Friday, November 24, 2006

Richmond construction fee increase

(CBC) - Richmond is planning a substantial increase to the amount of money developers pay to the city's affordable housing fund, as part of an effort to deal with the Lower Mainland's high real estate prices.

Construction companies can now pay 60 cents per square foot in lieu of adding lower-cost housing to new developments.

Under the city's new affordable housing strategy, that charge would go up to $4 per square foot in some cases. "What they've really done is simply increase the cost of new housing stock for Richmond," he said, "which means tomorrow's buyer of housing is being saddled with the cost of affordable housing when it's everybody's issue, not just new home buyers." link.

This seems to me to be wrong-headed. There was a requirement for developers to build "affordable" housing alongside the market housing. Richmond City Council offered them an "out" by tacking on $0.60 per sq. ft. This is not an onerous sum, as it would only add $1200 to the price of a 2000 sq. ft. home. Surely the developer added their 40% to that, which would bring it up to about $0.84 per sq. ft. My question is; how much money has Richmond spent on affordable housing? I would wager not too much.

So now they want to tack on another $8000 to the cost of that 2000 sq. ft. house, and by the time the developer adds his 40%, that number climbs to $12k. Council wants to make housing more affordable by making it more expensive? This is where I bring in one of my favourite quotes - by Tweedledee in Through the Looking Glass:
`Contrariwise,' continued Tweedledee, `if it was so, it might be; and if it were so, it would be; but as it isn't, it ain't. That's logic.'

I find myself wondering if this is just leger de main by Richmond City Council to cover the costs of the $178 million Olympic Oval - which was never subjected to any public consultation.

Richmond council candidate Annie McKitrick says civic funds spent on the $178,000 Olympic speedskating oval is money that could be used elsewhere.

Council candidate Annie McKitrick says the books need to be opened on Richmond's $178 million Olympic oval because the public was never consulted.

"The decision to make a bid on the oval was made without community consultation," said McKitrick, a former school trustee who is running for council on Nov. 19.

"We have no idea what staff said to sell council behind closed doors. It is $118 million worth of funding which won't be used for other projects like affordable housing. There are concerns about cost overruns and revenues not meeting projections."link

I am reminded daily of Marie Antoinette's exhortation - Let them eat cake!

We truly live in a society gone mad with feeding on it's self.


Anonymous said...

The price of housing in Richmond is determined by the market, and the new fee imposed by the City will make no difference. They could impose a $100,000 fee for all it matters - it would make no effect on the market price, as Richmond is not a market in itself. Or so I would think - maybe there's a certain group of people who would pay anything to live in a place that sounds like "rich man".

As for affordable housing, the way to get it is to increase supply, and the current bubble seems to be doing that quite nicely.

Freako said...

Would have to agree with Anon that such fees do not directly affect prices. However, all else the same, they do restrict supply which WILL make housing more scarce and less affordable.

Don't really know what to make of the affordability. The whole thing is a mishmash of freemarket capitalism, socialistic intervention and wishful thinking.

Exactly why is it that market cannot provide affordable housing? And what exactly is affordable housing? A nice SFH with a picket fence in a gentrified neighbourhood? Five pieces of plywood? Until we realize that quality of housing is a relative concept, I don't think we can even define the problem. And once we do, how will it be rectified, and who should pay?

A good parallel is the Whistler situation, where landlords are called "greedy" for demanding market rent. But they are called so by local businesses who complain that they can't get workers. Pathetic. If that was the case, they should pay more. They will probably argue that they can't afford to, which is hogwash. Everything is relative to supply and demand.

Sometimes those who speak or act on behalf of others have ulterior motives.

solipsist said...

Interesting points anon. and freako.

I'm not sure that the government has a responsibility to provide affordable housing. I think that they ought to encourage it though.

My socialist tendencies don't go much further than a belief in a universal health plan, education, support for the old and the disabled, and such.

Some of the problems that rankle me regarding gov't intervention are things like the training wage, and indeed, the duties that developers pay as they displace existing "social housing" - such as the conversion of SRO's and the like.

I get stuck with all the free market ideas though. On the one hand, I don't think that anyone has any right to interfere with the business of others, but at the same time, I am a very compassionate and equitable person not driven by profit and wealth. I give money to beggars, and I give old coats that I have to shivering street waifs on days like this. I have also helped people start businesses in Mexico. I can't really make sense of other sentiments.

My wife sure didn't marry me for my riches.


Freako said...

"I'm not sure that the government has a responsibility to provide affordable housing. I think that they ought to encourage it though."

What, how and why are separate problems. We don't have to judge the what and why to p*ss on the how.

solipsist said...

I'm not sure that I follow freako.

Anonymous said...

Of course housing is affordable. Everything's affordable. That's what market pricing means.

What are the real issues? One, Vancouver moreso than a lot of other Canadian cities has an uneven income distribution. That's why low income people spend so much of their incomes on shelter. The answer to this problem is to flatten the income distribution, of which there are myriads of ideas which are not related to the topic of housing as such.

Second, we have an asset bubble in housing which makes buying a house out of whack with renting. There are taxation and monetary weapons for fighting asset bubbles, which the authorities are reluctant to use, probably because their friends make a lot of money from them, and also because they don't want to be blamed by Joe and Jane Homeowner for the bubble bursting, which will happen anyway.

Third, if we really wanted housing to be cheaper, the provincial government could mandate higher density, development targets for municipalities, and tax policies that discourage holding RE for capital gains on land.

This would increase supply and decrease shelter costs. But not even the NDP would touch that one - too many oxen to be gored.

Freako said...

I guess I am trying to say that one doesn't have to have an opinion about the touchy feely aspects of social housing to evaluate the implementation of it.

One of the problems I see is that we divide into left and right wing camps, and play games of "enemy's enemy".

If you pardon my oversimplification, the "left" dedides that housing should be affordable and goes about it in some assbackwards way that exacerbates the problem. The "right" decides that any market interfering proposal that comes out of the left is evil and must be stopped.

Turns out that people who know HOW to best implement sit on the right side of the spectrum. The people who know best WHAT should be accomplished sit on the left.

The divide is huge, and it is not easy to find middle ground. We love to villify. One arch villain is the Fraser Institute. In reality, a lot of their conclusions make a lot of sense. Emotions are so strong, that I betcha many now see red and have me equated with Attila the Hun for just saying the above. I presume that goes two ways. I admit to seeing red every time free trade is criticized by a Big Labour leader.

The world would be a better place if the divide of what can and should be is bridged.

solipsist said...

Thanks anon. and freako for expanding on that.

Perhaps what it comes down to is the politicization of everything. That is unfortunate, as I don't think that political solutions are...the solutions.

One of the more interesting ideas that I have encountered lately is a musing by Sam Sullivan.

Mayor Sam Sullivan is calling on Mayors in the Greater Vancouver Regional District (GVRD) to put the issue of municipal funding for social housing on the ballot in the next civic election in

I can't find any definitive discussion on this right now, but the idea (as I understand it) is to have a question on the 2008 ballots regarding an increase in property taxes to be used towards affordable social housing.

This seems to be an equitable (and politically astute) solution. If the majority of the populace agrees, we have our funding, if not, Sullivan can say that he has no support, and is clean.

The problem (as I can discern) is that property taxes are set to increase by 6%, and who will agree to an even greater increase? Further, there will be many non-property owners voting on it. Vested, competing interests all around.

Somebody elsewhere asked if P3's are a form of fascism, and by definition, my answer is yes. The Olympics are a P3 entity. Can it be argued that part of the affordability problem in Vancouver is a direct result of the Olympic bid, and construction? Again, I would say yes. I don't see any benefit (other than an egoistic one) to hosting the Olympics. Conversely, I see a detriment - soaring property prices, increased taxes, etc.

Who benefits from the soaring economy? I see no benefit to my family. I'm not getting any richer, and my money is worth less all the time. Some homeowners (who sold) have seen benefit, but there will be a lot more hurt in the long run. Developers (by-and-large) are seeing a huge benefit.

I agree with freako about the Fraser Institute, and though I loathe Steve Harper, and his gov't, I have to (begrudgingly) admit that I agree with quite a few of the policies introduced. I could not define myself as "left", "right", or "in the middle", because I find that kind of thinking to be simplistic.

freako discerns between what can, and what should be, and bridging that divide. That is the hard part.

Freako said...

Perhaps what it comes down to is the politicization of everything.

Yes, that is how it works. You choose the horse that will allow you to win.

We can't entirely blame the politicos for that, as it it the voting populace's lack of understanding of the economy that forces them to spin rather than focus on tangible issues.

And we can't blame the voting populace for not understanding economics. It is often complex and counterintuitive.

The answer, of course, is economic education.

regarding an increase in property taxes to be used towards affordable social housing.

Again, what exactly is affordable housing, and why doesn't the market provide it? It provides just about everyhing else that people need.

I agree with freako about the Fraser Institute, and though I loathe Steve Harper, and his gov't, I have to (begrudgingly) admit that I agree with quite a few of the policies introduced.

Prepare to be tarred and feathered. You distinguished between likeability and the correct course of action. I would vote for the biggest asshole in the world if he/she implemented the policies I favored. Unfortunately the game is much more about the choosing sides rather than evaluating individual arguments, proposals and policies on their own merit.

Overall, I feel that the "left" see a zero sum society where a positive sum one exists, and as a result they don't grasp the impact their policies have on incentives.

The right, on the other hand, tend to overlook the externalities (positive and negative) that are not easily quantifiable into hard numbers (but no less real). An example would be

I have toyed with starting an "apolitical" political movement whose sole purpose is to analyze various conflicting interests and derive an "optimal" solution. Turns out that a sweetspot generally exists where improving one interests position only slightly while worsening the other's dramatically.

Rather than seeking power directly, the movement would assert itself by judging by the positions of existing parties and invididuals and making recommendations. Candidates would be encouraged to bond their promises in return for support.

What would keep such a movement apolitical and honest? Just the notion that it has to be in order to assert any influence. Since no direct power is gained, there is little incentive to mislead for personal gain. Ideally, people would put enough trust in its recommendations that they understand unpopular but correct decisions. It is catering to popularity which cause misallocations and the destruction of political integrity. The opponent promises the mooh, so we must too.

Furthermore, the rationale and for recommendations would be laid out in writing and be so clearly explained that a layman can follow. Facts, analysis and conclusions would be fully disclosed and open to honest criticism.

There are some role models in the traditional sense:

1. Singapore's Lee Kuan Yew's war on corruption.
2. Tony Blair's fine balance of social policy and economic laissez faire.

Furthermore, the realization that contrary to popular belief, free financial markets is not a source of misjustice, but rather keep powerful people honest. Also, the heart of the economy is at the entrepreneurial micro level, not with mega corporations.

Similarly, globally, the recently popular micro credit system blows away corrupt large scale mega aid projects.

And so on.

Freako said...

An example would be

Forgot to finish this part. An example would be environmental impact.

vineland said...

That would be a great solution Freako! An educated decision is better than a passionate one.

Babybull40 said...

I am wondering why Freako and vineland don't have a blog? And if you do where is it and how can I check it out...? Soli's baby sista..

Anonymous said...

Richmond definately does seem full of corruption and problems in terms of City Council. Very ironic given their mantra "to be one of the most well managed communities in Canada".

Don't forget also that Richmond property taxes are very high vs others (and also they charge for water metering, recycling -- a fee of $700/yr for a house, $500/yr for a condo -- a fee that Vancouver does not charge!).

I had a Condo in Coal Harbour. It was worth 20% more than the Richmond one.
Property tax on Coal Harbour: $1150
Utilities bill from city on Coal Harbour: $0

Property tax on Richmond: $1200
Utilities bill from Richmond: $600

(Both condos had no swimming pool, and no concierge, and maintenance fee was w/i $10 from each other. Both similar size).

City council has its reasoning all flawed. I was at a recent city council meeting and McNulty talked of affordable housing as $700k (this was a meeting where they proposed to allow developers to split lots to create affordable housing). If $700k is considered affordable housing, then most of Richmond is already affordable housing (since average price is <$650k).

Also not surprising how at least 2 of the City Councillors are real estate agents (what better way to increase business by having more $$$ housing created).

Anyhow, I could go on and on. Just my $0.02.

solipsist said...

I don't feel that I've been tarred and feathered freako. Are you pulling your punches? I'm not sure about other people, but I do not vote on the basis of popularity, I vote on ideas. Harper and Co. do not get a free pass from me by any means either, but I'm too tired to go into that. Let's just say that I am ambivalent, and uninspired over all. I have a fondness for minority, and coalition gov'ts - in that no one has too much power.

It's funny that you mention your idea of an apolitical (political) movement. I had a long discussion with an old school fellow (in Winnipeg) about that last June. We got quite into depth with it as the beer bottles piled up around us, but what we did decide (late into the night) was that it would be difficult to get the ideas across to people - mostly because of media connections (of the politicos), and because of the egregious lack of education/critical thinking abilities of the populace at-large.
Most people can't pay much attention past a ten-second sound-byte, and there is so much focus on things like who has the prettiest, most demure wife.

I truly am too tired to do this discussion justice. I'll try to get back to it soon. You hit a favourite cause of mine vis-a-vis micro credit.

Thanks anon. for your take on Richmond. I don't follow that structure very closely, but I do think that things aren't as bad as they used to be there. Can't really say too much about that.

Thanks to all for your views.

Freako said...

I don't feel that I've been tarred and feathered freako. Are you pulling your punches?

I am not sure what you mean. In case I wasn't clear, the tar and feathering wouldn't be care of me, but those who turn violent when you suggest that the Fraser Institute may actually be on the money once in while. Try it during a union rally or something. Better get your dukes up before you open your mouth. Oh, and taekwando won't get you far. Mixed Martial Arts is where its at. However, my heelhooks and and armlocks are getting rusty.

Anonymous said...

Demand-side subsidies to housing, like to anything else, just push up prices. As I said above, the way to make housing more affordable is to make it cheaper across the board, and there is plenty that government can go about this. But this runs against the vested interests of property owners, so it doesn't happen.

Ideology and realilty do intersect from time to time, which means that the Fraser Institute is sometimes right. But I heard nothing from them about the housing bubble in 1981, and I'm not hearing anything from them about the current one. Housing is by far the most important economic issue for the average person, and if this doesn't demonstrate that the Fraser Instutute doesn't give a rat's ass for anything except the interests of its paymasters, I don't know what does. And that goes for Michael Campbell too.

solipsist said...

Housing is by far the most important economic issue for the average person

That is my thinking too. Housing, fuel, food (and they are inter-related) are the most important needs that we have. Why, oh why have they been removed from CPI?

Smoke and mirrors for all!