One Foot Off Center: Kelowna’s vacancy rate could mask future economic pain

High vacancy hides pain?

Castanet presents One Foot Off Center, a podcast tackling the big issues facing the Okanagan.

Rick Maddison, Ron Mattiussi, Scott Lanigan and Cassidy deVeer meet every month to discuss how these issues impact everyday Canadians.

Maddison is a well-known entrepreneur in Kelowna and owner of Tempest Media. Mattiussi is the former chief administrator of the City of Kelowna and has worked in local government across the province.

Lanigan is the lead pastor of Trinity Church, one of Kelowna’s largest churches, who has served with various community groups like Journey Home.

Cassidy deVeer, the newest member of the panel, is the executive officer of the Canadian Home Builders’ Association of Central Okanagan. She is known for asking the uncomfortable questions, focusing on practical outcomes, and cutting through theory to get to what actually works.

--

Kelowna's rental vacancy rate now sits at 6.4%, among the highest in Canada.

With provincial and municipal government policy encouraging development of rentals, some see the rising vacancy rate as a sign that housing pressures are easing. At the same time, vacancies at that level traditionally discourage developers from entering a market.

Kelowna's vacancy was previously as low as 0.6%, which saw rents soar.

"There’s a downside to 6.4 per cent," said deVeer.

"What I find so interesting is that nobody's put together the high rate (8.6%) of unemployment right now. It's wonderful vacancies are high... but unemployment is also high. So what does that mean? It means people have left our city to go find work elsewhere."

Local construction companies have felt the impact directly, with one firm shrinking from 18 employees to just two, and award-winning renovators now working solo jobs just to stay afloat, according to deVeer.

"I don't really call that lucky for a lot of people."

Part of the issue, according to Mattiussi, is that the market is currently "off equilibrium."

"I think getting up [to this rate] was a perfect storm... nobody builds multifamily. You make the commitment many years before you pour the concrete," Mattiussi says. "I think on one hand, we're overbuilt in the condo market... The best thing it does is it brings rents down... but is that a healthy way to bring rents down? No, I don't think so."

The discussion also highlighted the skyrocketing cost of delivery as a major barrier to new housing. deVeer points to what she calls B.C.’s aggressive building codes, which exceed national standards, as a key driver of costs.

"Our homes are highly over-engineered," says deVeer. "If we're going to change anything, we have to address the cost to build because labour rates aren't going down... We tax housing like we do alcohol and cigarettes, which is crazy."

While development cost charges (DCCs) remained a contentious topic, Mattiussi argued they are necessary to prevent taxpayers from footing the bill for new growth, though he admitted there needs to be a balance.

"Without DCCs in place, I've watched developers go bankrupt in the 90s," Mattiussi says. "When you look at the city of Kelowna, it has some of the highest rates in BC, and yet the lowest rates of property tax."

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.