Kelowna ripe to explode with new construction as COVID-19 restrictions ease

The City of Kelowna was flooded with a record number of development applications in the first part of 2020.

A report going to council on Monday, May 11, shows that 219 development applications were filed in the first three months of the year to March 31. That beats the 2017 record of 216 for the same time period and eclipses last year’s 151.

The simple explanation for that surge, offered in the report, is that a new fee of about $7,000 per housing unit was set to start on Jan.1 to pay for park development. That was delayed by the province, giving developers a window of opportunity to rush applications to City Hall and save big bucks.

By early January, the savings from just five major projects topped $8.4 million.

When it came to actual building permits for the same time period – which reflect what is actually being built rather than what is proposed – it’s a totally different picture. The value of new construction for the first three months of 2020 dropped by 50 per cent from $196.5 million in 2019 to about $90 million this year.

“Housing starts which are often quite strong in March were a bit less than half of their normal volume,” states the report. “The drop in this area is directly related to the impacts of COVID-19.”

Construction of new multi-family projects ground to a near halt with many projects being delayed. At the same time, construction of single-family homes kept on going, but at a slower pace.

There were 127 single-family homes started in the first quarter of the year, about half of the 288 average over the past 10 years.

Plus, single-family homes made up 91 per cent of the new starts, compared to an average of only 41 per cent over the past five years as the City shifted to more high-rise condos and rental apartments near the downtown core.

“This change is to be expected given that there is far less financial risk associated with commencing single family home construction than multi-family type construction,” the report states.

A strong recovery is expected over the course of this year and into 2021. In part, that’s due to time limits on when work has to start on projects before the developers are forced to pay the extra $7,000 parks fee. Plus, most developers have delayed, not cancelled, their projects.

“In a recent survey of the local development industry, only five per cent of respondents indicated that they would be cancelling projects,” the report to council states. “Most are either deferring projects or proceeding in a limited manner."

“Based on the available information at this time, all the fundamentals appear to be in place to allow a quick re-bound from a slow first quarter which was heavily impacted by COVID-19.”

City staff are now working with the Urban Development Institute to “identify additional opportunities.” These will be presented to council later this spring.

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