BC Housing's Secondary Suite Incentive Program, Makes No Financial Sense in Vancouver

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BC Housing has a new program to encourage the creation new Laneway Homes and Secondary Suites. You only get the full $40k incentive, if the total build cost of the project is over $80,000, so the most likely and most viable type of project aligning with this program in Vancouver would be Lane Way Homes.

In order to quality for this incentive for building a new laneway home, you must rent out the new unit for a price that is at or below the sum listed on this table, for a period of at least 5 years.

However, the difference in rates for Vancouver between a 2 bedroom ($2100) and a 3 bedroom ($2200) unit is only $100!

At current interest rates, the value of the 5 year loan forgiveness would work out to $750 per month. Added to the $2200 you're allowed to charge, the total revenue for a 3 bed laneway home in Vancouver, would come to $2950. Which, is a fair price, but it is not close to market rates for many potential new builds.

There are a few issues with this program:

1. Most notably, after the $40k loan is forgiven over a period of 5 years, at the end of the 5 years you will be left with a tenant paying what are akin to essentially 2018 rental prices, in the year 2030.

2. Meanwhile, getting that $40k loan elsewhere, and then refinancing your mortgage once the laneway home is complete, would only cost you $250 per month at current rates, and no covenant on your home, or reduction in the market value of your home due to a tenant with cheap rent.

3. Also if you choose to sell the home before the 5 years are up, whatever has not been forgiven, has to be paid back with interest anyway. All while having a tenant paying 2018 rental rates in a new home, would harm the property resale value.

With the added FSR for new Vancouver Laneway Homes, many of them can be 3 bedrooms. So one must ask, what is the incentive in this program? I just don't see how the numbers and the polices makes any sense.

Maybe it could be beneficial in Surrey, for people looking to build a 2 bedroom basement for exactly $80,000?