MEETING THE DEMAND FOR RENTAL HOUSING
Paul Martin has been living in the same Vancouver Yaletown rental tower for 20 years and has no plans to move anytime soon.
“It works just fine for me,” said Martin, a one-time wine distributor and restaurant owner. His first move into 600 Drake was to a 307-square-foot studio suite in the 192-unit highrise built in the early 1990s by Concert Properties, a developer that continues to manage the apartments to this day. While others were scrambling to buy a starter home in Vancouver, Martin, said he was happy to take a pass on buying a place on the Monopoly board. Today he is comfortably ensconced in his one-bedroom flat. He prefers to focus on his work and hobbies. “I really would rather be sailing.”
That government support has come none too soon, say experts. It follows decades of inaction on rental housing development as government abandoned the housing field and grappled with rising debt, recessions, and a political shift favouring private sector solutions. In 2017, however, the federal government launched its National Housing Strategy, ultimately committing more than $70 billion in funding over the next 10 years to deal with the growing unaffordability of housing across Canada.
Brian McCauley, Concert Properties CEO and president, whose company built and manages Martin’s rental highrise, sees the increase of purpose-built rentals as an expedient way of addressing Vancouver’s pressing need for affordable rental housing.
“Over 50 per cent of residents in the City of Vancouver are renters,” said McCauley. “This is not new. The reality is that rental is in high demand and will continue to be in high demand as our population grows. As housing becomes less and less affordable, people have no other option than to rent.”
Historically, rental housing in British Columbia has been provided by individual entrepreneurs—sometimes called ‘Mom and Pop’ rentals—with everyone from families and small businesspeople, to professionals such as doctors and dentists, investing their money in small rental projects such as three-storey wood-frame apartments.
From the 1970s until 1992, the federal agency, Canada Mortgage and Housing Corporation (CMHC), was also developing between 12,000 and 16,000 rental units nationally each year. Then, in 1992, faced with economic uncertainties, including a recession and rising government debt, the then-Liberal government turned off the tap and CMHC pulled back from its wholesale development of rental units. With the ending of financial incentives from government, higher interest rates and the ever-rising cost of land, the construction of PBRs came to an abrupt halt.
“People realized that buying condominiums and renting them out was a good investment opportunity,” said McCauley. “The thing that has helped us have rentals through the last three decades has been the rental condominium market.”
A major drawback to condo rentals for renters, however, has been the absence of any security of tenure. With condos, an owner can at any time sell the property, evict the tenant, or raise rents high enough to prompt the tenant to leave.
When Concert Properties began building PBRs in the 1990s, its unique corporate structure provided solutions to the tenure security issue. As a company owned by the pension funds administered by 19 labour unions, Concert was also tasked with a social agenda. The owners addressed the tenure issue by creating rental accommodation to assure tenants would never lose their homes because the ownership or use of the rentals or rent rates had changed. In doing so, it also created a stable and workable business model that has served as an example to other corporations. Today, the corporate sector, including other pension funds, insurance companies and Real Estate Investment Trusts (REITs) – investment vehicles popular among smaller retail investors – recognize the long-term value of PBRs as a reliable source of steady, long-term income and are lining up to enter the field.
“PBR is the most secure form of rental housing. It means that individual units will never be sold [unlike renting an investor condo] because there’s no single title,” said Hutniak. “There’s a single owner for the entire building.” Tenants also benefit from the improved liveability of new and renovated buildings and an increased supply of housing. Governments benefit from increased revenues from taxation of PBRs, and support for carbon reduction programs. The economy gains from the stimulation of construction across B.C. with increases in jobs and incomes. The environment benefits from improved building efficiency and reduced energy use, he explained.
Despite these benefits, there remain threats to the continued growth of PBRs that could create an even greater housing crisis than exists today. Jon Stovell, president and CEO of Reliance Properties, which has been building PBRs since the 1950s and now has more than 1,000 units under administration with more on the way, said he sees there are headwinds building. “I think interest rates are going to rise, construction costs are out of control, and on top of that, there is an uncertain and unpredictable regulatory environment.
Story by: Vancouver Sun