COMMUNITY AMENITY CONTRIBUTIONS (CACS)
These pro forma scenarios have been completed
without the inclusion of a Community Amenity
Contribution (CAC) calculation; however, this
would typically be considered as part of a real
redevelopment. Without clear government policy,
CACs can be difficult to assess when underwriting a
pro forma and are often negotiated with municipalities
during the rezoning process. CACs are intended
to ensure that new growth contributes to the
development of complete communities for new and
existing residents, but these processes are lengthy
and costly. In some cases, it can take over seven
years to reach a conclusion. This creates a lack of
certainty and delay in the delivery of new housing,
including purpose-built rental. Some builders have
elected not to proceed with their projects based on
CAC expectations set by the municipality, resulting
in projects being paused, re-designed or sold for
alternate uses.
HARD AND SOFT COSTS
Construction materials have also become a key driver of
cost increases over the last two years. Between 2019 and
2021, the hard costs associated with lumber, steel and
wages have increased significantly, and prices remain
volatile, in some cases due to supply chain issues.
In Scenario 3, a 4-6 storey wood-frame development
in Victoria, where 114 suites are being financed, hard
costs have increased by $23,263,000 since 2019.
This is a 74% increase over a two-year period.
Soft costs, including leasing, marketing and other
services associated with the development process have
also risen substantially - up to 19.6% in Scenario 2 - a
4-6 storey development in Vancouver. With the double-
digit percentage increases in both hard and soft costs
over the past two years it has resulted in the need to
recover those costs in order to make a project feasible,
typically requiring higher rents.
In Scenario 3, where 114
suites are being financed,
hard costs have increased
by $23,263,000 since 2019.
This is a 74% increase
over a two-year period.
No Vacancy
What do rising costs mean? | 6