Okanagan developers are struggling with an onslaught of conditions that are making the business of building a harder sell.
“Most of the industry, they’re saying that it kind of feels like just before the big recession when everything ground to a halt,” Mark Holland from the Urban Development Institute said.
“And it’s not anyone’s particular responsibility or problem and, I will say, the cities of Kelowna and West Kelowna are largely considered across B.C. (as some) of the best communities to do business in if you’re trying to build housing… This is not forever, but at this moment in time (the industry) is really fragile, and the slightest increase in cost may result in the bank saying, ‘No, I’m not going to lend you the money to build this.’”
Developers, in turn, won’t have the money to build it.
This cost crunch couldn’t come at a worse time, Holland pointed out.
“We need a lot of housing in order to respond to the housing crisis. We need housing at all the different price points but the industry is facing some very, very serious headwinds and challenges in being able to provide that housing regardless of the level of demand,” Holland said.
“One of the biggest reasons is that based on the slow growth of incomes over a long period of time, the ability of people to pay rent or to pay a mortgage has not kept up with the increase in costs. We’re hoping that over the next several years that will equalize out better than it is today, but right now, there’s a very large mismatch.”
When banks aren’t able to see builders able to sell or rent the housing that they build for enough money to cover off all the costs, they get very uneasy and Holland said they essentially start pulling back on lending money.
There are a few things that could make it easier, and one is the cost of land.
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“Municipalities have a fair amount of control over this because they established the official community plans and the zoning and they can take a very proactive approach to bringing on land that doesn’t require large political war zones in order to get in the zone,” Holland said.
“This is how the province has stepped in in the last year, as you know, with Bill 44, and other ones is to remove some of those barriers. They don’t reduce the costs anywhere else, but they do help in that regard.”
“Everyone’s trying to push their wages up, especially post-COVID,” he said.
Then there are interest rates and costs from municipalities.
While the struggles are mounting, so too are the number of people trying to solve them, Holland said.
And, for the time being, at least, the slowdown of projects has not been too significant from a city perspective.
“I don’t think we have seen enough change to be concerned,” Ryan Smith with the City of Kelowna said. “A 10-15 per cent change in incoming applications isn’t a big deal. I think in Kelowna we are one of the busiest planning departments in the country so that actually gives staff some breathing room to clean up process and implement new processes in the future.”
He said he has noticed less urgency to get projects permitted or to move on projects that are already permitted.
“Particularly condo sale projects would probably be the ones that are most impacted but we are still seeing lots of rental applications go through for building permits,” he said.
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