Brandon’s rapid growth may put the city in an envious position, but that growth has come at a cost. In its ongoing series, the Brandon Sun is studying the city’s affordable housing crunch and how other growing communities have dealt with their housing issues. This is the third article in the series.
SASKATOON — The Hub City hums with construction activity similar to Calgary, which is saying a lot given the Alberta centre’s history for rapid growth.
But how Saskatoon managed that feat differs greatly from Alberta, which is more known for private sector development.
Unlike many municipalities, which like Brandon, went away from buying land and developing its own housing projects and left that to the private sector, Saskatoon not only has stayed in the game but thrived in it, said Derek Thompson, a City of Saskatoon land development project manager.
“We are a department of the city that operates as if we were a private sector company,” Thompson told a group of touring municipal officials at the Federation of Canadian Municipalities last month. “In 1953, a formal decision was made to formalize the land branch department.”
The city, with a population of approximately 230,000 people, now has 50 per cent of the residential property development market share, generates a profit of approximately $140 million each year and doesn’t borrow a dime to operate. Those profits are then re-invested into other housing projects or land purchases for the purpose of new housing.
“We are a large developer, so we are able to engage in continuous development and that gives us an advantage in that we can guide that development along. Without buying any more land, the city can develop for the next 25 years.”
When Saskatoon started to make strides in resolving its housing stock crunch, it didn’t mess around. Developments large enough to house 12,500 people — Portage la Prairie’s population is approximately 12,700 — are being built in one swoop in several areas of the city.
They are done after private developers buy tracts of land, sometimes worth as much as $18 million at a time, on the condition the entire property be developed under a single plan with central retail areas, linear parks that aid in draining excess water and overland flooding and various types of housing. Plans for light rail transit are already being made to combat growing traffic issues.
That housing construction is fed by population growth rates of 2.5 per cent a year, which translates to 6,000 people a year, or 500 people a month, Thompson said. And the land the city already owns or has sold for development can accommodate a population of 500,000 people.
As people move in, demand for housing remains high, as indicated by a 51 per cent increase in housing starts in the first half of 2011, stated Sask Trends Monitor, an economic analysis newsletter. And the year before that, housing starts were up 67 per cent to 2,381 housing units, with an average sale price of $295,768.
And since 2005, the Multiple Listing Service property value statistics show existing homes are selling for a lot more, increasing from approximately $150,000 in 2005. According to the Saskatoon Housing and Homeless Plan 2010-14 report, which is available on the city’s website, housing affordability took a nose dive as the city’s boom hit around 2007. In one year, 2007 to 2008, housing prices increased 51.7 per cent, a figure that was the largest in the country. Rent also increased at above-average rates and rental vacancy rates were below two per cent.
Alan Wallace, the City of Saskatoon’s planning and development branch manager, said when the city studied the matter in 2006-07, it needed 3,500 affordable housing units to meet current demand. To combat the need for housing, the City of Saskatoon committed to build 500 affordable housing units each year, up from the 200 it had averaged the previous five years, Wallace said.
Migrants to Saskatoon seeking better employment fortunes, however, will find apartment availability doesn’t mean the rent is cheap. The provincial government’s Housing Strategy for Saskatchewan notes that while “increasing the housing supply will increase the number of affordable options, there is a need to improve affordability.”
There was a decrease in the number of apartment units in Saskatoon from 2009 to 2010, but that trend is changing thanks to a push to build more apartment blocks. Saskatoon’s Rental Land Cost Rebate program offered funding for 1,000 purpose-built, market rental apartments. Under new regulations, owners of these apartment units can’t even apply to convert them into condominiums for 10 years, but that hasn’t stopped the construction of new units just south of the south leg of Circle Drive and elsewhere.
That has made a difference in the number of available units. Unlike Regina, where there is a miniscule 0.6 per cent vacancy rate, Saskatoon’s vacancy rate has been more than three per cent for at least a year and was 3.1 per cent as of April. That’s significant, as the Canada Mortgage and Housing Corporation generally views three per cent vacancy rate as an optimal mix between an owner’s ability to turn a profit and unit availability for renters.
While people are moving to Saskatoon for jobs, the cost of housing is rising faster than their paycheques and that has meant more people are affected by housing affordability issues. Sask Trends Monitor reported that between 2006 and 2009, housing costs grew 10 per cent in Saskatchewan while weekly earnings only increased by 4.2 per cent.
As of April 2012, the average two-bedroom suite in Saskatoon rented for $976, higher than the $901 the average Winnipegger paid, and the $948 paid in Regina. However, rent for bachelor suites ($610), one-bedroom units ($785) and three-bedroom suites ($1,069) are all lower than rents paid in Regina. In Winnipeg, the average bachelor suite ($552) and one-bedroom suite ($697) are much cheaper than rents in either of Saskatchewan’s two major centres.
Saskatoon’s vacancy rate only tells part of the story because it is only an average that ranges from 3.4 per cent in two-bedroom suites to 0.5 for three-bedroom units.
Like Calgary before it, Saskatoon now has a working homeless population and shelters run at 120-130 per cent capacity, states the Saskatoon Housing and Homeless Plan 2010-14 report. There are groups such as the Lighthouse Supported Living group, that are attempting to alleviate those pressures by building low-income housing projects to help those unable to pay the rising costs of shelter.
The Lighthouse has converted the former Empire Hotel in downtown Saskatoon into a variety of different types of housing, ranging from emergency shelters to a 58-suite affordable housing tower set to open later this year at a cost of approximately $18 million.
Private-sector groups have also gotten involved in affordable housing projects, using the programs like the 2012 City of Saskatoon Housing Business Plan. That plan offers 10 per cent of a project’s cost as capital funding for affordable housing initiatives. Rental housing projects provided on a non-profit basis can receive a property tax abatement for five years. If you are building new rental properties, there are grants up to $5,000 per suite and the same five-year incremental property tax abatement.
In 2009, Innovative Residential, a development firm specializing in affordable housing projects moved military-built six-plexes from McNabb Park, near Saskatoon’s airport, south to the Fairhaven neighbourhood in Saskatoon’s west end to create a 78-unit neighbourhood.
Even Saskatoon’s business community is finding that space is scarce. A June 12 Saskatoon StarPhoenix story reported that commercial vacancy rates are under two per cent, even as retail space increased by 35 per cent. That same story reported that the competition for good commercial spaces has led to higher rent. That has independent retailers moving to other, cheaper areas such as Riversdale, one of the founding communities of the city located just west of the downtown core and could aid community revitalization efforts.
While the massive amount of growth in Saskatoon increase property assessments, bring more tax revenue to the city and offer more housing stock that should theoretically give more people access to an affordable home, not everyone is optimistic about the situation.
The June 2011 Sask Trends Monitor newsletter stated: “The level of new construction in Saskatoon seems excessive right now.” Sask Trends Monitor’s publisher Doug Elliott said he had anticipated a bubble in the real estate market in Saskatoon and a crash in prices may be coming, but that has not yet happened.
Next week: Programs that help Saskatoon residents get into a hot real estate market.
Republished from the Brandon Sun print edition July 21, 2012