Commentary: Why BC pays too much for public housing

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​​​​​​​A comment from a former Victorian real estate agent.

I was amazed to read the Auditor General’s report that all recent purchases of Victorian property intended for social housing were at or below market/appraisal.

First, “market value” is intended to reflect what an informed, independent buyer is willing to pay for a property and a seller is willing to accept in an open market.

“Appraised Value” is what BC Assessment calculates the value of a property using a series of computer models (and this becomes the basis for the property tax levied on that property by a municipality).

“Appraised Value” is what a professional appraiser calculates the value of a property using a series of tests to arrive at an estimated value.

After many years in the business (22 of them as a Victoria real estate agent) I have seldom seen a review worth the paper it was written on. I could cite many unsavory reasons for this, but one of them is that valuations are too often conducted after a deal has been negotiated, and the apparent tendency is to conclude that a buyer is willing to pay that price and a seller accepts , then it must be worth it.

Appraisals are all too often used to “paper” a file with a bank, company or government agency to prove that the agreed price was justified. (Banks use them all the time for this purpose when offering mortgage financing. It’s one of the main reasons our real estate values ​​skyrocket. You can offer virtually any outrageous price for a property you choose, no matter how far If it is above the “true” value, the banks will provide a mortgage, provided that they subsequently receive an expert opinion to their insurers to justify it.)

The purchase of an old warehouse on Russell Street in Vic West is an intriguing case of an owner attempting to sell the property in an open market at a price of $3.4 million. It was professionally marketed by real estate agents and they couldn’t find a buyer at that price so it was withdrawn from the market.

A year later, the provincial government paid $9.6 million. And the Auditor General thinks that’s fine…because the rating required by the government was consistent with that rating. For real? Interesting.

It was then renovated for 40 homeless residents over a period of 18 to 24 months. Operating costs should be around $2 million per year. That meant the initial cost was $235,000 per unit, not including the renovation or running costs. The grand total is likely in the $14-$15 million range for the two years. You could rent 40 rooms at the Empress Hotel for a lot less.

The Capital City Center Hotel was bought last year for $25.2 million. Now they’re going to tear it down.

My family built and owned this hotel (formerly the Imperial Inn) with the Elworthy and Manning families. I helped and worked with the construction. I don’t know what the operating and repair costs were, but by the time the site is demolished, the acquisition cost of the site will increase to about $30 million. And the auditor general says everything’s fine? (Meanwhile, it and Paul’s Motor Inn across the street have been wreaking commercial havoc in this neighborhood. Just ask the White Spot and others).

Perhaps the Auditor General should look at the estimated values ​​at which his own government has valued these properties and seek the opinions of commercial real estate agents who actually know at what price these properties should be sold, rather than relying on after-the-fact valuations leaving .

We would be talking about a very different and very interesting story.

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