B.C. is considered one of the most prosperous province in the nation. Certainly, with investment potential in cities like Surrey and Abbotsford through the roof and a plethora of available jobs, the Lower Mainland is an attractive destination for local millennial and migrants alike. But the region is not without its challenges. In fact, political intervention may be affecting the development of new, affordable housing, even though multi-family completions are expected to surge past the average. So what happens when people can’t afford to live in Vancouver, even if the best employment options are here?
We look at these issues and more in Western Investor’s pick of the top commercial real estate stories published this week.
Western Investoreditor Frank O’Brien’s editorial takes a look at the disconnect between hob opportunities and affordability in Vancouver, asking what happens to the city when people can’t afford to work here.
If a young person in Vancouver accepts a $20 an hour job, it equates to less than $2,500 per month in net take-home pay. But the average rent for a one-bedroom apartment in Vancouver is $2,090, and rising.
Little wonder that city retailers, restaurants, construction companies and some of the biggest tech companies in the world are begging for low-skill, low-pay workers and can’t find them.
In reality many people simply can’t afford to work in the most prosperous city in a province with the lowest unemployment rate in the country. The disconnect is not only undermining the economy, it threatens the societal fabric of the city.
More than half of Metro workers say they are already struggling paycheque to paycheque, according to 2016 Canadian Payroll Association survey. Many of those who can’t make it number among Metro’s 3,600 homeless.
Within three years, there could be 61,500 more jobs in the province than people to fill them, according to B.C.’s most recent Labour Market Outlook.
The 2017 study also forecast that B.C. will produce one million job openings by 2025, half of these in the Lower Mainland.
Yet 73 per cent of B.C. restaurants say they’re already facing an immediate labour shortage. One restaurateur told Business in Vancouver that he has tried everything, without success, to retain staff at his eatery in downtown Vancouver, including offering $20 an hour to entry-level employees.
Upcoming B.C. construction projects, not counting residential, are estimated at $325 billion. But the industry is facing a shortage of more than 14,000 workers right now.
This year only one in 70 B.C. high school graduates went into the construction trades, the lowest level in at least four years. Even Amazon, the giant online retailer, is running employment ads in local newspapers as it desperately tries to fill scores of low-skill positions at its Metro distribution centres. Amazon is offering $15.75 per hour.
Employers say they can’t afford to pay a living wage, and for many that is likely true. But that leaves few options for workers.
Governments and the private sector appear witless in slowing Vancouver home prices or delivering enough affordable rentals, the main barriers for even mid-income city residents.
Many young families are already fleeing Vancouver and the hollowing out is forcing school closures and will further drain the labour pool.
So what is the answer? It is not mandatory minimum wage increases. It will require unified action and rare sacrifice by industry, government and real estate owners to both raise wages and reduce housing costs.
The chances of success are doubtful. The options are even worse.
According to The Real Estate Network, Surrey holds the most investment potential in B.C., and offers cheaper housing costs than Vancouver.
The Fraser Valley city ranks above New West, the Tri-Cities and even Vancouver as the city with the best real estate profit potential. REIN believes the fastest-growing city in the province is at the beginning of its real estate boom, providing investors with an excellent opportunity to purchase and flip homes.
Surrey beat out nine other cities thanks to its proximity to transit and an increase in population, jobs and household incomes.
“The main conclusion for strategic investors from these key drivers is that Surrey is a unique combination of a youthful, growing city with a diverse economy that is relatively affordable compared to the rest of the Metro Vancouver region,” the report states.
Surrey recently came in at number two on Western Investor’s top five list of Western Canadian investment destinations. Our list also highlighted the city’s sizable adolescent and millennial population – one in four Metro Vancouverites under the age of 19 live in Surrey. Western Investor suggests investing in multi-family rental apartments, due to their relatively cheap per-suite value that can be extremely profitable as rental demand in the city increases along with population growth.
REIN determines a city’s market status according to a boom-slump-recovery real estate clock. Cities poised at the beginning of the boom cycle present plausible to optimal investment opportunity.
Supply and affordability are at an all-time low in Vancouver, and political intervention isn’t helping, according to Business in Vancouver columnist Peter Mitham.
The report ranks Vancouver the top market in Canada for investment and development, but second to Toronto in terms of housing – a factor that bumps it into second place in the overall tally.
A common refrain from interviewees is that governments should stop trying to interfere in the market and turn their attention to other more important issues, such as the impact of regulations and processes that are limiting land supplies,” the report notes, adding that the issue is becoming entrenched. “This echoes our findings from last year’s report, in which many stated their belief that provincial land use policies and local government approvals are factors holding back the supply of available land for development.”
Speaking to the Urban Development Institute (UDI) last month, market analyst Michael Ferreira, principal of Urban Analytics Inc., said political meddling of all stripes has to take a back seat to creating housing.
Metro Vancouver housing starts are set to decline 8% to 16% in 2018 to as little as 21,135 units, Canada Mortgage and Housing Corp. estimates. Ferreira said curbing demand without facilitating construction won’t solve the issue.
A development permit board member remarked at last week’s hearing that developers need certainty, to the chagrin of 105 Keefer opponents.
It’s the sort of scenario that Ferreira said won’t address the housing everyone wants.
“Some of this frustration I’m hearing in the market … could lead to our political leaders deciding that they want to bring in a policy,” he told UDI. “We’re a little concerned with what we might see.”
Multi-family home completions to surge to 50% above average next year: BCREA – Business in Vancouver
Although housing starts are beginning to decline, multi-family completions are expected to surge next year, according to Business in Vancouver. But this new supply will only prove changing if completion rates remain consistent with population growth.
Some of these imbalances will start to improve next year, however, according to the report, as a number of projects are nearing completion.
Multi-family home completions are set to jump 40% above trend levels in 2018, increasing from fewer than 4,000 units per quarter in 2016 to around 6,000 units by Q3 2018.
The BCREA compiled these projections by looking at the 35,000 multi-family units in development and estimating their completion dates by looking at where they are located. For example, projects in downtown Vancouver are expected to be completed in, on average, 37.5 months – almost three years.
Some of the areas with the highest completion times are Southeast Vancouver (26.5 months), South Granville/Oak (24.8 months), North Burnaby (21.9 months) and Westside/Kerrisdale (21.6 months).
The fastest turnaround times are found in Surrey (12.5 months), Kitsilano/Point Grey and Delta (both 14.2 months), Langley (14.3 months) and Maple Ridge (14.7 months).
An estimated 19,700 starts are forecast for 2017. In 2018, 19,000 more starts are expected.
The report points out that most of these units are already pre-sold, but they will still boost rental market supply as households transfer from the rental market into home ownership.
“This surge in multi-family completions isn’t the only solution for housing affordability in Metro Vancouver,” the report said. “However, a marked increase in aggregate supply can move the needle toward market balance and help slow the pace of housing price/rent growth in the region.”