A recent report highlights that escalating government charges are significantly hindering new rental housing development in Vancouver. This trend is leading to stalled projects and raising concerns about a future shortage of rental units, potentially driving up rents for tenants.
Key Takeaways
- Government charges on new high-density rental buildings in Vancouver have surged dramatically.
- These increased costs represent a larger portion of overall construction expenses.
- Developers are finding it difficult to build rental units at prices the market can sustain.
- A potential consequence is a future supply crunch and elevated rental rates.
Escalating Costs for Developers
The report, commissioned by NAIOP, a commercial real estate development association, reveals a stark increase in government fees and charges. For a typical high-density building in an established urban area of Vancouver, these costs per unit have jumped from $18,901 in 2010 to an projected $73,772 in 2025. This represents a 290% increase.
Consequently, government charges now account for a significantly larger share of construction costs. In 2010, these fees made up 10.2% of the per-unit construction cost, but by 2025, they are expected to constitute 20%. The report indicates that current fees and charges in Vancouver are equivalent to 28.1 months of rent, more than double the 12.8 months recorded in 2010.
Impact on Rental Supply
Blaire Chisholm, president of NAIOP’s Vancouver chapter, expressed concern that developers are struggling to bring new rental inventory to market at affordable rates. "It’s one massive impact to the development realities to be able to move these projects forward," she stated. She warned that limiting new supply could lead to market constraints and subsequent rent increases, as the higher costs of construction must be recouped.
Broader Economic Context
Since 2010, rents in Vancouver have already seen substantial growth, with an 86% rise for all apartments and a 78% increase for newly constructed units. The report points to developer fees levied by regional bodies, such as Metro Vancouver for water and wastewater infrastructure, as a key contributor to these rising costs. Some of these fees have reportedly increased by as much as 235% over a three-year period.
While NAIOP is in discussions with regional authorities and looking towards potential federal infrastructure funding to alleviate these pressures, clarity on how such support will be implemented remains elusive. The federal budget has committed significant funds to infrastructure, but the allocation details are still pending. Chisholm noted that rental development had been gaining momentum in recent years due to favorable lending conditions and incentives, and it would be a "shame" if rising government fees now impede this progress.
