Commercial Real Estate: Too many barriers to building rental apartments, says analyst
Credit to Author: Evan Duggan| Date: Tue, 29 Oct 2019 18:00:10 +0000
Various taxes and policies by all levels of government have not resulted in the development of enough new purpose-built rental apartments to keep up with renter demand in Metro Vancouver, says a local property data company.
Michael Ferreira, managing principal with Urban Analytics, says there were a total of 7,012 purpose-built rental apartment units completed in the region from 2017 to 2019. There are another 6,800 units being planned or “contemplated” by developers.
To compare, Seattle added 17,450 new purpose-built rental units last year alone, Ferreira told Postmedia after presenting his data at an Urban Development Institute event in Vancouver on Oct. 16.
There are not enough new rental units getting built because there are too many obstacles for developers, he said. “(That includes) opposition to (projects) from the public, but also just how difficult municipal planning departments are making it for developers to get projects approved.”
He added that Vancouver’s sizeable inventory of privately owned condos do provide a considerable amount of rental homes, but it’s not enough. The region continues to have a rental vacancy rate of just one per cent.
Ferreira said the sources of demand for rental apartments are only going to evolve and grow.
“We have basically almost 100,000 study permit holders from around the world (in Metro Vancouver),” he said. “Not all of them rent traditional, typical rental product, but a good portion of them do.”
Ferreira also cited surveys by GWL Realty Advisors that polled local residents at least 55-years-old without school-aged kids at home. The survey asked them if they would consider renting a future down-sized home.
“They did the same survey back in 2011 and back then only 10 per cent said they would consider (a rental home),” he said. “This time around, when they did the study last year, 36 per cent said yes, they would consider renting, and another 23 per cent said they might consider renting.”
He said new employment in the region will also be a factor. There is currently about four million square feet of office space under construction in Vancouver’s downtown core. “Almost 60 per cent of which is already pre-leased,” he said, adding that 70 per cent of the tenants will be new entries to the market.
Those new workers are going to need homes and many will be in the rental market, he said.
Various government taxes and policies since 2016 have not resulted in the development of enough rentable homes, he said.
Among those are the former B.C. Liberal government’s initial foreign buyers tax in 2016; the speculation and vacancy tax introduced by the NDP government in 2018; the City of Vancouver’s empty homes tax in 2017; the federal government’s mortgage stress test in 2018; and the B.C. government’s 30-point plan to increase protections for renters, including a cap on annual rental rate increase of 2.6 per cent for 2020.
Those policies have mainly tamped down local home prices and sales figures, while also generating new revenues for governments without spurring more rental development, he said.
Overall, new housing development of all kinds is being blocked by “perfection paralysis by planners,” Ferreira said. They are paying too much attention to small details rather than focusing on an overall goal of making it easier for home builders to deal with our “looming rental crisis”.