City Hall gives developers $71 Million, they cry for more
City Hall is making and proposing pro-development policy changes and neighbourhood plans. The first effect is a great leap in land values.
How does this work? A property’s value rises when a landowner or developer makes an application to build on a site. For instance, to construct a 9 storey condo with 97 units on a property that used to be five one-storey shops directly influences the value of that property on the real estate market, even if nobody has even built anything there yet. And when the application is accepted by city hall the value shoots way, way up. So even if a landowner successfully gets an application to build a condo with no actual intent to ever build it, they can then sell the undeveloped property for way, way more then they bought it for. This is because the development-potential of the property has changed according to the government regulators.
Let’s look at how proven potential has influenced property values at five condo sites that City Hall approved in 2012, but which have not yet begun construction. In the last two years, the property values of these five sites went up an average of 107%, and landowners received a collective property value increase of $21.5 million.
Not all increases in property values stemmed directly from changes to city policy. They were also raised by condo proposals, which proved development potential in the DTES Oppenheimer District, where there had not been market developments before. (See graph)
City development policy and neighbourhood plans work just like that except on a big scale, as gifts to property owners in entire neighbourhoods.
How big are the City’s gifts to developers in the DTES?
On the Main Street strip in Chinatown, where City Council changed policy in order to raise building heights to 15-storeys in 2011, property values went up an average of 50% by 2013. The combined property value increase on these two blocks, excluding strata units, from 2011 to 2013 was $27 million. Between 2011 and 2013, on the adjacent blocks where building heights were raised to 90 feet, property values increased by $28 million.
Property values were also impacted outside of the specific area where council offered other gifts to developers. Way back in the early 1990s City Council declared the Hastings Corridor area, between Heatley and Clark Drive on both sides of Hastings, a “let-go” area which lifted the previous ‘industrial-only’ development restrictions and allowing condos to be built. Nothing happened until they declared a height increase on transit corridors citywide in 2012; then the condo proposals came. Between 2011 and 2013 on the Hastings Corridor property values increased by an average of 28%, with an combined property value increase of $15.5 million.
In just these three areas, on just 13 blocks, over just two years, the gift from City Hall to DTES landowners as a group was $71million in property value increases. That means an average of 35% in property value increases over two years for DTES property owners. By comparison, average property values increased by 3% between 2012 and 2013 in Vancouver as a whole. Look at this comparison and ask why there is suddenly such an interest in ‘social mix’ development, and so much opposition to zoning changes that would hold back potential condo development in the Downtown Eastside Oppenheimer District.
In making a plan for the future of the DTES, City Hall has to choose whether to continue this policy of giving massive gifts to rich developers and property owners, or to finally do something to protect low-income residents against these greedy seekers of superprofits.