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Without investors, almost all rental apartments could disappear and endanger the living conditions of millions of people
Published on October 23, 2023 • Last updated 1 day ago • 3 minutes reading time
A construction worker works on a house in a new housing development in Oakville, Ontario. Photo by Richard Buchan/The Canadian Press Files
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The Canada Mortgage and Housing Corp. estimates that this country will need to build almost six million new homes by 2030 to make housing affordable again. However, the chances of achieving this goal or even half of it are slim, as not even 2.5 million homes have been built every decade in the last 100 years.
The goal of building six million homes in less than ten years is very ambitious, but these goals may remain elusive given the intellectual and structural deficiencies that are slowing new housing construction. The structural deficits are understandable, but the intellectual deficits are surprising.
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To build new houses you need land, labor and capital. Most areas in urban areas or on their periphery have already been developed in the last five decades. Not In My Back Yard (NIMBY) advocates are thwarting attempts to further densify neighborhoods, and environmentalists are preventing greenfield construction, making building anywhere nearly impossible.
Canada experienced a construction boom in the 1970s, when 2.34 million new homes were built there. It was a time of optimism when Canadians were inspired to put the country on the world map. The 1976 Summer Olympics and Expo 67 took place in Montreal when Canada dreamed and built big things – and not just in housing. Banks and other companies staked their claims in the city centers with new skyscrapers.
First Canadian Place in downtown Toronto was the sixth tallest building in the world when it was completed in 1975. Builders and developers were able to mobilize capital and employ labor to build the very landmarks we cherish today, including Toronto’s CN Tower, which was built in 1975 and retained the title of being the tallest free-standing structure until 2007.
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With a population of fewer than 23 million in the mid-1970s, Canada was building on a scale and at a rate never seen before or since. With a population now exceeding 40 million people, Canada is struggling to even build the homes it needs to house its current population, despite advances in construction and information technology.
Also standing in the way of construction is the intellectual deficit promoted by NIMBYs and others, which hampers new development and demonizes investors and developers. A prime example of the intellectual deficit is the campaign against investors in the real estate markets.
Many housing advocates believe that the role of investors in housing development should be limited or eliminated. Such a move would be catastrophic, particularly for the increasingly vulnerable cohorts, which primarily include renters.
It is difficult to understand that almost 100 percent of renters live in apartments owned by investors. It doesn’t matter whether an apartment is a purpose-built rental apartment (PBR) or a condominium, an individual or corporate investor owns the apartment and assumes all risks and costs associated with ownership.
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A series of arbitrary changes in tax laws since the 1970s have led to a precipitous decline in PBR housing construction. The rental supply gap was filled by individual investors who financed condominiums and made them available to rental households. In the Toronto Census Metropolitan Area, 46 percent of renters live in non-PBR housing.
The 2021 Census recorded five million renter households in Canada, representing approximately one in three households. Without housing investors, almost all of Canada’s rental housing stock could disappear, endangering the lives of millions of people.
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Some may naively believe that governments can replace private landlords. This is unlikely as less than 0.5 per cent of households live in accommodation provided by a local government or a First Nations group.
Canada must overcome structural and intellectual deficiencies to meet its housing needs. Building millions more homes requires capital, land and skilled workers. The land must be found here, but labor and capital can be sourced from around the world to meet the housing needs of a growing country.
Murtaza Haider is a professor of real estate management and director of the Urban Analytics Institute at Toronto Metropolitan University. Stephen Moranis is a real estate industry veteran. They can be accessed on the Haider-Moranis Bulletin website at www.hmbulletin.com.
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