With so few options available to those who wish to live in metro Vancouver–either due to unmet demand or financial restrictions (read: dizzying real estate prices)–leaseholds are an option I seem to be revisiting more and more these days. So I thought it would be important to take a look at some of the issues surrounding these properties, as well as the current landscape for those interested in leaseholds as an option to freehold properties.
If you’re not sure what a leasehold is, or need more basic information like what a lease agreement covers, you can visit an article I recently penned for REW. In it I cover some of the finer talking points, as well as the implications that buying a leasehold property may have on your chances of obtaining a mortgage.
LET’S LOOK AT FALSE CREEK
False Creek is an interesting example of what can go right as well as what can go wrong where leaseholds are concerned. Close to Granville Island, two-thirds of the neighbourhood’s total 5,500 residents live on land leased from the city. As mentioned in another recent blog post, the push to turn False Creek into a more liveable residential area was novel. Or, at least it was forty years ago when sentiment was that no one would want to live in the former “industrial wasteland.” Now one of the most coveted neighbourhoods in Vancouver, even the idea that False Creek would have been considered undesirable is laughable. But I digress. For our purposes today, all we need to know is that they were wildly successful in this goal, thanks in large part to leaseholds on much of the land.
The majority of the leases in False Creek south, however, are set to expire within the next 50 years. In fact, some leaseholds will expire in just 4 years, while for others it will be 22 years and 39 years, respectively. What exactly the city plans to do with these leaseholds is still uncertain. According to an article in the Vancouver Sun, either it could buy some or even all of them back, making room for high-rises. But even if the city decides to renew some of the leases, if they sell based on the current market values of similar properties, current residents may not be able to afford to renegotiate.
On the other hand, Vancouver needs more homes; like, yesterday. As pointed out in a Vancouver Sun article, speeding up the development permitting process could “fast-track the redevelopment of its land on south False Creek where condo owners, co-ops and renters on leasehold property have already expressed a willingness to have higher density.”
COMMUNITY LAND TRUSTS – VANCOUVER’S REAL ESTATE ANSWER?
An article published this February in The Globe and Mail reported that South False Creek residents living in the city-owned land around Granville Island “are considering whether a land trust might be the answer to some of their problems.” This sentiment has come in large part as residents keep a watchful eye on the Vancouver Community Land Trust Foundation; a recently created organization with the goal of creating and preserving low-cost housing.
Currently, the land-trust’s most newsworthy project is three buildings on the banks of the Fraser River and a fourth on the Kingsway, 358 units in total. These homes will be built on city land protect from the speculative market. Valued at $25 million, the City of Vancouver handed over the land for a cool $10. Yes, ten Canadian dollars (currently $7.32 USD).
As you might imagine, a lot of people have been hot to hop on board. Vancouver institution and Vancity credit union, have already become involved and residents of South False Creek are wondering if this is their future as well. After spending years struggling to find a solution that would ensure them a say in the future of the area, many are hopeful that VCLTF’s success would pave the way. Or, as put by the Globe, “If the South False Creek group joined the existing Vancouver foundation, it would make it the biggest land trust on the continent.” It also puts power into the hands of those who live there instead of the developers–looking at what’s good for tenants and the community as a whole instead of lining developers’ pockets.
THE BOTTOM LINE
Once completed, some of the units along the Fraser River will be rented for as little as $375 a month, which is what those on welfare, receives each month for housing. Other units will not be able to rent for more than 30% of tenants’ declared income. Evidently, the model is similar to the social-housing system already in place in a number of European centres. If it works, together with leaseholds in specific areas throughout the city, Vancouver might have found the answer to its long-running housing crisis.