Missing Middle mythbuster: Developer debunks 5 misconceptions of Victoria’s housing initiative

If you live in the City of Victoria you’ll soon receive a notice in the mail with details on the city’s information session for its much-discussed Missing Middle Housing Initiative.

It’s the next step in a plan that’s been debated for months.

The Missing Middle Housing plan would rezone single-family homes to allow for more housing options like houseplexes and townhomes. It’s a move city staff say will help diversify housing choices as single-family residences become increasingly unattainable for young and first-time home buyers.

Following the information session, council will give first and second reading of the bylaw on July 14. If it passes, a public hearing is planned for Aug. 4.

In a recent episode of the MicCHEK Podcast, local developer Luke Mari sat down to discuss what he feels are the five biggest myths surrounding Missing Middle Housing in Victoria.

Luke Mari is an urban planner, land economist and principal at Aryze Developments. He also serves on the CMHC Missing Middle Housing Innovation Lab, CRD Regional Housing Advisory Committee and is on the board of directors for the Greater Victoria Housing Society.

He also supports Victoria’s Missing Middle Housing Initiative.

Myth #1: Missing Middle Housing won’t be affordable

MARI: “Right now we don’t have a free market on housing, we have a highly regulated market with artificial price controls. What Missing Middle Housing is looking to do is, at a broad level, increase the diversity of housing which will lead to more affordable types of housing getting built. They might not be affordable to all incomes but on a continuum, they are more affordable. We need to think of housing as a continuum.

For example, single-family homes are one option. There might be five per cent of the population that can access these types of homes. Townhomes are another option. They might cost an average of $850,000 but it might mean 30 per cent of the population can access these types of homes. Today, townhouses cost a million dollars because there’s no competition for them because townhouses are less than five per cent of the city’s entire housing stock.

I think the intent of the Missing Middle Housing policy is that if you allow a lot more townhouses to be built, you’re increasing the competition, so developers have to sharpen their pencils and have to add attractions to the units like amenities or be more competitive on price and location. If 10 developers are building missing middle housing and they all price them at one million dollars, and one comes along and prices them at $900,000, what do you think the other guys are going to do?”

Myth #2: Missing Middle Housing will result in rapid neighbourhood change

MARI: “Neighbourhoods are changing. It’s how they’re changing that’s the more important piece of the discussion. Older homes are currently being bought and demolished under existing zoning and very large homes are being built in their place. So the neighbourhoods are changing but we’re not necessarily adding additional units, and as a result we’re losing families across the City of Victoria.

The Gonzales neighbourhood is 98 per cent single-family housing. They’ve lost families over the last three census periods in a row. So we need to provide more diverse housing options to stabilize the neighbourhoods. Duplexes have been legal to rezone since 2012 but in Gonzales only two have been built in a decade because the process is extremely difficult.

MicCHEK: What do you say to the person who owns their home and fears there will be a massive apartment on their block if this goes through?

For starters there are height limits in the missing middle housing initiative. It’s a maximum of three storeys on corner lots and two-and-a-half-storeys on interior lots. This question brings up a philosophical question though: Why should past housing forms dictate and guide future housing forms? If the volume metric form of the building is in line with what’s already there, why do we care about how many homes are in it?”

Aryze developer Luke Mari talks to MicCHEK about the Missing Middle Housing initiative in Victoria. June 23, 2022.

Myth #3: Missing Middle Housing will result in labour shortages that could impact affordable housing projects

MARI: “This concern makes sense on the surface but there is a really important nuance to understand. There are two different trade networks in Victoria. The first is residential trades and the second is commercial trades. They both build housing but residential trades focus on a portion of the building code called Part 9 buildings which includes things like single-family homes, duplexes and townhouses.

Commercial trades focus on Part 3 of the building code and these people specialize in low-, mid- and high-rise construction. This is the type of housing that non-profits focus on because government money is limited so they like to focus on large-scale projects where they get more bang for their buck.

So the Missing Middle Housing policy will deliver Part 9 buildings under the Building Code, which is a totally different building group than those focusing on affordable housing.”

Myth #4: Missing Middle Housing is just a profit giveaway to developers

MARI: “I looked at all of the housing options under this policy and the city’s own economic analysis shows that the most profitable options resulted in a 14.9 per cent return to the developer. The bank requires an 18.5 per cent return for the developer to even get financing. There’s not enough profit in these projects to even get bank financing. I think we often think developers control their profit and they can charge whatever they want. It doesn’t work like that.

MicCHEK: As a developer are you excited about the prospect of the Missing Middle Housing Initiative being approved?

I would be very surprised if Aryze did a single project under this policy. I think the scale of our business has grown beyond the scale of the level of these projects, they’re just too small for our company. There are, however, a lot of smaller developers who could benefit.

I actually think this policy creates a new kind of developer, I think it creates the homeowner developer, who can partner with a developer who can utilize their property differently. We’ve been approached a few times by homeowners that want to stay in their community but want to downsize their housing option — that’s a very frequent request. Another request we get is young people who own a piece of property or have inherited a property and they have a bunch of friends who can’t afford housing and they want to build a fourplex for them and their friends to live in. If the Missing Middle Housing Initiative goes through they could do that. People would be shocked at how common a request that is.”

Myth #5: Missing Middle Housing will lead to more institutional investors in Victoria

MARI: “This one is the easiest one to debunk.

Institutional investors measure their assets in the billions. Their average deal flow is about $250 million a project. Their minimum threshold is around $120 million per project so they’re not going to flock to Victoria to do a four-million dollar townhouse project.”

You can hear the full conversation with Luke Mari on Episode 145, “Debunking 5 Missing Middle Myths” of the MicCHEK Podcast available wherever you get podcasts or click here.

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