Social housing or sometimes known as Affordable Housing is currently a flavour of the day for politicians on all 3 levels of government. The Canadian public is also fully aware of the current affordable housing issue as rental prices and housing prices escalated beyond most bread earners.

In fact, in the City of Vancouver, it is probably beyond the reach of most salaried workers to consider buying a traditional ground-orientated Single-Family House as their first purchase. They will need to settle for a Condo or Townhouse which are more affordable and probably away from the City.

The homeless issue further escalates this social concern and the 2010 Olympic is an easy scapegoat for those social activist craving to bring this issue into the spotlight. For municipal politicians, as they are facing their election at the end of this year, there is additional pressure to demonstrate their commitment towards the provision of affordable housing in their municipality.

Unfortunately, during the last many years, politicians from all stripes are loud in words, but poor in action. The 3 level of governments prefer to bury their head in the sand and has failed to come up with a comprehensive policy involving the 3 level of governments. Unless they work together, it is unlikely that any meaningful long-term solution can be found. It has to include a mixture of tax relief, financial incentives and subsidies and other fiscal and monetary tools to start channelling private funds into the business of providing affordable housing.  Until a comprehensive and co-ordinated approach is agreed upon, all we have are temporary patch-work attempts by the governments to win votes and to demonstrate that they are at least doing something when the other level of governments are not.

The Provincial Government of B.C. bought a number of old hotels and set them aside for social housing. It is probably a short term fix. The City of Richmond has just adopted their Affordable Housing Initiative, forcing the developers to build affordable housing and to consider it as part of the privilege of being able to develope their site. The B.C. Housing Commission throw some funding to some projects and the Federal Government is still seeking some meaningful way to find some solution to this issue.

Somehow, we need to get the 3 level of governments together. Any long term solution has to involve the utilization of private investment funds to build affordable housing. Unless this is done, all other attempts is just a temporary short term solution our politicians are too ready to pass on to their successor.

Lawrence Lim, Mayfair Commercial Real Estate Advisors

The Vancouver Sun wrote an interesting article today regarding the different perspective of landowners and developers' expectations.

Most landowners have not accepted the fact that the market is changing rapidly, due to price resistance from the consumer, increased in construction cost, fear of recession in the US and increased expectations from municipalities on their levies on development.  Landowners are still thinking of the rapid escalating prices of their land following the pattern in the last 4 years and projected that their land will be worth a certain value, as if the trend of price increase will still continue on the same pace. 

During the last few years, developers were able to pay the premium future price of the site because they too, feel optimistic on future price increases on their end product and in most cases, they were proven right. But times have changed and most developers are more cautious due to the above factors and are more selective on their site acquisition, seeking longer option period to watch the changing market and keeping away from overpriced land.

This is resulting in a "price-gap" which makes it tough for those in the business of land assembly.  

Unless the developers become more optimistic and are willing to pay a higher price or the landowners become more realistic and accept the new reality of the market place, we are in a middle of this dry spell, when deals are difficult to put together.

The failure of a few developers who were caught with unexpected construction cost increases have send shock waves in the marketplace. We will need a few more of these failures to change the expectations of the landowners.

Until then, it is a tough go if you are in the land assembly business.

Lawrence Lim,  Mayfair Commercial Real Estate Advisors