Long time recurring fan-favorite guest Tom Davidoff from the UBC Sauder School of Business returns to join Matt and Adam for an in-depth analysis of his recent op-ed in the Vancouver Sun, “Zoning for Dollars”.
Tom critiques the City of Vancouver’s tendency to negotiate community amenity contributions with developers behind closed doors. He also offers some potential solutions to increase transparency in the development process and facilitate the inclusion of community groups and their interests within those talks.
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On his proposal, Zoning for Dollars: Getting Community Amenity Contributions out of the Back Room, the 105 Keefer development, specifically, and if the Chinatown community won:
It depends how you define “the community”. There is less affordable seniors’ housing built with a smaller building under as-of-right zoning, with less need for the developer to buy into things. The parking lot, as-is, is considered an important part of the community, though most Chinatowns are bustling and it’s hard to see how smaller buildings with two stories less will be helpful. You won’t stave off gentrification for too long. Many more people need affordable rentals than can live in Chinatown, and people have an instinctive distaste for development—which is understandable, but how bad is it really? Tom isn’t sure if anyone got anything out of it.
On whether those against the development were misguided:
Maybe the taller building would have ruined the community feel—it’s hard to say. How much is the extra housing worth, not just in terms of dollar value? It’s very hard to quantify the value to the community.
On Henry Yu’s policy to “do nothing” regarding Chinatown (while the area rapidly changes, regardless of anything we do):
Doing nothing is hard to define. Urban renewal projects are giant plans to screw up what the market or community comes up with. For instance, in New York they destroyed a lot of neighbourhoods by building freeways. Boston spent billions of dollars burying a freeway that split the city, in many ways. This is one thing, and Tom doesn’t disagree. However, not building freeways is very different from the government not intervening hugely with the market (so, 105 Keefer would likely have been 50 stories if left to the market’s own devices). The government is hardly doing nothing; even if it allows 12 stories, they are still doing a lot with this intense zoning. It’s hard to know what Yu means by “nothing” and the point from where he’s starting.
On 105 Keefer as a referendum on the direction of City planning, and if it’s unique to Chinatown or symbolic of Vancouver’s future:
Generally, we’re building higher downtown than we should be and not high enough in residential areas, like on the west side. It might be nicer to make Vancouver four or five stories throughout, like Amsterdam or Paris. Buildings get stuck downtown because of the politics (neighbourhoods there are accustomed to density). Perhaps elsewhere, we’re seeing neighbourhood groups comprised of unaffluent home owners saying, “Not in my backyard.” The standard model of building large towers downtown and nothing novel on the west and east sides will come under pressure, for many reasons.
On the City’s Northeast False Creek plan:
Tom is not sure they got it right. The best possible zoning is hard to describe and is not a political winner. Residential building outbids commercial building of any kind—condos are the highest and best use, everywhere. But is this sustainable? Vancouver could become a bedroom community for Metrotown or the Valley. By banning residential in the False Creek Flats, perhaps it’s to increase the ratio of jobs to residences. This isn’t crazy, but more jobs and housing would have been best.
On the argument of his proposal, Zoning for Dollars: Getting Community Amenity Contributions out of the Backroom:
Tom’s motivation for this was a fascinating event with a panel of leaders in the industry, and the consensus that we need more transparency in the community amenity contribution process (or, “zoning for dollars”). He believes local governments near Vancouver may control a trillion dollars worth of zoning rights. A community amenity contribution says you must pay for the zoning, the rationale being that you are screwing up the process and should pay for that. How should prices be set? A negotiation in a backroom? An auction? (Which may be best, as the development ends up where developers are willing to pay the most, not where the developer with the best political game wants it most).
If a community member goes to the council at 105 Keefer, they can either kick and scream while the housing units they can’t afford do or don’t get built, or, if the project goes ahead, they get nothing and profits go to the City. Given these options, why would people support the project? You need to be transactional—have people put their money where their mouth is. People who live around the project and are most impacted can name a price. In monetary terms, the legitimate objections of the neighbours and groups are probably less than the benefits of building a few extra stories. So, the City could be a middleman and compensate them with the cost to build extra FSR (floor space ratio) above zoning, and reduce their property taxes. Developers could bid what they would pay for extra FSR, and the City can take the difference and spend it on bike lanes and affordable housing.
Tom understands this is not how planning will go, but you would get many housing units in the communities that most want money and least object to development—and the City would get tons of money, too. Instead, what we have is everyone, mostly neighbours, engaging in cheap talk about the project and then seeing what will happen. Getting towards a market-based solution would help. Financial considerations impact zoning outcomes, of course, so we should think of it as a transaction to the extent it’s not politically disgusting to do so.
On if his proposal is an addition or a new model, considering the City already leverages developers to build amenities, social housing, retirement communities, etc. (to “give back”):
Vancouver and cities around it, such as Burnaby, are doing well. They are trying to read how much developers are willing to pay and do a reasonable job of it (you don’t want to scare them off, but you also don’t want to give things away). The Province tells communities not to be transparent and to negotiate. This is the worst advice as it limits how many people can build and introduces uncertainty, so less is built. Westbank and Colliers say there is nothing wrong with community amenity contributions; the problem is going into the process and not knowing what you have to pay—it can blow up the deal. Developers, therefore, want higher rates of return, and the City will likely end up getting less money. This isn’t a criticism, but it can be built upon.
On his credibility and why he’s an expert on zoning and density in Vancouver (why listen to him, seeing as he’s from Brooklyn, teaches university economics, and does not live in Chinatown):
Fair question! Tom feels he should not get to go to the hearing at 105 Keefer. Urban renewal came out of the type of decision making where academics and experts were too involved, community engagement was lacking, and there was no democracy—this leads to disasters.
However, as an economist, Tom can contribute thoughts collected over many years about what happens when people fight over limited resources. You need to define property rights, including who gets to weigh in and how disagreements get settled. When there’s a market in which people engage in transactions, others will get hurt—so, how do you deal with that? You pay them money. If you define a group of people who are truly impacted, they need to name the price it would take to make it right (they have no incentive to lie because if they go too high, they won’t get anything). You need to find a way for neighbourhoods to a) get benefits, and b) get an incentive to be honest about just how bad it is. When communities get no benefit from up-zoning, there is no reason for them to be honest. For a certain price, people won’t complain.
On if the issue was that certain community members will see no benefit:
Yes. There is a contrast between 105 Keefer and the Cambie townhomes [Cambie Corridor], now expanding to Phase 3: neighbours are so supportive of expanding townhome density because they’re cashing in. This is millions of dollars of augmented property value, and the City is getting a community amenity contribution. Everyone benefits. Ensure the neighbours and builders win, and the City gets cash to spend on affordable housing.
The last thing Tom would encourage is trashing the environment or important pieces of Vancouver’s history, but he thinks you can reinforce community planning principles and have less sprawl and a better environment if, a) neighbours get the chance to tell the truth about how bad development is or isn’t, and b) developers get the chance to compensate victims. Another example is Metrotown—Burnaby gets a lot of money, but there are many losers due to “renovictions”. Many tenants have lost their homes to development. If you’re making $500,000 per unit profit, give $300,000 to the tenants. They could find better housing and still have money leftover. Doing this is the key of his proposal—the opposition dissolves, and everyone wins.