Transit-Oriented Affordable Housing StudyPHASE 2 – KEY FINDINGSRaymond KanSENIOR PLANNER

Regional Planning Committee April 5, 201929241026

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Presentation Overview

Study Context

TOAH Fund: Key Findings + Q/A

TOAH Policy Tools: Key Findings + Q/A

MVRD Board Recommendations

• Purpose: Policy research into challenges and opportunities for transit-oriented affordable rental housing

• Study Partners: BC Housing, BCNPHA, CMHC, Ministry of Municipal Affairs and Housing, TransLink, UDI, Vancity, MV Affordable Housing

• Funding: MVRD Sustainability Innovation Fund and partner contributions

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Study Context

• Large projected rental housing supply shortfall for lower income renters

• Renters drive transit ridership, lower income renters more so

• Construction and land costs are major barriers, especially near transit

• Rental is competing against strata (and existing use) for land4

Phase 1: 2016-2017

Expectation for high density

development

High Construction CostConcrete Construction

Strata Apartments High Land Cost

1. Revolving loan fund • Target audience: potential funders and beneficiaries

e.g. provincial and federal governments, financial, philanthropy, non-profit and for-profit housing sectors

2. Reducing the barrier of high land cost• Target audience: local member jurisdictions, non-profit and for-profit

housing sectors, TransLink, public and non-profit landowners

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Phase 2: 2018-2019

ECONorthwest with Enterprise Community Partners and CitySpaces

• Final Business Framework Report• Memo #1: U.S. TOAH Fund Case Studies• Memo #2: Local Context

(plus key informant interviews)

• Memo #3: Implementation Option(Experts Roundtable)

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TOAH FUND RESEARCH

TOAH Fund Experts RoundtableMetro Vancouver Head Office

November 13, 2018

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TOAH FUND BACKGROUND

Source: Enterprise Community Partners

Range of Funders

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TOAH FUND BACKGROUND

Typical TOAH Fund Model Typical Sources

Source: Enterprise Community Partners

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TOAH FUND BACKGROUND

Fund Region Fund Size

($USD)

PublicShare($USD)

Matching Ratio

Bay Area Transit-Oriented Affordable Housing Program (2011)

Bay Area $65M $16M 3:1

Denver Transit-Oriented Development Fund (2014)

Denver $24M $5M 4:1

Regional Equitable Development Initiative (2016)

Seattle $21M $5M 3:1

Metro Affordable Transit Connected Housing Program (2018)

Los Angeles $75M $9M 7:1

1. A TOAH fund is a tool that supports policy goals on integrating transit and affordable rental housing.

2. A TOAH Fund could potentially aid pre-development and post-construction/permanent financing of affordable rental housing in the Metro Vancouver region. Given the differences in the U.S. and Canadian contexts, further evaluation of these concepts is required.

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TOAH FUND – KEY FINDINGS

Pre-Development Construction Post-

Construction

Project VisioningFeasibility Analysis

Planning/Engineering/ArchitectureMunicipal Approvals

Holding Costs

Operating CostsHard Costs

1. A TOAH fund is a tool that supports policy goals on integrating transit and affordable rental housing.

2. A TOAH Fund could potentially aid pre-development and post-construction/permanent financing of affordable rental housing in the Metro Vancouver region. Given the differences in the U.S. and Canadian contexts, further evaluation of these concepts is required.

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TOAH FUND – KEY FINDINGS

Public sector funding/financing programs have rigid requirements Traditional private lenders are less interested in small developments with small loans Private lending for affordable rental is small in scale Expressed interest in loans to expand pre-development support Expressed interest in blending loans and equity, and scaling post-construction support Expressed interest in combining the best elements of different loan products into one

1. A TOAH fund is a tool that supports policy goals on integrating transit and affordable rental housing.

2. A TOAH Fund could potentially aid pre-development and post-construction/permanent financing of affordable rental housing in the Metro Vancouver region. Given the differences in the U.S. and Canadian contexts, further evaluation of these concepts is required.

3. Land acquisition would likely be a limited component of a TOAH fund in the Metro Vancouver region.

4. The non-profit housing sector would likely benefit from a TOAH Fund.5. Partnerships, simple governance structures, professional fund management,

and adaptable scopes are best practices for a TOAH Fund.6. Champions are required to take the next step.

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TOAH FUND – KEY FINDINGS

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Champion(s) and Fund Development

Having initiated the policy dialogue…

…and shift into the business development process (2 to 3 years).

…need to identify a champion…

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Example: Bay Area TOAH Fund

2006-2009: Grassroots organizing and advocacyFeb 2010: Metropolitan Transportation Commission

approves in principle $10M with conditionsFeb 2010: RFP issued to retain Fund ManagerJuly 2010: Fund Manager Consortium selectedJul-Dec 2010: Fund creationMarch 2011: Launch Fund v.12018: Launch Fund v.2

• 3:1 matching funds• Priority Development Areas• Member of RFP team, and

policy advisory committee

Federal Budget 2019 proposals:

$300 million to launch ‘Housing Supply Challenge’• New ways to break down barriers that limit the creation of new housing

$300 million to launch ‘Sustainable Affordable Housing Innovation’ • Improve energy efficiency in new and existing affordable housing

Other Proposals• Additional $10 billion to expand Rental Construction Financing Initiative• Expert Panel on the Future of Housing Supply and Affordability

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Potential Opportunities

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U.S. Tech Employers (January 2019)

Seattle: $500M USD Bay Area: $500M USD

1.b. Continue to explore options to collaborate with interested partners, including identifying a potential champion(s).

Sample options for further discussion:• MVRD plays an observer role• MVRD continues to convene interested partners until a fund creation champion

is identified

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Recommendation

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Questions on the TOAH Fund Research?Next: TOAH Policy Tools

REDUCING THE BARRIER OF HIGH LAND COST:FACILITATING MORE AFFORDABLE RENTAL CONSTRUCTION IN METRO VANCOUVER

Coriolis Consulting Corp. / WMCI April 5, 2019

TRANSIT ORIENTED AFFORDABLE HOUSING STUDY PHASE 2

ObjectivesA. Evaluate 4 approaches to making land available for rental housing1. Land and air space acquisition and deployment 2. Density increases via density bonus or rezoning3. Inclusionary housing requirements 4. Zoning for residential rental tenure

B. Explore ways to improve delivery of new rental units1. Flexibility in meeting developer obligations for affordable housing2. Alternatives for affordable rental unit ownership3. Mixed tenure, mixed income4. Increased coordination or centralization

C. Suggest ways to integrate planning for transit and affordable rental housing

Rental Housing in Metro Vancouver

Vacancy low, rents rising faster than income: not enough new supply

Need 6,000 new rental units per year to keep up with growth in the number of households

Rental construction faces significant financial challenges, including high land cost

Some efforts to protect existing renters and existing rental units also impair the construction of new rental supply

Financial Barriers to Affordable Rental Construction

At 30% of income, what is affordable rent?

What are average rents across the region?

What are breakeven rents for new rental units?

Affordable Monthly Rent at 30% of Income

CMHC Average Rents for 2BR Apartments

Breakeven Rent for New 2BR Rental Unit

Fixes: Reduce Cost, Add Strata Density, Mix Incomes

Perspectives of Local Housing Developers(For-Profit and Non-Profit)

Acquiring land is a huge challenge Approvals processes too long, too complex, differ

widely across region Design/sustainability expectations costly Cost reductions essential (parking, DCCs/DCLs) Don’t mix strata and rental in same building Mixed market rental and affordable rental okay, but

with single ownership of building

Seattle and Los Angeles Case Studies

Coordinated planning for transit and affordable housing

Affordable housing requirements combined with density increase

Affordable rental developed and owned by private, non-profit, and public sector agencies

Strategic land acquisition as part of transit projects

Surplus land post-construction made available for affordable housing

Metro Vancouver Local Government Measures to Encourage or Facilitate Rental Housing

A. Four Approaches to Create Rental Capacity

Acquiring and deploying land and air space

Density increase Inclusionary housing requirements Zoning for rental residential tenure

1. Acquiring and Deploying Land and Air Space

Land already owned by local/regional government agencies

Creative acquisition by local/regional government agencies

Land already owned by non-profit sector, including those not currently in housing

2. Density Increase (Density Bonus and CACs)

New density for rental housing (no land value), and/or

New strata density in exchange for rental housing benefits that offset cost of affordable housing

Housing Agreements under Section 483 of LGA govern tenure, number and type of units, rents

3. Inclusionary Housing Requirements

Requires % of units at specified rent (usually geared to income)

Reduces net income but does not reduce cost…so makes numbers worse

So, almost always combined with density increase and other incentives to offset costs

4. Zoning for Rental Residential Tenure

Eliminates strata residential redevelopment as competitor for land and driver of land value

Does not eliminate existing use of land as driver of property value

Controls tenure but not unit type or rent

Rental Zoning Financial Analysis: Metrotown Example

Site Size 55,000 sq.ft.Existing Use Older Rental

Residential FSR 0.9

Older Commercial FSR 0.4

Property Value Existing Use $17.1 Million $11.6 millionLand Value if rezoned to RM5s, FSR 5.3, Strata

$49 million

Land Value if rezoned to “rental only”, FSR 5.3, no CAC, concrete

$9.4 to $9.6 million

Total rental density needed to support land value equal to existing use, no CAC, concrete

7.7 to 11.0 FSR

Implications

Rental tenure zoning protects existing rental stock but it does not support new supply

Rental tenure zoning does not specify rent…any new projects are likely to be at market rates

Conclusion: Best Ways to Increase Rental Supply

Creative land and air space deployment Increased density for strata and for rental,

combined with Housing Agreement to define number of rental units, types of units, rent rates

B. Improving Delivery of New Rental Units

Flexibility in meeting requirements: on-site, off-site, cash

More units if developers retain ownership rather than turnkey

Mix market and affordable rental, not strata and rental

Stand alone rental buildings under single ownership

More partnerships, more financial and technical assistance to non-profits with land but no expertise

Faster, simpler approvals across the region

C. Integrated Planning for Transit and Affordable Housing

Look beyond rapid transit stations Strategic land acquisition Advance station area and corridor planning

Parting Thoughts…

Protecting existing rental stock and encouraging new rental supply are different challenges requiring different solutions

Major increase in new supply is essential for rental affordability

New rental must be financially viable

Without massive injections of public sector capital, offering new strata density in exchange for rental units is best option for expanding the supply of affordable rental units

New density combined with Housing Agreements is more effective than rental tenure zoning for creating new affordable rental supply