It is hiring season at UBC and my inbox was feeling it. “Housing is proving a major factor in our current recruitment round. What is the status of the housing action plan,” wrote a department head. Similar queries were coming from many units currently engaged in competitive recruitment of the best and the brightest. Well, I have good news. The Board of Governors has just approved an improved version of the housing assistance program that was voted in September 2012. And the provost’s office has shifted into high gear in order to accommodate the current recruitment effort.
Why is it an improved version? Because a new option was added in order to facilitate on-campus home ownership/leasing for tenured and tenure-track faculty members. The remainder of the plan, in particular the part pertaining to rental opportunities, remains the same. The Board of Governors has indeed directed the Administration and the UBC Properties Trust (UBCPT) to commence a pilot program for up to 150 units and/or loans over three years to support the implementation of Policy 1 of the Housing Action Plan. The approved faculty can now exercise two options:
They can either choose the previously approved option of purchasing into the “Restricted Resale and Capped Appreciation project.” The first such buildings will be on Lot 45. It will go ahead if and only if there is demand for at least 80% of the units in that development.
The Board added another option: The “Restricted Faculty Second Mortgage Loan Program,” which is applicable to purchase units in various current and upcoming projects on UBC’s Vancouver campus as identified by UBCPT as part of the program.
The Board also directed the Administration and UBCPT to include an option for several large (approximately 1500+ sq. ft.) units within any Restricted Resale Capped Appreciation Project (where sufficient demand exists). The UBCPT will also encourage third-party developers of market projects to provide larger three-bedroom units or to accommodate requests to aggregate smaller units into larger ones (approximately 1500+ sq. ft.) at the presale stage, subject to receiving committed faculty demand for these units.
Now, a few cautionary items:
- Not every faculty member is eligible for this program. These two options are meant to address retention and recruitment challenges. The Board has also approved a set of policies dealing with the eligibility, allocation, and occupancy, which will guide implementation of both faculty home ownership program options.
- And here is a very important piece of information. Unlike traditional real estate transactions, both options will very likely entail an assessment of potential taxable benefits. While the tax implications surrounding option #2 are relatively well understood, this is not entirely the case for option #1.
The Board has therefore directed the Administration to fully explain the financial implications for both programs in detail. Given that the financial and tax situation of each faculty member will be different, the program participants will be encouraged to seek independent financial and tax advice, and will be required to confirm in writing that they have done so.
Is this plan the best that the Board could offer for the faculty? I say yes, once one considers the constraints under which we are operating.
We could have of course asked that the Restricted Faculty Second Mortgage Loan program be applicable to purchase any residential property on the UBC campus or University Endowment. But this would create a serious cash flow problem for UBCPT.
We could have asked that at time of sale in option #2, UBCPT simply gets its mortgage back instead of receiving 33% of any appreciation. But this would have made the assistance program less sustainable and unfair for future generations of faculty.
I would however like to see UBCPT be proactive in developing policies to minimize the taxable benefit to faculty participants in the Restricted Resale Capped Appreciation project. After all, I don’t see how anyone by any stretch of the imagination could fail to understand that the value of a property under such restrictions could not be equivalent to similar ones on the open market.
In any case, this plan is a huge step forward for UBC. Kudos to the Board of Governors and to the Administration for removing what I believe is the last barrier preventing UBC from becoming one of the top 10 public universities in the world. Now that Stephen Toope is stepping down from the presidency, we can start contemplating what his legacy for UBC will be. This bold initiative will undoubtedly be a defining part of his.
Piece of Mind 
We should have a big round of applause to you, Nassif, for making this possible and shepherding this plan through a long process.
And THANK YOU, Lior, for the invaluable input you have provided me on these complex issues for the past two years.
Let me join Lior in applauding your Herculean accomplishment here! Assuming UBC and UBCPT carry through with the spirit of the plan (and don’t maximize exploitation of the weasel words), this is a HUGE step forward. Bravo!
As someone with formal logic training, though, I do worry about all those weasel words. Every promise is phrased as “up to x%”. How many great deals do you find in a store that is advertising “up to 80% off everything in the store!!!”? 🙂 There’s also a mild incentive for UBCPT to designate only projects that are not selling well or are otherwise undesirable to wealthy open-market buyers. But something like this always depends on a certain amount of trust, and the UBC BoG have demonstrated their intention to do the right things.
It will also be important that the implementation be done well. UBC’s plan has an incongruous mix of great elements of other programs I am familiar with, but it’s not clear to me that they play well together. Also, as I read the summary document of other university’s plans, I’m struck that the summary lacks essential elements of programs that I know: e.g., it fails to mention Princeton’s Tenancy-in-Common program, which is a very clean implementation of a shared equity model; and it doesn’t really capture how Stanford’s ground lease program works, which is a very clean implementation of a restricted ownership model. UBC’s restricted ownership model will be like Stanford’s, but mixed in with various indexing rules which could create unusual market distortions, whereas Stanford’s less regulated model successfully supported the university in it rise from sleepy regional backwater to preeminent academic powerhouse, through huge California real estate booms and busts. Hopefully all will go well…
I’m also heartened to see the commitment (subject to “up to” weasel-wording) to build a lot more student housing. For all the housing challenges faculty face, I think students have it even worse. Having a lot more affordable space for students to live on campus will be great for the academic vitality of the university.
Whoa… I just realized I spent my time analyzing a 1.5 year old document still posted on UBC’s Housing Action Plan site. Is whatever was just approved posted somewhere? I can’t seem to find it.
Thanks for your work on this, Nassif. I was wondering if you could explain how allowing faculty to purchase any property on campus rather than just a few handpicked units “would create a serious cash-flow problem for UBCPT”? I was under the impression that 300,000 dollars are 300,000 dollars no matter what property they are applied to. The restriction seems to me the greatest downside of the program.