THE PLACE OF GOVERNMENT
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WHAT PLACE DO GOVERNMENTS HAVE IN BUILDING APARTMENTS?
hile we were working on getting the ROCK New Apartment Construction report to the printers, the Federation of Canadian Municipalities released a position paper on what they saw as a serious shortage in rental apartment housing in Canada. This report was released to the media, and highlighted Canada Mortgage and Housing Corporation statistics which suggested that growth of tenant households would outpace rental construction over the next decade. The Federation of Canadian Municipalities likens the tightening of rental supply to a housing crisis. We disagree. We share the Federation’s concerns that supply be increased to
by as much as $20,000 per new unit built. Unfortunately, since 2001, the federal government has already subsidized new construction to the tune of $120,000-$150,000 per unit, and the FCM’s own numbers indicate that this has failed to significantly increase new construction. Politically speaking, it seems unlikely that the current federal government will be amenable to a new subsidy program or an increase of subsidies. Fiscally speaking, it seems irresponsible to add this burden in this age of high deficits. Further, the Federation of Canadian Municipalities seems to have overlooked tools they already have at hand to launch a rental construction boom.
WE SHARE THE FEDERATION’S CONCERNS THAT RENTAL SUPPLY BE INCREASED TO MEET INCREASING DEMAND, BUT WE FEEL THAT SOLUTIONS TO THE ISSUE ARE READILY AVAILABLE AND, IN CERTAIN MARKETS, ALREADY UNDERWAY... ...WE ACKNOWLEDGE THAT, IN SOME CENTRES, THE WILL TO BUILD NEW CONSTRUCTION HAS BEEN LACKING. THE QUESTION WE MUST ASK IS: WHY?
Conditions are already favourable for a significant investment in rental housing in this country. Demand for apartments is high and supply is tightening. Rental construction booms are already taking place in smaller centres such as London (Ontario) and Halifax (Nova Scotia). We feel that the fact that little construction is taking place in the Greater Toronto Area or Vancouver is largely due to developers’ concerns over regulatory obstacles, including high municipal fees and development charges. The will to build new rental apartments exists, and one of the best steps municipalities can take to encourage such development is a step to one side. Rent control itself is one reason why supply in certain centres is so tight. When rent control was imposed on the Ontario marketplace in the 1970s, construction of new apartments basically stopped throughout the province. Although regulatory controls were eased beginning in the mid 1990s, new construction was slow to start because the constraints of rent control had forced a number of developers out of the industry. This has reduced the pool of developers that can quickly step in to create a rental construction
meet increasing demand, but we feel that solutions to the issue are readily available and, in certain markets, already underway. In a number of venues, including the recently released ROCK Apartment Report, we have called for developers to build purpose-built rental housing. The renter market is there. The endbuyers are there. The returns are there. There has been no better time than now to build. Average rents are rising and vacancy rates are dropping. We acknowledge that, in some centres, the will to build new construction has been lacking. The question we must ask is: why?
Ineffective Subsidies
While we understand the FCM’s concerns about the lack of new purpose-built rental housing, we do not believe that the solutions the FCM offer are fiscally or politically realistic. The FCM position paper called for senior levels of government – particularly the federal government – to increase the subsidy of new construction
The Marketplace is Eager to do the Work
THE FACT THAT LITTLE CONSTRUCTION IS TAKING PLACE IN THE GREATER TORONTO AREA OR VANCOUVER IS LARGELY DUE TO DEVELOPERS’ CONCERNS OVER REGULATORY OBSTACLES.... THE WILL TO BUILD NEW RENTAL APARTMENTS EXISTS, AND ONE OF THE BEST STEPS MUNICIPALITIES CAN TAKE TO ENCOURAGE SUCH DEVELOPMENT IS A STEP TO ONE SIDE.
“ROCK has a vision and we have always seen them as the advocate for the apartment
industry. We have worked with ROCK for over 15 years and there is no question in our minds that they understand the business and the needs of private developers like ourselves. ROCK will play an important role in positioning the business for the next generation. David Horwood, Vice President, The Effort Trust Company 34 w w w.rockadvisors.ca | 1 (80 0) 898 - 0347
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