[Music] no mega towers and yes to affordable housing. That's the rallying cry against a proposed building in East Vancouver, where the developer is planning to replace the existing Safeway with three towers containing almost 1,000 rental apartments. And boy, has it been controversial. A petition against these so-called Mega Towers received over 2,000 signatures. Why? Well, perhaps the biggest concern of them all is that this development would be luxury housing—fancy penthouses, luxury condos, and pricey suites. According to the poster, concerns like that are partially responsible for why this proposal has gone through revision after revision, going back and forth to the local government for almost a decade. For me, this development is emblematic of a much larger concern across the country: new housing seems to be overwhelmingly luxury housing. Thousands of units of luxury housing, million-dollar condos. We're building too much luxury housing—luxury for luxury condos. Everyone wants to build luxury condos over and over again. Well, I have a problem with luxury housing too, but my problem is with the label luxury.

housing because I think it might be hurting the housing crisis more than helping it. And before I begin, I want to quickly thank our sponsor, Westbank Developments. They build gorgeous, spectacular, and high-end condominiums throughout the world. And just kidding, this video is sponsored by Surfshark VPN. You'll hear from them later. Now to start, I completely understand why this frustration exists. It does seem like virtually every new development is unaffordable to the average person. In this building, a one-bedroom rents for $3,800 a month. In this building, a one-bedroom rents for almost $4,000 a month. And in this totally structurally stable building, a one-bedroom rents for almost $3,000 a month. But it does come with an outdoor chandelier. These are some of the rents you can expect in some of Vancouver's newest apartment buildings. The median employment income for individuals in Vancouver is a nice $69,500 a year, according to the last census. That means with a typical job in

Vancouver, you'd be paying over half your income renting one of these apartments. These rents are a slap in the face. So why is new housing so expensive? Why aren't developers building housing that's affordable to the average person? Very simple: greedy developers. These corporations building housing want to make as much profit as possible, so they'll rent out their apartments at the highest rents they can get. But it's not the full story. A study in 2019 estimated how much you'd have to charge in rent to break even on a typical development in Metro Vancouver. What it found is that even a nonprofit developer would have to charge a minimum of $1,500 to $2,000 a month for a one-bedroom apartment just to cover their costs without making a profit. For a for-profit developer making a 15% return on their investment, they would have to charge at least $2,100 to $3,000 a month. It turns out new housing is just pretty expensive to build in general, luxury or not. $2 to $3,000 a

month for a one-bedroom apartment might just be what a developer needs to charge to cover their own costs of building it. So, what is actually making this housing so expensive? Well, that's the complicated part. One Toronto developer recently published the budgets from two of their own projects, one from 2005 and one from 2020. What they found was price escalation in pretty much every key cost in their development, like construction costs, soft costs, and financing costs. The greatest price escalation was in government fees, charges, and taxes, which increased 43% since their previous development. And through it all, their profit margin actually decreased 45%. Each of those costs has a ton of complicated reasons as to why they're increasing, and it's important that we look into each one to see how we can reduce the cost of building you housing. But that's not what I want to get into for this video. For this video, I want to understand what we should do about developments like this one at the Safeway site. Given the costs of building right now, we know it'll

probably be unaffordable to the average person. So, does that mean we shouldn't build it? And more importantly, who should you use to protect your privacy when using public Wi-Fi? Well, that would be Surfshark VPN, the sponsor of this video. I recently started using Surfshark VPN after I made a concerning realization. When you're using a public Wi-Fi connection, other people can intercept signals between your device and the network and ease drop on your activity, your searches, your passwords, your browsing history, and much, much more. In fact, there are countless articles and reports of people regularly stealing sensitive information over Wi-Fi networks. That's why I now use Surfshark VPN. It encrypts your identity when you're using the internet so that anyone sharing your network can't access your information. With Surfshark, I have the peace of mind and freedom to go use public Wi-Fi anywhere and everywhere because my information is protected. There are other benefits to using a VPN service as well, like setting your IP address to pretty much anywhere in the world. That means

you can access content and websites that might not be available in your country. So, no more flying out of the country to watch my favorite foreign television show. I can now do it all from the comfort of my apartment in Vancouver or in São Paulo or Ecom seeum. You'll never know because of Surf Shark VPN. Use the code about here to get an extra 4 months free of Surf Shark VPN. You can find more details at the link in this video's description. Okay, back to the video. So again, should we prevent new developments like this one if we know it will be unaffordable for the average person? Well, there is a case for this view. Many argue that new and expensive buildings influence rents in a neighborhood to go up. If a new apartment gets built next to your place, it could attract wealthier residents and their fancy coffee shops into your neighborhood. Then your landlord might think to themselves, Hm, if they're charging that much rent over there, maybe I should charge more rent too, and subsequently raise your rents. That certainly feels concerning, but

There is a bit of an assumption being made here. We're assuming that new housing is what causes rents to increase, or alternatively, not building new housing would mean that rents would relatively stay the same. But in most cases, that doesn't end up being true. And to understand why, we just need to take a look at San Francisco, a city known for its tech jobs, a pretty decent basketball team, and that bridge. Trust me, it's there. But it's also a city that builds very, very little housing. Between 2015 and 2021, the city permitted fewer than 500 homes per 100,000 people every year, putting it behind cities like Portland and Oklahoma City. The reasons why are complex and largely stem from the fact that the city has some of the most complicated and restrictive development regulations in North America. But the outcome is clear: preventing new housing from being built in San Francisco hasn't kept the city affordable, far from it. Housing everywhere in San Francisco is some of the most expensive in the world, with skyrocketing rents since the tech boom.

and it doesn't take a degree from Stanford to figure out why all those new tech employees that might have rented in newer, more expensive apartments are now just competing with the rest of the city's residents for the same old housing and bidding up the prices. In fact, you might pay almost $4,000 a month for a one-bedroom in an old walk-up apartment. The truth is, new housing is often not the cause of rising rents; new housing is usually the symptom of rents already rising because of a host of other factors: new and higher-paying jobs, population growth, the vibes of a neighborhood just generally improving, and all the other socioeconomic factors that make cities and their neighborhoods more desirable. In that context, preventing new housing from being built doesn't get rid of the demand for housing; it just shifts that pressure onto older housing. Here's a visual to demonstrate what's going on in a housing market where we continue to build new housing supply: the people who are willing and able to pay more for their

housing tend to move into newer and more expensive housing. Over time, those newer and more expensive homes today often become the older and more affordable homes of tomorrow, as long as we continue to build new housing. But when we don't build new housing, we just put pressure on the overall housing market. The people who can pay more for their housing just bid up the cost of older housing, and the people who can't afford that new price face more and more dire consequences as a result. On the flip side, when you build new housing, the people who can afford to move into those homes free up the rest of the housing market for others. In fact, this effect has a name: vacancy chains. When new housing gets built, the people who can afford to move into those places free up their old place for somebody else, and the people who can move into that place free up their old place for somebody else, and the people who move into that place free up their old home. You get the idea.

study tracing 52,000 residents in 12 major US cities found that constructing a new market-rate building that houses 100 people ultimately leads 45 to 70 people to move out of below-median-income neighborhoods. To see this effect actually working in a city, I think we need to go to Austin. Oh, like San Francisco, the city is experiencing a tech boom. Its population doubled between 2000 and 2020, and rents began to sharply increase as a result. But unlike San Francisco, Austin built housing. Between 2010 and 2021, the City of Austin permitted over 133,000 homes to be built. That new housing isn't cheap; in fact, many criticize it as being luxury, and there are still fancy new one-bedroom apartments that rent for $2,500 a month. But all that new housing may be paying off. Average rents in Austin have been decreasing for the past year. Renters have a lot more bargaining power than they used to. Supply for rental units is up, meaning rent prices are down. My last

place exactly a year ago. I was paying 1,900, and now I'm closer in the range of like 12 to 1300. I negotiated down to what I was seeing in the market. So, to recap, in San Francisco, new and higher-income residents just bit up the price of the city's older housing because there's very little new housing being built. But in Austin, new and higher-income residents have the option of moving into newer housing. These new developments are helping absorb all that extra demand for housing while taking pressure off the overall housing market as a result. But with all that said, I don't think the moral of the story here should be to just build, build, build without any restraints. I'd like to offer a few caveats for your consideration. First off, where we build new housing matters. Not all new housing is equally helpful for housing affordability. When new housing developments replace old and affordable rental buildings, it's not all positive. We might be adding more housing, but we're causing a huge disruption to those

evicted for that Redevelopment while getting rid of older affordable housing. For example, here in Kitsilano, this old apartment building is likely going to be demolished to be replaced by three single-family homes. With this Redevelopment, we're not only reducing the number of homes available but replacing them with arguably the most luxurious form of housing there is. With that, I think we should prioritize new housing in areas where there are fewer renters or on properties where there are no tenants to displace, like the Safeway site. When properties get redeveloped, landowners often have a lot to gain, but renters have everything to lose. Second, this isn't an argument to say that building Market housing alone is a replacement for building subsidized non-market housing. Oh, there is a dragonfly. It's just an argument to say that every bit of additional housing in our cities does help in some way by taking pressure off of the overall housing market. And finally, this is not to say that we shouldn't be concerned about expensive housing at all. Luxury housing

does exist, but if we're really set on making sure our cities aren't just full of luxury housing, I feel like we're focusing on the wrong target. In most cases, the type of housing that multi-millionaires are buying aren't one or two-bedroom condos in apartment buildings. In many cases, it actually looks something like this: a single detached house. Most cities designate the vast majority of their land for detached houses that are increasingly out of reach for the vast majority of the population. But these luxury neighborhoods never seem to get the same amount of scrutiny we reserve for new apartments. That's why I ultimately have a problem with the label of luxury housing. It's an oversimplified term that's largely just used to oppose a certain aesthetic of new housing, all while conveniently ignoring all the housing in our cities that's actually luxury. We need thoughtful and nuanced solutions to our housing crisis, not catchy and misleading phrases. I think we could start by dropping this label altogether. Okay, so that was the video.

Thanks so much for watching, and thanks once again to Surfshark VPN for sponsoring this video. Here's your final reminder that you can get an extra 4 months free of their service if you use the code about here at the link in this video's description. All right, bye. That's why I'm singing now. I hate he everybody Len to me.

The REAL Problem with "Luxury Housing"

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