Sat. Jul 2nd, 2022

But one consultant says the rising interest rates could benefit providers of affordable housing as market housing is more sensitive to borrowing costs.

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Metro Vancouver’s housing committee says its $ 100-million, 10-year plan to build affordable housing has been hit by dramatically rising construction costs over the past two years.

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But the consultant retained to assess the situation says the region’s goal of adding 1,350 new and redeveloped units can still be met even as prices for materials, labor and fuel surge.

“In the realm of affordable housing, much of the funding is coming through government agencies, which have these blocks of funds that they set aside. They are not bearing the same risk of interest rates (rising) as everyone else, ”explained Vancouver-based Ken King of Hanscomb Quantity Surveyors.

As market housing developers will have to reconsider what they can spend on projects and pull back on splashier budgets because of rising interest rates, there is a window for affordable housing projects to get more for the same amount of money. They tend to stick more closely to fixed budgets and are less sensitive to the cost of borrowing.

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“The housing craze is going to cool down a bit because the price of money has gone up. The industry that supplies market housing relaxes its prices. And then the affordable housing group can go and take advantage of that and do some very careful purchasing. This actually works very well for them, ”said King, citing the example of buying appliances that are now cheaper because there is less competition for them.

His view comes as the housing committee notes that challenges have increased uncertainty and risk for the 10-year plan.

Since January 2020, there has been an increase of about 15 per cent a year in construction costs compared to what had, for a decade prior, been a steady increase of between just 2.4 per cent to 2.8 per cent a year. Population growth and high immigration rates leading to high demand for housing were past factors, according to a memo to the housing committee from staff.

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During the pandemic, as many more homeowners undertook renovations, the cost of materials such as lumber and plastics increased as supply chains were hit. Labor was also more expensive as demand intensified because workers got sick, were laid off or changed jobs.

In particular, already higher housing costs in the Lower Mainland contribute to higher trade costs and shortages, and dramatically increasing fuel costs impact the transporting of materials.

The staff report also cited geopolitical challenges such as the Russian invasion of Ukraine and China’s zero-COVID strategy that have hurt already fragile supply chains and will continue to reverberate.

The $ 100-million plan approved in 2020 is targeted at redeveloping existing housing and developing new sites on public land leased to Metro Vancouver Housing rather than buying new land or properties, said Jason Hingley, director of housing plan development and finance with Metro Vancouver Housing.

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So far, portions of the money have been used for redeveloping properties at Eastburn Square in Burnaby, Malaspina in Coquitlam, and Heather Place in Vancouver, as well as partnering with municipalities at Southwynde in Burnaby and the Pitt Meadows Civic Center. All five have been approved and are in design phases.

jlee-young@postmedia.com


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