The Prohibition on the Purchase of Residential Property by Non-Canadians Act -- which came into effect in January of this year and bans foreigners from buying residential real estate in the country for two years -- is weird.
We can debate whether banning foreigners from buying residential real estate is really helpful for housing affordability and if it's the most impactful place to focus our attention (and we have talked about this many times before), but the part that is particularly odd is this feature here:
...the law’s definition of residential property includes land that is zoned for residential use or mixed use, which covers huge swaths of commercial land across the country. As well, an entity is deemed foreign if a non-Canadian owns a minimum of 3 per cent of the entity.
What this means is that the following scenario is now technically a problem (not actual legal advice!):
You own a commercial property with zero homes
You have long-term commercial leases in place that also generally preclude you from building new homes in the foreseeable future
The Prohibition on the Purchase of Residential Property by Non-Canadians Act -- which came into effect in January of this year and bans foreigners from buying residential real estate in the country for two years -- is weird.
We can debate whether banning foreigners from buying residential real estate is really helpful for housing affordability and if it's the most impactful place to focus our attention (and we have talked about this many times before), but the part that is particularly odd is this feature here:
...the law’s definition of residential property includes land that is zoned for residential use or mixed use, which covers huge swaths of commercial land across the country. As well, an entity is deemed foreign if a non-Canadian owns a minimum of 3 per cent of the entity.
What this means is that the following scenario is now technically a problem (not actual legal advice!):
You own a commercial property with zero homes
You have long-term commercial leases in place that also generally preclude you from building new homes in the foreseeable future
The zoning of your property allows for residential uses (which you like having in your back pocket)
And your cousin from Italy owns 3% of the entity that owns the real estate
This is a scenario where residential homes do not exist and they are unlikely to exist any time soon. It seems clear cut, but I suppose one could argue that it's exceedingly onerous to try and figure out which sites are soft sites and could actually be developed with new residential. And so if you have the potential to build and then own residential, you should be regulated as if you might ultimately own some of it one day.
But even here, I don't know why we would want to restrict the supply side of the housing equation. If you're a developer in Canada where housing is known to be kind of expensive and you want to build more of it for Canadians, isn't that a good thing? And isn't it also a good thing if we can get some non-Canadians to help pay for these new homes?
The City of Victoria, BC did a good thing last week: It passed its "Missing Middle Housing Initiative", which means that up 6 dwelling units (their language not mine) will soon be permissible on every single-family lot in the city, and up to 12 dwelling units will be permissible in "corner townhouses". These land uses changes come into effect on Sunday, March 12, 2023 (45 days after adoption).
Here on the blog, we've been talking about this shift toward intensifying our single-family neighborhoods for many years. And momentum clearly continues to grow. At face value, this appears to be one of the more enlightened moves by a city: 6 homes and 12 homes. Though these headline numbers may have something to do with the average lot sizes in Victoria. Either way, the devil is in the details. And here are some of those details:
What do you get when you have some of the most stringent affordable housing requirements in the United States? You might think that you get lots and lots of affordable housing, but that is not the case in San Francisco. Paradoxically, you still get some of the most expensive housing in the United States. And part of the reason for this -- according to this inclusionary zoning review committee -- is as follows:
Of all 40 scenarios, only four, all of them ownership-based, penciled out while satisfying the inclusionary program. Many of the projects that were designated as feasible, or came close to it, were smaller. That could be because larger structures use more expensive union labor and tend to contain advanced safety systems, like elevators that can operate during fires, said Strachan Forgan, principal at SCB, an architecture and design firm.
Among the 20 that were rental projects, only one was shown to be feasible, but it did not satisfy the city’s mandatory inclusionary policy. While not yet ready to make recommendations, the committee members accepted the findings as accurate. Multiple development experts who reviewed the analysis for The Chronicle said it appeared to be well done.
What is often missing from analyses about inclusionary zoning is how many projects it makes infeasible as a result of the requirement. It is not no-cost affordable housing. There are real costs and real impacts. But we like to tell ourselves that this isn't the case because, at the end of the day, we're not really that serious about building more housing and building more affordable housing. Too inconvenient. Too disruptive.
The zoning of your property allows for residential uses (which you like having in your back pocket)
And your cousin from Italy owns 3% of the entity that owns the real estate
This is a scenario where residential homes do not exist and they are unlikely to exist any time soon. It seems clear cut, but I suppose one could argue that it's exceedingly onerous to try and figure out which sites are soft sites and could actually be developed with new residential. And so if you have the potential to build and then own residential, you should be regulated as if you might ultimately own some of it one day.
But even here, I don't know why we would want to restrict the supply side of the housing equation. If you're a developer in Canada where housing is known to be kind of expensive and you want to build more of it for Canadians, isn't that a good thing? And isn't it also a good thing if we can get some non-Canadians to help pay for these new homes?
The City of Victoria, BC did a good thing last week: It passed its "Missing Middle Housing Initiative", which means that up 6 dwelling units (their language not mine) will soon be permissible on every single-family lot in the city, and up to 12 dwelling units will be permissible in "corner townhouses". These land uses changes come into effect on Sunday, March 12, 2023 (45 days after adoption).
Here on the blog, we've been talking about this shift toward intensifying our single-family neighborhoods for many years. And momentum clearly continues to grow. At face value, this appears to be one of the more enlightened moves by a city: 6 homes and 12 homes. Though these headline numbers may have something to do with the average lot sizes in Victoria. Either way, the devil is in the details. And here are some of those details:
What do you get when you have some of the most stringent affordable housing requirements in the United States? You might think that you get lots and lots of affordable housing, but that is not the case in San Francisco. Paradoxically, you still get some of the most expensive housing in the United States. And part of the reason for this -- according to this inclusionary zoning review committee -- is as follows:
Of all 40 scenarios, only four, all of them ownership-based, penciled out while satisfying the inclusionary program. Many of the projects that were designated as feasible, or came close to it, were smaller. That could be because larger structures use more expensive union labor and tend to contain advanced safety systems, like elevators that can operate during fires, said Strachan Forgan, principal at SCB, an architecture and design firm.
Among the 20 that were rental projects, only one was shown to be feasible, but it did not satisfy the city’s mandatory inclusionary policy. While not yet ready to make recommendations, the committee members accepted the findings as accurate. Multiple development experts who reviewed the analysis for The Chronicle said it appeared to be well done.
What is often missing from analyses about inclusionary zoning is how many projects it makes infeasible as a result of the requirement. It is not no-cost affordable housing. There are real costs and real impacts. But we like to tell ourselves that this isn't the case because, at the end of the day, we're not really that serious about building more housing and building more affordable housing. Too inconvenient. Too disruptive.
What is positive to see is that a number of other zoning requirements have been updated. Because it's not enough to just say, "Hey, we're going to allow more homes on each lot. There, we've done something. Developers, go and do that." Here, the allowable height has been increased, setbacks have been decreased, and the floor space ratio (site density) has been increased from 0.5 to 1.1 (assuming you do at least one amenity contribution).
I don't know if this is exactly right and if it's everything that developers will need in order to start building a lot more missing middle housing in Victoria. (If you're a local developer, please let me know in the comment section below.) But I think it's certainly a step in the right direction.
What is positive to see is that a number of other zoning requirements have been updated. Because it's not enough to just say, "Hey, we're going to allow more homes on each lot. There, we've done something. Developers, go and do that." Here, the allowable height has been increased, setbacks have been decreased, and the floor space ratio (site density) has been increased from 0.5 to 1.1 (assuming you do at least one amenity contribution).
I don't know if this is exactly right and if it's everything that developers will need in order to start building a lot more missing middle housing in Victoria. (If you're a local developer, please let me know in the comment section below.) But I think it's certainly a step in the right direction.
