Re: Sasha Izard’s letter to editor: Saanich shouldn’t be providing discounts to developers.
The price of a home is made up of the sum of all of the costs that go into the home. Those costs include the land, the time for dozens of experts to do the design, engineering, approvals, building code analysis, construction, marketing, management and more. They also include the cost of all the wood, concrete, drywall, plumbing, electrical, windows, appliances and all other items that go into building a building. They also include all interest that will be paid to banks to borrow about 70% of the total cost of the building, as well as all the fees the municipality will charge (applications, DCCs, amenities, and others).
Developers are not making off with massive profits as people typically think. The minimum profit margin is basically set by the bank that finances the project. What that means to your readers is that the bank is lending a developer your reader’s savings to make the money to pay interest on their bank deposit.
Banks require around 15% profit in the financial model before they will finance a project to ensure there is enough room to handle cost overruns and economic fluctuations and not put your reader’s bank deposits at risk. Most projects face any number of unforeseen cost overruns over the many years it takes to get them approved, constructed and rented or sold.
Recently, interest costs have driven up the price of construction so high that many projects are now shelved indefinitely until costs come down. Saanich recently experienced this cost escalation on their fire hall.
There is no conspiracy here – just raw economic realities, a housing crisis, and responsive governance to address the housing crisis.
Saanich is showing leadership by reducing its fees, to partially offset the rise in interest rates and other costs in order to slow the rise of housing prices in our community, as part of their commitment to providing housing.
If anyone doubts this, you don’t need to talk to a developer. Just do a little homework and talk to any qualified appraiser or financial lender to housing projects – preferably before flinging around accusations of conspiracies against the hardworking women and men in city hall and in our building industry.
Past participant in Saanich’s Housing Task Force