TOWNSHIP OF ESQUIMALT MEMORANDUM
MEETING DATE: February 10, 2025 Report No. DEV-25-005
TO: Committee of the Whole
FROM: Bill Brown, Director of Development Services
SUBJECT: Affordable Housing - Council Discussion & Determination of Next Steps
INFORMATION:
Purpose
The purpose of this memorandum is to provide the Committee of the Whole (the Committee) with background information for consideration to help inform their decision about whether to direct staff to draft a revised Affordable Housing Impact Assessment.
Background
At the September 23, 2024, Special Committee of the Whole meeting, the Committee reviewed new initiative proposals including one related to affordable housing (Appendix “A”). At that meeting, the Committee recommended that Council direct staff to report back with an impact assessment on the Affordable Housing Plan proposal.
The impact assessment (Appendix “B”) was presented to the Committee at their December 9, 2024, meeting. The Committee recommended to Council that,
staff be directed to prepare a revised Initiative Impact Assessment on Affordable Housing with an expedited schedule for Council’s consideration, advising on what the implications are for reducing the scope, schedule, and cost of the project.
At the subsequent Council meeting on December 16, 2024, Council commented that,
Recommendation language reflects intent to direct staff to proceed; determining next steps will necessitate further discussion, once staff have completed initial work and provided options available for advancing affordable housing in the Township
Prior to proceeding with the drafting of a revised Affordable Housing Impact Assessment, staff are providing the Committee with some background information related to affordable housing for its consideration.
Overview
The provision of affordable housing is a wicked problem1. A number of solutions have been proposed, however, the one that often comes up is to have the federal and provincial governments facilitate the construction of thousands of new housing units to be rented or sold at prices/costs that result in them being attainable by households that are very low income, low income, moderate income, or average income (see definitions in the issues section below). In this context, a variety of issues related to this problem are listed below for the Committee’s consideration.
Issues
There is a myriad of variables that contribute to the issues associated with affordable housing (not all of them apply to the Township’s housing market). These include but are not limited to:
- Cost of land
- Cost of labour
- Declining productivity
- Cost of materials
- Cost of financing (interest rates)
- Cost of time
- Condition of housing
- Location of housing
- Financialization of some forms of housing
- Role of local government housing authorities
- Government policies including but not limited to:
o zoning
o parking requirements
o inclusionary zoning
o tenant relocation
o density bonusing
o foreign buyer policies
o immigration policies
o speculation and vacancy taxes
o short term rental policies
o government financial support for affordable housing
o rent controls
o development cost charges
o amenity cost charges
- Supply of housing
- Demand for housing
1 “In planning and policy, a wicked problem is a problem that is difficult or impossible to solve because of incomplete, contradictory, and changing requirements that are often difficult to recognize. It refers to an idea or problem that cannot be fixed, where there is no single solution to the problem, and “wicked” denotes resistance to resolution, rather than evil” <https://en.wikipedia.org/wiki/Wicked_problem> .
While many of these variables are interrelated, very few of them are within the exclusive jurisdiction of local governments and even fewer are within the jurisdiction of the Township of Esquimalt. In order to determine the extent to which each variable impacts housing affordability it is necessary to identify the main issues.
The first issue is defining “affordable housing”. There are many definitions - the Canadian Mortgage and Housing Corporation (CMHC) states that “housing is considered ‘affordable’ if it costs less than 30% of a households’ before-tax income”. The problem with this definition is that it us too broad. A better approach is to use the categories developed by the Housing Research Collaborative at the University of British Columbia in their Housing Assessment Resource Tools. This tool uses five categories of income to assess housing need (<https://hart.ubc.ca/wp-content/uploads/2024/03/HNA-Methodology.pdf>) They are:
- Very low income - 20% or less of the Area Median Income.
- Low income - 21 - 50% of the Area Median Income.
- Moderate income - 51-80% of the Area Median Income.
- Average income - 81-120% of the Area Median Income.
- High income - More than120% of the Area Median Income.
Any future affordable housing policies or programs in the Township should be based on these categories.
The second issue is that affordability is not the only issue. Rather, housing professionals refer to “Core Housing Need”. A household is considered in core housing need when the housing is inadequate (e.g. in need of major repairs), unaffordable, or unsuitable (e.g. not enough bedrooms for the number of people in the household) (<https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/housing-research/core-housing-need>). Extreme core housing need (ECHN) is one of the outputs of the Housing Needs Report. According to the report, it is estimated that there are 95 owner households with a mortgage in ECHN in the Township and 518 rental households in ECHN in the Township.
Even with this data, there is little the Township can do to physically provide more housing for those in ECHN. It only owns a portion of one parcel of land (the north half of 500 Park Place - north of the Public Safety Building currently under construction) that could conceivably accommodate affordable housing in the near future. Staff are analyzing this vacant land to ascertain various options for Council’s consideration. Even if it was deemed appropriate for affordable housing, development could not commence until construction of the Public Safety Building is competed in 2026. In the longer term, there may be options to use the Sports Centre parking lot for a mixed-use development that includes affordable housing, however, that would be a project beyond the scope of this analysis.
The third issue is related to limitations on the tools available to the Township to provide affordable housing. Two of these tools are density bonusing and inclusionary zoning. The Township has used density bonusing in the past to create affordable housing, however, the number of units created is minuscule compared to the number of units required. In addition, there is a burden on staff to follow up on developments that include affordable housing units to ensure compliance with the Section 219 Covenants which are the legal tool used to secure affordable housing in these situations. Additionally, recent amendments to the Local Government Act require a financial feasibility analysis to be completed for each density bonusing bylaw. As the Township does not have the staff expertise to do this, it will have to be done by a consultant. Guidance from the province related to this analysis states that:
This analysis helps determine the bylaw conditions (e.g. the amount of affordable housing and/or amenities) and the amount of the cash in-lieu payment if included as a compliance option in the density bonusing bylaw.
The analysis must consider certain matters, including but not limited to:
• All development-related costs (e.g. construction materials, financing, charges, sales prices).
• How different development types and factors impact a project’s ability to provide affordable housing units or amenities.
• The amount of increased density needed to offset the costs to the developer for providing the affordable housing units or amenities.
If requested, local governments must make certain information used to inform the analysis available to the public (<https://www2.gov.bc.ca/assets/gov/housing-and-tenancy/tools-for-government/local-governments-and-housing/inclusionary_zoning_density_bonus_interim_guidance.pdf> ).
This type of analysis is far more detailed than the analysis done by the Township previously for density bonusing bylaws. In addition, the effectiveness of density bonusing may be limited in the future due to the statutory requirement that the official community plan and the zoning bylaw must accommodate a 20-year supply of housing based on the latest housing needs report without the use of density bonusing. Until these amendments are made staff are unable to determine if density bonusing will remain an effective tool for obtaining affordable housing.
Inclusionary zoning is a new tool available to local governments to provide affordable housing. Inclusionary zoning requires that a certain portion of new development be provided as affordable housing. To implement inclusionary zoning local governments:
• must adopt an inclusionary zoning bylaw and set out specific requirements including the amount (sic) of affordable units, tenure, price, and length of time that the units must comply with these requirements;
• must undertake consultation, a financial feasibility analysis, and consider the most recent housing needs report, when developing the inclusionary zoning bylaw;
• must report affordable housing contributions annually;
• may vary the inclusionary zoning requirements by area, site, and development type (such as the size, tenure or construction materials); and
• may collect cash-in-lieu of the affordable units and may allow for the affordable units to be provided on another site.
The amount of analysis required to implement inclusionary zoning is significant. Given the current commitments in Development Services, further work in this area would require the assistance of a consultant. Furthermore, there is uncertainty associated with the financial feasibility of inclusionary zoning.
In addition to the above referenced tools, there are a number of government programs at both the federal and the provincial levels that are aimed at various housing issues.
Two of note are:
Housing Accelerator Fund - This federal government program provides funds to local governments to use to implement initiatives that will lead to faster approvals of more housing units. The Township applied for a grant but was unsuccessful. Local governments that were unsuccessful in the first round were invited to apply to a second round of funding. The Township applied but to date has not received notice that it was either successful or unsuccessful.
The second program of note is the BC Builds program <https://www.bcbuildshomes.ca/> . It aims to provide rental housing to middle income British Columbians. Eligible projects need to provide 20 percent of the units at 20 percent below market rent. It requires that landowners come into the program with the land already zoned for their proposed projects. The program is open to both non-profit and private developers. If a developer came forward with a proposal in Esquimalt, staff would provide all the assistance possible. Specific Council policy would not be required outside of the rezoning process.
There are a number of other programs administered by organizations such as the CMHC and BC Housing that developers access. Negotiations are between the developer and the organization. There is no role for staff. From time to time staff will write letters to funding organizations in support of developers applications, however, these are not frequent and do not require specific policy direction from Council.
Financial Impact
Obtaining the services of a consultant to prepare a housing affordability plan would be funded through a housing grant that the Township received from the provincial government in January 2024 and therefore, would not directly impact property taxes. The grant money can be used to support a variety of studies related to housing initiatives.
Conclusion
Notwithstanding the need for affordable housing, the resources required to implement the various tools are beyond the current capacity of Development Services and would require the assistance of outside consultants. Even if the various tools are implemented, there is still no guarantee that there will be a significant increase in the number of affordable housing units. Anecdotal evidence from local developers along with published information (for example, see Key to the City (2024) by Sara Bronin) indicate that tools such as inclusionary zoning may have unintended negative consequences such as increasing the cost of other housing in a development to offset the costs of affordable housing and decreasing the supply of housing as developers move their capital to markets with better potential financial outcomes. Staff consider these assessments to be reasonable. The Township also lacks one of the most fundamental components of affordable housing: available or inexpensive land. This leaves the Committee with the essential questions:
• Have staff provided enough further information about an Affordable Housing project to facilitate Council decision-making?
• Does the Committee wish to instruct staff to provide a revised Affordable Housing Impact Assessment with new instructions related to scope, schedule, cost or expected outcomes?
REVIEWED BY:
1. Sarah Holloway, Manager of Corporate Services, Reviewed
2. Ian Irvine, Director of Finance, Reviewed
3. Dan Horan, Chief Administrative Officer, Concurrence
LIST OF ATTACHMENTS:
1. Appendix “A” - Affordable Housing - New Initiative Proposal
2. Appendix “B” - Affordable Housing - Impact Assessment