Housing
something that should be a right remains a privilege
Housing should be a basic human right. But that’s not how we do it. Housing is locked within a private market. Even social housing is tied to private purveyors. The result is one of the most unaffordable housing markets in the western world.
Outrageous housing costs have thrown the hard-to-house onto the streets. All around campus people can be found living in cars and campers. Many of UBC’s lowest paid workers commute hours to and from work. Middle-class faculty, recruited from around the world, find themselves paying up to half of their monthly income for the privilege of working at UBC. Despite their different economic situations all of these people confront housing as a significant barrier to their wellbeing and security.
UBC makes a big deal about mental health and resiliency: “UBC is committed to enhancing mental health and wellbeing for all of our community members and supporting healthy and sustainable workplaces and learning environments.”
Two big tactics UBC deploys is to increase the number of us who think UBC cares and to improve our mental health literacy.
But, as the Canadian Mental Health Association says: “Decent, safe, affordable housing is one of the most important factors that affect our mental health. Poor housing, such as housing that’s too expensive, run-down or over-crowded, can lead to poor overall health. It can also make recovery from mental health or substance use problems much more difficult.”
Beyond simple affordability, housing is foundational to personal and societal wellbeing.
UBC’s current housing action plan is firmly rooted within the domain of private market provisioning for faculty and staff housing. Thirty years ago, UBC Housing provided limited accommodations for faculty and staff. Housing rates were modest (and not taxable). For the past two plus decades UBC has shifted the provision of faculty/staff housing away from UBC Housing into the hands of the university’s private development company, UBC Properties Trust (managed by its rental division, Village Gates Homes).
A Path through housing at UBC
In 1996 my family and I paid about $800/month (~20% of a Faculty of Arts starting salary) for a two bedroom apartment on Osoyoos Crescent operated by UBC Housing (not deemed a taxable benefit). The equivalent rent in a UBC Properties Trust rental today is about $3000/month (ranges from 2600 to 3500, ~30% of a Faculty of Arts starting salary). Renting from UBC Properties Trust is deemed a taxable benefit and can add several hundred dollars in tax to the monthly charges. As a proportion of monthly income, campus rents have significantly increased following the transfer of faculty/staff rental accommodations to UBC’s private development corporation.
In the summer of 2001 my family and I moved into Azalea House on Hawthorn Lane, one of Village Gate Homes’ first faculty/staff rental. Rent was about $1700/month (the same unit rents for $4000/month today). The rental buildings along Hawthorn Lane were the first buildings built by UBCPT for faculty/staff rental and reflected the UBC’s move away from the university building housing for employees directly. The provision of employe housing was turned over to the private company, UBCPT.1
Two things to note about UBC’s transition to private housing provision: (1) there are more rental options available for faculty and staff today, and (2) the cost of housing for renters has gone up, not simply in absolute terms, but as a proportion of monthly household income. As a private company, UBCPT can (Unlike UBC itself) borrow money for building and go into debt. This legal framework allows UBCPT to build without direct government funding. At the same time it leaves housing in private hands that could be sold to a firm not connected to the university at any point in the future.
In 2005 my family moved again into a co-development housing project up the street from Azalea House. Logan Lane Strata was the second of four co-development housing projects initiated by UBCPT. While this model allowed the original purchasers a below market option (essentially acting as ‘developer’ and not realizing a profit) it also didn’t create a long term affordable option. First generation owners were restricted on profiting for five years, but after that time their units could be sold on the open market. Since purchase the assessed values of these stratas have more than trebled. Any affordability benefit was locked into the hands of first generation of owners. UBC was asked about placing a restrictive covenant on the units, but they felt it would have too negative an effect on resale to be viable.
Is Market Rental the Only Path?
At various times groups of faculty have lobbied for alternative models such as shared equity housing, co-housing, or cooperative housing. The university, while at times expressing interest in such experiments, has focussed on two options: (1) a loan program for faculty and, (2) rental properties. For most faculty the loan options haven’t really been a major benefit. Rental options have had a more positive outcome.
In a May 2023 interview with UBCPT CEO Aubrey Kelly, he explained the rational behind UBC’s rental strategy:
We've done Village Gate Homes,” said Aubrey, “and that manages our faculty and staff program because that's a different program. Then Westbrook Properties, that portfolio is a couple of things. It's our residential, that's market because we have a market component as well. So there's the high rise over here on Georgia Point. Then all the commercial properties as well. So they're managed. I think we manage [the faculty/staff] portfolio differently than we would if we were just a management company, had just general public in there. I think we would probably manage it a little bit differently. I think [rental properties are] seen to be a real recruitment and retention tool for the university.”
“Here's why rental works so well at UBC, where for the past 20 years, we've seen very little purpose built rental in our region. One of the reasons for that is the land use plan has said that 20% -so it's baked into the language of land use plan from Victoria- that 20% of all of all that we do out here needs to be rental. They don't specify what type of rental. They just say 20% of everything we do has to be rental. That's the Land Use Plan that was last updated in 2011. I think in the [Campus Vision] 2050 plan, there's even an increase of that 30%.”
“Just to explain how we have viewed this, how we have made this work, because at the end of the day, we are wholly owned by the university. So everything we make is dividended back. In fact, we're an income trust, so we don't have retained earnings. We operate and everything that we make gets dividended out to the university on an annual basis.”
“The good thing with having a quota is it's a quota we have to meet, right? So if we have to meet it, it really makes no sense for me to ascribe an opportunity cost to that land. Because if I were doing that, I wouldn't probably come up with a business plan that made sense. If I were to say to my board ‘we're going to do the next rental building and we could get let's just call it $500 a buildable foot if we sold this prepaid lease to a developer. If we were to do that based on our rental rates, we wouldn't be able to build a building, we wouldn't be able to finance it. So what we do, to the extent then that we cannot sell that land, it cannot be sold by policy by those two documents: The Land Use Plan and Housing Action policy. The input is zero. So there's a zero opportunity cost of that land.”
“If I understand this right,” I said. “Because the LUP says there must be rental, that means the land lease value is essentially zero and all you have to do is finance the building?”
“Correct. We have to for this reason, for this reason only we do it because we're putting financing on that and the university can't borrow money.” “At the end of the day, all those assets are wholly owned by the university.” “On the rents we are discounting them as much as we can. But the only reason, the secret sauce that makes it work is that we're not ascribing an opportunity cost. So if you take the land component out of the building cost, the development cost, that is where you get the ability to discount [the rent] and still finance it with the bank.”
…
“Here's a thing on the rental,” said Aubrey. “The university really hasn't lost value. We don't want to get overly technical because I'm not sure your readership maybe are interested in this but I think it's worth pointing out that there's money that goes into the endowment from the land sales. That's easy to understand. That's used for all kinds of initiatives and in fact that's how student housing is built because student housing borrows from that (the university itself can't borrow money from a bank because the debt rolling up to the provincial; the government has said that public institutions cannot borrow money). But UBC’s Student Housing office is able to borrow from the endowment because it's internal borrowing. We feel that we've been able to build up that endowment and it's been used for all kinds of good things.”
“There's a double whammy when it comes to a rental.”
Aubrey explained that not only are they providing rental opportunities for faculty and staff, but they are creating longterm value in the rental enterprise.
“A rental market, a building is valued. You look at the income stream and this is how it happens in the real world. We know we're not necessarily in the business of selling off our rental portfolio, but we could do that to to a big, say, a REIT or a pension fund or something like that, could come and buy this. It's different than you pricing your house. You look at what it cost to build it. You look what the value of land is and then that's kind of how you come up with the sale price.”
“The sale price on income properties are all about how much income does it produce? We talk about a cap rate, which is just an abbreviation for capitalization rate, which means where are interest rates right now? What are they doing? And you reverse it. You take it and divide it by the cap. You take your annual income stream divided by a cap rate. And it's a big number into millions of dollars. If you were to take our portfolio right now, there's not only what we put into the endowment in terms of the cash contributions from land sales, there is this equity. I would call it an appraisal surplus, if you will. In other words, we owe a lot of money to the bank on some of these projects and that's fine. But if you were to take off, if you were to apply a cap rate, a market cap rate today to our income stream across our portfolio, you would come up with a number that's into the billions of dollars on our value of our portfolio, then subtract off some of the debt that we owe.”
“So there's a smaller number, but it's still into the hundreds of millions that is the appraisal surplus as well. So the university has not lost. So you're saying, yes, they've transferred this piece of dirt to us for a dollar, but we built an income asset on that. And yes, it's providing a strategic initiative for the university in that it's faculty and staff housing. That's very important. But if the university ever needed to raise some quick money, they could take that asset and they could sell it on the market. And it's more than the value of the building’s value. And we always look at that and say, now you take that appraisal surplus and divide it by the square footage and it's a university asset. It's actually into the hundreds of dollars per foot. So it's while we haven't paid the university $500 a foot for land, it's been less than market in fact considerably less than market. We've created the value and that value is there for the university because they own us.”
Rental properties are not the only path, but they are the direction UBC has gone. With the renewed Land Use Plan, rentals will remain UBC’s longterm solution to faculty/staff housing.
Its Bigger Than UBC
UBC operates within a context not created solely by UBC, but it is one that UBC can play a role in shaping. Since the ascendancy of neo-liberal economic policies in the 1980s governments have retreated from key sectors like housing. Deregulation, withdrawal of government, and a belief that private firms can do it better has left us with one of the most unaffordable housing markets in the world.
We need more core funding from federal and provincial governments into the general housing market. We also need changes to the federal tax laws to removing housing from consideration as a taxable benefit. UBC can play a role actively lobbying on these issues.
But UBC can -and should- do more than lobbying. UBC can use its land endowment to build non-market housing, not housing just for faculty/staff/students and those who can afford the privilege of private housing, but for those who are unhoused and underhoused. UBC has made hundreds of millions of dollars off its Vancouver campus lands that have been salted away into a private endowment. Building low barrier community housing for the unhoused would help fill in overall societal housing gaps. UBCs access to a large public gift of land gives UBC a social and moral obligation togo beyond private profit. As UBC ramps up the density on campus, and pushes for a skytrain extension to campus, there is nothing that would prevent UBC from stepping in to provide fundamental game changing contributions to the overall housing problem.
The UBC area is a medium-sized town heavily skewed toward medium-to-high end properties. We lack fundamentally affordable and supportive housing options on campus. UBC talks a lot about mental health and addiction, boasts about their programmes like inclusive excellence, but in this fundamentally important domain UBC sits silent and inactive. This is a space within which UBC could take a meaningful lead in setting the agenda for other corporate housing developers.
Housing affordability means UBC taking responsibility for the gift in land it sits on. UBC has an obligation to make this land liveable for all people, not just the few who have managed to find a way into secure housing.