Catching a Runaway Train—Harnessing the Value of Vancouver’s Real Estate Development Boom

I’m getting priced out of living in Vancouver, along with most of my peers, and so naturally I’m interested in how the City redistributes the economic benefits of property development so that all citizens, and not just the owners and developers, share in the benefits.

Vancouver is first among municipal governments in North America for the level of effort and resources they have committed to developing proactive policy to harness the explosion of wealth coming from real estate development.

I researched some details about the City’s benefit-sharing agreement with the Parq Vancouver development on False Creek (and one of the most valuable in Vancouver’s history), and what I found was pretty interesting. This post describes what that agreement is, how it works, and how Vancouver citizens can get the most from future developments.

How does the community benefit from Community Benefit Agreements?

The City has several ways to get value from real estate development; two of the most interesting are Community Amenity Contributions (CACs) and Community Benefits Agreements (CBAs).

Community Amenity Contributions are easier to understand—in exchange for development rights, the owner or developer give a one-time cash or in-kind contribution to the city to build city facilities like parks, libraries, community centres, and so on.

With Community Benefit Agreements (CBAs), developers commit to some specific requirements about who they hire and what materials they buy for the project so that local residents and companies get a bigger share of project expenditures, and the community gets more value from the project than they would in a ‘business as usual’ scenario where most of the labour and material spending might go out of the city, out of province, or even out of the country.

How do we know if we, the citizens, are getting good value out of these deals?

It’s relatively easy to measure whether the City and the community gets value from the CACs, in the sense that you can answer the question “did we get the money, yes or no?”—when you get a million dollar cheque, you can see it, and spend it on something like a nice new library.

It’s trickier with CBAs—we don’t get to see the benefits all in one place like that. First we have to track who got hired, for which jobs, and what got purchased, and from where, and then analyse the information to decide whether this is benefiting the community as intended.

On the one hand, it’s a bit more complicated than just getting a million-dollar cheque; on the other hand, it creates more of a long-term relationship of accountability between the property owner and the community, and that’s valuable in its own right. Let’s look at the Parq Vancouver CBA example in a bit more detail.

Parq Vancouver, a large mixed-use commercial development currently under construction in Northeast False Creek, is the signing party to the City’s most recent CBA. This agreement includes a 10% local employment and 10% local procurement requirement for construction as well as ongoing operations.

The City’s report to the Standing Committee on Policy and Strategic Priorities describes the intent of the CBA: “The intent is to ensure that benefits from redevelopment remain within the inner-city through employment opportunities for individuals living with barriers (e.g., individuals living with mental health and addictions, Aboriginal residents, newcomers whose English is not their first language) and to increase local purchasing to stimulate the economy for small businesses and social enterprises in the inner-city.”

“The intent is to ensure that benefits from redevelopment remain within the inner-city through employment opportunities for individuals living with barriers and to increase local purchasing to stimulate the economy for small businesses and social enterprises in the inner-city.”

I got really interested in this whole subject when I met Jeff Waters, the Business Development Coordinator for EllisDon, who is the lead contractor to Parq Vancouver for the construction. Waters was responsible for tracking the 10% employment for EllisDon and their sub-trades on the Employment and Procurement report that shows Parq Vancouver’s performance to the terms of the CBA. This has meant figuring out what data about employment and purchasing was available, and possible to collect, and how to make sense of it. To help EllisDon meet the hiring targets, and track who was hired for what, Waters built relationships between the many groups involved in project construction labour: the site managers, the trade unions, other contractor organizations, nonprofits and employment organizations in the Downtown East Side, and others. Jessica Breen, Jasmine Marchant and others at PARQ have also done outstanding work to get management buy-in at Parq Vancouver to meet and exceed the targets set in the CBA; to this end their work with a wide range of community partners from the inner city and the First Nations and urban Aboriginal communities has been instrumental.

Waters’ work is included in Parq Vancouver’s interim report to city council in November 2016. The report does a pretty good job of answering the question about what Parq Vancouver is doing to hire people and buy things locally, and whether their results meet the terms of their Community Benefit Agreement with the City. We can see in the report that 137 inner-city residents were employed, and that about $18.3 million in local purchases were made, but it’s a fair starting point to say “so what”? What is the expected long-term outcome from this, and how do community members hold Parq Vancouver and the City accountable for long-term effects of development?

John Cahill of Parq Vancouver submitted some great commentary with the report (see appendix 1, after the staff report) where he reflects on what their reporting numbers mean, where we may be limited in assuming the long-term effects of the purchasing policy, and how future CBAs may benefit from what they’ve learned. Among other insights, Cahill noted that it can be difficult for developers to get cooperation from contractors to follow a procurement policy when there is an open bid process in place (although in this case they were successful in helping EllisDon/Tishman to overcome initial resistance). Cahill also noted that the CBA specified hiring and procurement from the same downtown catchment areas, but this was somewhat at odds with where people and businesses are actually located, with the suggestion of revisiting how the City’s zoning policy for industrial properties has a role to play.

City staff noted, in their own report to council: “While PARQ has made best efforts for local procurement requirements by supporting a range of businesses in the catchment area, they were only able to meet their 10% requirement by extending beyond the catchment area… some of the challenges lie in the City’s limited industrial land use, or that the zoning of inner-city neighbourhoods limits local procurement opportunities.” This is where I get excited, because I intuitively understand that business, social policy, and community health are inextricably connected, but sometimes it takes some digging to see the connections… that’s usually more the job of the City Planners.

What are the long-term goals?

It’s important to know that the City planners who manage the CBAs also manage Vancouver’s Healthy City Strategy, which includes a section on “Making ends meet and working well”, that carries the specific goals of reducing the city’s poverty rate by 75% (from roughly 120,000 people to 30,000 people) and to increase median income by at least 3% every year. Progress to these goals is assessed by a set of indicators including the percentage of low-income individuals, median incomes, income distribution, job quality, and others—much of the data comes from the census and other Statistics Canada products.

To assess whether CBAs are delivering on their promise, there should be a plausible and compelling story that connects “local hiring and purchasing” (short term outputs) with “reduction in poverty” (and other long-term outcomes) in the Healthy Cities Strategy. Who decides what that story is? That’s an important question!

If it were left up to me, I would undertake to write a report that contained a mix of short, medium, and long-term outcomes of the CBA. Short term outputs are well covered, and could include the number of persons hired and total wages paid. Medium term outcomes could include following up with employees to understand the effects that local employment has had for them, which could be anecdotal, or summarized. Long term impacts (as outlined in the Healthy City strategy) could include monitoring the median incomes of long-term residents in the neighbourhood, or of other target populations at risk of displacement by development, and potentially other measures of housing security or well-being.

The way in which results are reported, and the way that the purported beneficiaries (“the community”, in this case) are engaged in the process of developing and interpreting results, is very important in terms of who has the power to tell the story about what benefits have resulted from the project. There is an onus on the City and Parq Vancouver to interpret the reporting data from CBAs and hold space for community members to review and give feedback.

The report from Parq Vancouver, on its own, does not significantly empower community members (who have little formal power) to ask, “Could they have done more?” and hold them accountable. Community members need a forum to ask questions, and a formal commitment from Parq Vancouver and the City to hear them and respond. This power dynamic was already anticipated at the outset, and the City appointed a 3rd party auditor (Nathan Edelson) to provide ongoing assistance to Parq Vancouver in fulfilling their requirements in good faith. There is also a City committee on social procurement that represents citizen interests and provides input to the way CBAs are designed and administered.

Building long-term relationships is a valuable benefit for everyone

There is huge potential value in the ongoing relationship that can develop from CBAs (compared to the one-time payments of CACs). The value is unlocked by having communities engaged with owners, directly, as well as via City representatives, over the long term, so that all parties’ interests are served.

Local residents and community members benefit from having a forum to give critical feedback, and share their stories and experiences in a way that “speaks truth to power”, and that is connected accountability from property owners to act on the feedback.

The City has a huge opportunity to better align their relationship with developers with Vancouver’s progressive brand, and without presuming to completely own or control the narrative. As with the successful Greenest City initiative, the City sees lasting successes where they are able to mobilize a constituency of engaged, passionate citizens around their policy platforms. Junxion wrote a case study about the Greenest City Community Grants program last Fall—there are relevant insights there for people responsible for real estate development policies and programs.

For their part, owners and developers have a good story to tell about their contributions in local hiring and purchasing, but there is a bigger story they could align with—a shared story about poverty reduction, livelihoods, and community well being. At Junxion, where I work, we help organizations effectively tell their stories of social impact, and I know a good opportunity for storytelling when I see it.

There is an opportunity to tell a new story

Developers are under significant (and justifiable) scrutiny for the way they contribute to, and benefit from, the ongoing affordability crisis in Vancouver. To the extent that owners and developers can start shifting the way they understand and talk about the value they create for the community, they have an opportunity to gain ‘social license to operate’—something that developers in San Francisco have been challenged to do, as noted in the most recent Vox interview of Brent Toderian, former Vancouver city planner. As the affordability crisis drags on, and engaged community groups push for more and better contributions from developers, it may be the opportunity to gain ‘social license’ that incentivizes owners and developers into compliance with more generous CBA terms.

Developers are under significant (and justifiable) scrutiny for the way they contribute to, and benefit from, the ongoing affordability crisis in Vancouver.

The building boom is not stopping any time soon—there is a huge opportunity still in the making here in Vancouver to see future CBAs that stake out some long term value for communities, and especially marginalized communities downtown. Vancouver has this incredible ecosystem of social enterprises and supports that can provide labour and services to these developments, and they create great social value in their own right. These are made-in-Vancouver success stories like Embers, Bladerunners, CleanStart, Potluck Café, and others listed at BuySocial.

The success of future CBAs will hinge on having a clear process that engages people with the data, and gives a solid answer to the question of “what do we want to know, and show” about the value of these CBAs. This is where I have another personal interest in the project—in my professional work as a management consultant at Junxion I use the tools and framework developed by the Demonstrating Value Resource Society, another one of the made-in-Vancouver social enterprise success stories. Demonstrating Value’s tools and framework were developed to help all stakeholders in a reporting relationship understand what is important to “know and show” about the value of a project. Demonstrating Value emerged to meet the reporting needs of the burgeoning social enterprise sector in 2007, and it fits well in this scenario, where there is reporting data to put in context, and several groups with different but not mutually exclusive objectives interested in the outputs and outcomes.

A Demonstrating Value ‘snapshot’ for the PARQ project would tie together the employment and purchasing metrics with the long-term vision and goals of the Healthy City Strategy with a narrative drawn from the citizens most impacted by the project into a one or two page summary with text and graphics. It would provide a comprehensive view of the current and expected benefits of the project and the CBA, and act an accessible conversation starter for the owner or the City to engage people in a constructive conversation about who shares in the benefits of development.

Looking to the future

There are some important next steps to secure the potential future successes for CBAs in Vancouver. The first is to make sure that the City and Parq Vancouver are able to that what they’ve learned from their CBA and make it transferable to future CBAs and development projects. Parq Vancouver has compiled their research on social procurement into a resource guide that will be made available to the City, for the benefit for other future projects—both Parq Vancouver and EllisDon have come around to be champions for local procurement, which bodes well. The next accountability report from Parq Vancouver is expected before the end of summer and it will be interesting to review the progress they’ve made, and their ongoing insights about the process.

The second is for the City to commit what they’ve learned into a CBA policy; this is also already in progress and expected in late fall of this year. The policy will provide clarity about when a CBA is to be included in a development project and what exactly that entails for developers, community and the City itself as actors. This policy can ideally provide a framework through which industry, community and the City can engage in processes that are inclusive, not cumbersome, and enable developers to maximize their potential for social impact by tapping into Vancouver’s abundant resources and expertise, and also signal to employers, suppliers and social enterprises the potential scale of ongoing opportunity created by the policy. I will be watching closely to see how these two next steps unfold.

It’s not hard to uncover connections between these big development projects and the livelihoods of people and businesses in my extended community—so I think they’re pretty important.

While I am not personally directly affected by the CBAs, per se, it’s not hard to uncover connections between these big development projects and the livelihoods of people and businesses in my extended community—so I think they’re pretty important.

CBAs are an important part of harnessing the value of the real estate boom—for more than just the owners. The CBA reports to date, developed by city staff, and PARQ’s own review of the report are quite good—they are detailed, they are fairly transparent about the process, and they include insightful reflection and commentary about what is and isn’t possible to attain, and to measure, relative to the goals of the CBA at the outset.

But reporting alone doesn’t tell the story—to be honest, the report to council may get high scores for technical merit and transparency, but I give it does poorly for artistic impression and storytelling. It’s not going to grab the average reader and get them excited—and to be fair, this is the problem with a lot of accountability reports.

There is an onus on Parq Vancouver and the City to interpret the CBA results and engage community members in the review, to establish ‘social license’ for the project and the CBAs. Neither Parq Vancouver nor the City can claim to tell the community’s story. The challenge is that the beneficiaries of the agreement – i.e. “the community” – are a bit amorphous, and while the City government acts as their representative in the agreement, individuals who are vulnerable, marginalized, or otherwise directly affected by real estate development in Vancouver are not really directly engaged in the process of administering these agreements between developers and City at this point. But by systematizing their approach to CBAs, and involving more community members in assessing whether the CBA contributions are fair value relative to the value of the development, or the other costs of development to residents in the community, will improve the long-term value of the next set of CBA deals to be negotiated and signed.

With thanks to Jeff Waters, Nathan Edelson, Wes Regan and Tamara Hicks for furthering my understanding of the Parq Vancouver CBA.

 

Garth Yule is a Senior Consultant in Junxion’s Vancouver office. He supports clients in for-profit, non-profit, and blended models, supporting efforts to shift entrenched systems and solve complex societal problems.

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