The Perfect Storm

The Perfect Storm

While the recent windstorm could be described as such, that’s not the perfect storm I’m talking about.

This storm started back in the early 1970’s, long before 75% of the people who currently live on Salt Spring arrived on its shores.

In 1974 the Islands Trust was established by the Province. It’s purported purpose was to “preserve and protect” the archipelago of about 500 islands, large and small, which lie between Vancouver Island and the Mainland of British Columbia.

The driving force behind the establishment was the concern that the islands would be carved up into small lot subdivisions. Maliview Drive on Salt Spring, and Magic Lake Estates on Pender were the two most prominent examples.

With the adoption of the Islands Trust Act, the winds of economic forces were put into motion and began to slowly blow.

When it comes to housing, the most basic, relevant question was never ever asked – “What will the result of limiting the supply of land (in what was described as a “unique” area of the planet, with the mildest climate, in all of Canada) be on the value of real estate?”

Well, if it isn’t obvious at this moment to anyone reading this, then you’re either brain dead, or you’ve been contemplating your navel fastidiously.

For years now I have been saying “We have been preserving and protecting Salt Spring for a bunch of rich people who don’t live here yet.”

The future has now arrived on that.

Real estate prices on the island are at all time highs. The inventory of available homes on the market is at an all time low. There are, as I write this, only 14 homes for sale under one million dollars. Read that again, and repeat, until it sinks in. Then know that only 2 of those homes are under about $600,000.

“Affordable housing” homes are defined in our Islands Trust OCP and land use bylaws as being about $270,000. So currently there is no “affordable housing” for sale on the island, and, all indications are there never will be again unless something changes.

Add to that formula the harsh reality that every month legal rental homes on the island have been flying out the window since the real estate market began to recover (from the 2008 downturn) in May, 2015.

Investors have realized that this is an opportune time to retire from the questionable fun of being landlords, especially given the recent BC Residential Tenancy Act changes. Goodbye tenant headaches, hello retirement.

And, speaking of retirement, the Baby Boomer retirement bubble has just begun to show itself. Property owners in Vancouver nearing retirement are realizing they can cash out of their 1400 sf home on a city lot, and buy a waterfront home on Salt Spring and put the balance of a million or two (capital gains free), into their retirement savings plan and take early retirement by moving to Salt Spring, where everything is comparably a bargain.

But those in the Bubble don’t just live in Vancouver. Look at the weather today in Montreal, Toronto, Winnipeg, Calgary, Edmonton, and ask yourself how many retirees have turned their heads west while they’re shoveling snow in sub-zero weather?

That’s the cold easterly wind blowing them this way.

Next up is the Chinese investment into BC, which has not just driven up Vancouver prices, but has now reached Salt Spring. It is accelerating due to the 20% foreign buyer’s tax which is making Chinese investors look outside of urban BC to rural BC for lower priced real estate to invest in. Comparably, Salt Spring real estate is bargain basement. So, this is effectively a double economic whammy on housing prices.

Meanwhile, unserviced, bare land lots are starting at $200,000. Want to build? Try getting a contractor to build under $300+sf with the new (December 2018) BC Building Code change requirements. (zero net energy). A 1,000 sf home would run you – $300,000 plus $200,000 = $500,000, about twice the regulated value of affordable housing. In other words, it is now nearly impossible to build affordable housing, of any kind/size, unless you get land for free, or, unless the government is intelligent to buy and/or rezone property to increase the density, thereby lowering the per unit land cost.

Add on North Salt Spring Waterworks unnecessary moratorium on water supply due to their own incompetence (what happens when you remove a beaver dam and decrease the volume of a lake by 90,000,000 gallons during the driest part of the year?), making it more difficult to provide water to development.

To top it off, the increase in people being displaced from Victoria has added to our homeless numbers.

And don’t forget record high rents.

So, here’s the formula for the Perfect Storm for no affordable housing:

LS+HD+RHHP+RLHI+EDRS+BBRB+CI+BCBCC+BLV+IH+NSSWDM+RHR = PERFECT STORM

(Limited Supply + High Demand + Record High Home Prices + Record Low Home Inventory + Ever Decreasing Rental Stock + Baby Boomer Retirement Bubble + Chinese Investment+ BC Building Code Cost + Bare Land Values + Increased Homelessness + North Salt Spring Waterworks Moratorium + Record High Rents = THE PERFECT STORM)

That’s the bad news….

Well, sorry…that’s actually just the beginning of  the bad news, because, there is virtually no good news on the horizon.

In the face of this storm our Local Trust Committee Trustees, elected to represent OUR interests to the Trust, have thrown up their hands, shrugged and claimed there is little they can do.

As a former Trustee, and with all due respect….BULLSHIT.

Pardon my English, but that is, and sorry to repeat myself, in caps no less, BULL…SHIT.

The Trustees are paralyzed with fear of doing what is needed to be done – by killing the sacred cow created by the Islands Trust – “limited density.”

Islands Trust Staff meanwhile appear to have ZERO understanding the above formula is in play. Their “planning” for the future has been at best abysmal, and at worst non-existent. They operate in an atmosphere of “Storm? What storm?”

As Arvid Chalmers used to say, “The motto of the Islands Trust should be ‘We’re not happy, til you’re not happy.’” Well, the peasants are unhappy, and its about pitchfork and torch time.

Peasants Revolting

Long Term Seasonal Cottage Solution, or, Making Things Worse Long Term?

The recent proposed bylaw legalizing some of the existing and potential seasonal cottages as permanent rental units sounds like a great plan until you scratch the surface and realize what Staff and the Trustees (who have now given the idea 1st Reading) are proposing.

Staff have referred to the OCP which states in essence that the density of properties (and therefore the island population) shouldn’t be increased by more than 5%. That number was calculated to be 450 properties.

And, to be clear, that is not 450 cottages, but, 450 properties. The distinction is necessary since not all 450 properties will ever HAVE to build, or WILL build, a rental cottage on them. Not even close….

So, Staff set out to limit the number of potential seasonal cottages to convert to rentals to 450 by eliminating the rest of the seasonal cottage properties from the proposed rezoning. They have excluded the entire North Salt Spring Waterworks District area, Agricultural Land Reserve, and areas not close enough for someone’s warped sense of distance to public transit.

The irony of giving a rationale for the exclusion of some seasonal cottages for permanent rentals is this – IF the bylaw is passed, what is Staff’s rationale for NOT enforcing against any and all seasonal cottages which have NOT been legalized?

Illegal, Legal, Aftermath

After the bylaw is passed, what is to prevent a neighbour from making a complaint against the illegal seasonal cottage next door that has been illegally rented for the past 20 years, AND, more to the point, what would stop Bylaw Enforcement Staff from evicting the targeted tenants? The answer is “nothing.”

Well, you may say, “Yes, but all seasonal cottages are currently illegal to be rented out full time.”

That’s true, but, the responding question is this – “Is the Trust going to proactively, or passively (e.g. complaint driven), enforce against cottages which are NOT going to be legalized by the bylaw?”

If the answer is “yes,” then, with all due respect, at the ever worsening peak of the housing crisis, WTF?

If the answer is “no” then (a) why even propose the bylaw, and (b) what is the incentive for a property owner to enter into a “housing agreement” with the Trust?

Economy? What Economy?

Because Staff have not taken into consideration the economic impacts of our rising real estate market on this proposal, IMO, they have utterly failed in their 3 year long planning process.

Let’s start with some fundamentals.

As a realtor with 30 years experience I can tell you there are very few people who can afford to buy a million dollar property who want, or need, tenants. Why would they? They are upwardly mobile, and the BC Residential Tenancy Act is now geared towards the “rights” of tenants, not landlords. Instead the new owners will use the cottage as a guest cottage, or a studio, or an exercise room, or a place for their teenager’s band practice.

This is the first reason why I am gobsmacked that the planners have not taken the reality of our real estate market.

Secondly, with each new 3+ acre, house and cottage, property reaching a new high sales price (think $800,000+), and new immigrants moving to the island, cottages are LIKELY NOT to be used for rental – legal or illegal.

Thus, the 450 number of properties, while soon to be set in stone by rezoning, is not realistically a stable number, nor does it create more than the number of cottages currently rented out. Out of the gate the “real” number will be less than 450, and on an ongoing basis the actual number of the 450 that will be utilized as rentals will decline over time.

BUT, because the 450 represents the 5% in the OCP, the day after the bylaw is passed, if a non-profit group comes forward and says, “We’d like to rezone this property we just bought for 50 units of affordable housing,” what are Staff and the Trustees going to say? “Sorry, but we just used up the 5% allowance in the OCP legalizing 450 properties. Your application will require an OCP amendment, and, given it will increase the potential population of Salt Spring we aren’t likely to support the OCP amendment.”

Indeed, a recent rezoning application made by a property owner, effectively offering an EXISTING 700 sf cottage to be covenanted, by way of a restrictive housing agreement, to be used as an affordable housing unit, was met with non-recommendation by Staff and what can only be described, at best, as lukewarm, non-support by the Trustees. WHAT? Read that again…..

An existing cottage offered on a silver platter as affordable housing during an ever worsening housing crisis that has been arguably (according to over 20 studies over as many years) going on for over two decades, isn’t welcomed with open arms and offers of “How can we help you?”

As I recently posted – and if you’ll excuse the vernacular – you can’t make this shit up.

When I was a Trustee in 2003 I lowered the rezoning application cost for seasonal cottages to full time residences from $4500 to $1,000 in the hope that it would help to encourage property owners to come forward with applications. How many came forward and were successful over the past 15 years? ONE.

Salt Spring is rudderless in the Perfect Storm, without a Captain(s) and the crew is reminiscent of an old TV series (You can thank the “No” voters for that.)

Gilligan

The analogy of a ship on the rocks being battered relentlessly against the shore of an island, as the occupants abandon it for residency elsewhere, is applicable.

However, I’m not going to complain endlessly without providing solutions.

Solution #1

The Local Trustees, who represent their electorate, not the Trust, should, at their very next meeting, propose and pass the following standing resolution, “In recognition of our housing crisis, the Salt Spring Island Local Trust Committee hereby institutes a moratorium on any bylaw enforcement on illegal rentals on Salt Spring Island. This standing resolution will stay in effect until such time as evidence is provided to the LTC that sufficient legal housing exists on Salt Spring to house all local employees.”

Copy, paste and pass. For those who cry, “Yes but what about health and safety issues?” let the Capital District Building Inspection Department, the Fire Department and Island Health deal with those. Be part of the solution, not the problem.

Solution #2

Lower water requirements for rezoning of multi-family properties to 150 litres/day, per person, with the average of 2.1 residents (Stats Canada average for Salt Spring). That would have helped allow the recent Croftonbrook, Dragonfly, Drake Road projects to have proceeded without the year long, multi-million dollar delays caused by Islands Trust, Island Health and CRD water requirements, all of which are different.

Solution #3

Revise the Land Use Bylaw by passing the following resolution: “The Salt Spring Island Local Trust Committee directs Staff to prepare a bylaw to remove the words “seasonal” and “temporary” from the definition of the term “seasonal cottage” in Land Use Bylaw 355. The revised definition is to read as follows, “cottage” means an accessory dwelling unit not exceeding 90 square metres in floor area.”

Solution #4

Revise the Land Use Bylaw by passing the following resolution: “The Salt Spring Island Local Trust Committee directs Staff to prepare a bylaw to change (a) the minimum average lot size in the Rural Zone (R) from 2.47 ha (5 acres) to 1.2 ha (3 acres), and (b) the minimum average lot size in the Rural Uplands 1 (RU1) zone from 8 ha (20 acres) to 4 ha (10 acres). The bylaw will provide that subdivision in (a) the Rural zone into lots a smaller minimum average area than 2.47 ha. will require a covenant to be placed on one-half of the additional lots which would otherwise not be permitted to be created if the minimum average area was 2.47 ha., and (b) the Rural Upland 1 zone into lots a smaller minimum average area than 8 ha. will require a covenant to be placed on one half of the additional lots which would otherwise not be permitted to be created if the minimum average area was 4 ha. The covenant will provide that the additional lots created will conform to affordable housing limits with respect to selling price, and resale value linked to Victoria Consumer Price Index.” (The details can be hammered out by Staff, but the intention is to allow for a property owner to, as example:

(1)   subdivide a 160 acre RU1 property into 16 lots (instead of 8), four of the additional 8 lots created would be sold with affordable housing covenants on them.

This solution provides a financial incentive to subdivide and create affordable housing lots. Without either a change in the bylaw, or, an incentive, NOTHING will change.

It is worthy to note the vast majority of Rural and Rural Upland zoned properties are in the lower 2/3 of Salt Spring where fractured granite provides excellent water aquifers and thus good wells, with good ground water.

Solution #5

Revise the Land Use Bylaw by passing the following resolution: ““The Salt Spring Island Local Trust Committee directs Staff to prepare a bylaw to clarify the definition of “mobile home” to include any trailer or 5th wheel which has been constructed to Z240 R standards (4 seasons).”

This would allow the virtual instant use of good, used, 5 wheels and trailers to be used as dwellings. For example, for $10,000 or less you can buy a good/excellent condition, used, 5th wheel, which is far better living accommodation than sleeping on a couch or in a car or in a tent, etc.. Toilet, shower, stove, fridge, beds…

Here’s just such an example of what $9,000 on Usedvictoria.com can get you:

“$9,000 – 2006 Dutchmen classic 5th wheel RV, its in great shape and everything works good. its 27ft long and it has 1 slide that makes the whole living room bigger, it sleeps 8 as it has a queen bed in the front, the couch turns into a queen, and the table folds down and it has bunk beds!”

 

Recreational vehicles, owned by property owners, and used on a seasonal basis, are parked on properties all over the island, as are a plethora of shipping containers. What is the downside of allowing this form of accommodation until such time as we have sufficient housing on the island?

As long as there is a supply of water available, and a holding tank for septic (permits for holding tanks can be applied for), and electricity, then there is no cheaper, easier, quicker way to provide housing. If you think there is, I’d love to hear your solution(s).

Bottom lines? There are solutions available to our Trustees which they can put into effect by passing the above proposed resolutions immediately. You don’t need studies, and you don’t need to those who make up reasons why it can’t happen.

While we don’t have a captain to lead us out of this perfect storm, here’s a simple direction from a famous captain – damn the “No” bodies, the NIMBY’s and the BANANAists (Build Absolutely Nothing Anywhere Near Anyone), full speed ahead and

Make it so

 

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5 Responses to The Perfect Storm

  1. Steve says:

    The Act was written at a time when population growth running amok was a concern. In fact, it never happened. And, at this point we are looking at de-population.

    In order for a population to increase there must be (outside of immigration) a 2.1 live birth per female birth rate. Canada has been up and down, but hovering around 1.6 live births per female or almost two generations now. When that happens, by the third generation the population drops to 80% of what it was, then 64% of what it was.

    Let me give an example, if a society has 1000 people, 500 men, 500 women, and each couple has one child then initially the population goes from 1,000 to 1,500 (when the 500 babies are added in). If the 500 babies, pairing into 250 couples, add another 1 child per female, then the population goes from 1000 to 1500 to 1750. It appears as though the population is increasing. It isn’t however, as shortly thereafter the initial 1000 begin to die off. When they do the population decreases from 1750 to 750. A massive de-population, and done in about 20 years.

    It takes three generations. We are at that point now. Canada’s population by 2025-2030 will be significantly less than what it is now, other than the effect of adding immigrants.

    It is time to re-look at the population targets of the Islands in the light of rapid de-population.

    Salt Spring becomes less viable below a certain amount of people. And, most especially Salt Spring becomes less viable below a certain amount of young people. In the upcoming twenty years the competition will be on to attract this most coveted demographic. Without them all communities fail.

    The housing strategy of the Trust should be centered around affordable young family housing, and how to attract this single most important group.

    Look for marked and massive devaluation of real estate coming up in the next 15-25 years. This will be averted only in the areas that have appealed to the younger generation.

    • I agree with 99% of what you’re saying, but, historical real estate examples don’t bear out your final conclusion of “marked and massive devaluation of real estate” on Salt Spring. Here’s one good example of a community that is “ahead of our curve.” – https://www.zillow.com/nantucket-ma/ – and, it is in a country that includes the warm climes of Florida, Arizona, California and Hawaii. Salt Spring is Canada’s Hawaii…and, it is has not yet even been discovered. There are a couple of million people on the BC Mainland who have never been to the island….yet.

  2. Having withdrawn from any focus on the plausibility of ‘island governance with leadership fundamentals’ it was refreshing to read your well thought-out and highly plausible simple interim solution to a huge Salt Spring problem. Your solutions are practical and address a few core elements of the OCP which have ‘inadvertently’ caused the housing problem, going back over decades of neglecting to update the OCP as the problem evolved. The real tragedy is that such minor changes in mere wording is all that stands in the way of allowing a more equitable approach to the needs of our island citizenry, our children and children’s children. Are you listening Gary Holman and Island Trustees? The time is now. Indeed ‘make it so’, you offer a glimmer of hope Eric.

  3. Hannah Brown says:

    I would encourage the Trust to make certain that all future subdividing is for affordable homes only…this would solve many of the problems that Eric has addressed…housing our own residents and workers on this island needs to be our first priority…

    • Steve says:

      Affordable homes cannot be financed. An affordable home based on the criteria people expect loses $100s of $1000s of dollars for each home. Who makes up this shortfall? And, why would a developer do this? When you stop all construction except affordable you make the situation way, way worse.

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