In early 2019, the City of Burnaby introduced a new Rental Use Zoning Policy intended to support construction of new rental units and to prevent the loss of rental units to demolition for condos.

Since then, the City has monitoring rezoning applications and receiving feedback from applicants and stakeholders regarding the policy. The biggest feedback has been from developers regarding the City’s proposed “vacancy control” whereby rent increases were limited between tenancies.

As a result, the City of Burnaby is recommending a number of amendments to the Rental Use Zoning Policy, to be approved at the Planning and Developement Committee next week.

These changes include:

1. Use of CMHC Market Median Rents instead of CMHC Market Average Rents

The Rental Use Zoning Policy currently uses CMHC market average rents as the metric from which below-market rents are calculated. However, the use of market average rents may result in significant fluctuations over time, as unusually high or low rents skew the average amount. To ensure a more accurate reflection of current market rents, staff propose using CMHC market median rents.

2. Amend Inclusionary Requirement to Deliver Greater Affordability

The Rental Use Zoning Policy currently requires all new developments in Community Plan areas to provide 20% of the total number of units as rental housing.

The inclusionary units are provided through density provisions under the Multiple Family Residential Rental (RMr) zoning districts. Inclusionary units are currently not subject to affordability criteria and may be rented at market rents. To incentivize affordability, additional market density, known as a density offset, is granted to projects that provide the required rental units at 20% below CMHC market average rents.

The City is now proposing to amend the policy to require the 20% inclusionary requirement to be offered at 20% below CMHC market median rents. As noted, to support the economic viability of these projects, a density offset is available to achieve this new affordability requirement. In addition, staff further recommend that the 20% inclusionary requirement be calculated from the total number of market (strata or rental) units derived from RM and RMs density provisions, as opposed to the total number of all units. This is to ensure that projects that seek to provide additional rental housing, particularly at below-market or non-market rents, are not dis-incentivized to do so due to the methodology for calculating inclusionary units. Overall, both RMr zoning district density and offset densities are not subject to the inclusionary requirement. For reference, the table below illustrates the current starting rents for the proposed below-market inclusionary units at 20% below CMHC market median rents, based on the most recent 2019 CMHC Market Rental Report. CMHC market average rents, as well as 20% below that metric, is also provided in the table below for comparison.

3. Amend RMr Density Provisions, Including Removal of Vacancy Control

The current Rental Use Zoning Policy requires units created by the new RMr density to be subject to vacancy control. The only units not subject to vacancy control are below-market rental units that receive a density offset and rental units permitted in Commercial zones.

The concept of vacancy control has resulted in concerns that few applicants would take advantage of the voluntary RMr density, impacting the delivery of new market rental units in the City. “The development industry has noted the hardship that vacancy control could impose on the long term viability of rental developments as the amount of rent that could be charged on vacant units between tenants would be limited. In particular, the change to the calculation of the RTA maximum allowable rent increase in September 2018 from rate of inflation plus 2%, to rate of inflation only, has increased concerns from landlords regarding the ability to maintain rental properties over time. Finally, and perhaps most importantly, the impact of vacancy control on the ability of the development community, including pension funds, to secure development financing, thus leading to a low uptake of the available density, remains a concern.

To incentivize the use of RMr density provisions, staff support the PDC motion to remove vacancy control. Instead, the affordability of rental units would come from the proposed amendment to require inclusionary units to be offered at 20% below CMHC market median rents. In addition, staff further propose that the use of RMr density above the required inclusionary component be set at a 1:1 ratio of market and CMHC market median rental units. In this case, for every one market rental unit proposed by the applicant, an equivalent one unit at CMHC market median rents would be required. This would assist in meeting the City’s long term affordability objectives in the absence of vacancy control, and create additional below-market rental opportunities for moderate income households. As the discount from market rents would be minimal at CMHC market median rents, a further density offset is not recommended for this new 1; 1 market and CMHC market median rental unit requirement for additional RMr density. “

4. Clarify Use of Density Provisions in Commercial Districts

The Rental Use Zoning Policy also allows developers to offer voluntary rental density in commercial districts, with 49% of the designated commercial floor area within applicable commercial zoning districts to be residential rental housing, provided the remaining 51% of the floor area are typical commercial uses.

The current policy language on the use of density to achieve voluntary rental housing in commercial districts is unclear and warrants clarification. As such, staff propose amending the Rental Use Zoning Policy to specify that rental uses and density from commercial zoning districts may only be achieved after the inclusionary requirement and all multiple family residential densities, including bonus, are fully utilized.

5. Clarify Rental Replacement Requirements

The Rental Use Zoning Policy requires all rental units lost through redevelopment to be replaced in Community Plan areas. This was one of the main original driving factors behind the policy, and will remain in place.

The policy sets the replacement ratio at 1:1 or 20% of the total number of strata units, whichever is greater.

A number of minor clarifications are proposed:

• “First, staff propose clarifying that replacement units must be offered at the tenant’s rent level at the time of move out, plus any adjustments based on permitted RTA rent increases during the time between move out and occupancy, to remove vagueness in the current language.
• In addition, the replacement ratio would be amended to be 1:1 or 20% of the total number of market (strata or rental) units derived from RM and RMs density provisions, whichever is greater.
• Staff further propose amending the rental replacement requirement to apply to redevelopments involving the loss of purpose-built rental buildings with five or more units, as opposed to six or more units, to align with the City’s approved-in-principle Tenant Assistance Policy.

“A more critical amendment is clarifying a potential inconsistency noted by the development industry and BC Housing regarding the City’s desire to prioritize both returning tenants and secure deeper affordability through senior government funding. Under the current policy, applicants are required to provide tenants who are eligible for assistance the opportunity to move into the new replacement units upon completion, by way of a tenant’s right of first refusal. The policy also encourages applicants to pursue senior government funding to achieve greater affordability, including for the replacement units. As senior government funding often requires income testing of tenants to ensure the affordable units are provided to those who need it most, some returning tenants may not qualify, depending on their income. To balance the City’s objectives of prioritizing displaced tenants and housing affordability, staff propose amending the Rental Use Zoning Policy to state that if senior government funding is secured, the non-profit housing operator would prioritize returning tenants for these units, provided they meet funding and eligibility criteria. If any returning tenants do not qualify for the senior government funded units, the applicant would be responsible for accommodating these tenants in other units in the development at their established “move-out” rent (plus RTA increases). Units may include inclusionary units, if available, or any below-market or market rental or strata units in the development, with the units reverting back to its original tenure and affordability requirement, if any, once the returning tenant vacates the unit. Staff also recommends adding a statement in the policy that a tenant’s right of first refusal is contingent on the tenant remaining in good standing as per the RTA. Should a tenant be evicted for cause during the interim period between move out and occupancy, the applicant would not have to offer a replacement unit to this tenant.”