At a pre-meeting held before the Hornby Island Housing Society AGM on October 20th, 2021, the team working on Beulah Creek gave a project update. Attending guests, via Zoom, were:
- Lindsay Monk and Graham Burns from M’akola Development Services, the project’s development consultants
- Kevin Albers from M’akola Housing Society, the organization that will take on the construction and operation of the Village
- Kirsten Baillie from BC Housing (BCH)
- Alan Fletcher from AFC, providing pre-construction services
Sixty-two members of the Hornby community were also on the Zoom.
Lindsay Monk led the presentation. She described the work that has taken place on the project since the community open house last February 2021. She highlighted the site features and the challenges they present.
She explained that the current budget estimate creates an ongoing operating subsidy that is higher than BC Housing can support. A subsidy from BC Housing will be required because the projected rents will not be able to cover both the operating costs and the mortgage payments. Thus a subsidy will be needed for the duration of the 35-year mortgage period in order to keep the rents affordable.
The high cost of this project was described as due to a number of factors:
- the increase in material costs since the project was first costed
- the challenge of transporting materials and/or workers to the island
- the cost of the infrastructure on a very challenging site with a creek, wetlands and a high water table.
- the cost of the road building and site remediation due to the road cutting through a riparian area
- the cost of storm management requirements again due to the regulations regarding riparian areas
The guests from BCH and M’akola Housing all reaffirmed that they are committed to building affordable housing on the island and that they understand that the cost for doing so will be considerably higher than building elsewhere. They believe strongly in people being able to live in their community and will do what they can to achieve that goal on Hornby.
The current construction plan under discussion is to build onsite using as much local labour as possible, as the cost building with pre-fabricated units was higher than anticipated. M’akola, BCH and AFC are continuing to work collaboratively, and being as creative as possible, to reduce the costs of the project enough for it to meet BCH’s funding approval.
Once the budget is finalized, the project plan will be brought to the community, as part of the Development Permit process with Islands Trust, hopefully in early 2022.
Question/Comments:
Looks like this project is dead in the water, that the requirements from Island Health may have killed it. What are the chances that this project will be underway within the next year?
Response: Island Health is only one of the many agencies involved and all have requirements including BC Housing. All of the projects that M’akola is working on are experiencing the same challenges with rising costs while trying to provide achievable, affordable and sustainable housing in their communities. It was acknowledged that this is a tough situation given the constraints of the site and reaffirmed that all involved are committed to working on it.
Question/Comments:
What is the percentage of the possibility of this project being started within the next year?
Response:
The budget considerations need to be resolved first and then the project can be brought to the Islands Trust in early 2022. There are some processes that are outside the control of BCH and M’akola such as the approval process for the Development Permit and they will take as long as they take.
It is common that there are challenges with this scale of project. The pre-fab construction was more expensive than anticipated and costs have been reduced by planning to use onsite building with local crews. The local politicians are very supportive and all involved really want this to go ahead with the design that was presented to the community in the Spring.
Question/Comments:
How does the cost per unit compare to other projects?
Response:
AFC estimates that it costs about 35% higher to build on Hornby than in the city due to the lack of infrastructure and the cost of transporting labour and materials to the island. Some of that higher cost can be addressed through using local labor and the landing barge to transport materials. The costs due to the challenges of the site itself are estimated at an additional $60,000 per unit.
Question/Comments:
What makes up the soft costs?
Response;
Soft costs include the design consultants, inspectors, appraisals, civil engineering, environmental assessment and reports, surveying, BC Hydro, contingency, and the various permit fees.
Question/Comments:
If the current Beulah Creek property were to be sold and if a similar property could be found that did not have all the infrastructure challenges, would our costs go down?
Response:
That option was considered but there would probably not be any savings at this point because of all the pre-development work that has been done. There may be savings on the civil work, but those savings would be used to repeat all the pre-work that has been done for the current site.
Question/Comments:
What is the highest cost per square foot that BCH has approved in the past?
Response:
The concern is not so much about the capital cost but the cost due to the operating subsidy that BCH will provide for the duration of the 35-year mortgage. BCH is committed to developing on the islands but is experiencing funding pressures province-wide due to Covid 19, the rising cost of materials and the lack of availability of some materials. BCH understands that a design that would work well in the city will not work here, nor do they want to do that. At the same time, the costs have to be reduced further. The team has done a great job already significantly reducing the original budget proposal.
The highest exact cost per square foot that BC Housing has approved is not known to us, however capital costs are unique to each project and community. The team is working to reduce the costs, while being mindful of the specific characteristics and complexities of the site and project, as well as the current building climate.
Question/Comments:
Is BCH likely to increase the budget at all?
Response:
Although BCH has not formally committed to this project at this time, they have committed the Pre-Development costs which are significant. BCH understands that the building costs have increased since the first proposal in 2018. The project team is looking at other options to secure additional funding. This will help to drive down the ongoing subsidy amount reducing the financial risk to BCH over the duration of the mortgage.
Question/Comments:
How much over the acceptable BCH subsidy is the current cost?
Response:
The finances are complex as the project cost includes capital, soft and operational expenses including the ongoing subsidy from BCH for the duration of the mortgage. Part of costing the project includes forecasting the mortgage interest rate.
The difference between where the subsidy is at the current cost of the project and where it needs to be is 20 to 25% over what BCH will approve.
Question:
If part of the project cost depends on forecasting the mortgage rate, are you waiting for a better time before taking out a mortgage?
Response:
The rate available for construction financing is one element; the take-out mortgage comes into play when the project is deemed completed and ready for occupancy. We are using rates forecasted by BC Housing.
Question/Comments:
Who will cover the cost of the Pre-Development no interest loan if the project does not go ahead?
Response:
The Pre-Development funding gets wrapped up into the mortgage. It would be at BC Housing’s discretion to forgive any Pre-Development funding if the project did not move ahead.
Question/Comments:
I live in an apartment block now and it is wonderful. The idea of single homes is expensive. Apartment blocks can be good. Would the project team look at building an apartment block on the island?
Response:
We are trying to keep the flavor of the current design however, an apartment block would save money. There is a community feel in the current design and that is preferred. On a personal note, AFC just completed the new school and would love to continue with another project that is unique and interesting that adds to our community.
Not at this time. There could come a time when there needs to be a hard conversation, maybe at some point, but not now.
