The supply of affordable housing — factors leading to illegal construction
I have spent the last 30 years as an engineer working on renovations of buildings in Vancouver and throughout British Columbia. Much of that time involved assessing buildings and developing a strategy that worked to reduce the costs of construction. Many of these projects involved adapting buildings and converting them to residential use.
In the early years of my practice, upgrading requirements were more reasonable — based on good fire engineering practice. Then the legal process of stratification took hold and we were forced in many cases to fully upgrade buildings even though much of the work was not significantly increasing the level of safety. Increased upgrading requirements have substantially increased costs and this is reflected in reduced availability of housing and higher rents.
The most obvious example of where governments can help with the availability of affordable housing is with the legalisation of secondary suites.
Most secondary suites are carried out without permit. This is a significant concern as municipalities need to facilitate legal construction if they are to bring more residential units on stream.
I recently decided to undertake renovations on a house that we purchased and to do this with a formal building permit application. This worked well until I received my tax bill for the property. My taxes went from $4,800 to $6,000-plus per annum. The building is a pre-manufactured home so, in my view, this is excessive.
It turns out that even if you already have the water and sewer service provided in the house, you will be charged for double the service compared to a single-family dwelling.
Admittedly, the cost of both water service and sewer service is significant, if the house is new. New connections are typically charged by the municipality depending on the size and lengths of connections.
If the house already exists and no new services are required there is no increase in the cost of infrastructure: water mains, sewers etc. In theory there is an increase in the volume of water and sewage service provided and some increase in costs to the municipality.
Typically, however, costs with water and sewer are either of an investment nature — water works/pipe works for instance- or operational costs, pumping of water/treatment etc. New service tends to require investment in infrastructure while operating costs are increased marginally as suites are added.
Why then is a totally new service charge applicable to a secondary suite? With new construction a much larger house on a new lot can have unlimited families in it without incurring such charges.
To charge legal suites a disproportionate amount for these services simply widens the gap, increasing work that is not carried out with permit. It also imposes punitive taxes on those who choose to undertake work through the formal building permit process. The choice for new suites is either to carry out the work without permit, which could incur penalties, or to use a formal building permit process leading to unreasonably high water and sewage taxes. This is one example of how governments work against innovation and investment.
The result is disproportionally high taxes on legally constructed secondary suites. This swings the balance towards illegal construction. For illegal suites, the owner gets the benefit of lower taxes while the municipality bears the increased operational costs.
We are fortunate to have a relatively good system for dealing with permits on the island compared to the very slow, bureaucratic system in Vancouver. But we do need to re-examine how we facilitate new housing capacity. Much of the charges that apply are simply based on an outdated model for cost recovery. Why not provide an incentive for construction of legal secondary suites?
If we do not address the unfair taxes applied to legal suites then there will be a diminishing supply of housing and not surprisingly, an increasingly energetic administration determined to squeeze more blood out of the stone.