Upzoning helps blocks of homes on Cambie sell for amazing $3.4M each

Post by Michael Geller in

15 comments

cambieproperties.jpg
Some Vancouver homeowners are becoming instant multi-millionaires

Anyone driving along Cambie Street between King Edward and West 57th, or reading the Real Estate Weekly, cannot help but notice that many of the single family properties along both sides of the street are for sale, or have been sold. According to newspapers, and recent CBC Early Edition reports, single family lots worth $1.2 million have sold for $3.4 million. This has included one ten lot assembly.

Experienced Vancouver developers have watched the situation with a mixture of amusement and surprise. They know that it is a mistake for anyone to buy a Vancouver property based on its potential rezoned value, since the City of Vancouver has a policy of charging a Community Amenity Contribution (CAC) whenever a property is rezoned. In other words, anyone paying $3.4 for a $1.2 million property may also have to pay another million to a million and a half dollars to the city as an amenity contribution.

I do not entirely object to this approach. I think it is reasonable for new development to make a contribution to offset the cost of providing additional amenities. What I do object to, however, is the manner in which the CAC is calculated, and in some instances, the amount of the CAC. The current system creates great confusion and uncertainty which is starting to stifle the type of redevelopment many of us want to see.

A couple of people have told me they don't really understand my concerns, and what I am proposing with respect to the determination of Community Amenity Contributions. In case you too are confused, here's a brief synopsis:

1. As discussed on CBC this morning, the city's current approach appears to be a negotiated CAC payment that takes into account the value of the land before rezoning, and the value of land after rezoning. The city's goal is to receive approximately 75% of the land 'lift' in cash or amenities. Sometimes the values are determined based on Purchase and Sale Agreements; sometimes they are based on appraisals; and sometimes they are negotiated with the City's real estate department

2. One of the drawbacks with this approach is that in some instances the city might not receive any CAC payment if it is determined there is not any increase in value upon rezoning. This was the case with the Lanesborough development in the 3000/3100 block of West 41st, where I did not pay any CAC's since the city's real estate department deemed I had paid too much for the land. In fact, my arrangement with the vendors was to pay them the rezoned value.

3. I am NOT advocating that we return to an approach based on Purchase and Sale Agreements. Nor am I advocating that we retain the current system which determines value using different approaches. On the contrary, I am advocating that the CAC be a pre-established amount on a square foot basis, (that is more reflective of the cost of providing services, not increase in land value) that is published and clearly understood by purchasers and sellers. I understand that this approach is currently in place around SEFC and other parts of the city. I think it is preferable since it creates more certainty, noting it is oftentimes very difficult to assess the rezoned value of a piece of property, years in advance of any development, or when the project is innovative and untested. This certainly was the case with my recent development known as Hollyburn Mews in West Vancouver.

4. Whether the CAC is paid in cash, or provided in amenities within the development is something that the city can negotiate with the developer. However, the value of the benefit will be predetermined

5. In establishing the CAC rate, the city will have to give regard to a number of considerations including: the cost of providing additional amenities; what is reasonable given the desired density, form of development and affordability; and finally, the value of the land under its current zoning. This latter point is important since if the residual value of the land for multi-family (after paying the CAC) is lower than for single family development, the desired redevelopment will not occur.

6. By way of example, the city might desire a CAC for the Cambie Corridor at $50 per square foot. However, if this results in a residual land value that is lower than the value as a single family lot, most owners will not bother with a rezoning. If it is $20 per square foot, then rezonings may be more likely. The challenge is to come up with a CAC rate that is sufficient to partially cover the cost of new amenities, but not so high as to deter rezoning and redevelopment

As the city seeks to encourage the transformation of single family lots to various forms of higher density multi-family development, it will be necessary to remove some of the uncertainties related to CAC's. I believe fixed CAC's, along with new forms of 'pre-zoning' are the way to go. This will hopefully help avoid the confusion and misunderstanding that has resulted in some people paying millions of dollars too much for the Cambie Street properties, which could well affect the timing and success of future redevelopment.

Editor's Note: CBC online also did a great story on this a few days ago that is worth reading. They stated:

Six months after Vancouver City Council approved a plan to transform the Cambie Street corridor, homes in the area have nearly tripled in value and some residents fear development will ruin the neighbourhood.

Last May the council passed a plan to bring 15,000 more people into the Cambie Street corridor through mid-rise development.

Then last month a block of 10 homes along Cambie Street near 41st Avenue sold for $3.4 million each — nearly three times their previously assessed value.

Neighbours say they're growing tired of being pressured to sell by developers and real estate agents.

Janice Douglas says she expects a six-storey building will soon be overlooking her single family home.

"We've got people looking in our back yard, looking in our bedroom, and we will never see the trees again — nor will we have any more sunshine," Douglas told CBC News.

 - Post by Michael Geller. Michael is a Vancouver architect, planner, real estate consultant and property developer. From 1972 to 1981 he was an official with CMHC during which time he oversaw the development of thousands of affordable housing units and the preparation of numerous housing policy and strategy documents. You can visit his blog by clicking here.

15 Comments

Micheal, what will happen to the assessed value come tax time of those properties and the unsold ones adjacent to it.

Immediately across the street is a commercial property with a restaurant etc. If I am not mistaken, this past year the property was assessed at 4 million +/-. Now that the much smaller lots in the next block have sold for the 3.4 million - what will happen to that commercial property taxable value.

More important, what will happen to the current tenant who is sitting in a long term triple net lease and will be facing an outrageous jump in property tax as a result of these residential sales.

This drama is going to replicate all the way down Cambie. Those merchants that survived Canada Line could be wiped out by the 'second wave' of calamity. It may not come in the form of dug up streets, but it will arrive in a brown envelope in June when the 2012 tax bill arrives.

You point to Cambie. I can't help but wonder if Norquay and Marpole are facing similar challenges.

Any suggestions beyond your discussion of CAC's?

And this mayor says he's committed to affordable housing. Ha ha ha ha ha ha ha ha ha ha ha. What a joke. He's pricing us out of this city one development at a time.

I don't really know where to start with this one... On the one hand you have an extremely select group of home owners cashing in on fools. On the other hand you have a community caught in the middle--I know many home owners just off Cambie who feel abondoned and ignored. It's interesting reading some of the comments out there, many wonder why Ms. Douglas and others would be complaining--take the money and run, right! But no one seems to acknowledge that they don't want to; they've spent decades building a community and now it's gone in a flash. On the other hand you have solid planning principles around TOD etc...

But even then, the cambie plan, that states it's based on transit has 6 story buildings at 30th and Cambie--5 blocks from skytrain, yet at 24th and Ash (one block from skytrain) nothing, just single family. How does that make sense? So perhaps Ms. Douglas lives 2 houses off Cambie, she's still planned as single family (part of this mythical phase 3 perhaps?) and so all she's got to look forward to is construction and six stories over looking her back yard.

This is a probably not fully coherent lol, but this Cambie plan is just so full of holes, these ridiculous sales from absolutely ridiculous speculators, the already ludicrous housing market... one wonders how it will all work...

Does anyone know if 4099 Cambie has been sold? It's right next door to the properties that Micheal has mentioned. 2010 assessment was $4.5 million. It was listed for $14,7 million back in May.

If it was sold, the little shops in there will likely be wiped out by the shock to their assessments and tax bill. 'Averaging' won't begin to help.

We need to do something for these existing users of 'land in transition' unless we want to see our neighbourhoods vapourize.

boo,

You're right, the Cambie Plan you can drive a truck through. And, this is Mayor Gregor and cos.' idea of affordable housing along with STIR at an average taxpayer subsidy of $100,000 per unit

(Please be aware that at $500/sf x's 390 sf = $195,000, the City could buy 1 unit and own it, and get return on investment, for every 2 $100,000 subsidies -- revealing yet another hole in Vision's bizarre, but feeble attempts to defend this misguided programme.)

Julia, another important and negative aspect of CAC's is that the City is in fact selling density to get their 75% cut. Because the City is the beneficiary of such a sale/upzoning and is as well the approving authority there is an obvious conflict of interest in this process. Do you think it would survive a legal challenge?

Michael is right the CAC's must be preset, fixed and publicly available in advance rates. I have spoken to a number of developers who also agree with this proposition. In addition to removing at least part of the conflict problem, it will stablize real estate prices. This will also have the effect of helping to keep prices down.

Keeping prices down is important not just to housing consumers, but to the development industry as well. Purchasers financial capabilities do have limits and if these are reached (I suspect we're close to that), the developer can no longer sell their product. This is not good for the business they're in, which is selling housing.

rumor only... I am hearing local developers are trying to tie up properties on Cambie 'subject to zoning' but there is money arriving from elsewhere looking to park cash in a safe market which is translating into no subject offers with quick completions.

Have a friend who owns a duplex further south on Cambie that is trying to take his money and run along with his neighbour. Can't say that I blame him. The notion of greater good has its limits.

I figure the final selling price of those redeveloped properties will be controlled by the market. You can only sell it if you have a buyer and if people can't afford it - they will sit there.

I don't have a problem with the densification of the Cambie Corridor, just like I did not have a problem with the Canada Line. I DO have a problem with the disregard for collateral damage.

Shouldn't it be densification of the area around the stations? I find it so weird that you densify based on the premise of capitalizing on transit and then have higher densities further from the transit stations. I've asked this question a number of times to a number of different people, I never get an answer.

It's also so bizarre to rezone everything with a Cambie address, but all the houses 1 lot over are untouched, still single family. Where's the transition? Where's the logic?

I have no problem densifying around the stations, build it up and take advantage of the metro. But do it right. And I find this mad rush to develop Cambie odd considering the expo line at a few of the stations in East Van are still surrounded by single family homes 30 years later!!

The Thought of The Day

“First thing I would change, is the print ads for all the nude bars in the city, from ‘Live Pole Dancing’ & ‘Girls, girls, girls’ to ‘Vancouver Alternative Ballet’ & ‘Nutcracker Extravaganza’!”

That way, every old fart and his dog, salivating from the corner of their mouths, could go in there, chin up, smile on their face, with their hopes kept high, knowing that they are now… the newly minted patrons of the Choreographic Arts instead of the shitty husbands that they really are.

At this point, some of you might think I’m delirious…
Naah, stay with me.
It’s ol’ same ol’, with housing development in this city as well.
What, you didn’t know?

Inside a Titty bar or inside City Hall these days, it doesn’t matter who you ask… everyone is crying wolf, Haouwww! Haouwww!
They’ll tell you, they are in there for the chicken pop-corn, for the beer and for the “affordability”….
Hypocrisy has run out of relevancy. It doesn’t mean anything anymore. It’s become the name of the game.

The Property Owner cries out loud ‘murder in my backyard’ but would sell in the blink of an eye… if the price is right!
The Buyer complains about affordability but would make an exception if a flip-flop is still in the cards and of course… if the price is right.
The Developer shouts ‘free market interference’ but would build… if the density related profit is right.
The City Politician will keep everyone guessing what the next euphemism for “Affordability” would be, but they could make concessions… if the campaign money contributions are right.
Same way as The City Bureaucrat, who puts out to the Politicos… if their career advancement looks on the right track.

Here’s what we have:
The ones who own/ sell, wants to make more $$ .
The ones who buy, wants to pay less $.
The ones who can’t buy or sell call themselves … #OccupyVancouver!
And, honestly… I don’t blame them.

Hypocrisy – redundant, I say?
Yeah.
How come people in this city fear the expansion of Edgewater when the whole city is a freaking Casino?
My point exactly!

Recently, has been reported, that houses “worth” the already inflated price of 1.2$M each were sold for 3.4$M each… on the Cambie corridor.
“For Sale” signs are springing everywhere around Queen Elizabeth Park, only they now say… “Buy Me – I’m Easy”!

Mayor Gregor, this wooden Mayor-nette that hopes that one day he’ll became a real Mayor, and his Vision traveling Circus, argue that if reelected they’ll tackle the Housing Affordability by making use of City owned land in a just, financial astute and sustainable way…
Three words for you, you arrogant, pathetic liars: “Little – Mountain – Coop” !
220 units of ‘affordable housing’ obliterated under your (Vision/ Robertson) watch.
Now?
A hole in the ground, a weed nursery, a dog latrine, a garbage collection dump, a haunted site, just in time for yet another Halloween.

Do you get the conundrum we’re in?
So please, a bit of decency, please.
Cut the propaganda, the empty promises, the ‘we’ll deal with it by 2020…’ slogans.
It’s all BS! I know it, you know it , everyone knows it!
Sure, let’s pretend to deal with it another term, won’t we now?

Also, have you heard the news?
Last night we as people, have turned symbolically, the page to 7 Billion, on this Planet.

There is not a chance in Hell for this city to ever recover and become affordable as long as the circle of corruption stays the same – a closed circle.
Local and Provincial Politicians – affecting immigration and city staff practices & policies, while accepting monies from Developers – that are dependent on profits based on height & density & development permit approval time constrains… overseen by the aforementioned… forms THE Vicious Circle.

Ladies and Gents, this… is your Cancer.
You either deal with it now, and hope for the best, or you’ll die.
The only other viable alternative to this, that I see, for returning the affordability back to this city is if the “Big One” hits hard one day in the near future, and than coupled with its consequential Tsunami, wipes out a good chunk of super duper real estate…

Only then… we’ll have a real chance of becoming affordable again, however, IMHO that would be… our easiest way out!
Till then…

We live in Vancouver and this keeps us busy.

"Julia, another important and negative aspect of CAC's is that the City is in fact selling density to get their 75% cut. Because the City is the beneficiary of such a sale/upzoning and is as well the approving authority there is an obvious conflict of interest in this process. Do you think it would survive a legal challenge?"

I think you touched on the major issue. When you look at how much of their revenue comes from this number, it is an addiction that will be very hard to break. Similar to the Highway Tolls, I think too much of this ends up in general revenue versus in true Community Amenities. One only has to look at how hard the City has made density transfer from Gastown projects to know they don’t like any competition which may decrease their yearly allotment.

I am looking more carefully at the photo that has been attached to this blog post. Is that not a commercial site rather than residential?

If so, those businesses likely got wiped out over night along with the folks across the street. BC Assessment has no choice but to revalue those properties and the corresponding property tax bills just went up 3-400% from $21,733 to $61,590. EACH PROPERTY...or $5,000 per month in taxes alone.

Where is a business supposed to come up with that sort of money?

Julia,

Those aren't the properties in question. This blog has an extremely poor record of matching the photo to the story, I just chalked it up to that.

Those are commercial lots including an animal hospital. The lots in question are further up between about 33rd and 37th I believe on the east side of Cambie.

Thanks Boohoo. Thought I was losing my mind for a moment.

However, those commercial properties were for sale in May. $14+ million. Wonder if they sold and wonder what is going to happen to the tenants - like the animal hospital, when the tax bill comes.

Apologies to those of you who struggled trying to match the photo to the story. You're absolutely right. It doesn't fit very well. I just grabbed it off the internet thinking that any photo would be better than no photo, but I was wrong!

However, I do appreciate the comments and discussion. You are right in pointing out that even though the land hasn't been 'rezoned', there is now a danger that the initial sales could significantly increase the assessments and resulting property taxes along the entire street.

Ironically, some city staffers rejected my suggestion that the city should rezone the entire corridor to the desired zoning since they feared this would adversely impact assessments and property values. Now we may have the worst of all worlds.

My suggestion? If you don't want to force out the existing single family residents too quickly, rezone the land to a new zone with a variable FSR #eg 0.6 to 2.5# that allows both the existing single family housing, and proposed higher density housing.

Establish a fixed CAC and DCC to be paid at the time of Development Permit, and reach an agreement with the BC Assessment Authority that the assessed value will only increase once the land is used for higher density housing.

This is an important principle because over time, I would like to see gradual changes in density in many other locations, such as the lands surrounding the transit stations but away from the main arterial #as noted above#, along Dunbar, 41st and other arterials served by transit, etc. etc.

We need new planning approaches and zoning tools in Vancouver to accomplish this. These should include an overall city plan which I understand may soon be in the works. But that's another story!

You just made Brent Toderian happy with this comment. saved him some brain cells and it's now only a matter of copy and paste + putting it in a nice PowerPoint format that Penny Ballem would like and ta da! Case solved. Another day another 1$K for the Big City Planner.

Micheal, why do you think the city is so reluctant to advocate for Cambie with BCA when Richmond went to bat for Brighouse in a nano-second?

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