New Study: Rent subsidies a way to make apartments affordable near transit

In May 2016, the Metro Vancouver Regional District adopted a Regional Affordable Housing Strategy. One of the goals in the strategy is to increase the “rental housing supply along the Frequent Transit Network.” The regional district recently released a report called “Analysis of the Financial Viability of New Purpose-Built Rental Housing at Transit-Oriented Locations in Metro Vancouver.”

Map of case study sites used in the report.

This new report looks a several sites along the Frequent Transit Network in Metro Vancouver, comparing the sale price for condos, market rental value, and what the upper limit would be for these units to be affordable. Affordable studio and 1-bedroom units mean that a household making $30,000 would spend a third of their income on rent. Affordable 2-bedroom units mean a household making $50,000 would spend a third of their income on rent. The proceeding graphs show that there is a gap between affordable and market rental rates for both concrete and wood-frame apartments in Metro Vancouver.

Key Numbers in the Development of New Concrete Apartment Units (Strata Titled and Rental). Select chart to enlarge.

Key Numbers in the Development of New Wood Frame Apartment Units (Strata Titled and Rental). Select chart to enlarge.

The reports authors note that units can only be affordable if one or more of the following conditions are met:

• The construction costs are reduced.
• The land must be free or very low value
• The housing developer is content to earn a project management fee and the investor is content to earn a relatively low return on investment, but they are not compensated for risk to the extent the private sector normally expects.
• The rent is topped up by a subsidy

When it comes to building new affordable rental units, the authors of the report note that there are really three approaches that are viable in our current system.

One approach is that affordable rentals are funded by government. This could be done, but this would be a slow and costly process that would take a decade for enough affordable housing units to be built.

The second approach is to allow increased density for projects if a developer builds a certain percent of affordable rental units. This is a tool that is already used today, and is limited in its effectiveness given the severe shortage of affordable housing in our region.

The final option is to provide people a rent subsidy. Providing a rent subsidy for apartments would likely be the most expedient way to make housing affordable in our region. Local governments need to zone areas around the Frequent Transit Network for higher density. Currently, local government cannot zone based on tenure. The province could also consider allowing local governments to have “rental zones” near frequent transit to ensure that affordable housing is build near the Frequent Transit Network.