An Embarrassing Shortage of Purpose-Built Rentals

Last week, we wrote about the booming market for existing purpose-built rental projects among investors, with over $3 billion of PBRPs changing hands in Metro Vancouver alone.

The reason for the demand is clear if you use your high school economics – there’s essentially no new supply.

Here are some of the numbers, which are staggering in a city facing a crisis of rental supply: the volume of purpose built rental housing stock within the city of Vancouver has grown by just 7.3% since 1990. That adds up to only 3,960 additional rental units added to the supply in three full decades – from 54,170 in 1990 to 58,130 by 2018.

It’s no secret why there haven’t been more purpose-built rental projects in the city: it’s been far more profitable for developers to build condos. They can sell the units in advance or right away, walking away with huge profits instantly rather than waiting years to collect their profit in rents. Since laws were changed allowing for condo developments in the late 1960s, the city has never stopped adding them, with the vast majority of the more than 1,300 highrise residential towers in the Metro area being condos.

The surge grows every year, fueled largely by investors. A recent report found that 35 percent of condo units in the city are owned by investors. That means that about 300,000 apartments are not lived in by those who bought them, with the majority being rented out. That trend has grown since 2010, when B.C. Liberals changed the law allowing most new units to be designated as rentable.

But the terms of these rentals are exactly why more PBRPs are needed. The rents are higher, the lease is nowhere near as secure, and the screening process is unpredictable. Add to that the growing numbers of short-term Airbnb rentals, and you have towers full of rootless, overcharged renters with no security.

With the PBRP market booming, we can hope that developers will begin to take more risks in building them. Most Metro municipalities allow for higher density for PBRPs than for strata buildings, and there are increasing numbers of incentives for these projects. But there clearly needs to be many more friendly pushes from government if we’re to make a real dent in the supply.

Daniel Greenhalgh, ENM’s co-founder, hopes to position our company as a trendsetter for developing high-end purpose-built rental projects. Our recently opened 191-unit project, Willoughby Walk, is designed to look and feel like a luxury strata property.

“We want our tenants to have all the amenities and security they’d have as strata owners. We understand that most middle-class families have been priced out of the market as buyers, and we want to be part of creating affordable, stable rental housing for them.”