Burnaby council willing to hear developer concerns over purpose built rental projects in 2022

Burnaby’s mayor says he’s willing to listen to the concerns of developers who believe the city’s inclusionary rental zoning policy makes it potentially financially unfeasible to build purpose built rental buildings—but he wants to wait until spring, when council will review its housing policies anyway.

Mike Hurley’s comments to the city’s planning and development committee last week come on the heels of a letter that Anne McMullin, CEO of the Urban Development Institute (UDI), sent to council.

The City of Burnaby’s rental zoning policy requires new developments to include 20% below-market rentals.

McMullin told council that while that policy might be feasible for strata residential buildings, it’s not the same situation in 100% purpose-built rental (PBR) buildings.

“The city’s current approach to the approval of 100% PBR buildings is making them unviable for many proponents. As a result, projects are being delayed and some could potentially be cancelled,” she wrote.

“Thousands of PBR units are at stake, which is the very form of housing for families and individuals that Burnaby has committed to provide following your extensive and commendable public engagement process.”

The UDI says strata floor space has a significantly higher value than rental floor space, which means developers in PBR buildings have no way of offsetting the costs of below-market units.

Density bonus approach

Developers are also concerned about possible changes to the city’s density bonusing approach, McMullin said. Until now, PBR buildings have been charged about 50% less in density bonus rates than strata buildings of equivalent value to help support the financial feasibility of rental projects.

That means developers of PBR buildings are allowed to add more density than the set floor area ratio (FAR) in their respective area of Burnaby, for a lesser charge than strata buildings.

“Although no bulletin or policy has been released, we understand the density bonusing approach has substantially changed—in a way that will undermine our members’ ability to deliver market rental. Some of our members have been informed that PBR projects will be assessed as if they were strata projects to determine the appropriate density bonus value,” she wrote.

“It is not possible for purpose built rental to take on the same level of affordable housing and density bonus expectations as strata residential, and city policies, procedures, and decision-making that do not differentiate in this regard will significantly undermine our members’ ability to deliver this much-needed housing form.”

McMullin said a lack of clarity and certainty around density bonus rates may lead builders to take on rental projects in other jurisdictions instead—and could cause developments already in progress, like the Starlights Development project near Lougheed SkyTrain Station or the Grosvenor in Brentwood to pull out or significantly alter their plans.

“The potential changes to the density bonusing approach are very consequential and will dramatically impact the economics of projects, with no clear path for mitigation aside from re-assessing and re-designing them,” she said.

She said that in turn would undermine the affordability of Burnaby’s rental housing stock.

McMullin said developers in Burnaby are, for the most part, unaware that the density bonusing approach may be changing, and a sudden shift would make it difficult for them to meet their financial obligations and may result in them not proceeding with rental projects.

The UDI is asking the city to reconsider changing the density bonusing approach for PBR buildings, and release a bulletin clearly detailing the current or changing policy.

Council willing to hear concerns—in the spring

At last Tuesday night’s planning and development committee meeting, Coun. Sav Dhaliwal pointed out that the UDI is bound to represent developers and their perspective.

He said when it comes time for the city to review its housing and rental policies, it’s worth an analysis to see how the city can support market rental projects—and noted the city has been mostly focused on affordable housing policy thus far.

“When people talk about purpose built rental, it really in my view is market rental,” he said.

He said apart from a project being zoned as rental, there are no restrictions on how much buildings can charge in rent for market units.

“I think as part of our 2022 review of our policies, that might be the time when we want to spend a bit more time to see how we can support what we call market rentals. It may be through some reduction in the density we want to charge, it may be through providing in-kind supports. … But certainly this is a lot bigger than just wanting to say … ‘let’s not charge them,’” Dhaliwal said.

“We need to do an analysis of what that means to us. … So I think it’s worth talking about it. But then when we do open up our policy, that would be the time to talk about how we support purpose built market rental.”

Hurley agreed with Dhaliwal—saying there may be some “validity” in what the UDI has brought forward, but the appropriate time to revisit any possible changes to the density bonus would be in the spring.