The assembly of detached housing lots has become the norm for Vancouver developers looking to do multifamily residential projects.
However, one challenge with land assemblies is the premium which is often paid for the land, a cost which is then passed on to consumers. This is leading innovators within the industry to seek ways to mitigate the issue.
One Metro Vancouver developer has come up with a way to help offset the additional cost, while an urban designer is pitching an idea to thwart the land assembly process entirely.
Newcomers Vertex Developments assembled two single-family lots for its first project, The Hillcrest townhouse development on King Edward Avenue, near the Canada Line SkyTrain station. The 17 townhouses are aimed at young families and downsizers.
Vertex, as a newcomer to the Vancouver real estate market, is bringing fresh ideas.
Hillcrest by Vertex Developments
Pre-sales for the project launch in mid-April and construction is slated to start soon. The design stands apart from the current trend that has small floor plates and all bedrooms on the second and third floors.
Instead, Hillcrest has several single-floor units and others that include a master bedroom on the first level. The developers’ idea is to provide housing that fits buyers’ needs.
Its founders are two engineers who run a power company and have launched a separate property development arm.
Principal Graham Carter co-founded Vertex with Patrick Uy, formerly at Amacon. Carter said they are bullish about the Vancouver market.
“We are similar in age and demographic to the young families that we are building for,” said Carter. “So, our goal with Vertex is to grow it into a company that our daughters and sons can run.”
With a goal of keeping the units as affordable as possible in the current climate and helping offset the additional land assembly cost, Vertex is offering buyers eight per cent interest on their deposits as a purchase incentive.
If they’re paying five per cent on a line of credit, that gives them an extra three per cent, said Carter.
Vertex has another project underway, having assembled five more lots on W. 33rd Avenue for 45 units which is scheduled to come online about 18 months after Hillcrest launches.
Pulling together land assemblies
Land assembly, said Carter, can be a little complicated to pull off, but so far they’ve acquired their properties already assembled through connections.
“The Hillcrest site was previously owned by a developer friend who is now doing larger projects,” he said.
“When I was talking to him about our idea of starting Vertex Developments, he informed me that he had this particular site and that it would be a great location for our first project.
“The site at 33rd Avenue had initially been on the market, but it had come off the market at the time we acquired it. The realtor is a friend of mine and he approached me to see if we were interested in taking a look.
“He had a personal connection to one of the owners and knew that it was still available even though it wasn’t listed.
“Generally, developers do pay a premium on what you’d pay if it were a single-family lot. But, obviously the value is in the density, so the developers are willing to pay more because there is more density available.”
Land assemblies became a fact of life a few years ago when land prices rose and competition was fierce.
Other issues with land assemblies
The City of Vancouver began allowing an increasing number of spot rezonings as a way to achieve affordable housing, said Scot Hein, a former city urban designer who’s now a consultant.
However, the result was an increase in prices and buildings that were out of scale with the surrounding neighbourhood, he said.
“We tried to rezone our way to affordability and the consequences of that was everyone wanted in on the action. We saw land prices rise across the board everywhere.
“So the idea behind the prevailing zoning — the scale, the form — all that got away from us. It didn’t really work anymore.”
Much of the rezoning happened along major arterials which had been zoned for single-family housing, such as West King Edward and Cambie Street.
As homeowners sold to tenacious realtors knocking on their doors for a group sale, the sight of rows of empty houses along those arterials became the norm.
Because they’d been upzoned for much higher density, the houses often sold at double the price.
Developers pay a premium and are then usually required to do significant excavation to construct parking stalls for the units, a hefty price tag. Then, there’s the high cost of marketing, including presentation centres.
Multires on a single-family lot
Hein has a proposal for the city and the development community that could lower costs for everyone: build on a single lot at a greater density.
He used the example of a recent rezoning at 1535-1557 Grant St. on the east side of Vancouver, where four city lots were assembled and will be redeveloped as 35 market-rate rental homes and 23 parking spaces.
He argues that if the lots had been developed individually, with seven units on each lot and fewer parking stalls, the density would be similar, costs would be lower and the scale of development more consistent.
“The paradigm I would like to propose to the development industry is to recalibrate a bit and do what others are doing with laneway infill duplex-scale housing and go bigger and more intensively — but without land assembly.”
He proposes a partnership with landowners that would allow the developer to sell off some market rate units, while the landowner keeps a couple of units for their own use.
If the zoning were changed to allow six to eight units on a typical city lot of 33 or 50 feet, developers could do several consecutive sites simultaneously.
This would require the city to change its zoning to allow more density in detached housing zones, speed up permitting and forego the parking requirements in order for it to work.
A solution for central Vancouver?
As well, neighbourhoods would have to get on board. However, the developer would then forego the expense of marketing and the land wouldn’t be exposed to market pressures.
“So you have a pro forma that says you don’t have to assemble land, you work with the land owner who’s paid off their land or is on their way to paying it off so they can downsize from being over-housed on a 50-foot lot.
“And they get seven units on a 50-foot lot easily, if not eight, through some clever managing of form and density.
“There’s a new way to do things that could open up new markets for developers and they wouldn’t be encumbered by the land assembly thing, or the marketing thing, and they could get in and out of projects quickly.”
And, he adds, it could bring affordable multifamily housing to central areas of Vancouver.