That both Vancouver and Toronto are cities in desperate need of more rental housing stock has been discussed at great length in the news these days, and it’s also true that other big Canadian cities are feeling this pinch too. Both Vancouver and Toronto have municipal governments that are taking steps to address the problem. However, it seems that while the results are in fact helping to create more rental housing it is not being built where it’s most critically needed – in the Metro areas of the cities.
We’ll take a look at this in greater detail here, but first mention that trends like these have a very measurable effect on a realtor’s business in big cities like these. Here at Real Estate Leads, our online real estate lead generation system is an excellent resource for real estate agents in Canada who want to get much more out of their client prospecting efforts.
Which – given this rental-housing shortage – is important. That’s because this aberration in the housing hierarchy is quite a departure from all the generations previous. The lack of rental housing in metro areas has the very detrimental effect of driving young, talented professionals out into suburban areas and forcing them to make long commutes.
In some instances, they leave the city area altogether. Not only is that something of a ‘brain drain’ as the expression goes, but it also disrupts the natural homebuyer continuum. That could be an entire discussion on its own, but just trust us when we say that adequate rental housing levels for young professionals makes for more property buyers in the future.
Most on The Outsides
The number of rental construction proposals in Vancouver’s satellite regions (tri-cities areas most notably) are currently far exceeding those seen in Metro Vancouver, as is laid out in the Goodman Report’s 2019 Mid-Year Metro Vancouver Rental Apartment Review.
Over the last 3 years new proposals for rental-purpose buildings in the city have gone down by 29%. Considering the glaring need for rental housing, it’s hard to make sense of that. Much of the new volume has been focused on the suburb – where a 147% increase in proposals has been seen during the same time period.
Looking past the land available for development constraints that are a reality for nearly any major city in North America, this is a real failure on Vancouver’s part. Especially when you consider that many years will go by before all these suites are available – and assuming they’re all actually built.
Young, ambitious professionals who would be renting IN the city and building up their down-payment on a house are either taking themselves elsewhere or assuming the literal and quality-of-life costs that come with having to make long commutes 5 times a week.
One end result of this is that there are inevitably fewer ready home buyers once the next batch of them come around at the age they’re ‘supposed’ to.
Detrimental Government Intervention
Significant government intervention has pulled Vancouver’s rental transactions down by 50%, and overall value by around 27% in that same 2016-present timeframe. Along with that, dollar volume has shrunk by as much as 62%, from $1.383 billion last year to $529 million this year. And to ice this mismanagement cake, at the same time cap rates in the City of Vancouver have gone up 50%.
Long story short, in the last two years the City of Vancouver has been disproportionately outpaced by the suburban rental housing market. All this despite knowing full well that METRO rental housing was where the need truly existed.
What’s even more problematic is that these trends are usually self-perpetuating. Fast-forward two and a half years, and we’re likely going to see an even more disparate rate at which developers are applying to build rental in other municipalities.
All of which has a damaging influence on the real estate market as a whole, for the reasons stated above.
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