The City of Vancouver is taking a new, major, active, and direct step in its role of catalyzing secured purpose-built market rental housing.

Next week, Vancouver City Council is expected to approve City staff’s framework of creating a brand new for-profit real estate development company wholly owned by the municipal government.

The company will act as an independent “government business enterprise” to build and operate market rental housing on six City-owned sites, at least initially.

Such an approach is similar to the City of Surrey’s wholly-owned Surrey City Development Corporation, which built projects such as the 3 Civic Plaza tower, and is currently in the process of pursuing the Centre Block office development project anchored by Simon Fraser University’s new School of Medicine next to SkyTrain’s Surrey Central Station and the substantial four-tower, secured purpose-built market rental housing project with over 1,800 units next to SkyTrain’s Gateway Station.

For the City of Vancouver’s approach, the municipal government will sell an initial six City-owned development sites to the new company for the purpose of redeveloping the properties into market rental housing. These properties having a combined total assessed value of about $412 million.

The six sites could generate approximately 4,000 market rental homes within new mixed-use developments. The City’s Vancouver Housing Development Office (VHDO) is currently leading the pre-development design and planning work for the redevelopment of these sites.

2022 concept for 625-777 Pacific St. and 1390 Granville St., replacing the north loops of the Granville Bridge in downtown. (City of Vancouver)

2022 concept for 625-777 Pacific St. and 1390 Granville St., replacing the north loops of the Granville Bridge in downtown. (City of Vancouver)

The most significant site in terms of value and the potential number of rental homes is 625-777 Pacific St. — the newly created city blocks from the demolition of the loops at the north end of the Granville Street Bridge. In July 2022, the previous makeup of City Council approved a City-spearheaded rezoning application with about 1,000 rental homes. This site is worth $144 million.

Over the past year, VHDO has submitted rezoning applications to redevelop three of the sites. This includes proposals for the redevelopment of a major site at the north end of the Burrard Street Bridge (1402-1460 Burrard St., 900 Pacific St., and 1401-1451 Hornby St., worth $79.3 million) into over 1,100 rental homes, a site south of SkyTrain’s Main Street-Science World Station (1510 Quebec St. and 1405 Main St., worth $97.7 million), and the 2400 Motel (2400 Kingsway, worth $36.4 million) into nearly 900 rental homes. These are mixed-use projects, with retail/restaurants, community benefits, and other uses below the residential uses.

Through the new company, the City will also pursue rental housing redevelopments of 8324-8486 Granville St. (worth $36.3 million) in the Marpole neighbourhood and 3917-3981 Main St. (worth $17.9 million) in the Riley Park-Little Mountain neighbourhood. Rezoning applications for these two sites are forthcoming.

Concept for the Vancouver Housing Development Office site of 1402-1460 Burrard St., 900 Pacific St., and 1401-1451 Hornby St., Vancouver. (Diamond Schmitt Architects/City of Vancouver)

Concept for the Vancouver Housing Development Office site of 1402-1460 Burrard St., 900 Pacific St., and 1401-1451 Hornby St., Vancouver. (Diamond Schmitt Architects/City of Vancouver)

Concept of 1405 Main St. and 1510 Quebec St., Vancouver. (HCMA/Archeology/City of Vancouver)

Concept of 1405 Main St. and 1510 Quebec St., Vancouver. (HCMA/Archeology/City of Vancouver)

By creating an arm’s-length company, the City can spearhead these development projects without affecting its own debt capacity or credit rating, effectively reducing some of the direct risk. The independent company will have the ability to secure its own construction financing, while generating long-term revenue that helps fund the City’s growing infrastructure needs. The additional revenue will help relieve pressure to raise property taxes and user fees as the City’s costs continue to rise.

At the same time, this approach will deliver much-needed market rental housing for working- and middle-income individuals and families, increase the value of City-owned lands, and maximize returns for the municipality.

The City will provide the company with start-up funding of up to $8 million from the City’s Property Endowment Fund for the first five years of the business, with the entity using this funding to become financially self-sustaining. This includes the cost of hiring new professional staff for the company.

Similar to SCDC, the Vancouver company will be governed by a board of directors — comprising up to six directors of independent industry experts in real estate development, property management, finance, and legal, and three directors being City representatives, such as city councillors and City staff.

The board will approve the transfer of profits as dividends to its sole shareholder, the municipal government. It will also create a long-term strategic plan and an annual implementation plan for City Council’s approval.

The company will seek partnerships with private developers and other entities in which it holds a 50 percent or greater ownership stake. On a case-by-case basis, City Council may approve a lower share, depending on market conditions and the specifics of each project.

While the company can borrow money, it will be given a debt ceiling of no more than $200 million.

Similarly, TransLink also recently launched a major for-profit real estate division to redevelop under-utilized properties it owns. The public transit authority intends to generate new revenue, and high-density projects near public transit hubs will also serve the dual purpose of increasing ridership.