103: The Housing Market's Not Crashing, The Industry Is with Urban Development Institute's Anne McMullin

Taylor Atkinson: Welcome back to the Colonial Real Estate Podcast. I'm your mortgage broker host, Taylor Atkinson.

Matt Glen: And I'm your real estate agent host, Matt Glenn. What's cooking today, Taylor?

Taylor Atkinson: Oh, cookin. Yeah. We went to a lake house last night for a yeah. A little cooking class. It was incredible, man.

Matt Glen: Really Yes. Your Instagram was popping off and looked awesome.

Taylor Atkinson: Yeah. I mean, you walk out of there with tons of confidence. We cooked paella. Oh, yeah. You know?
So you're like, oh, I could definitely cook this at home. But they do a bunch of the prep work and coaching through it. It was awesome. I think Emily and I were the only ones that didn't walk away with leftovers. We ate it all.
Such a cool experience and beautiful venue. Like, if anyone hasn't been there, you took a class. It is a little bit more expensive. But when you think about, like, the costs of that kitchen and the chef and the ingredients and everything. Like, it's well worth it.
There's good value there.

Matt Glen: So Yeah. Chef Travis Pi runs a good ship there. He's doing good things.

Taylor Atkinson: That's just one of the the fun activities we've done this summer locally. Nice We wanna jump into talking about the show. It was an awesome show today, Anne McMullen. She is the president and CEO of UDI, so Urban Development Institute. If you're part of their program or have listened to them or seen her on LinkedIn, like, just an awesome organization.
Basically, they're, like, the voice of, you know, mostly a group of developers and professionals in the industry.

Matt Glen: Pretty big group of developers, though, like, most of them.

Taylor Atkinson: Yeah. There's eight hundred and fifty members and they advocate, you know, at, like, a BC provincial level with the housing minister and and Ebi. And, like, she's really just like a great voice and hard to be in, like, a balancing act in that position. Right? Like, most us just sit here and kinda complain about legislation.
She's actually providing, like, solutions at a government level.

Matt Glen: Well, she's talking to everyone that's affected by all these swinging rule changes and not very well conceived rules and laws that come out Yeah. We go into quite a few different ones in this episode and she lays out the reasons pretty well.

Taylor Atkinson: Yeah. I mean, one that, like, I thought was hilarious in, like, a bad policy. She highlighted that developments in Vancouver have to have a million dollar allocation to artwork for a building, which is just humorous if we're talking about affordability and putting units out there. And, like, I love Vancouver. Like, the artwork around those buildings is incredible.
And now it kinda made sense. You're foreseeing a developer to spend a million dollars on art. It just goes down to the end consumer. You know, let's say like a fifty unit building, that's twenty grand to pop, like if someone that is out there buying, would you rather have like twenty grand off your purchase price? Or, like, a really cool statue when you walk into the lobby.
Gotta know.

Matt Glen: Well, it's funny. Like, the art idea is a good idea, but that you're also talking about affordability. That's like, hey. Where can we cut costs? The other one that you've highlighted here is a twenty percent social housing aspect.
The new buildings. And then we went into quite a bit of detail in the pod about this. And then I heard the story about curve, the big building in Vancouver that just went into basically foreclosing in receivership now. And then you read the stories and, like, just check this out. Project was approved by City in Vancouver in twenty twenty two, but is yet to reach the construction stage.
Earlier this year, the developer secured approval to cut the planned social housing units in exchange for a fifty five million dollar cash in lieu payment. So they had to pay fifty five million dollars to the city to not have social housing, like a luxury building right in probably the richest part of Vancouver. And then now it's in receivership. Wonder why? That is insane.

Taylor Atkinson: Like, that is just kind of the theme of this show is, like, one person's not speaking to the other person. You know? Yeah. Like, we need to build units. We need developers to, like, be part of this solution, and they're just being handcuffed with, like, crazy pulse.

Matt Glen: That is so crazy. Like, fifty five billion dollars. So that ups the price of all those units. On one hand, you're gonna bitch that the units are too expensive, but then you're also gonna up the mall by what is a half how many I don't even know how many units are in that project, but it's gonna be three or four hundred thousand dollars a unit. Just to pay for that.

Taylor Atkinson: But then where does that money go? It gets allocated to social housing elsewhere in the city? Yeah. Yeah. I'm sorry.

Matt Glen: I'm not sure about that. Those that tell you cheap. But now that the economy is, like, getting tighter and things are getting squeezed. We get to hear all these crazy stories. And, like, pay attention to them.
And it's just like, wow. Another funny thing about this curve is it was just vacant lots before. It wasn't like they had kicked anyone out. Like, it was just a vacant house. They're putting more housing in and government, in this case, the city of Vancouver, says fifty five million bucks did not have social housing where it doesn't really fit in anyway.

Taylor Atkinson: I wonder how they came up with that number. Like Yeah. Pharmacy. Fifty was two rounds, so just tack on another file.

Matt Glen: After a couple of beers, let's just double it.

Taylor Atkinson: Yeah. The other point, you know, we kinda spoke about, which you've spoken about, you know, fairly passionately a bunch is the foreign buyer ban.

Matt Glen: It does not make any sense. Like, especially, I understand maybe in back when I guess Chinese people were buying all the expensive houses and keeping them vacant, but now we have a vacant house tax. And a poor environment? Like, just thinking about this poor environment. Like, hey, what's going down in the US?
We have, like, basically, an opportunity to brain drain so much of the US so they can come to Canada, but they can't buy a house when they get here. Right? Like, Thanks for that. Also, like, she said it in the show, but, like, it is kind of racist to say Chinese or Asians cat buy houses in Canada. If you just look at a map, look at a bigger country is and can't buy a house.
Here unless you live here? Like, what yeah.

Taylor Atkinson: And she highlighted, like, it's kinda geographical. So, you know, in certain parts of greater Vancouver is really where it's being affected most. But, one, like, you know, who cares if they're buying preconstruction development? Like, that's great. It's investment to to our economy, which we need.
And then the other fact would be, you know, luxury homes in, like, North Vancouver or something, which is, like, again, who cares? You're pumping a lot to

Matt Glen: three million dollar house? Why are we just saying no to that money? Even if it's, like,

Taylor Atkinson: a hundred transactions a year. It's absolutely a drop in the bucket. But it's not even just like the capital being invested in the economy. It's the confidence. Like who internationally was even interested in investing in anything in Canada right now, let alone housing if, like, we're restricting them to.
So it was a really cool show.

Matt Glen: Okay. Let's just stick on these presales. So, like, agreed. So, like, we talk about this, like, the presales, like, how they get off the ground. We've talked about the show, like, many episodes, developers have to hit a certain amount of sales before they can even get them financing to build these projects.
So, like, when you're buying a presale, you're basically paying money to finance a project and put more units on. Right? So when you just make it hard as possible to do this, we need more housing. We need more housing. Everyone says everyone knows it.
The path should be cleared for you to do this. So not just roadblock after roadblock after roadblock to get these projects programmed. It just does not make any sense.

Taylor Atkinson: Yeah. There was also a post I mean, there's a bunch of different municipalities across Canada, but I think Vancouver, like, new single family homes sales were down, like, fifty eight percent from last year. It's, like, no one is building homes because no one's buying these homes because they just cannot afford, like, DCC fees or, like, artwork or, like, any of these Yeah. Policies. So anyways, I guess, like, you know, Anne's kind of in the weeds, speaking to developers, speaking to government, she's kind of the middle person.
You know, trying to find the middle ground that works. Yeah. A lot of great stuff in this show. So I think you guys are gonna enjoy it.

Matt Glen: Alright. This episode, like, every episode sponsored by Century twenty one, insurance Realty, the best brokerage in the interior of BC. We're growing. We have property management. Sales, residential, and commercial.
We're in it. We are putting offices in seminar, Vernon, Preston, Kasselvar, CalOops. We're all over the interior. So If you're a buyer or seller looking for an agent, give us a call or if you're an agent looking for brokerage, give us a call and enjoy the episode. It's a good one.

Taylor Atkinson: Okay. And welcome to the show. So grateful to have you here today.

Anne McMullin: Pleasure to be here. Thank you.

Taylor Atkinson: First of all, can you just kind of give us a real high level who you are and what you do?

Anne McMullin: Yes. My name is Anne McMullen, and I'm the President and CEO of the Urban Development Institute. Which is an organization that represents the commercial, residential, and industrial developers in British Columbia. And we advocate on behalf of the industry and also provide opportunities for networking and education for our membership. Our membership is about eight fifty companies since you join UDI as a company, not as an individual.
And we represent what is the development industry. So it'd be all the major developers in British Columbia as well as architectural firms, engineering firms, accounting firms. So any company that is related to the process of development, yeah, will represent literally hundreds of thousands of people about British Columbia.

Taylor Atkinson: Awesome. Well so, yeah, you guys are obviously have what do you call them, like, an event like, in Kelowna? You're based in Kelowna Vancouver, where else in B. C. Victoria and Victoria?
We have

Anne McMullin: an office in Victoria. And also, as you said, in Kelowna, our main office, I guess, our pet office. That's how come they cover.

Taylor Atkinson: I didn't know that you guys were so intertwined at a government level advocating and giving feedback, and that communication line is still well open. So I guess is that one of your main jobs is to take you know, feedback from developers and provide it back at a government level and vice versa, you know, when you hear policy coming down the pipeline, like, provide that to developers?

Anne McMullin: Yeah. That's exactly what we do. You know, I have a large board, but then we have a tighter executive committee made up of nine people and we meet monthly. In fact, we probably meet and talk almost every day, many of them. That is our job is to advocate on behalf of the industry.
And we work with all three levels of government at the municipal level, the provincial level, and the federal level, and we work both with elected officials and the regulators, the bureaucracy. And it's just exactly as you say whether it's policy that is being developed by government or more often we've got recommendations of how to improve policy. And so that is a huge part of what we do. And we have very strong working relationships with all levels of government and with bureaucracy. We've been out of a long time, and our information is always factual, data driven, and we come up with solid solutions.
And so really you know, our job is to advocate on behalf of the industry, but also to help the government as well, but also really it's about great and great communities.

Taylor Atkinson: Yeah. I mean, one of your most recent posts, it's a little bit, I don't wanna say, depressing, but like there are obviously a lot of developers being vocal about having layoffs and, you know, struggling right now. Do you wanna try and summarize that post a little bit?

Anne McMullin: Yes. And I think that's the crux of the issue that we have right now. Is the cost of building homes is more expensive then the average person in British Columbia can afford. And as a result, we're seeing less projects launching. We're seeing less starts, less applications.
And as a result, we're going to start seeing layoffs, which we've already started to see. So we've had enormous pressures. Of course, we've seen rising interest rates, although they've come down a bit. We've had escalation in construction costs. And of course, labor costs always go up due to inflation and cost of living increases.
And we can't do anything about those. But what government can by role in this reduction of policies and taxation and fees and charges. And so now in some cases, it's fees, taxes, charges and even sort of cost of waiting for processing can add up to thirty percent of the cost of building a new home. And when median incomes in this province household incomes are about a hundred thousand, dollars when you get up to a certain price point, the buyer can't afford it, and we've been warning all levels of government that we're getting to that point. You can't keep adding fees and charges and costs and all these things.
We're gonna hit the ceiling, and we've hit that ceiling for eighty percent of the population, can only afford up to about eight hundred and fifty thousand. Dollars So that's why we're seeing a real slowdown. And the repercussions of that are just starting to be felt because these things unfortunately take time. If a developer puts an application in or maybe slows down on a project or got a build in permit but doesn't go ahead with that project, then the people that we're working on it, you know, is the potential of layoffs. So we have seen layoffs at West Group at Reddy and at other companies.
And I know that engineering firms and architectural firms are all waiting and wonder when is this going to fall. And the industry really isn't in a state of crises, but it's that cost of how much it costs to build and what people can afford. So is complicated, but in a way, it's just simple arithmetic, it's just simple math. When you're producing something that people want that can't afford, you know, it doesn't get sold, so then you don't build it. They don't make it.

Matt Glen: Yeah. Like, the government's been receptive to any of your suggestions or anything?

Taylor Atkinson: Or

Anne McMullin: Yes. But this isn't a criticism of government, and I don't wanna comment on taxes, but government is very slow. They've bought many competing interests. And the latest announcement, which was paying the majority of the development cost charges at occupancy rather than at building permit. You're saving the interest on that money over that three or four year period.
You know, we've been working on that. We had to demonstrate it from a financial viability perspective, but government need to figure out, you know, what's gonna cost the government or not when it cost the government? And then it's got to go to cabinet, you know, so these things just take time. And so it's unfortunate because it took time to get here and not take time to unwind, but there is receptivity, yes, very much. So in some municipalities are better than others, and the provincial government is not receptive to it because they don't want to see layoffs, but now we've got to go back to drawing board.
Okay. How do we do this? How do we unwind that? You know, what are the unintended consequences? So it's well frustrating, I guess, because I don't like the phrase, but I do feel a little bit we told you so.
But here we are. So

Matt Glen: So the DCC is being paid at occupancy just on Kelowna. Is that a thank you, Worthing?

Anne McMullin: No. It's a British Columbia thing. I think it starts January twenty twenty six. So you can pay twenty five percent of your DCC at building permits, and then you can hold off seventy five percent of the rest of it for four years or at occupancy, whichever comes first. The developer has to take out a surety bond to guarantee that that money is paid.
So the municipalities are left whole. So it's no cost to municipalities because they also have the guarantee that it will get paid. For the developer, what it is is that saving the interest on that money that they would have to borrow to pay for the DCC because they don't get paid for the building in a sense until you occupy when you close, then you as a buyer pay. So the development cost charge, it could be like thirty or forty million dollars. So you're saving, let's say, four and a half percent on thirty million dollars or forty million dollars.
They all add up. Yeah. Well, let's get things moving. It might, for some, but there's been so many fees charges taxes policies that have been layered on over the last number of years. We need to change about fifteen things.
To really make a difference.

Taylor Atkinson: I mean, we've brought this up a few times over the last two years, probably, like, yeah, let's delay DCCs until occupancy. Seems like a no brainer. I guess, my only question in regards to that is, is the DCC, is it locked in at the time of the application? Like, that's how much you pay? Or is it, you know, let's say, they paid twenty five percent of the DCCs now.
And then in three years, they have occupancy. Is it based on the new DCC fees in, like, two thousand twenty eight?

Anne McMullin: That's right. It will depend on the municipality. Right? So, you know, like, sorry, for instance, they're not raising their DCCB. So it will depend on the municipality.

Matt Glen: Have you been dealing with this new GST for for some homebuyers? That is a rebate and not exemption. It's confusing because I had a buyer walk out of a deal recently because they just didn't have the cash to pay for it to get the rebate in the future. Almost seems it's not really helping the right people. Do you have any thoughts on that?

Anne McMullin: I agree. You know, governments have all been well intentioned policies, but in practice. So depends, you know, the ability of a developer too, to say, okay, we'll we'll pay it. There's a way of almost loaning

Taylor Atkinson: it Yeah.

Anne McMullin: To the buyer. So sort of creative solutions in that regard because, yeah, you've gotta come up with the money. Can you go to your bank and borrow it through your line of credit or But often as first time homebuyers, they're using their very last penny. Like, I don't even have any money to give you so that you can give me back. Right?
Because I don't have five bucks. Right?

Matt Glen: If you have the money

Anne McMullin: Yeah. It's like, can you five bucks. I don't have five bucks to loan you. So even if you're gonna give it back to me, I don't have it. So but yeah.
So there are sort of creative ways of looking at can the developer help the first time home buyer until once they close, you know, then it's deducted. Yeah. So there's creative ways, but it's a huge amount of money. So it's you and me that are ultimately paying for it through our taxes. But, you know, we have lobbied for did the GST rebate on all new homes under a million dollars?
Because

Taylor Atkinson: for

Anne McMullin: the first time home buyer, it's one thing, but, you know, it's like to see about two people or two apartments and they've come together. Well, they're not with some home buyers, and nobody wanna buy bigger and it doesn't allow them to move out of or move out their housing continue.

Matt Glen: Taylor and I have been talking a lot about it. It should be for all principal residences under a million. Like, it makes sense to GST investors, I guess, but, like, I agree. Yeah.

Taylor Atkinson: I mean, can you give us some insight on some of the conversations you're having at? Government level? Like, what suggestions or solutions are you guys discussing with them or urging?

Anne McMullin: Well, it is a number. Both at the municipal level and at the provincial levels. So, you know, one of the ones is a really big one is in building, you're required to have a certain percentage of prices twenty percent of below market rental units in a building. So the new renter is subsidizing essentially twenty percent in the inclusionary zoning in a building. And at this stage when the builder can't even afford to build at what the going rents are.
To lower that, we can even lower it to five percent. And it sounds like a great idea, but when the cost of delivering a unit is more than what the average person can pay in rent, and then you've got to further add more cost because you've got to now subsidize twenty percent. So that's a big one. You know, I don't want to put any sort of subjectivity answer. Inclusionary zoning sounds great.
Let's have all the high rent people pay for the low rent people, great. But if the money is not there, again. If you don't have the five dollars to loan, then we're not gonna get anything built.

Taylor Atkinson: Yeah.

Anne McMullin: And so the next one we'll just talk about is the rapidly advancing green building standards. Again, I'm not putting on any subjectivity to it, but it adds an enormous amount of cost. So we're talking to the provincial government about that extensively. So when you look at green building initiatives or what they call the step three, the new building code, it's adding upwards of fifty thousand dollars to sixty thousand dollars a door. And the savings to the home buyer or the homeowner is about five to ten dollars a month.
Now you can argue that it's stating things and then body carbon and those sort of things. But we said, look, we need to do a cost benefit analysis. What is this costing? And what is the benefit? And as a society, you know, that's what we're calling for.
Well, then, you know, there's gotta be offsets. You know, whether it's the auto industry or other industries, you know, whether it's government subsidies or tax free, but you keep adding and adding and adding, you know, whether it's tripleizing the windows and it sort of goes on and on or the building requirements that are in place now. The buildings that were around, you know, built fifteen years ago, don't have those. So are they less safe or are they less green? You know, so I think that when we bring in these initiatives, we really need to be mindful of what the costs are.
So we're adding a hundred thousand dollars a door. What benefit are we getting? So the provincial government and the government have agreed, yes, let's look at this. Let's examine this. What is really required and where can we or have lower the cost?
You know, it's the mandatory electrification buildings, no use of natural gas, you know, EV charging stations, saving existing trees, so then we have to change the routing of the parking lot or the driveway, and all that, then that adds more carbon from concrete and things. So then we've got to pay for that because we've added more carbon, but it's because of a requirement to save one treat. So again, I'm not saying that these things are good or bad. My tongue is to say whether the impact and the cost that it has on housing and that delivery of housing. It's their job to figure out whether this is necessary for the environment or not, and if it is at what cost.
If it's costing so much that we're not getting housing built, that's what we need to think about. And the new building code as well is requiring the twenty percent of units be adaptable. Again, that adds cost. And often, they don't get rented or purchased. So then you're holding them for when somebody may or may not want those units.
You know, so when you have an adaptable unit, it has to be bigger. There's all the changes to it. You can imagine that go into that. And when twenty percent of them have to be, you know, you're adding cost. Those are the three sort of big ones that we're talking about.
I could rattle over a whole bunch more like in the city of Vancouver and there's a public art fee of a million dollars of building.

Taylor Atkinson: I saw that in one of your emails. What is the public art fee?

Anne McMullin: You pay a million dollars to city towards public art, or you can put a million dollar art installation in your billing. One or the other. Most developers will choose to do it themselves just because I don't know. I don't have some control.

Matt Glen: Like, affordable housing, twenty percent of these places have to be under rent, but you need to pay a million dollars for a statue.

Anne McMullin: Yeah.

Matt Glen: What's going on with that?

Taylor Atkinson: Yeah. Who came up with that? Like, when was that implemented? Like, I don't understand it's gotta get passed. Right?

Anne McMullin: Right a while ago. Yeah. You know? And then saying, okay. We're we're gonna reduce parking, but you have to now give everybody a bus pass.
We're like, well, they're gonna go into the building, then they probably don't have a car. So what is it our responsibility to get to the bus stop?

Taylor Atkinson: At, like, the developer level, like, is their feedback? You know what? Like, we're just gonna put things on pause, or are they leaving to Alberta or the states? Like, what are developers doing right now if it just doesn't pencil?

Anne McMullin: Well, it'd be above. So pre sale projects would frame concrete townhomes, are tracking well below pace of sales, which is needed to hit the seventy percent pre sale threshold, and some projects are just on pause. Many projects are on pause.

Matt Glen: In Kelowna, most are in pause. I don't know if there's any new ones coming for sale. It's a tough one right now for the pre sales.

Anne McMullin: Building permits in Metro Vancouver, and I think around the province have dropped by about ten percent. Some of them have actually experienced declines of forty percent and even as high as eighty five percent.

Matt Glen: In your opinion, do you think this is gonna actually raise prices in the next five years because of all of this slowdown?

Anne McMullin: That's the sad part. There's only twenty percent of people that can afford it. And if there's less supply. So then that twenty percent will then be competing for that short supply. Yeah.
So then the prices will go up. And then you're creating a bigger delta between what's available and what's for sale.

Taylor Atkinson: Yeah. I mean, you hear it frequently. From a small amount of the population that's probably hoping that the market's gonna crash, but they're like, you know, it's not sustainable. These prices aren't affordable like it's going to crash. And you're like Yeah.
I see where you're coming from. However, like supply and demand would argue that point.

Anne McMullin: Well, I think that it's not going to crash. What is crashing? Is our ability to build. So it's not that the prices are gonna come way, way down because the cost of delivery hasn't come way, way down. So you're not going to flood the market and lose money.
Why would you do that? Why would you build a bunch of buildings when it's costing you a thousand dollars a square foot to build, the people can only afford eight hundred and fifty dollars a square foot. So that doesn't make sense. It's not the market's crashing. The industry's crashing.
You know, so our price is gonna come off a little bit. Sure because, you know, with rent, the prices are coming off for sure because buildings got built and they need to be rented.

Matt Glen: Yeah.

Anne McMullin: And so developers or builders are renting at a loss. And over time, the value of that building will go up and the equity in it will be paid down, and rents will go up a little bit each year. So over time, if you have building a building and you need to collect five or six dollars a square foot for rent to cover your cost, you're not doing that very often. Rents is sort of is a three fifty to four fifty, a square foot. I mean, it's all these people who pay less than that, but, you know, you're getting up there at that price.
So, you know, if you think it's five dollars a square foot and you're living in a thousand square feet, you know, you mean by that as much. But they can't come down that much and it's so much based on income. Like I said, when there was room in the market, you know, when you could build for three hundred and fifty dollars a square foot and incomes were at that a hundred thousand dollars level, there's a room. And so governments have kept adding costs. And frankly, in a way seeing the industry like an ATM just kept taking and taking and we said, there's a limit here.
There's a limit. We've reached the limit. Oh, no, you haven't. You keep on building. You say that all the time.
I'm warning you. There's a limit. Here are the incomes. Here are the costs. Many of them like, oh, See.
Okay. So how do we reduce costs? Or governments lower income tax? Interest rates can come down a bit more whether they will or not. I don't know.
Income tax is going to come down? I don't know. PST is going to come down. I don't think so. Unless you have more money in your jeans or more money in the bank or more money is coming in every month.
Salaries are going to tick up a little bit each year. You know, the cost of living allowance are going to go up two percent per year, your salaries. And can costs come off two or three percent? Three or four percent over the next couple of years, then maybe there's some or some profit that you have to demonstrate to the banks that you can realize a profit, then you will get financing. But you can't get financing from a bank unless you could demonstrate that project is gonna be profitable.

Taylor Atkinson: Yeah.

Anne McMullin: Banks are not in the business of losing your money or my money. You know, they're not gonna loan you that money if they think that you're gonna go underwater.

Taylor Atkinson: The salary is an interesting one to me because, yeah, it does make more sense like people do need to earn more money compared to the expenses we have. But where does the salary come from? Like, I feel like in Kelowna, we have a lot of small businesses entrepreneurs. So, you know, if a store down the street needs to pay their employee four bucks an hour more, who owns that store? You know, that's a direct expense to them.
So we're just kinda like chasing our tail. In that scenario. Well,

Matt Glen: that's how inflation kinda works. As everything gets more expensive, then wages have to go up, then things get more expensive, then wages go up, and it just kinda gap. Exactly.

Anne McMullin: Or can you lower income tax? But then that's less money to government. Then the government needs to they're spending and how they spend and how they spending way more of our money than they should be. Everything's connected.

Taylor Atkinson: Yeah. To me, that one is like staring us right in the face. Like, the spending needs to be under control a little bit. Like, that seems like the easiest part of this. But I guess, when was the writing on the wall?
Like hindsight, what year was this kind of developing where people were like, okay, this is a serious problem? Like, it seems like we've been talking about it forever.

Anne McMullin: Two years ago, two and a half years ago, when we started saying, look, incomes are at this level, and it's now costing us this to build. And it was two or three years ago when projects had been launched or sales had been started and construction costs during COVID started to go up like this. And those buildings they sold at at this level, you know, two thousand twenty one level, and they're building at twenty twenty three prices, and it doesn't work.

Matt Glen: Mhmm.

Anne McMullin: And so we've seen foreclosures, seen companies go under. You've probably heard about the foreclosures. There's been buildings that aren't getting finished, buildings that aren't going ahead, buildings that have started, maybe digging a hole, and it stopped.

Taylor Atkinson: Yeah. If

Anne McMullin: people say, oh, I see cranes in there. Well, yeah, those were cranes of projects that were sold, you know, three years ago, let's say Yeah. And then they got their building permit. And then they started construction. And those projects may or may not be underwater depending on what they sold for and what, you know, contracts that they had in place for construction costs.
So the ones that are, you know, midway to big companies are able to hold on. But developer, I know well, speaking with him last week, he said, take twenty five to thirty percent of people are not closing on the project. So he's gonna have thirty percent of his units. He's gonna have to pay GSC on those. He's gonna get the deposit back, that the deposit's a fraction of what it cost him.
And he's gonna try to sell them in this market. And people just can't afford that because interest rates went up and lost their job. And so people are, you know, backing out on their purchases

Taylor Atkinson: we're seeing that as well. I guess, like, is there a light at the end of the tunnel? I don't wanna fully blame the government. I know that's not what we're doing here, but, like, obviously, you know, we kinda went through COVID. We went through, like, essentially getting close to hyperinflation.
Like, you know, some of the things were kinda out of their hands, obviously, globally. Are there some solutions that are being implemented where it's alleviating some of this pain and, you know, you guys in your organization or developers are going, yeah, if we hang tight for the next couple of years, like, we feel there's some optimism at the end of this.

Anne McMullin: Well, I think what I would say is that we are working extremely hard over the next year, eighteen months to make substantial changes. So am I optimistic? I have to be. You know, I have to be optimistic that we will get changed and that all of us pulling together. It's that our companies and our employees and everybody is speaking with government doing the research, getting the information.
Sitting down with regularly saying, this is what we can do. So yes, I think there will be, but it's going to take time. It's going to take, you know, a year to eighteen months. Like I said, the DCC change is not going to be in effect right away. It takes a bit of time for it to be implemented.
So the light at the end of the tunnel is that we do get some substantial massive changes in policy that income levels do go up by cost of living and that interest rates perhaps come down a bit. That's the only thing that we've got. That's probably two years. Before there's any substantial feeling really for projects to say, okay, we got this. It's gonna take time.
But this is also a year of, like, massive slowdown this year. So then you gotta catch up. You know, and people say, well, where is everybody living? Well, they're living in with roommates and in basins and weeks and there's couples living with other couples and people staying at home, living at home longer, moving away from Vancouver, moving away from BC.

Taylor Atkinson: Yeah, we're seeing a population decline in BC, just crazy.

Anne McMullin: And so when you have a population decline, you have less people paying income tax, you're building less homes, you got less people paying property tax. Indeed, property transfer tax alone is, I think, I'd have to go back and look, I shouldn't have that stat, but I think it was a lumpy as high as three billion dollars that they would receive in property transfer tax. Well, they're not going to get that. They're going to get probably half that So that's a hit in toll in the government budget. And then if there's a slowdown in construction, if construction's at thirty percent in Kelown or Vancouver or wherever, then those are job losses, and that's less income tax being paid, and that's less product being paid.
That's less people working. It's a cascading. Because I don't have to explain it to you or your viewers. We all know it has to be thinking, oh, well, the developers who know they're just not getting rich. That's not the point.
The developers will figure out where to go and build or they just won't build, but what does that mean to you and me? And our families and children and people with jobs in the construction sector or engineering or architects is hard to turn it around.

Taylor Atkinson: Howard Bauchner: Yeah, with property transfer tax, I'm curious, have you heard any Rembley like Do we need it in BC? Obviously, it's BC in Ontario, but, like,

Matt Glen: two or three billion dollars.

Taylor Atkinson: I know, but, like, is that not something we can take away?

Anne McMullin: Well, I don't disagree with you. However, it goes back to can the government reduce their costs by a billion dollars.

Taylor Atkinson: Yeah.

Anne McMullin: Maybe you would need property transfer tax or maybe that could be lowered, but they rely on it. It's a cash cow. Right? You know, you get GST on new homes or property transfer tax. It's incredible.
The amount of taxation is put on housing. Yeah. People don't see it because people could afford something. Right? But now it's even hard to afford, you know, an eight hundred square foot condo in Kelowna or Victoria or in the markets, you know?
And the cost of construction from it is more expensive in Kelowna than it's still or meaningless.

Matt Glen: What about something like the foreign buyers' ban? Like, when I look at this and I think about what the briefing right now with the US, what's happening, feels like it's a massive opportunity for us to brainstorm the USA, but they're not allowed to come here and buy a house. It just doesn't make any sense to me at least themselves in the border. I don't know about Easter West, but what's your opinion on this?

Anne McMullin: We've been opposed to foreign buyers' tax since Christie Clark brought it in all those years ago. It doesn't do anything. First of all, in our opinion, it was a racist thing to do because they were seeing certain people buying up these big single family homes on the west side of Vancouver. Yeah. It's ridiculous.
It didn't help. In fact, it hindered. Nobody has taxed with that. We warned them, you know, I don't know these taxes, whether it's farm borrows tax, speculation tax, additional school tax. You can't tax your way to affordability, and we told them, you're just gonna raise prices because it's gonna limit supply.

Matt Glen: Yeah.

Anne McMullin: But with the foreign buyers tax or the foreign buyers ban Yeah.

Matt Glen: It's a ban. It's not even a tax. It's a ban.

Anne McMullin: It's access to equity. You're widely banning equity in the development of housing. It's a huge risk to develop. A tall building or a building, you know, you build a single family home, it's a risk, but think about the tens of millions of dollars that go into a multifamily development. And if we're only allowed to use Canadian money and this is Canadian money swirling around, you know, we need to have an influx of an investment in our country, an investment in our industries.
You know, an investment whether it's natural gas or, you know, force you're mining or whatever it is, you know, the auto industry, the steel industry, you need foreign invest but we need money to come to our country. You know, our leaders go on trade missions to other countries to encourage them to invest in this country.

Matt Glen: Yeah. But don't buy a host.

Anne McMullin: Don't invest in the multi billion dollar housing industry because somehow that's wrong.

Matt Glen: I agree with you. I honestly I've tried to figure out, and it just makes no sense at all.

Anne McMullin: And then politicians will say, well, it's popular. You know, the public is supportive of it. Well, is that gonna make policy in this country in this world if we always went with what's popular, maybe we wouldn't be making decisions for the minorities or the least advantaged. Policy should not necessarily be BOHA! It's popular.
And if it's the right thing to do and if that's what we need, we need more in capital in our market. I talked about all these policies and regulations, access to capital is the biggest stumbling block because if you can't get your financing, you can't get your project. And you've got to sell a multifamily building within twelve to eighteen months. And if it's a large tall building, it's almost impossible right now to sell seventy percent or eighty percent of it, and you have no other way to access capital.

Taylor Atkinson: Like, it seems like in the last few years everything's been purpose built rentals, MI Select, that type of funding. I guess, two questions. Do you feel that that's maybe been a little oversaturated and they've really just focused on that? Or is there asset class that they are not focusing on that they should be, stratified condo properties, single family homes, like, there's no creative type funding, like, by the government to support developers on those asset classes. Should there be?
And is there anything coming down the pipe on that? Yeah.

Anne McMullin: I don't know if it's oversaturated the rental market, but, you know, took advantage of it. We hadn't built rental in this country or in province for decades properly. But, you know, that all the analyzed, like, programs changed again and other. They charges for that insurance have gone way, way up, something that program is done. We've said that together, you know, even if for investors.
So, you know, again, the investor is bad. Dubai a condo sort of profit from it was seen as bad, whereas you buy a condo and you put it into the rental pool and you leave in the rental pool for twenty years, yes, you made some money on it. But I don't see why we demonize that. So we said, okay, if you really don't want people flipping, what if investors could purchase and they would get the GST rebate as long as it stayed in the rental pool for a certain number of years. So we did get the GST rebate on purpose built rental, but only if you're building it for a certain number of units.
But if you bought a couple of units, and you're renting them out and as a small mom and pop operation. What's wrong with that? But somehow, we don't want that, but nor do we want the big REITs or the big foreign investment. So where's the money coming from? So, yes, there are ways we believe that you can incentivize all forms of housing.
A lot of it is that getting the policies, the layering and layering policies out of the way. You know, don't have so many of these requirements. You know, you've got so many of these requirements like I said, whether it's green building initiatives, EV charging, and we don't even have access to the power. Yeah.

Taylor Atkinson: I mean, that's been a topic in Kelowna's. Like, are we going to have enough power in the next couple of years to fulfill any of these projects? So, yeah, EV charging. Not be necessary. Howard Bauchner:

Anne McMullin: And then, soil relocation. We think to the average person, they just want a nice helm with the nice fixtures and things, but these are the things that we have to deal with. It's now we have no way to dump soil because on the agricultural land, it doesn't meet the requirements you know, it's clean soil or we don't have enough dumping sites. So now you're having to truck stuff for thirty, forty kilometers or there's nowhere to dump it. And how has that stayed in the environment?
And so we have had a meeting. We did just have a meeting with the minister last week. And it's okay. We see the problem. And, you know, we need to create more dumping sites on Crownland or in other areas because that had its costs.
You know, you got to hire the truck. The truck is driving for literally hours and then you got to dump it somewhere else from the Okanagan and some plays if there are any docking sites, I mean, in the island, they're having to truck it up and over the mala hat, you know, for a couple of hours. So those are sort of things, like, it sounds like a really good idea. Oh, yes. Well, that soil doesn't match that soil or this.
So you can only dump soil on the agricultural land if it's soil fit for food production even though the soil is actually probably completely fine, but it might be just point zero one percent more salinity that are something like that. There isn't that subjectivity. Salinity levels, you know, the soil can't go there. Well, it just came from here. Why can't I put it over there?
Well, you know, so there's the kind of rules that you're up against that and you say, who came up with these guys on, you know, good intention. Yeah. But not looking at the cost. And when there was, as I say, room in the system, when there was enough profit I suppose in the system that could pay for that stuff, but those days are gone.

Taylor Atkinson: Yeah. At the federal level and provincial, you know, in the last year, we've had new leadership, not new parties, but new leadership. Do you feel that that leadership in their campaigns, like the promises they've made, are now following through with those promises? Like, is it still going in the direction that people voted for?

Anne McMullin: At the federal level, it's too early to tell, but the wheels and the machines of government are going in that direction. They're not huge changes. Right? The GST relaxation talked about, you know, and then the infrastructure sort of paying for half of the DCC to that half the development cost charge, but the amount of money that was earmarked in the federal budget wouldn't pay for even half of what that is. So at the provincial level, there was a lot of really substantial and good work that was done on changes in legislation.
But then at the same time, interest rates went up and the cost of housing delivery went up as well as the new building code that came in, which is adding ten percent to fifteen percent Building step three, increasing the DCCs at all levels. There was some good work done. But now in order to have that legislation work, we need to take a lot of the costs out of the system. The provincial government is saying, oh, we didn't realize, I guess, they were told that people were still making money, so how could the possibility be a problem? I said to once a deputy administrator says, it's just math.
It's just money. And I said, you know, if it costs more to build, then someone can afford, it doesn't get built. And they went, okay. You know, so people complicate housing. You know, it's an answer to homelessness.
It's the answer to adaptability. It's the answer to this state in the environment. Now, we're just trying housing build. Let's height housing a priority and ensure that it is safe, you know, sustainable, accessible. But if we're bringing the policies to achieve those things and it costs more to get it built, then we need to look at that.
Then we need to rethink that. So to answer your question, and I think that there is a recognition and I just have to be hopeful, but it's a lot of work. I mean, what else I've never worked so hard? I've never worked in such a frustrating difficult environment in my career. It's hard.
It's really hard and that you know what needs to be done. And that you know it's gonna take time, you know, it's just to see people lose money.

Matt Glen: Yes, ma'am.

Taylor Atkinson: If you could just make one policy change, one rule, anything like a change that would be implemented tomorrow, whether that's removing current legislation policy or you know, implementing something, what do you think would be the biggest needle mover?

Anne McMullin: Well, in the lower mainland anyway, I think it would be removing the requirement for a twenty percent inclusionary zoning at least until things turn around. And I think that other big one, certainly the Okanagan and Victoria, the costs that are associated with the new building code, there has to be a financial offset. You can't add ten percent to the cost of building. With government requirements without compensation or offset?

Taylor Atkinson: Well, honestly, this has been awesome. Yeah. I've really been looking forward to this conversation, and, yeah, you did not disappoint. So thank you so much for coming on. Hopefully, we'll see you next time you're up in Kelowna at Walmart at meetings.

Anne McMullin: Definitely appreciate this and it was really a pleasure to talk with you too.