Five-billion dollars in new rental housing stock at risk

Goodman Report
September 17, 2018

As Metro Vancouver’s residents gear up for municipal elections, the single most galvanizing issue all voters and politicians can relate to, yet seldom agree on, is that of housing—especially rental housing.

Chronic rental supply shortages plague Vancouver and most of its suburban communities. Each year, CMHC’s Rental Market Report reaffirms to the frustrated aspiring tenant that finding a place to live almost anywhere in the Lower Mainland is frightfully difficult. Whether in Surrey, Maple Ridge, New Westminster or the City of Vancouver itself, vacancy rates stand at 1% or less.

Let’s be clear: the crucial impetus for new rental supply lies exclusively with municipal governments. Acting as gatekeepers, they alone manage the ebb and flow of all development projects, including rentals. For example, despite overwhelming tenant and new development demand, Vancouver recorded only 800 new suites in 2017, with 1,500 expected each year from 2018 to 2020. In the absence of effective government programs, it’s private-sector developers and investors risking their capital who decide on the potential viability and profitability of rental and condo projects.

From research we’ve conducted at the Goodman Report, we’re aware of 20,000 privately funded purpose-built rental units either proposed, approved or under construction in Metro Vancouver. Of these, 8,500 are slated for the City of Vancouver and an additional 11,500 units for surrounding communities. It’s not a given that they’ll all be built, but if they are, they’re all expected to be ready for occupancy within 5 years. The total dollar investments stemming from the private sector for these projects are estimated at whopping $9 billion.

That’s the development backdrop. Now let’s look at some of Vancouver’s election platforms. Mayoral candidates and various tenant organizations touting options such as the 4-year rent freeze, the demonization of landlords, the admonishment of “giant property management companies and speculators (Kevin Griffin, Vancouver Sun, September 12, 2018),” despite their patterns of acting within the laws of the Residential Tenancy Branch, is doing little to instill confidence within the private sector. Some of these same vocal groups, while totally dismissive of established longstanding market forces within the private sector, are urging expanded government involvement in affordable housing. Potentially triggering significant disinvestment, government missteps could perpetuate, if not seriously worsen, the current rental housing crisis and forestall needed solutions.

Investment either in existing rental buildings or in new development projects is typically fickle. These dollars could evaporate almost overnight, given a more onerous political or investment climate. This would undermine private-sector investment and jeopardize proposed market rental development, further exacerbating supply problems.

We urge Metro Vancouver’s politicians and planners to create a practical working environment conducive to the rapid development of new rental stock, both market and social housing. Providing sufficient density, eliminating or reducing development fees and fast tracking the approval process would be a good start.

Sincerely,

David Goodman, Mark Goodman & Cynthia Jagger
Celebrating 35 years of publishing The Goodman Report