One of the few affordable housing options in Naramata will be exposed to the full force of the market seven years ahead of schedule.
Although the 18-unit Naramata Court townhouse development faced stiff opposition when first proposed, public opinion was partly swayed by a covenant placed on the title that dictated units be sold at 10 per cent below market value for seven years.
In March 2009, that covenant helped win developer Wildstone Holdings support for the necessary rezoning approvals from the Regional District of Okanagan-Similkameen. The homes went on the market in October 2010, and since then, only three units have sold.
To get sales moving, Wildstone asked the RDOS to modify the covenant so that it’s lifted from each unit after initial purchase from Wildstone. RDOS directors agreed to the request at a board meeting last week.
Listing realtor Julius Bloomfield said the covenant was simply too subjective. Different appraisers may have come back with different opinions on a unit’s market value, he explained, leading to higher legal costs for buyers, sellers and the RDOS on every sale for seven years.
“That unknown quality of the future sale was off-putting to a lot of buyers,” Bloomfield said.
“The principle of the covenant was good, in as much as they were trying to create affordable housing, but the mechanics could have been better.”
He suggested a better route to ensure affordability in a similar development would be to restrict sales to owner-occupiers, which would help stop wealthy out-of-town speculators from driving up prices.
Bloomfield said since the RDOS decision on Naramata Court last week, “We’ve certainly seen an increase in inquiries and an uptick in activity, and we’ve put them on at lower prices to reflect market conditions now.”
The cheapest unit, a 1,424-square-foot home with two bedrooms, three bathrooms and a garage, was originally listed at $355,050, but has now been reduced to $299,900.
Naramata RDOS director Karla Kozakevich acknowledged “it’s a possibility” that modifying the covenant will open the door for speculators to purchase units at a 10 per cent discount and quickly flip them at full price, but, “We need to move forward on it and get some families living there.”
Wildstone principal Jim Morrison did not return a call for comment, but minutes from a public hearing on the matter in April state he told the meeting that the covenant would still apply to him, so he doesn’t stand to gain financially as a result of its modification.
Naramata resident Dennis Smith was the only person at that hearing who spoke against the idea.
“I was just a little concerned that Wildstone’s commitment to what they’re calling affordable housing was pretty weak,” Smith, a Penticton firefighter, said in an interview.
“I think that their idea was good, and they should stick with it a little while.”
Smith’s wife and two daughters are realtors, so “I know a little bit about real estate,” and he thinks blame for sluggish sales has been misplaced on the covenant.
“It doesn’t pass the smell test for me,” he said. “I think this is just a bunch of fluff from people trying to sell their project that they have overpriced.”
Naramata Court first went to a public hearing in December 2008 when the initial rezoning application was still before the RDOS. Minutes from that hearing show eight people spoke out against the project, with most concerned about increased density in the village.
Such opposition was not unexpected, said Tom Chapman, who was the RDOS director there at the time.
“Everything runs into stiff opposition in Naramata,” Chapman said in an interview.
At the time, a red-hot real estate market pressed the need to attract families to the community and kids to the elementary school, which was at risk of closing due to declining enrolment. A pure social housing project wasn’t seen as a good fit for Naramata because there are too few amenities, the former director continued, so Wildstone’s plan seemed like a good alternative.
In hindsight, though, “Had we recognized that the market was going to collapse the way it did, I wouldn’t have pushed for that covenant.”
Chapman’s not disappointed with the way things turned out, and he sympathizes with Wildstone: “I admire the developer for taking the risk that he did. At this point in time, he’s sitting with a couple million dollars in inventory that’s going nowhere.”