Feature Article

FIVE PERCENT RULE FOR AFFORDABLE HOUSING

Written By: Lawrence Herzog
Published By: Real Estate Weekly
Article © Copyright Lawrence Herzog
2007-11-22

Earlier this month, city council voted 7-5 to require a developer to provide five per cent of its new housing units to the city, and the city will use them for affordable housing. The vote came even before council has approved an official policy requiring that five per cent of new residential developments be affordable housing units.

That policy is expected to come before council early next year. But at a public hearing, council gave the okay to higher-density zoning in the new Callaghan neighbourhood in south Edmonton west of 111th Street, but added a caveat that new housing can be built there only after the developer agrees to the five-per-cent policy.

The developer is seeking to build another 608 housing units in Callaghan, and the city is asking for 30 of them to fall into the city's category of affordable housing. It makes perfect sense to me, but five of the councillors didn"t see it that way.

They argued that it is unfair to impose the five-per-cent rule on one developer seeking rezoning when it is not yet official city policy applied to all new developments. But what those councillors missed is that, with the composition of the new council, it is destined to be.

This is a council that has already signalled it wants affordable housing. Three new city councillors " Ben Henderson, Don Iveson and Amarjeet Sohi " supported the affordable housing motion.

Tony Caterina, the new councillor for Ward 3 did not, saying he didn"t believe the city should be in the landlord business. What Caterina fails to realize, perhaps, is that the city has a responsibility for housing and its own affordable housing strategy identifies that lack of units as a significant obstacle.

It's a problem that, unfortunately, the market won"t fix on its own.

Even without a formal policy in place, several large projects have already committed to providing at least five per cent of their units as affordable housing. It just makes sense " economically, socially and fiscally. When the bean counters and the number crunchers working for developers sit down to run the financial assessment, factoring in affordable housing should be part of the formula.

With Edmonton's surging property prices and historically low vacancy rates, the crisis is real and has the potential to get much worse. That's why the city plans to purchase the units designated as affordable from developers at 85 per cent of the list price, and those units will then be managed by a non-profit third-party.

Once the city's policy is in place, developers will have certainty about their business costs, and those feeling the housing squeeze will get some long awaited relief. The demand is enormous, and there's just no room at the inn.

Over the last three years, the city's population has grown by about 50,000. There's a nearly three year wait for social housing, and the 2006 Homeless Count showed a 19 per cent increase from 2004. The link between the lack of affordable housing and homelessness is clear.

While the Edmonton home building industry has achieved record breaking housing starts in the past few years, the construction of affordable rental units has virtually ground to a halt. The return just isn"t there, homebuilders say, and even many rental units have been converted to condominiums.

It's all combined to kick the stuffing out of the vacancy rate, which has tumbled from more than five per cent three years ago to barely one per cent this year. Escalating housing costs are a growing burden for all wage earners, but especially for low and fixed-income households.

Edmonton's "Building Together, Low-Income and Special Needs Housing Strategy" correctly asserts that affordable housing is the fundamental to living healthy and productive lives. The 2003 summary report of the Edmonton Task Force on Affordable Housing found that the lack of affordable housing in Edmonton poses a serious problem to the quality of life in the city.

"The reality is that low wage families in Edmonton today face housing costs beyond their means, while new workers coming to the city have difficulty finding a place to live, the report said.

"Affordable housing" is defined by government agencies like Canada Mortgage and Housing Corporation as rental or ownership housing which costs less than a third of what a tenant or owner earns. CMHC says for housing to be affordable, rent or principal, interest and taxes should consume less than 30 per cent of before-tax household income.

The increasing lack of affordable housing reduces the city's ability to attract entry-level workers, and undermines the overall quality of life in Edmonton, the summary report said. "Neglecting these needs may result in costs to society that are far higher than the costs to develop affordable housing. These include increased crime, health and social assistance costs, increased pressure on food banks, and on other private and public services. Failure to respond can, in the long term, decrease Edmonton's attractiveness as a place to live, work, learn and play."

Across Canada, municipal councils and community groups are relating the same heart rending stories " more homeless people and families, longer social housing waiting lists and more children relying on food banks for their meals. Affordable housing advocates are exactly right when they note that decent housing is crucial.

A decent, safe place to live improves health, income and education. It helps people become more active, improve their lives and, in so doing, improve the life of their community.

The city and its community partners have prepared an integrated strategy and a way to deliver it. The Edmonton Community Plan on Housing and Support Services (endorsed by all three orders of government) identifies needs and solutions.

One of the mechanisms is Edmonton's Cornerstones Plan, which provides direction and funding towards affordable rental and ownership housing. Cornerstones aims to add 500 units of affordable long-term affordable housing each year for the next five years.

Developers need to be part of the solution, too, and five per cent certainly isn"t too much to ask.