Income Mix Zoning — Vancouver, British Columbia
To include non-market housing as an element of all large scale residential redevelopment in Downtown Vancouver.
Low- and moderate-income households, including those with young children.
Vancouver’s income mix policy requires developers of large redevelopment projects to set aside sites for "non-market housing". "Non-market housing" is defined as "housing subsidized through government programs for families and individuals who cannot afford to rent market housing, or for whom the market does not always provide housing, such as people with disabilities." The City negotiates the inclusion of non-market housing in a new redevelopment project when the developer applies for rezoning from industrial or other non-residential use to residential use. The City establishes a legal agreement with the developer to include 20% of the base density of the redevelopment as non-market housing. Through a combination of provincial and City funding, the City purchases a section of the site from the developer for 60% of market value, and leases the site to a non-profit housing provider. The developer builds the non-market housing and turns it over to a non-profit group. Since the policy’s inception in 1988, the capacity for 2,670 units of non-market housing has been created in the major projects on over 30 sites.
In the late 1980s a number of private large redevelopment projects were being planned in Downtown Vancouver such as the Expo site, Station/Lafarge and Coal Harbour. All were on industrial or other non-residential lands that needed to be rezoned for residential development. Due to the market conditions, developers would have only produced higher priced housing.
The City of Vancouver supports the notion that non-market rental housing should be available throughout the City, including new inner city neighbourhoods. In 1988 the City developed and adopted the income mix policy to address the growing housing needs of low-income households.
Generally, the policy states that large private residential developments in the downtown should allocate sites capable of accommodating at least of 20% of their units for non-market housing. There may be exceptions to the policy such as Collingwood Village where the economic viability of the project would have been compromised if non-market units were included. The provision of non-market housing is one of several public objectives the City seeks in redevelopment. Other public objectives include the addition of parks, community centres, sites for schools, and daycare centers. If the cost of meeting the public objectives would make the project financially not feasible, then the requirement to include non-market housing is waved.
How the Income Mix Policy Works
The following steps are followed:
- A developer of a larger project (usually 200 or more units) applies for rezoning from non-residential uses to residential. The City identifies sites for non-market housing at that time within the area that is being redeveloped, in suitable locations with respect to the overall development schemes.
- A legal agreement between the City and the developer is signed that requires the developer to make sites available for non-market housing. The number of sites that are to be made available is usually equal to 20% of the base density of the new development (the density permitted under the zoning for the area before the redeveloper is granted the density bonus). The legal agreement also stipulates the timetable for making the sites available.
- When a non-market site must be submitted for Provincial funding (the Province seeks non-market housing proposals annually), the developer is given a list of non-profit housing sponsors from which they select one to partner with in their submission to the Province.
- If the Province accepts their proposal, it supplies 75% of the funds needed to buyf the site and the City pays the remaining 25%. The developer is then responsible for satisfying the Province’s conditions which includes finalizing the design and construction contract.
- After all the conditions are satisfied, the City buys the site from the private developer. Cost ceilings are placed on social housing development by the Province. The amount the developer receives for the site is the difference between the cost ceiling under the Provincial program and the total cost of construction including land.
- The City then leases the site to the non-profit sponsor for at least a 60-year term. The developer then builds the project and turns it over to the sponsoring group .
- If the province does not supply the funding, the developer must continue to submit the site to every subsequent proposal call until they are either granted funding or the City chooses to proceed with an alternate use of the site. The City holds the option on the site for 80 years.
Why There is a Need for Developers to Set Aside Non-Market Sites
When provincial funding is involved in producing non-profit housing, a ceiling is placed on construction costs. It assumes that non-profit units, regardless of where they are located in that municipality, can be constructed at a price that does not exceed a specified threshold. This threshold often does not reflect the high cost of land in downtown Vancouver. If land were not bought at a reduced rate from developers, construction of non-market housing would not be possible within the cost ceilings in the downtown area, thus defeating the income mix goal.
A private developer conveys the site at a below-market value in exchange for a density bonus. The lower price that the developer receives for the land represents a redistribution of the value the site gains as a result of the re-zoning. Since the developer does not generate this value, the developer cannot claim that he or she is offering a subsidy. Nevertheless, the low-income occupants of the site do receive a public subsidy of an amount equal to the difference between what the developer could have made had the site been used for market rate housing and the present value of the net rental income generated by the social housing.
Changes to the City Policy Resulting from Lack of Federal Funding
Following a review in 1993, City Council modified the policy. Because the federal government cancelled funding for new non-profit housing, the City needed to become more flexible with what could be produced on the sites they had secured. For example, the City now considers cash-in-lieu on a site-by-site basis, and is open to alternative non-market housing options such as non-subsidized life-lease housing. City Council made it clear, however, that building non-profit housing remains the preferred method for providing a mix of incomes in all new developments. The City also permits increased density to market rate developers in exchange for non-market units, especially on smaller redevelopment sites. In some instances, land is now leased by the City to the non-profit sponsor at no cost. Muir Manor, completed in 1998, is an example where the City leased the land to the non-profit sponsor B.C. Housing Foundation at no cost.
Impact on the Provision of Affordable Housing
The Coal Harbour Co-op is an example of the income mix policy. The co-op, completed in 1998, has 99 units and is part of the new Coal Harbour neighbourhood that will eventually have 2,000 homes. The co-op consists of two buildings: a seven-storey apartment with 55 units, and a four-storey townhouse project with 44 units. The buildings are on top of a parking garage that serves a nearby marina. Through the B.C. Housing Program, 60% of the units are for core-need households, and 40% of the units are for moderate-income households.
By securing sites equivalent to 20% of the base density of each redevelopment project, the City is now capable of accommodating 2,670 affordable units, which represents 10-15 years worth of non-market housing. Nearly 2,200 of these units resulted from the first three projects: Expo, Station/Lafarge and Coal Harbour. Eight hundred units have been constructed or committed on these sites, the majority of which are non-profit units earmarked for core-need households, half of whom have small children. The exception is a non-subsidized life-lease project for senior citizens.
The other acquired sites have not been developed due to a lack of funds. The options on two sites have been sold back to the developer.
Summary of Impact on Housing Affordability
The City has secured sites capable of accommodating 2,670 affordable units.
800 units have been built or are committed on these sites.
The City is exploring other ways of developing units on the sites in the wake of decreased provincial and federal funding.
Suitability for Replication
Inclusionary housing policies such as Vancouver’s income mix policy are predicated upon several conditions:
- A growing demand for the conversion of industrial and other non-residential land to residential use; and,
- Rising land prices; and,
- The ability to use provincial or federal funding to bring down housing costs so they are affordable to lower income households.
Vancouver has experienced large-scale residential development and a strong downtown real estate market. The conversion of industrial and other non-residential land to residential use requires rezoning giving the City leverage to negotiate set-asides for non-market housing. The dramatic increase in land prices in the City has created the potential for owners to reap tremendous windfalls that are being tapped by the City to help provide affordable housing. Without the growth the potential for windfalls dores not arise. In that case, the policy does not work as developers would have paid the current price for the land that is set at the potential profits offered by the best development oppofrtunity. The developer could not pay the high price, offer concessions and still make their projects financially viable.
In the case of Vancouver, the availability of federal and provincial funding, in addition to the City’s own contribution, allowed the City to specifically use non-profit housing providers to serve households in core-need, especially those with children. Even after the removal of federal funding, the provincial government in British Columbia continues tocontribute
s to non-market housing as does the City.
Key Players and Contact Persons
||Role/Responsibility/Reason for Involvement
City of Vancouver Department of Housing and Properties
negotiate the agreement with the developer
originated the policy
453 West 12th Avenue
Vancouver Housing Centre, Community Services Group
ensure policy implementation
monitor on the success of the program
look for new ways to make use of the idle sites
515 West 10th Avenue
provide sites for non-market housing at below market rates
Sources of Further Information
- The Ministry of Housing, Recreation and Consumer Services of the Province of British Columbia have produced profiles of a number of B.C. communities who have implemented affordable housing strategies. The resource is entitled Affordable Housing and Local Government: Building Strong Communities and includes the 20% core need policy for income mix zoning from Vancouver.
- Hagman, Donald C. & Misczynski, Dean J. (1978) Windfalls for Wipeouts: Land Value Capture and Compensation, 704 pp. APA Planners Press, Chicago, IL. (Order at BookService@planning.org).
- Deborah Kraus profiles the Vancouver policy in Municipal Initiatives in Affordable Housing that was prepared for CMHC in 1993.
- Richard Drdla outlines the policy in Municipal Regulatory Initiatives: Providing for Affordable Housing prepared for CMHC in 1998.
- The federal/provincial relationship in non-profit housing funding is featured in The Report of The Provincial Commission on Housing Options which was prepared for the Minister of Municipal Affairs, Recreation and Housing in 1992.
- To learn more about Vancouver’s housing policies visit the city’s Web site at http://vancouver.ca and click on "Housing".