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Comment: Greedy everybody: Housing costs in Victoria

Writing here as a small-time and occasional residential developer, let me break down development costs for you.
A residential construction project on Esquimalt Road in October. DARREN STONE, TIMES COLONIST

A commentary by a Victoria resident with a lengthy resume of community involvement with an urban design focus. Through his company New Landmarks, Miller conceived ASH (Affordable Sustainable Homes), a 100 per cent efficient houseplex, each of whose suites has its own front door.

In an effort to increase the ­supply of affordable and straight market housing, the province has put rules in place to simplify and speed municipal development approval and has mandated the relaxation of single-family zoning, now permitting up to six dwellings — either suites in a houseplex or townhouses on ­corner lots, as I understand it.

Given the goal of enough housing to meet needs, along with housing affordability, this seems like a giant step in the right direction; but math sits beside both policy and aspiration, so it’s helpful to understand housing delivery mathematics, just to make sure that cost realities align with housing affordability goals in particular.

One recent letter said that increased density eventually overwhelms existing infrastructure, producing new civic costs and a tax burden. This is a telling and novel argument, and it has no comeback except to note that this happens endlessly with civic infrastructure in all cities as they evolve and grow over time.

I was particularly interested in the consideration of regional housing costs, developer “greed” and municipal council acquiescence to the developer agenda.

Still, a friend of mine recently told me, without a hint of lament in his voice, that a house “up the street” from his in View Royal just went for $1.7 million. And almost any property in Fairfield, to pick a neighbourhood, currently carries a roughy $1.5 million price tag.

While the numbers may vary by locale, this is the Greater Victoria reality, the new normal. Did developer greed produce these enormous real estate price hikes (which, by the way, precede any provincial policy intervention), or was it other market factors which, frankly, I’m not enough of an economist to understand?

I know that the jar of mayo that cost me $7 last year is now $9. Greedy Hellman’s?

Writing here as a small-time and occasional residential developer, let me break down development costs for you. While there may be parts of the region where some costs — property in particular — are somewhat lower, my numbers here generally hold true in the Victoria setting.

A standard lot with an existing house is, in most locations, likely to run not less than $1.2 million or, assuming six new units, $200,000 a door as the “dirt cost.”

Assuming a modest two-bedroom unit size of 750 square feet and current construction costs of about $500 a square feet, construction to finish will come to $375,000 a door.

Soft costs (architect, municipal fees and permits, lawyer, consultants, interest costs on borrowed money, etc. etc.) at a low estimate of 20 per cent of construction adds $75,000 a door.

Then there is a contingency, real estate sales commissions and developer profit, all totalling, let’s say, 25 per cent of $650,000 per door costs sub-totalled above, or $160,000 (rounded); all of this leading to likely per-dwelling pricing of around $750,000, or $1,000 a square foot. (Note, by the way, that a risk-averse bank or other lender will, as a condition of project lending, require a thorough and accurate project budget including a credible projected profit as proof of project viability.)

One can quibble with my numbers — they are quibble-able — but they’re not off by much. And assuming I have my numbers right, it remains fair to ask how affordability fits into this structure, without more and smaller units (reducing the per-unit land and construction costs) and/or some discounted units set aside as a condition of development approval.

Another letter dealt with the “harmful consequences of the province’s housing plan.” It began:

“B.C.’s simplistic plan to attack the complex housing crisis will unleash more crises in its wake.

“With a breathtaking, one-dimensional view, up to six homes are crammed into one parcel, making peaceful neighbourhoods mutate to congested ones, as a group of 20 residences becomes 120.”

I’m not sure why, exactly, a sixplex is automatically peaceless, but I appreciate that hyperbole and poetics are fair game in such letter-writing — vaguely suggestive of Marjorie Taylor-Greene’s megaphonics in support of Donald Trump.

The letter continues:

“The rights of homeowners who invested their savings, the character and common good of communities, existing infrastructure, and the hard work and judgment of local municipalities engaged in customized solutions, will be sacrificed for this Stalinist central plan, along with its menu of just-announced, cookie-cutter house plans.”

Wow! Though, wasn’t it Stalin who famously said: “Want a place in Moscow with a view of the onion-domes? Ten more rubles a month.” (Central planning doesn’t entirely eliminate smart marketing.)

Greedy Stalin.