Over the objections of its planning staff, City of Vancouver council has recommended a policy change that the city admits would reduce the value of hundreds of mixed-use commercial properties by up to 30 per cent.
In November 2019, council proposed to add C-2 zoned properties –specifically those that mix commercial use with residential rentals – to its current rental housing stock bylaw that requires that any existing rentals be replaced on a one-to-one basis if the building is demolished or redeveloped.
About 80 per cent of the properties affected by the proposed amendment are smaller retail buildings with 10 or less residential rentals.
“For property owners who are intending to sell or redevelop their properties, the impact will include a reduction in land value of approximately 10 per cent to 30 per cent,” according to city documents. “A reduction in land value in some cases may result in a current or future owner’s ability to access credit/financing and current and future redevelopment potential.”
The policy would mean that nearly 400 city property owners could not redevelop the building for pure commercial use, or sell the land for residential strata development without replacing all of the existing rental apartments, and securing them as rentals for 60 years.
Submissions to a city surveyon the proposal, originally scheduled to end October 5, have been extended to October 19, according to a city spokeswoman in an email to Western Investor. She added, “should these changes be referred to public hearing, we expect it will be held in December 2020.”
If approved by council, the amended by-law will come into force in early 2021.
“This may require a separate air space parcel from the rest of a new development, as well as separate ongoing management of the replacement rental units,” according to the city.
“The City has reportedly sent out notifications via hard copy mail to affected owners, though no one we’ve spoken to has received it yet,” said Mark Goodman, a multi-family specialist with Goodman Commercial Inc., a Vancouver real estate agency. Goodman added that the policy is being considered despite the robust creation of rental units in C-2 zoned areas.
City documents show that, over the past 10 years, 497 new rental units have been built in C-2 zoned area of the city, while just 77 rental units have been lost in the same areas due to strata development or property renovations.
Currently, C-2 zoned areas account for about 4 per cent, or about 3,000 units, of the city’s residential rental inventory.
During a marathon 13-hour city council meeting on November 26 last year, city planners cited this increase in rental units and the negative impact on C-2 property values in urging the city not to proceed with the amendment.
“For these reasons staff are not recommending this policy,” Vancouver City senior planner Edna Cho told the meeting.
Anne McMullin, president and CEO of the Urban Development Institute, which has been fighting against the amendment since last year, said the deliberate devaluation of property could drive some owners out of business because they would be restricted in financing of their property for renovations or improvement.
The policy would reduce the number and quality of rentals, she said, which is “the exact opposite of what the city is trying to achieve.”
When asked if she believed the amendment would be approved, McMullin said “I would hope not, but with this city council, what goes into the wash is very different from what comes out.”