Anshu Arora LLM, MSc, PMP

An adequate supply of rental housing is essential to restoring affordability in Canada. According to one of our recent studies, it would require an investment of at least $1 trillion to achieve this. In this context, the private sector plays a crucial role.

Research conducted earlier this year showed that most of the recent purpose-built rental housing stock in Canada is owned and developed by the private sector. In order to launch the construction of new rental development projects, return expectations by investors need to be met. As a result, larger-scale developers with the deepest pools of capital and a greater ability to source upfront equity have been playing a significant role in the development of new rental housing.

Purpose-built rental developers in Canada are facing an increasing number of market challenges. Under these circumstances, developers have adjusted in several ways; by either reducing the potential future supply of rental housing or adapting their strategies to move along new construction projects. For most rental projects planned in 2022, the limited return premiums have motivated the decisions to pause or cancel projects. Other developers who decided to move along projects saw the need to raise rents to offset increasing borrowing, construction and development costs. It is worth mentioning that developing a multi-family housing project requires several years and the timeline may vary across different cities, with some taking longer than others.

Research suggests that important financial adjustments needed to be made to ensure financial viability. These include, increasing rent prices, using lower quality materials and/or reducing the square footage of units. In this context, economic and financial conditions are contributing to the deterioration of future rental affordability.

Larger-scale developers (1,000+ units) should be responsible for more than 3 out of 4 new rental units among survey respondents in the coming years. They also represent 9 out of 10 respondents who are leveraging public sector funding, such as CMHC programs, hence incorporating a greater share of affordable housing units into their portfolios. That said, market rent was mentioned as the most common product strategy.

Partnerships between larger institutional investors, such as pension funds and public companies (that is, REITs), and private developers can allow for reduced upfront cost and greater access to alternative financing. These partnerships were mentioned to be increasingly leveraged to build new rental housing. Larger scale developers are seemingly putting more focus into creating affordable housing opportunities. Collaboration and partnerships between different development typologies and investors will be foundational in the future rental housing development ecosystem.

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American economist Thomas Sowell once said that “there are no solutions, only trade-offs.” That is, dealing with a problem entails making a choice, and doing so entails forgoing the alternatives.

For example, damming a river to protect a town from seasonal flooding means accepting that a reservoir will form on other side of the dam. The reservoir – and all it may entail for its natural surroundings – is deemed preferable to the potential damage that yearly flooding would do to the town.

The good news is there are policy options that can be brought to bear on a painful housing crisis that is leaving Canadians exasperated, and rightly so. The bad news: we haven’t decided which options we’re willing to accept. At its heart, the crisis stems from a growing gap between housing demand and supply; many homes are needed, but too few are built. The Canadian Mortgage and Housing Corporation has estimated that we need to build 5.8 million homes nationwide by 2030 to restore some semblance of affordability; we are on track to build less than half of that. Closing this gap will require significant increases in investment, labour, materials or productivity – but more importantly, it will require political will.

We have three broad choices, each with their own trade-offs.

First, we can build our cities outward, accelerating the creation of new neighbourhoods at the edges of our communities. This has been Canada’s way for most of its history, but especially after the Second World War and the mass adoption of personal automobiles. Canada has also traditionally used its enormous land mass to build entirely new cities, including railroad and resource boom towns from Calgary to Dawson City. The trade-off: More land for homes means less land for everything else. Canadians who currently oppose the redesignation of farmland or other rural areas surrounding cities would need to accept more home building in these areas. In more remote regions targeted for development, the thorny issue of divvying up Crown land – which comprises the majority of Canada’s land mass – would inevitably emerge.

Second, we can grow upward and become denser by shoehorning additional homes into existing neighbourhoods. To an extent, we’re already doing this: more than half of home building between 2016 and 2021 occurred within existing urban areas, and recent government reforms (e.g. allowing the conversion of single-family homes to triplexes) signal an appetite for more, though Canada’s cities would need to at least triple the current densification rates to close the gap through this option alone.The trade-off: most neighbourhoods would change – perhaps drastically. Canadians in urban areas, for instance, would need to mentally divorce themselves from the notion of owning single-family detached homes with garages and yards, and accept that neighbourhoods can’t stay frozen in time. As famed urbanist and former Torontonian Jane Jacobs put it, “a city cannot be a work of art.”

Third, we can grow our population more slowly. Faced with an enormous gap between the number of homes Canada needs and the number built, we could simply shrink the need. Governments (thankfully) don’t control how many children Canadians have, but they do determine immigration policy and the number of permanent and non-permanent residents. Anyone broadly opposed to historic increases in home building at the urban fringes or within existing neighbourhoods, but who still wishes for affordability, also wants to reduce population growth, whether they know it or not. The trade-offs here are more complex. If the federal government reduces immigration levels, Canadians must accept new demographic realities and policy solutions aimed at significantly improving productivity to offset a slower-growing or perhaps even shrinking work force, which may change how and when Canadians retire, among other considerations. In short, this would require additional trade-offs in other avenues.

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New provincial legislation means public hearings will no longer be held for residential or mixed-use development with at least 50 per cent housing, but Abbotsford Mayor Ross Siemens said there are still opportunities for people to have their say.

Bill 44 – an amendment to the Local Government Act – was recently adopted by the province. Part of the bill prohibits municipalities from holding public hearings for housing projects that fall within the official community plan (OCP).

Council on Monday (Dec. 4) approved revisions to its Development Application Procedures Bylaw to fall in line with the new legislation. The changes also remove the requirement for a council hearing for development variance permits and housing agreements. Previously, all zoning bylaw amendments required a public hearing before final approval to allow neighbours to express their views on a proposal’s benefits or impacts.

But the mayor pointed out public hearings must still be held for any OCP changes. “It’s when we do the official community plan updates that there’s a … robust public engagement component to that, and that’s why we would recommend people pay specific attention to because changes in their neighbourhoods will be part of that process,” Siemens said. He said the public will also have an opportunity to ask questions of city staff on any project once a development/zoning sign is placed on the development site.

Also under Bill 44, all municipalities must update OCPs every five years. As well, starting July 1, 2024, developers will be able to start building a minimum of three and up to six units (near transit) on lots currently zoned for single-family homes and duplexes in municipalities above 5,000 people. The legislation means that local governments can no longer exclusively zone neighbourhoods for single-family lots. The province predicts Bill 44 will create 130,000 homes in B.C. in 10 years.

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Freshly made at Alstom’s plant in Kingston, Ontario, the first cars of an order of 205 new generation Mark V SkyTrain cars are now on the Trans-Canada Highway — onboard flatbed trucks — for their journey to reach TransLink’s SkyTrain hub in Edmonds in Burnaby.

These Mark V cars will be connected into fully articulated five-car-long trains — creating a total of 41 Mark V five-car-long trains — for use on the Expo and Millennium lines. They will be the longest trains yet on the SkyTrain system, providing the highest passenger capacities. Each new five-car Mark V train will be able to carry about 25% more passengers than the existing four-car Mark III train. The five-car Mark V train will be able to hold 672 passengers regularly, both seated and standing, while the four-car Mark III train can currently hold 533 passengers. This is an increase of 139 people per train compared to the current largest train, which is the four-car Mark III train.

These new cars also carry new interior design features, such as an improved seating and standing configuration with flex spaces, a large video screen above the doors for the programmable display of useful information, including next station details, and Indigenous art. Earlier this year, the first completed Mark V train underwent extensive testing at the manufacturer’s facility in Kingston, with provided video footage showing the train making looping runs around the test track. The 40 remaining five-car trains will gradually arrive in Burnaby and enter service between 2024 and 2028.

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A two-year engagement project intended to establish guidelines for Saanich’s version of missing-middle housing will now be a six-month educational program to explain the implications of the province’s new housing rules.

The new Housing Statutes Amendment Act will allow single-family lots to be replaced by denser housing forms such as houseplexes of three to six units, depending on proximity to transit, townhomes or small apartment buildings. Instead of the “neighbourhood homes” study, staff will work on bringing Saanich’s zoning bylaws in line with the new provincial legislation and keeping the public informed.

Saanich has until the end of June to bring its bylaws into line with the provincial changes. “What the province ended up bringing forward effectively sets the new rules and anything that would have been created as a result of the study has already been determined,” said Mayor Dean Murdock. Council voted this week to revise the terms of the “neighbourhood homes study,” directing staff to work on amending its zoning bylaws.

Councillors Judy Brownoff and Nathalie Chambers were the only two to vote against it. “I do not think this is democracy. Overriding community plans, in my opinion, is not democracy or good governance,” said Chambers. Brownoff, who was concerned about the ability of the district’s infrastructure to handle additional density and the effect on assessment values, asked district staff if municipalities could refuse to abide by the new legislation.

Staff said the municipality can’t opt out of the mandatory provisions of the legislation, although it’s not yet clear what the penalties would be for refusing. Murdock said the province is responding to the same concerns being heard in Saanich — that people are looking for family-suitable homes in the community.

“Duplexes, triplexes, townhouses are going to be more in reach for families than a single-family home,” he said. “We should be using our limited resources to address these concerns and working with the province to create more options for folks rather than dedicating our resources to trying to fight the province, which is a losing battle.” Coun. Teale Phelps Bondaroff said he likes the fact that the pace of change has been increased.

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