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Q&A with developer Jordan Milne on factors impacting housing prices, and Victoria's rental market

Developer Jordan Milne of GMC Projects discusses the many costs impacting the delivery of new housing to the region, the state of the Capital's rental market, and GMC's upcoming projects.  Citified.ca

Q&A with developer Jordan Milne on factors impacting housing prices, and Victoria's rental market
Ten on the 10th
Citified's Ten on the 10th is a monthly question-and-answer segment connecting our readers with the insight and knowledge of Victoria's top real-estate and business professionals.
 
Ten on the Tenth's September, 2023 segment features Jordan Milne, President and CEO of GMC Projects, a Victoria-based real-estate development firm.
 
Asking the questions is Ross Marshall, Senior Vice President of the Victoria offices of commercial real-estate brokerage CBRE. As a leader in facilitating large-scale commercial real-estate transactions throughout the Capital Region – which include apartment complexes, industrial retail and office properties, and land/development opportunities – Ross and his team are at the forefront of market-leading real-estate transactions on Vancouver Island.
 
 
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GMC has historically been focused solely on rental housing, but a number of your new projects are market for-sale product, can you speak to what is behind this shift?
Yes, GMC is passionate about creating thoughtfully designed, high-quality housing, and we have historically focused on rental. We are proud to provide over 185 rental homes in the Victoria and Esquimalt markets with 96 more proposed in Esquimalt and 77 approved in Vancouver. However, as we look at the housing spectrum, we recognize there is a need for a variety of housing typologies and tenures, and we are seeking to provide housing across the spectrum to ensure we can create a diversity of options for a variety of households. Rental will always be part of our portfolio, and as a sector, will be a critical part of helping solve our housing crisis, but so will new ownership options and we are excited to be creating both.

With your background in rental housing in the region, what are your thoughts on the future of our rental market in the coming years? Will we see continued rental growth or are we near rents peaking?
While I know many would hope that our continuously rising rents have peaked or will peak soon, I am of the view that our supply and demand fundamentals continue to put upward pressure on rents, and we will continue to see rent growth. It really is a failure of all levels of government who took for granted for too long that the market would produce the required housing without recognizing the role they have played in preventing the level of investment into the space that could have occurred.
 
The Province is still doing this with its meager 2% annual rent increase. The message this sends given their promise made to use CPI after they nixed CPI-plus 2% is that you cannot trust us. They are using a one-size-fits-all approach, or in other terms, a sledgehammer for a job that requires a screwdriver. The reality is that when I know I am going to be limited in my revenue growth to below inflation, I am going to push rents on completion of a new building or turnover of a unit to the greatest extent possible so that I can create a risk buffer. I would rather see a market system that encourages investment and competition, but between rent control and our historically restrictive and cumbersome land use processes, we live in a different reality. Ideas around taxing housing further, such as the rent increase between tenants, will only lower the amount of capital being invested in the space and worsen the existing crisis. I think we should all understand, just as contemplated with carbon taxes, if you want less of something, tax it. If you want more of something, reduce taxes and barriers to getting it.
 
We’ve seen municipal costs put on new home construction creep higher and higher in recent years, from development cost charges, to amenities, to affordability payments to land gifts and permitting. How much of the entire project costing are these municipal costs today?
It really varies on a municipality-by-municipality basis but without question, there is a trend to increase existing fees and possibly introduce fees where they have not existed. The result of any fee, tax, or surcharge on housing is increased housing costs or if those costs cannot be recouped in the market, there may be no project and no new housing. I sympathize with municipalities that are trying to increase and improve services and amenities for the community while simultaneously keeping property tax increases to a minimum. However, putting those costs solely on the backs of new housing is one of the factors that has led us to being in the housing crisis today. I am hopeful that as the Province looks to create changes in the area of development finance that a more equitable approach will emerge, but only time will tell.
 
What about the building code? Municipalities are introducing requirements for the BC Building Code Step Code, which, while environmentally forward and promising better energy efficiency, comes at a cost for builders and eventually can be expensive for end-users replacing materials or conducting maintenance. How much has the BC Step Code impacted the cost of housing?
The development industry has been faced with a fire hose's volume of policy and economic changes in the past five years and the continuously changing building and energy codes are part of that. The costs are significant and while all of the rationales for these policies and changing codes are laudable, such as helping create more resilient buildings that have a lower impact on the environment, the costs to do so are at cross purposes with the goal to deliver more housing, and housing at a more affordable rate.
 
The forthcoming harmonization with the National Building Code that comes into effect in B.C. on December 1st will have significant impacts on the cost to build on Vancouver Island separate of most of the remainder of the Province, and may render certain built forms, such as six-storey wood frame, no longer possible on some sites given their geotechnical conditions. The significant increases in costs will be primarily due to seismic impacts and the way your geotechnical site class is determined, but there are other aspects that will impact all of B.C.
 
For example, it is being contemplated to require 100% of new multi-family housing to be built as adaptable. That means different kitchen and bathroom sizing, door widths, and infrastructure in the unit to support future conversion to a fully accessible unit. This will not only add cost but also impacts the design and layout of suites. Storage will likely be negatively impacted unless units increase in size and that has a negative impact on affordability all around.
 
This is all being driven by a housing equity mandate. It seems to me that too many layers that add cost are being decided upon by various levels of government, in silos, without understanding their collective impact on what is supposed to be our most pressing current crisis, housing affordability.
 
We’re not done yet on the cost questions. What are the environmental costs that you’re facing today, that you didn’t have to account for in prior times?
There are new requirements from the Province around soil relocation that are adding considerable costs and time for the relocation of clean soil. This is an example of a 'belt and suspenders' approach that only adds more costs to the delivery of housing and becomes part of government-controlled aspects hurting housing delivery and delivering housing more affordably. Broadly speaking, there continues to be an expansion of the bureaucracy around the development of land and the delivery of housing. It amazes me that for a Provincial Government that has made large promises on the delivery of housing, a more holistic approach to remove barriers has not yet been deployed. I am eager to see what comes of the Housing Supply Act, but land development is not just impeded by the Ministry of Housing or the current local government approach to land use, it is also impacted by the Province in many other ministries.
 
When trying to finance land acquisitions, what are you seeing in terms of the interest rate environment?
Rates are up substantially and so the cost of borrowing on land or construction today is well outside the upper end of what most would have underwritten just 18 months ago. We have seen lenders acting with more caution around land financing given that many have land loans that have extended well beyond their expected repayment dates. This means they do not have the turn of capital they were expecting and are now having to recapitalize or negotiate with borrowers around topping up interest reserves or paying down debt. This has primarily been caused by delayed development approval processes and challenging project economics in the face of rising rates, construction costs and sometimes government fees/charges, with softening market conditions. There remains appetite from lenders for borrowers with proven track records and strong balance sheets but I fear the volume of supply won’t be what it could have been as some projects are just no longer viable. 

 
If you could point to a municipality doing things well at the moment, who would it be, and why?
No one is perfect and the same goes for municipalities. I am encouraged by what I am seeing in Victoria and Vancouver as their councils take bold steps to advance housing projects without staff support, but that are compliant with community plans and will provide much needed housing supply across the spectrum. I am also encouraged by Esquimalt and their recent decision to send their proposed parking bylaw update back to staff and their consultants so that they can apply a climate lens to it. With 40% of the area's greenhouse gas emissions coming from transportation, Esquimalt possesses a real opportunity to be a leader in a forward-thinking approach to transportation and development. However, they have also talked about instituting new development fees and that raises concern as we are facing tough economic headwinds and the costs to build have risen so dramatically in the past two years that it's rendering some projects un-viable. I would love to see them continue their historic approach of welcoming, encouraging and incentivizing development, as more fees will only hurt the ability to deliver housing, let alone anything attainable or affordable.
 
Your new projects span the housing spectrum from townhomes to a proposed 26-storey tower in Esquimalt, allowing you to see various housing policies at-play throughout the region. What can you tell us about the City of Victoria’s Missing Middle Housing Policy that the City is updating due to no take-up by developers. What did they do wrong, and what will they need to do to get it right?
I was and continue to be supportive of the intention of producing more family-oriented housing options, but I think given the scale of change the Missing Middle Housing Policy was bringing forward from a policy perspective, the City wanted to soften its impact by creating a variety of goals alongside the delivery of more family-oriented housing. The mistake was trying to accomplish too much out of one policy, without giving enough flexibility. In my view, greater density than what is currently provided for, the ability to build townhomes anywhere instead of just on corner lots, and removing the maximum unit count per lot are three low hanging fruit. However, I know from speaking with others who have tried to work within the policy, that there is more that needs to change beyond that, and that change would be within some of the finer details of the policy. 
 
With GMC proposing the largest project in Esquimalt’s history at 26 storeys tall, can you explain what drew you to Esquimalt, what your proposal is and what helped inform such a bold vision?
As someone who moved to the region in 2008, I did not grow up with the negative perceptions that have historically existed around Esquimalt. In fact, they never made sense to me. Esquimalt was the first place I ever lived in the region. I saw and continue to see Esquimalt as a municipality with tremendous potential that punches above its weight in many respects.
 
From its proximity to Victoria, its access to nature, its recreational facilities, its economic drivers, its views and its culture and community, Mayor Desjardins and her colleagues have done a great job in creating a strong framework to support and encourage the revitalization of Esquimalt. Our vision for 900 Esquimalt falls on the backside of that and the Official Community Plan. It was not something that we arrived at quickly or was formed because we had a goal to create the tallest building in Esquimalt. Far from it. For each of our projects we establish a variety of values and objectives and for 900 Esquimalt they are: Diverse Housing, Community, Sustainability, Affordability, Revitalization and Adaptability. All decisions will be evaluated based on these principles and as we moved through the planning and massing process, it became apparent that to see the block redeveloped in a manner that achieves our values and objectives to the greatest extent possible and creates significantly expanded public infrastructure (two plazas, a publicly accessible dog park, new and expanded sidewalks, bike lanes, boulevards, and a meaningful contribution to affordability of $1 million) that the best way to shape the density and provide these benefits for current and future residents was by going taller.
 
As we massed out options, we saw the negative impacts of stretching the density out in a slab design that would not yield the best urban form and create worse shadow impacts for our neighbours (think View Towers). Instead, by taking the density from the majority of the floorplate and stacking it on top of the remainder, we could create a more slender but taller form. This pushed height up while improving the urban form, reducing shadowing impacts to some of our most immediate neighbours, improving livability and enabling the public benefits I noted above.
 
As well, the scale creates the opportunity to deliver an unparalleled on-site amenity offering with an over 9,000 square foot outdoor rooftop oasis adjacent to a two-storey great room, all with views over the inner harbour. Add to that, a yoga studio, fitness centre, meeting space, car and dog wash areas and a dog lounge adjacent to the dog park enabling pet owners to have a pet-friendly common room with private access to the new publicly accessible dog park. We have set aside space for kayak and paddleboard storage as well as substantial bike storage, including for cargo bikes and all future residents will receive memberships to Modo with a planned on-site car share vehicle.
 
Our vision is forward thinking in creating both for-sale and for-rent housing above new vibrant commercial spaces to ensure a balance within the scale of development envisioned, and to provide diverse housing options for existing and future Esquimalt residents.  
 
You have been working for several years on a proposed rezoning for the current Cedarwood Motel site along Sidney’s waterfront. I understand a development application has now been made. Can you tell us what GMC is envisioning for this property?
Yes, we are excited about the vision that has evolved. With over three acres, this site presented both opportunities and challenges, and we feel we have struck a good balance alongside the important feedback of our immediate and nearby neighbours and on the backside of Sidney’s recently adopted Official Community Plan. Our proposal envisions a new mixed-use three-storey building spanning the Lochside Drive frontage containing 49 condominium homes ranging from one-bedroom to three-bedroom plus-den, and one commercial space at the corner of Lochside Drive and Weiler Avenue designed with the intention of a café, bakery, or the like.
 
A common rooftop outdoor space features BBQ, dining, socialization, and games space and will provide the opportunity to accommodate larger gatherings, build relationships and foster social connection while enjoying views over the Salish Sea and Gulf islands. The remainder of the site has been designed to support 48 two and a half storey townhomes ranging from two to three bedrooms and from 1,094 square feet to 1,983 square feet, which have been purposefully designed to maximize ocean views, and most of which feature private rooftop patios with ocean views. All townhomes contain two-car garages, some of which are tandem, and there is a private outdoor amenity space for the townhomes with BBQ, dining, socialization, and games space to create opportunities for larger gatherings that foster social connection, like the other building but designed for a more family demographic. We see this as a tremendous opportunity to create housing for all age demographics with the diversity of housing form and size as well as the proximity to Tulista and Iroquois parks making this a compelling offering for families. C

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