The hard limits to ‘affordable’ rentals

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Geoff Hugh, Western Canada GWL Realty Advisors Inc.’s vice president of development, left, and Mike Reid, Western Canada GWL Realty Advisors Inc. senior director of development, in a 793-square-foot two-bedroom suite in the Chronicle Building. Located on Robson Street in Vancouver on November 24th.Rafal Gerszak /

The challenge of building one of the first new rental apartment buildings on Robson Street in decades in the heart of Vancouver’s West End was not lost on the 50 or 60 business people who attended its launch party a week earlier.

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Among the speakers were Mayor Kennedy Stewart and Bob Rainey, the city’s renowned condo marketer, whose team was brought to market by the new high-end rental building, called Chronicle, owned by Great West Life Realty Advisors from Canada Life. Assurance was created for the company. Which is a boom in the Vancouver market.

Mr. Stewart brought his dog along to underscore the pet-friendliness of the new building, whose interiors resemble those of a contemporary condominium. There’s a rooftop barbecue party area with a charming common kitchen, a penthouse gym with English Bay views, a plush common area at ground level, small living room for remote workers, and parcel storage for e-commerce packages Is.

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Lounge area in the lobby of the Chronicle Building.Rafal Gerszak /

This is by no means affordable for the average Vancouver household income, but it does fit in with the mayor’s new goal of achieving 100,000 housing units built in a decade. Rentals in the Chronicle will be in the $4.50 to $5 per square foot range and sizes will range from 430 square feet to 1,018 square feet. One bedroom starts at $2,550 a month and two bedrooms start at $3,550. Thirty percent of the units have two or three bedrooms. The 21-story building at 825 Nicole St. is completely for market-rate rental. This predates the city’s Moderate Income Rental Housing pilot program, which offers a density bonus in lieu of 20 percent of units set aside for below-market rents.

Mr Stewart said he talks to tech and biotech companies all the time that worry about employee housing.

“They’re making good salaries, contributing, finding answers to the pandemic, growing our economy, and where they’re going to live, they’re here, in buildings like this,” he told the crowd. , “The really safe market is in rentals that this city has needed for a very long time – 128 units, 250 people.

“We crunched the numbers last week and we are on track to have 100,000 units over a 10-year period. It looks like this – it’s not just numbers on paper. It’s real investment and hard work and great design.”

Rendering of the Chronicle Building.GWL Realty Advisors Inc.

Mr. Rainey spoke of an expected increase in population with an increase in federal immigration numbers. He praised the mayor for supporting the development community:

“Which is a political risk, but we need 10 more developments like this. … If we don’t go into more of these buildings, Mr. Meyer, we’re going to see rents closer to $6 per square foot. .

He then casts some shadow on councillors, who sometimes lag behind on valuable developments, and also on naysayer residents.

“People in council are saying we shouldn’t see any more development, and taking this stand today is immeasurable. And I think the communities that were ‘Not in My Backyard’ are really starting to see that their kids.” Can’t stay in this area until we start seeing supplies.

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He ended with a joke, alluding to the downtown condo market that has softened over the years—the type of housing he’s famous for marketing: “I’m a little personally annoyed that it’s not worth the condo. The level is not titled,” he said with a laugh. “But we’ve managed to put together a new business model to live through it.”

It took GWL exactly six years to reach this ribbon-cutting day, and that doesn’t include the time required to find the property in the southwest corner of Robson and Nicola, where the popular Gyoza King restaurant once stood inside an old . Retail and 13-unit rental building, housing most of that student.

Jeff Fleming, executive vice president of GWL, told the crowd that he hadn’t bought a multi-family property in the decade before its arrival.

“It’s hard,” said Mr. Fleming. “If we were in Toronto, you would probably be buying an apartment building of this size for the price you pay for the land here.”

Mr Hugh said the firm managed to enter the competitive downtown market because of the West End Community Plan, which gave them certainty on the amount of density that they were allowed to build.Rafal Gerszak /

Geoff Hugh, GWL Realty Advisors’ vice president, Western Canada Development, said the firm managed to squeeze into the competitive downtown market because of the West End community plan, which gave them certainty on the amount of density that was allowed to build. At the same time, they were buoyed by low interest rates and lucrative Canadian Mortgage and Housing Corporation financing programs, and indirectly, by the B.C. government’s measures that had taken steam from the luxury condo market, including a 20-cent foreign buyer tax. New Landlord Transparency Registry, making it harder for owners to hide behind a handful of companies.

“Whatever drives the condo market, it’s certainly the playing field for rental developers,” says Mr. Hugh, GWL’s senior director, development, with Michael Reed.

Although they were able to buy the land, they continue to compete with the condo market in another way. There is pressure to deliver high-end rentals because non-purpose-built-housing provides more than half of the rental supply, especially condos.

“We are competing against condo rental units, so we have to build to at least that level to get the same rents,” Mr. Hugh said.

Despite a recent Oxford Economics report that said Vancouver is the least affordable metropolis in North America (Toronto came in third), institutional investors like GWL are hungry for the Vancouver rental market, which has remained strong throughout the pandemic. Was. GWL has another rental project underway in North Vancouver and is in talks to purchase other properties in Vancouver.

“I would say we have a huge appetite for our customers…everybody wants more Vancouver… and Vancouver is the hardest market to acquire,” said Mr. Hugh.

“When you get institutional funds that are so big, a lot of it is about allocation and risk mitigation, right?” Mr. Reid said. “So you want different asset classes and different markets so you can diversify as much as possible.”

Pro-supply advocates argue that an over-supply of housing, even high-priced housing, will cause prices to drop as wealthier residents move into expensive housing and lower-income residents tend to move to older, lower-income housing. Will skip the more affordable units.

Chronicle Building.Rafal Gerszak /

However, there is a hitch in that theory – which is that older cheaper units are being dismantled to build expensive housing. In some cases, wealthy investors hold many properties as long-term investments rather than set them free for redevelopment.

“A lot of properties here are with long-term owners. They are all established family, and they just want to hold onto it. And they have to pay capital gains when they sell, which is an issue,” Mr. Hugh said.

“For many projects in Vancouver, you have to tear down old apartment buildings to make a new project.”

Added Mr Reid: “Because that’s the only place you’re allowed to build new apartment buildings.”

CBRE vice president of capital markets, Jim Szabo, said existing apartment buildings are desirable because a redevelopment adds more time to an already years-long process. Like many in the industry, he criticized the city’s approval times for slowing growth. He also said that downtown land prices have made it difficult for rental development numbers to work out.

“When you can sell a condo for $1,700 a foot and you can build rentals and … even when it’s rented, you sell it on a yield basis, not me. address, $1,200 per foot. You can see why they don’t build rentals. …every site that turns out to be a condo developer will always outshine a rental developer.”

He gave developers city credit for giving them additional density in lieu of building rental buildings, which has led to more interest in rentals. He can think of four or five new downtown towers that are the result of the new policy. But he reiterated Mr. Rainey’s suggestion that once the technical staff starts to come in with thousands of international students, the rent will rise even more.

“If you think rents are expensive right now, wait… when we have no supply and the demand side is completely changing in the next 18 to 36 months, you’re going to have a real housing problem.”

Andy Yan, director of Simon Fraser University’s City Program, said the mayor’s goal of building 100,000 housing units is commendable, but he questions the affordable housing being lost in the process.

“What is the net number for rental construction in Vancouver, and who does it displace? It’s a kind of pyrrhic victory, with high-priced market rental housing being built where affordable rental housing once stood, “They say. “One has to remember that half of the households renting in downtown Vancouver can only pay $1,400 per month or less for the rent to be affordable. Pay more if you are living in smaller units. So is it winning or losing?”

The GWL has had to hire consultants to help them find new homes for the displaced, as per the city’s requirements. They will also have to pay rent compensation for several months to the tenants, and…

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