Kelowna urged to revamp affordable-housing policies

Ron Seymour 2008-04-13 Kelowna Courier

The City of Kelowna‘s current policies aimed at increasing affordable housing are not working well, council will hear Monday. Incentives now being offered to developers to build more affordable units are “too small,” and the system should be modified, according to a land economist contracted by the city. A key change suggested by Jay Wollenberg is to make it easier for developers to give the city cash-in-lieu payments, designed to support the construction of affordable-housing complexes elsewhere in the city, rather than build such units into their own projects. Developers would make such payments when they are granted a so-called density bonus, which is permission to build more residential units on a site than would normally be allowed. “The payment should be equal to the value of the additional development right. These funds would be collected by the city and pooled to create new affordable-housing projects,” writes Wollenberg in his report to council. Wollenberg was commissioned by the city to evaluate the city‘s current approach to encouraging affordable housing. One of its main features is requiring half the extra units permitted under the density bonus to be designated as affordable housing, meaning they sell for considerably below market rate. Wollenberg points out that, particularly for small and medium-sized housing projects, the system isn‘t attractive to developers because they might gain only a few extra at-market units while also absorbing all the cost and uncertainty associated with providing the affordable suites. “In our view, the existing mechanism does not produce enough of a benefit to be of interest to a developer,” he writes. “The costs, time, risk and administration associated with the system are not worth the very small additional market density, so most developers are likely not to bother.”

There is also the chance, Wollenberg says, that the inclusion of a few affordable-housing units in a new project will make the at-market ones harder to sell, because the development‘s image will suffer. A developer will be concerned that the introduction of a different kind of unit aimed at a different target market may affect, even if only slightly, the market‘s response to the project,” he says. By increasing the density bonus and requiring developers to make larger cash-in-lieu payments, the city could build up a fund to support the construction of affordable-housing projects, Wollenberg says. He gives these examples: for a typical low-rise, multi-family project, the cash-in-lieu payment could be around $170,000; for a medium-sized development, the payment would be $667,000; for a highrise, the payment could be more than $1 million. The city would use the payments made to the affordable-housing fund and partner the money with grants from senior levels of government to build new affordable-housing projects, where all the units could be sold at below-market rates.