At its meeting on Monday, Nelson city council voted in favour of Nelson Commons’ request that council waive a $54,000 contribution by Nelson Commons to the city’s housing committee and instead allow Nelson Commons to offer three “restricted resale units” at 25 per cent below market value.
Council also accepted Nelson Commons’ request that the city take over administering the future resale of those three units.
But council rejected Nelson Commons’ request that the connection fees for those units be waived.
Restricted resale units
“Restricted resale” means that a unit has rules attached to its re-sale in the future. Those rules could pertain to purchase price but in the case of affordable housing could also include stipulations about the financial situation of the buyer.
The three restricted resale units at Nelson Commons would be sold for 75 per cent of market value, and that price restriction would be attached to those specific units forever. With this concept now accepted by the city, it will waive a $54,000 payment that Nelson Commons would have otherwise made to the city’s affordable housing fund.
The objection among some council members has been that a buyer would have to have an income of at least $55,000 per year to qualify for a mortgage for those units, which would sell for about $200,000 after the discount.
The argument in favour of the restricted resale units has been that even though it may not help the people most in need, it could still get a renter into home ownership and free up rental units. Also, the total of the 25 per cent discounts for the three suites would amount to about $240,000 — much more than the $54,000 contribution to the housing committee.
This discussion over the past few months has been complex because of the reaction of the city’s housing committee and questions about what that committee did or did not agree to in 2013. For details, see the “recent history” sections below.
One of the most vocal opponents of the restricted resale units up this point, councillor Michael Dailly, voted in favour of them at Monday’s meeting.
“Even though I don’t think it meets the needs of the most needy, I will be supporting this because council needs to be fair and consistent in its dealing with developers,” he said.
Dailly explained that he has learned that in 2013, the city’s housing committee gave the restricted resale units concept its tacit encouragement and that the developer (Nelson Commons) acted on that, and that the developer had a right to expect consistency in dealings with council and its committees.
Councillor Janice Morrison was the only council member who opposed the restricted resale units proposal.
“As much as we might argue that previous committee or council saw this, it is clear to me that we are rescinding the $1000 per door (the $54,000 lump sum) previously accepted by the previous council. I don’t consider this affordable housing. This is still market priced housing, no matter how you slice it. I don’t see where the guarantee is that this would be sold to someone who is now in a rental unit.”
Council voted in favour of the restricted resale units proposal with only Councillor Morrison opposed.
Administration of future sales
The second issue was Nelson Commons’ request that for the restricted resale units, after the developer had sold them for the first time, future re-sale would be administered by the city so that the terms of the sale restrictions could be consistent over time. The idea is that the city would then have control over who could buy them — what income level, asset level, and personal circumstances the new buyers would have.
Councillor Robin Cherbo said he did not want the city getting into real estate and asked what would prevent people buying the units and flipping them for profit. Councillor Adams responded that this would be impossible because one of the restrictions on the units would be that the price must always be 25 per cent below market value.
“It is not the city getting into real estate,” said Councillor Valerie Warmington. “It is the city setting the criteria and making sure they are followed.”
Councillor Morrison asked what would happen if the real estate market failed. “There are too many variables and our staff is very busy,” she said.
City planner Pam Mierau said she thinks staff has the time to administer the sales, considering that there are only three units and they would not sell often.
Council voted in favour of taking over the administration of the units in the event of future resale, with Councillors Morrison and Cherbo opposed.
Connection fees
Nelson Commons had also requested that council waive the connection fees amounting to a total of more than $9,000 for the three restricted resale units, on the basis that it would help the developer construct the units affordably, thereby contributing to affordable housing.
Several councillors worried about the precedent this would set with future developers in Nelson, and the motion to waive the development fees was defeated with Councillor Bob Adams opposed.
More background information
This decision was preceded by some important recent history that includes the involvement of city council’s housing committee, and a recommendation from city staff, all of which is described in a May 4 story in the Star.