July 4, 2023 The Potential Path to Housing Affordability

THE COMPLEXITY OF HOUSING AFFORDABILITY: PART 3 

In our three-part series on the intricacies of housing affordability, we’ve looked at the influencing factors and complexities of the issues from multiple perspectives. To add to the conversation, we spoke with Hani Lammam, Executive Vice President at Cressey Development Group, who was able to further illuminate the challenges and potential productive solutions for housing affordability in Metro Vancouver.  

MLA Canada: Hani, thank you for providing us with a developer’s perspective on this big topic. In our past exploration of the issues, it has been emphasized that collaboration among governments, non-profit organizations, and the private sector is crucial if we are to make any progress in housing affordability. In your opinion as an industry expert, what specific steps can these stakeholders take to foster a culture of collaboration and work towards sustainable solutions? Who should be leading that charge to drive collaboration? 

Hani Lammam: The first step towards affordability, in my view, is agreeing that it is inherently tied to a significant increase in supply. Collaboration between the government and non-profit and private sectors is vital to building new housing, but forced partnerships between non-profit and private sectors may not always yield good results. Government, in my view, should lead in devising policies that would entice both non-profit and private sector participation. These policies will have different appeals for different sectors, and it’s unlikely a single policy will cater to both. To be successful, the government must consult stakeholders and heed the advice of experienced non-profit and private-sector developers. 

MLA: We know that tackling this is going to go beyond that need for collaboration and into a comprehensive approach that taps into multiple tactics. Which single tactic or strategy do you believe will bring the most change up front? 

HL: Ensuring an increase in supply is the path to affordability. To make this happen, the most impactful tactic is to offer participants the opportunity to prosper. Different sectors may define prosperity in unique ways, but the essential thing is that this prosperity will motivate their enthusiastic involvement in the pursuit of the shared mission – more supply which will lead to improved affordability. 

MLA: Our interview with Suzana Goncalves suggested the need for innovative and potentially controversial approaches to address the affordability crisis. Could you provide some examples of such approaches that have shown promise in other contexts and how they could be applied to the Vancouver housing market? 

HL: I concur with the view that housing affordability need not be exclusively tied to homeownership. However, I disagree with the suggestion that we need innovative or controversial approaches. The issue at hand, housing affordability, is directly connected to restricted supply. This is often due to municipal zoning, which limits the number of housing units that get built and government regulations, which, though initially meant to protect affordable housing, end up deterring landlords due to encroachment on property rights.  Housing is very capital-intensive.  The investors of capital, whether private or public, expect to achieve certain minimum returns on their investments. When these potential returns are hampered by regulations such as rent control, they will look elsewhere, resulting in a constricted capital supply and fewer homes being built. 

MLA: There is so much that happens behind the scenes when it comes to developing a property that meets the needs of homebuyers. What measures have Vancouver developers taken to maintain affordability for consumers, despite the current environment? 

HL: Developers face significant affordability challenges, most of which are beyond their control. Affordability is a function of costs, and it is the piling on of costs which has made housing less affordable. Developers are powerless to reverse the course of decarbonizing in the housing industry, which comes at a substantial cost premium.  Developers are at the mercy of municipalities when it comes to all the development fees and charges.  Developers have little ability to impact provincial and federal tax policies – how about those interest rates?! All developers can do is to value engineer the end product, maximize efficiencies, source cost-effective construction materials, and explore alternative construction methods. 

MLA: Finally, Suzana mentioned the importance of redefining realistic goalposts in the pursuit of housing affordability. From your perspective, what should these new goalposts look like, and how can they better align with the vision of vibrant communities and diverse employment opportunities? 

HL: One way to “manufacture” affordability is to have government-subsidized housing, but this comes at a societal cost. Another way to improve affordability is to saturate the market with new supply, which will lower prices and rents. Older housing stock will eventually become more readily available and affordable. 

Another tactic is to reduce and relax regulations. Smaller homes are more affordable, but many municipalities set minimum unit sizes. Also, allowing developers to determine the unit mix based on demand as opposed to municipal regulations that dictate unit mix resulting in the most in-demand units subsidizing the units in the least demand to the detriment of affordability. By reducing or eliminating minimum parking requirements and allowing developers the flexibility to determine the parking demand of their target market, construction costs can be significantly reduced, and we wouldn’t have half-empty parkades.  Finally, by eliminating expensive balcony requirements, we improve affordability and improve the thermal performance of the building, and the fact is that balconies are not very functional in highrise buildings. All these measures, when applied together, will have a meaningful impact on affordability and will inch us closer to the goal of vibrant and diverse communities. 

For our previous conversations on the depth of the housing affordability crisis, visit What Informs Housing Affordability and Getting Real on Housing Affordability.