.

And he argued that’s something more non-profit and public housing could do to self-finance housing projects.

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