VANCOUVER — Finding a way to include for-profit developers in the building of more-affordable rental units for minimum, low-wage and regular workers is where there could be opportunities for the industry, according to Anne McMullin, CEO and president of the Urban Development Institute.
“No matter how much money the province and the feds come up with, we’re not going to build enough rental or social housing [with that alone],” McMullin told the Vancouver Sun.
“It has to be done in part with the building community and the building community will build market condos and market rentals. But it can also build below-market rentals and social housing, by leveraging the land, and going higher [with more density in certain buildings] so there is a profit, legitimate profit, to subsidize [buyers with] a mix of income levels.”
Her comments come as developers face the prospect of significantly fewer housing starts in the coming years and as the City of Vancouver acknowledged in a housing update this week that developers have recently added almost 2,000 purpose-built rentals, but all of these were affordable to people making more than $50,000 a year.
Reliance Properties president and Urban Development Institute chair Jon Stovell said this is in spite of a growing number of would-be homebuyers getting snarled by federal mortgage rules who are turning to the rental market.
Developers not only take longer and make less money if they build rental apartments, but are also grappling with more market uncertainty. They have been vocal about the impact of the demand-side measures brought in by the province to cool speculation in the housing market as well as a lack of incentives to encourage more supply.
Some municipalities, in response to neighbourhood groups and political pressure to curb development and speculation, have been pressing pause on previously accepted assumptions about the size and nature of projects that will be allowed. This has lenders and pension funds, who had been used to financing based on plans for land in certain areas, getting nervous, said Beau Jarvis, executive vice-president at Wesgroup Properties.
“It’s profound,” Jarvis said. “Banks have an evolved system that municipalities don’t understand. And now, it’s shaking confidence in how we underwrite real estate and development.”
“It used to be FOMO [fear of missing out],” McMullin said. “Now it’s a fear of uncertainty.”
With so many factors in play, Jarvis said he and other developers are “pulling back on residential projects and thinking, ‘Why would I do this?’ ”