The British Columbia government is desperately trying to explain how only 14 of 68 apartments in a government-subsidized housing project in Vancouver’s Kitsilano neighbourhood are renting at below-market rates, even though the project is touted as offering “affordable rents”.

The developer of 1807 Larch St. received $31.8 million in low-interest loans through the HousingHub program, which is designed to provide below-market rents for middle-income households.

But a recent Globe and Mail article said the going rate for a studio apartment in the building is just under $2,600, while two-bedroom apartments are available for $4,200 a month.

This sparked an outcry from Green Party leader Sonia Furstenau, who accused the government of using “the pipette to put out a fire” by giving developers large loans in exchange for only a few affordable homes.

Housing Minister Ravi Kahlon said in an interview on Friday: “If there are no programs like this, either these apartments will not be built at all, or they will be built and people will just rent them at market price, or in some cases they will divide them into units and then sell them.”

Higher than expected rents in some buildings and financing problems in projects have made the program a lightning rod for criticism of the government’s housing program.

HousingHub was launched in 2018 by British Columbia’s NDP government to fulfill its promise to create 114,000 new housing units in 10 years. It was designed to incentivize developers to offer new units at prices that remain affordable for families with annual household incomes of $75,000 or less.

“Building affordable housing for middle-income people is key to tackling the housing crisis and we must work together to achieve this,” said then-Prime Minister John Horgan after the launch of the program.

The program’s first four projects were a partnership with the BC Conference of the United Church of Canada. Together, the projects would create “more than 400 new affordable rental housing units for individuals, families and seniors” in churches in Vancouver, Richmond, Coquitlam and Nanaimo.

The projects in Coquitlam and Nanaimo have opened. A third project, at Brighouse United Church in Richmond, was cancelled after project delays forced the church to close in 2021. The developer has since been sued for breach of contract.

Over the next three years, the province continued to advance its efforts, investing in HousingHub projects not only in the Lower Mainland and Vancouver Island, but also in places like Revelstoke, Quesnel and Salmon Arm.

In 2021, the government touted the success of the program, which it said had succeeded in opening or financing 3,400 apartments for middle-income renters.

To keep the program going, then-Housing Secretary David Eby allocated an additional two billion dollars for new construction projects.

“It provides loans to for-profit and nonprofit developers at much lower interest rates than would otherwise be available,” Eby said at the time. “These homes will help people stay in the community where they live and work, and everyone deserves that.”

But problems mounted last year when it emerged that apartments in many of the buildings funded by HousingHub projects and designated by the province as “affordable” were being rented at rates well above market rates. Some also ended up as short-term rentals on Airbnb.

One example is the Olympic Villas in Merritt, which received $16.6 million in loans. In return, the developer was expected to offer 45 of the building’s 75 units at affordable prices.

Instead, according to reports in the Merritt Herald and real estate news outlet Storeys, all of the building’s units were rented at market rates, and now the building is being foreclosed on because Olympic Villa cannot repay its loans to the government.

“We have provisions that say if they don’t pay back the loan, the province will step in and take over the building,” Kahlon said. “And this building is still financially viable. No one in the building will be affected and their rent will stay the same.”

Eby announced in February that the HousingHub program would be discontinued and the $2 billion in funding would be shifted to the new BC Builds program, which will support the construction of middle-class housing on government-owned land.

BC United finance critic Peter Milobar accused the NDP of simply renaming the existing program.

“Billions and billions of taxpayer dollars are going into these programs, and the cost per unit is very low,” Milobar said. “It’s just not sustainable, and it really feels like they’re desperately trying to change the language to get it through the ballot.”

Furstenau added that she believes the public is losing trust in the government because of the discrepancy between what is promised and what is actually delivered.

In their view, the government must focus on cooperative and non-profit housing and not rely on the market to solve the housing crisis.

“The market is not designed to provide affordable housing. And where there are jurisdictions, countries and cities around the world that are successful in keeping housing affordable, it is because of the significant investment by governments in non-market, non-profit, social and cooperative housing,” she said.

Tom Davidoff, executive director of the Centre for Urban Economics and Real Estate at UBC’s Sauder School of Business, said he agrees with the basic idea of ​​the HousingHub program but believes it is a waste of public money to support projects in new buildings in places like Kitsilano.

He said the government should instead focus on improving overall housing supply and increasing rental subsidies and other support measures for low- and middle-income people in these areas.

“Lowering rents in brand new buildings in A+ locations is far from the most efficient way to improve affordability,” Davidoff said.