Q: How is this different than inclusionary zoning (i.e. for every 10 units built, a developer must build one for affordable housing) or density bonusing where cities will give developers increased density in exchange for an amenity (i.e. cash for an affordable housing fund)?
A: The key difference between the above approaches and social offsets is the ownership and accountability taken by individual citizens in the community. Zoning and bonusing are institutional measures that are imposed by governments on citizens’ behalf.
In contrast, social offsets are explicitly designed to be community driven:
- New community residents (the new condo purchasers) are investing in a more inclusive community
- Existing community residents have the opportunity to engage in the local community through co-operative home ownership
This extends a fundamental principle of Community Economic Development: community engagement and empowerment. In addition, it means that this project could start immediately and make an impact in providing affordable housing. Zoning and bonusing, while valuable, take time in lobbying governments, enacting by-laws and legislation, implementation and enforcement costs and more.
Additionally, both of these approaches “force” developers into the affordable housing – an area in which they are not comfortable and not necessarily going to make the best effort to deliver. Social offsets provides a mechanism for community members to actively participate in the creation of a liveable, affordable, diverse and empowered community
A common question about Social Offsets is how to determine pricing – what will people be willing to pay?
Offsets are priced and marketed to individuals rather than developers. For simplicity, the offset is priced at 1% of the purchase price of the unit.
[An alternative would be to mandate that developers match funding. However this approach would require legislation. The idea behind social offsets is to develop a program that does not require government intervention]
This percentage would be consistent across development styles, and ideally across Canada. The selling price and building cost per unit will vary by region but should vary in proportion to each other.
As an example, in Vancouver, if offsets will be sold at a rate of 1% of total project revenues for new condo developments, this translates into $5000/unit given the average price according to real estate board for condos in Yaletown are $500 000.
According to CMHC Housing Marketing Information August 2008, there are approximately 1600 units being built in 2008 in Vancouver – Downtown and an estimated 1760 being planned for 2009. Therefore in two years the social offset fund will have $16.8 million dollars. Social offset funds will leverage additional grant funding at a rate of 2:1 and $320,000 is needed for each unit thereby funding the creation of 158 units of affordable housing in the city of Vancouver.
The model attached shows the impact of changing these variables and allows some basic price sensitivity analysis and assessing the feasibility of Developer matching funds
Social Offsets Pricing
To introduce the concept of social offsets, I wrote a FAQ making the assumptions that the idea is already up and running. This first post introduces the basics for discussion. You can read my full (still evolving FAQ) here
What is a “social offset”?
- A social offset is an investment you can make to offset the social impact of your housing choices. Just as a carbon offset mitigates your impact on the climate, a social offset mitigates your impact on housing affordability in your community by creating new alternatives for residents
Why are social offsets needed?
- New developments in areas such as the Downtown East Site (DTES) of Vancouver can be great economic stimulants and start to regenerate neighborhoods. Unfortunately, the benefits of this revitalization are distributed very unevenly. Existing low-income resident are no longer able to afford to live in their own neighbourhood. They are often forced to leave – either for economic reasons or simply because they have been evicted and their building torn down
How does it work?
- When you buy a social offset, you are contributing to a national fund to build local projects. The philosophy is “give nationally, build locally”
- The goal of this approach is to engage citizens across the country to become part of the solution by funding innovative creative solutions for affordable housing. Local expertise is used to evaluate proposals ensuring both community involvement and community appropriateness