Gimme Shelter – UDI Response to ‘Sympathy for the Developer’

As Executive Director of the Urban Development Institute (UDI), I must admit that I read with slight bemusement a recent opinion piece by Elizabeth James in the North Shore News (Sympathy for the Developer, March 21 - see bottom of post).  In her comprehensive deconstruction of UDI’s public policy positions as they relate to housing supply and affordability, Ms James has raised some valid - and some less valid – points which I will respond to now.

She questions the fairness of UDI’s position regarding the various taxes and charges new development is subject to – and therefore passed on to homebuyers – without the industry also providing clarity around the amount of profit generated by developers in BC.  Fair enough. So here it is. 

The general requirement of banks and financiers, before they agree to lend money to an entrepreneurial developer to undertake a new project, is that the developer demonstrates a certain level of profit is obtainable in order to mitigate the financial “risk” to the lender. Financiers generally require a 15% profit over the project’s costs as a condition of finance. 

This is called a developer’s “margin” and without it, projects are not seen as financially viable by a lender and a project will not proceed – along with all the jobs and housing it would create.  In reality, the margin often turns out to be much less and can be as low as 5% for some projects.  Hardly an extravagant figure, by any measure, or in relation to the level of financial risk entailed with new development.

Like every other business, whether it’s in hospitality, retail, tourism or whatever, profit or margin is the incentive that keeps the wheels spinning and the population productive – it is the backbone of our economic system.  Residential, commercial or industrial development is no different.

However, manipulating the discussion to focus on developer profit is a common technique of ‘not in my backyard’ opponents that distracts from the very real need to deliver an increased housing supply for a growing population.  On that note, the real conversation on new development should focus on how we as a community can provide more homes for more people and more workspaces demanded by a growing population.

My next point relates to conjecture that the costs of new development “do not come close to covering municipal costs for months of staff reports, public hearings, new traffic controls, realignment of roads, utilities, and more.”  The reality is that new development does pay for its fair share of growth.  It provides new community centres, new parks, schools and spaces for public services, as well as an additional property tax base for municipalities. 

But while we are on this point, I would strongly question why we even need to have “months of staff reports”, and needless public hearings?  When it comes to sustainable development we should be outcomes focused and not just engage in process for process’s sake. 

Every day a large project is delayed by a moribund approvals process – and that timeframe is often measured by years – it adds up to $30,000 per day to the cost of the project.  Again that is a cost that must be passed on to the new homebuyer, in the same way any other business must pass on additional costs to their customers.

As I mentioned above, delays and endless red-tape add costs to housing and also restrict supply thus impacting affordability – therefore there is a need for streamlining relevant municipal regulations and processes.  When it comes to density and the need to build more homes for more people, it seems that my fellow North Shore News writer is somewhat apprehensive with a streamlined approach to red-tape. 

I would suggest that building more homes for more people, and removing the constraints on density where appropriate, is our best means of improving housing affordability and meeting a growing housing demand.  In UDI’s view, housing in metro Vancouver should not only be the purview of the rich and well-heeled.

Our organization defends the rights, and options, of young families and first-time buyers to access affordable home ownership in Vancouver and for that matter on the North Shore.  What we need is not baseless criticism of innovative solutions that address the complex affordability challenges in our region – innovative solutions that our organization strives to develop. 

I will end by saying that the creation of affordable and sustainable communities in metro Vancouver would not happen unless someone can actually build and implement that vision – and UDI members have demonstrated that they are up to the job. So please Ms James, how about a pat on the back for all the sustainable communities that developers create, in partnership, with municipal governments and their residents?  

Symathy for the Developer -