Introduction
In British Columbia, the gap is increasing between the
high demand for rental housing and the low availability
of units. There is already a shortage of rental housing,
and the Expert Panel on the Future of Housing Supply
and Affordability is anticipating the number of all types
of homes needed in Metro Vancouver will be 27,438
per year between 2021 and 2026. Estimating that 30%
of future residents will be renters, that is approximately
8,231 rental units needed in the housing continuum
per year until 2026. According to CMHC’s most recent
Rental Market Report, there was an increase of 1,602
purpose-built rental units added to the rental universe
in 2021. The rental universe takes into account units
that were brought onto the market from new buildings
or completed renovations, and units that were taken
off the market due to renovations and demolition.
The rental universe does not account for the existing
shortfall that is evident through low vacancy rates.
It’s clear that we’re not building enough rental homes
to meet the growing demand in our region. Without
a more efficient process and substantial new supply,
rental housing availability will remain constrained and
the existing market rental rate will rise.
There have been significant changes to the risks
associated with building new rental housing.
Policy changes, increasing government taxes and
fees, and the costs of construction are at the root
of why new housing, especially rental, is difficult to
build in today’s market. This update will analyze three
pro forma scenarios and their sensitivity to risk in
today’s market. The pro forma scenarios illustrate
the new risks associated with building rental housing,
and how these affect the scale, market rents, and
ultimately, the viability of building new purpose-built
rental. These scenarios include a high-density project
near a SkyTrain station, and two lower density projects
that could be built on an arterial street in Vancouver
and Victoria.
We have engaged experienced builders and market
experts to create sample budgets, or pro formas,
to illustrate the impact that rising costs have on the
viability of building market rental. The initial analysis
was conducted in 2019 through the Making Rental
a Reality Report. This analysis re-examines three
locations in Metro Vancouver and the Capital Region
to highlight the changes in fees associated with rental
development between 2019 and today. All three pro
formas are included in the Appendix.
Policy changes, increasing
government taxes and
fees, and the costs of
construction are at the
root of why new housing,
especially rental, is difficult
to build in today’s market.
No Vacancy
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