City hall leaving money on the table

Real estate development in Kelowna should not be a dirty word. But it is. Here’s why.

Kelowna council approved two large projects recently that will raise land, housing and taxation costs throughout the city. Both projects quietly gave taxpayer subsidies to developers and raised the costs of publicly funded infrastructure.

Both projects failed to conform to Kelowna’s OCP and zoning bylaws, which means developers, city staff and council are skirting policies and zoning bylaws intended to guide development, provide affordable housing and protect taxpayers from the impacts of new growth.

These two projects have large public costs that have not been made public. For example, council gave developers of a 297-unit rental apartment project on Underhill Street a total of $4.5 million in taxpayer DCC public assist subsidies, 10-year tax exemptions and rental housing grants.

Taxpayers must now fund this amount to pay for new infrastructure needed by the project.

Despite a four-storey building height limit, Council also approved an extra 2-storeys of height to create 88 extra units, more rental revenues and greater profits for the developers should they stratify and sell the units as condos in 10 years.

Council also gave Anthony Beyrouti’s 650-unit downtown condo project a $1.6 million DCC public assist subsidy from taxpayers. All three towers of this project were outside zoning bylaw requirements for height, parking and bike storage. One tower is 16 storeys higher than allowed and provides Beyrouti with significant profits from the sale of 144 extra units.

This gift will cost taxpayers $350,000 in subsidies.

These variances and subsidies are not wise public investments to achieve public goals and benefit the community over the long-term.

Kelowna’s rental housing agreement with the Underhill project provides no long-term affordability for residents. Rents will be charged at market value and not controlled on land title. There is no guarantee units will remain in Kelowna’s rental housing pool for more than 10 years.

If housing costs peak before then, the developer can simply pay back the tax exemption and rental grant, stratify the units as condos and sell them at market value. Renters may be evicted and profits from sales of the extra 88 units created by the two-storey height variance will go to the developer, not to the city.

The sheer height, density and massing of Beyrouti’s three-tower project will increase downtown land, housing and tax costs and create a development shift to less expensive areas where costs will also increase. It will create other long-term impacts downtown, such as casting shadows on valuable public open spaces and on City Park; add over 700 vehicles to congest downtown traffic and on-street parking; and trigger road and highway intersection control upgrades.

Council justified its decision to approve both projects because both sites had been either vacant or problematic. Justification was not based on any detailed analyses of whether public benefits from redevelopment outweighed public costs.

Urban land economists have long known that approving higher density development increases property values and creates windfall gains for existing owners.

Higher density up-zoning also encourages landowners to delay development as they await opportunities to build larger, even denser buildings. Kelowna encourages these practices and the assessment of taxes on any increased land value, which worsens housing affordability.

In 2021, Kelowna’s high-density urban centre plan for the Capri Mall area resulted in many homeowners receiving land assessment notices 100% higher than in 2020. Will this encourage them to sell so developers can execute the city plan and subdivide or amalgamate land for higher density projects?

Between 1998 and 2018, Kelowna’s average residential sale prices increased over 730% due to speculative land investments and zoning changes made on both city-owned and private land.

Since 2011, when councilors Colin Basran, Gail Given, Maxine DeHart and Mohini Singh were first elected, home ownership and apartment rental costs have moved out-of-reach for many Kelowna residents.

Council has not kept housing and rental prices affordable. Between 2011 and 2016, 73% of new Kelowna households were renters compared to 32% in the previous five years.

Between 2016 and 2019, Kelowna’s rental housing became more expensive, as market rents rose between 7% and 10% annually.

Council has also not kept taxes low. Between 2011 and 2020, annual property taxes on the average single family home rose well above the BC Consumer

Price Index and are currently forecasted to exceed 5% to 2024.

Council’s policy and practice of luring developers to town with taxpayer subsidies and ignoring the OCP and zoning bylaws so they can up-zone and make huge profits is neither ethical nor serves the public interest.

Clearly, councillors need to answer serious questions about whose side they are on and why they are not willing nor able to make public investments that control land, housing, infrastructure and taxation costs for the benefit of Kelowna residents.

If they can’t answer those questions, then taxpayers are in for a long, rocky ride to the poorhouse.