Addressing the Housing Market Dynamics

To rectify the issue of affordability, it is crucial to understand how the current housing market operates. Condominiums represent the majority of new housing projects, and these units are typically rented out at high market rates, leaving tenants with no long-term security. The owner’s ability to sell or occupy the unit at any time can displace tenants abruptly. Furthermore, the presence of affordable units, often a small percentage reserved within new developments, reduces the overall supply of market-rate units and drives up rental rates for everyone else. This arrangement results in the market-rate units subsidizing the affordable units, benefiting only those who qualify and and are lucky enough to secure the limited availability of affordable housing, at the expense of everyone else.

The current method of providing affordable housing through various subsidies and programs is commendable but falls short in addressing the larger issue of housing affordability. These initiatives often cater to a limited number of individuals, leaving many others in need without adequate support. Moreover, the scarcity of affordable housing units, coupled with complex qualification criteria, can create an unfair advantage for those fortunate enough to secure these units.

Government spending on affordable housing can inadvertently contribute to the rising costs in the housing market. Policy that provides taxpayer money to non-profit organizations for the purchase of old rental buildings inflates the market and hinders redevelopment. Additionally, the current system of taxing property held by non-profits at a different rate further increases the tax burden on market housing.

Promoting Fairness in the Rental Housing Market

To rectify these issues and promote a fair rental housing market, it is essential to implement a system that ensures affordability for all individuals. A key principle of this proposal is to limit rent based on income at move-in. By setting the initial rent within a specific percentage of tenants’ income, we can create a rental market that promotes true affordability and market mobility. A suggested percentage for the initial rent is 35%, aligning closely with mortgage approval criteria and acknowledging the current reality that the majority of renters pay more than 35% of their income on rent.

Additionally, reforming the system of property taxes to focus on the land value rather than the entire property, thus incentivizing improvements, can promote development and enhance the overall housing supply. Alongside these measures, there is a need to limit GST to actual hard costs, eliminating any GST attributable to land value. It is also important to protect tenants by limiting fixed billing-related costs for utilities.

Implementing the proposed system of limiting rent based on income at move-in addresses the issues of unfairness and ensures that individuals are not reliant on luck or limited supply to access affordable housing. This approach promotes market mobility and allows individuals with lower incomes to secure housing in desirable locations that were previously out of their reach. As individuals with higher incomes move to more expensive housing options, the rental units they vacate become available for others, ensuring a continuous supply of affordable housing options.

Addressing Multiple Tenants

To address scenarios where multiple tenants are involved, such as roommates or family members sharing a rental unit, the combined income of all tenants could be considered. This ensures that households with varying income levels can still qualify for a rental unit, provided that the total rent amount remains within the prescribed income limitation. By incorporating mechanisms that account for shared tenancies, we can ensure that individuals and families have equal access to affordable housing, regardless of their specific living arrangements. This approach acknowledges the diversity of household compositions and considers the combined income of all tenants when assessing rental affordability. It promotes fairness and inclusivity, allowing households with varying income levels, such as roommates or family members sharing a rental unit, to qualify for affordable housing as long as the total rent amount remains within the prescribed income limitation.

Addressing Unique Financial Situations

The proposed rental housing system is designed to cater to a diverse range of circumstances, ensuring equitable access to affordable housing for all Canadians. In this comprehensive approach, scenarios may arise that affect renters ability to qualify for based on income; those whose income doesn’t reflect their ability to afford rent, those seeking or requiring a co-signer, and individuals with extremely low income. By considering each situation thoughtfully and implementing tailored solutions, we can create a rental housing system that is fair, inclusive, and sustainable.

In some exceptional cases, individuals may have limited income but possess significant net worth. While the proposed system primarily focuses on affordability based on income, it is crucial to ensure that the assessment of rental affordability may, at a tenant’s option, consider a more comprehensive evaluation of an individual’s financial capacity, including both income and assets. This approach promotes fairness and maintains the integrity of the rental housing market by taking into account unique circumstances that may affect an individual’s ability to afford housing solely based on income.

For individuals who need additional support to qualify for affordable housing, the inclusion of a cosigner would be accepted. In this scenario, the individual seeking housing may utilize the remaining portion of the cosigner’s income not used to qualify for their own rent or mortgage, as additional qualifying income. This approach ensures that the housing solution remains within the recommended percentage of income (e.g., 35%) for both parties, creating a balanced and equitable arrangement.

In cases where finding a cosigner is not an option, it’s important to provide a safety net for individuals with extremely low income. To ensure that no one is left behind, a maximum rent threshold should be established based on income equivalent to full-time minimum wage earnings. This ensures that individuals facing financial constraints can still access affordable housing within their means.

By incorporating these options into the rental housing system and emphasizing the need for a holistic evaluation process, we can cater to a diverse range of circumstances, ensuring the benefits of this proposal extend to all individuals, regardless of their particular situations. This approach also guarantees that rental affordability is accurately and equitably determined, providing a balanced approach to addressing exceptional situations within the broader framework of income-based affordability.

Addressing Home Office Expenses in Income Qualification

When determining rental affordability, it is essential to consider an individual’s financial capacity accurately. In this proposal, we advocate using the income reported on their tax return as the basis for qualification. This approach provides a comprehensive view of tenants’ net income before taxes, considering all earned income from various sources.

Furthermore, for individuals who work from home and claim legitimate home office expense deductions on their tax returns, it is crucial to add back these deductions to their reported income. By doing so, we ensure that tenants’ income used for qualification reflects their true financial capability, providing a fair and equitable assessment. This approach promotes a more accurate representation of tenants’ ability to afford rental housing, fostering inclusivity and fairness in the rental market.

Ensuring Long-Term Security for Tenants

To promote fairness and stability in the rental housing market across Canada, it is crucial to address the disparity between purpose-built rental units and condo rentals. Lessons learned from Ontario’s rental housing system serve as a cautionary example, where policy decisions led to a shortage of secured rental housing and resulted in the abolition of rent controls for new developments. This led to a two-tier system, where some tenants faced massive rent hikes with no limits, while others benefited from rent increases that were below the rate of inflation. This stark contrast in treatment is not only unjust but also perpetuates economic disparities and housing insecurity among renters.

To address this issue and avoid similar challenges, it is necessary to implement a policy that ensures all condo units, once rented out, are subject to the same regulations and protections as purpose-built rental units. By doing so, tenants would have greater stability and confidence in their housing situation, knowing that their rights and rental costs are governed by the same rules that apply to purpose-built rentals. This approach would create a more consistent and predictable rental market, benefiting both tenants and landlords alike. By removing some of the added incentive for developers to focus on condominiums over rental units, this shift in focus would increase the supply of rental housing in the market, alleviating the pressure on renters and providing more options for affordable and secure housing.

Financial Considerations and Incentives

To address financial concerns for landlords, rent increases would still be allowed, but they would be linked to housing-specific inflation costs such as mortgage interest rates, insurance, property taxes, and maintenance expenses. The aim is to ensure that landlords’ net income on these properties, on average, remains closely tied to inflation.This ensures that rent increases are reasonable and reflective of the actual costs incurred by landlords, while also preventing excessive rent hikes that would negatively impact tenants. By establishing a balanced and sustainable rental market, this approach provides stability and predictability for both tenants and landlords.

In addition to addressing rental affordability, this proposal aims to reduce taxes and government debt by eliminating redundant affordable housing spending. By streamlining resources and redirecting them to more effective solutions, we can achieve fiscal responsibility while still addressing the housing needs of the population. The resulting savings could also be used to reduce government-imposed costs associated with housing, such as Community Amenity Contributions (CACs), Development Cost Charges (DCCs), and property taxes. These measures alleviate the burden on taxpayers and incentivize new home construction.

Flexibility for Landlords

To ensure fairness and acknowledge the responsible actions of landlords, a provision would allow landlords to charge above the allowable rent if they have not taken advantage of those increases in the past. This provision aims to avoid penalizing landlords who have demonstrated fairness and consideration in their rent adjustments over time. By providing this flexibility, landlords are encouraged to adhere to the allowable rent increases over the long term while still allowing them to adjust rent appropriately if they have not utilized their full increase in previous periods.

This approach strikes a balance between protecting tenants from excessive rent hikes and recognizing the responsible behavior of landlords who have been considerate in their rental pricing. It rewards landlords who have not maximized their allowable rent increases in the past by giving them the opportunity to adjust rent more flexibly when necessary, without negatively impacting tenants. By implementing this provision, we create a system that promotes responsible rental practices while ensuring fairness for both tenants and landlords.

Striving for an Equitable and Sustainable Rental Housing System

In conclusion, this comprehensive proposal offers a transformative path towards creating a more equitable and sustainable rental housing system in Canada. By addressing the disconnect between income levels and rent payments, fostering long-term security for tenants, and implementing financially responsible measures, we can make a profound difference in the lives of countless individuals and families across the country.

The time is now to revolutionize affordable housing and promote fairness in the rental housing market. Through this visionary approach, we can break down barriers that have limited housing accessibility for low-income individuals, eliminate disparities in rental costs, and empower tenants to secure housing based on their actual income.

Rather than relying on separate affordable housing units, we advocate for a rental market that treats all tenants equally, regardless of when they started their tenancy. This approach promotes mobility, creates opportunities for families to thrive in their desired locations, and ensures that everyone has access to safe and secure housing.

In this journey towards an equitable rental housing system, envision a Canada where housing is not a luxury but a fundamental right for all individuals and families. This proposal seeks to unite stakeholders from various backgrounds in a common mission to transform the housing landscape. Just as a well-built home is supported by a strong foundation, an equitable society is built upon a foundation of fair housing opportunities. Let us rally together to construct this foundation, ensuring that every Canadian has a place to call home, one that provides comfort, security, and dignity.

The future of affordable housing is within our grasp, and the impact of this proposal extends far beyond words on a page. It is a blueprint for change, a testament to the power of innovative ideas, and a testament to a shared commitment to the welfare of all Canadians. Together, let us seize this opportunity to create lasting change and build a rental housing system that embodies fairness, inclusivity, and progress for generations to come.

Josh Adelberg
President – IDS GROUP

IDS GROUP is a real estate development management company based out of Vancouver. Their are-as of expertise include project financing, architectural design; project, construction, property, and as-set management; sales and leasing; land assembly, and investment. For more information, visit www.IDSgroup.ca

Mr. Eby’s current plan to buy old and obsolete apartment buildings in hopes of retaining affordable housing, is in my opinion, another example of the government unwittingly attempt to tamper with the Real Estate business. I am relatively confident that he came to this decision without any ideological agenda, but it seems to me this approach was influenced by those who do.

Spending $500 million of taxpayer money to purchase obsolete apartment buildings is not only a bad idea, but it’s also a road map to disaster. I’m of course referring to first, the windfall for the apartment owner and secondly the unavoidable shortfalls of maintaining old buildings, chock full of asbestos, wet rot, rust, and other deficiencies that come with old age. Forget for a moment that these buildings were built when building codes were, to say the least, unsafe; they will inevitably have to be replaced anyway.

In my opinion, government works best when it supports the private sector by establishing policies that protect the public interests and encourages economic growth.

I believe it is in everyone’s interest to redevelop old apartment buildings into new buildings that are modern and healthy and built to last. Through densification, we can replace existing affordable rental units at existing rates and add much-needed market units as well. The only obstacles standing in the way are Municipal development charges and levies, lengthy approval times, and the uncertainties of interest rate hikes and construction cost increases. All of which come under the heading of viability.

I am suggesting that Mr. Eby spend the $500 million on low-interest loans or grants or guarantees or equity to the apartment building owners in order to make the proposed redevelopment project viable. I am also suggesting that the government determines what is meant by the word “viable.”

I am an advocate for income caps. I believe that reasonable profit is good but huge profit at the expense of the public is bad. I also believe that the private sector should take more responsibility in ensuring that the public is protected from profiteers, and the public should take more responsibility in ensuring that the private sector is encouraged to expand.

Lastly, I believe it is possible to solve the housing crisis through cooperation between both the government and the private sector. A little trust can go a long way, especially when earned through fairness, equality, transparency, and the desire to succeed.

David Adelberg

IDS GROUP is a real estate development management company based out of Vancouver. Their are-as of expertise include project financing, architectural design; project, construction, property, and as-set management; sales and leasing; land assembly, and investment. For more information, visit www.IDSgroup.ca

If you’re looking to redevelop your purpose-built rental building there several steps to consider, including financing, tenant relocation, zoning, and time investment. This guide provides answers to your most frequent questions.

FINANCING — CAN I, AN INDEPENDENT APARTMENT OWNER, ACTUALLY FINANCE SUCH A MASSIVE PROJECT?
The financing to develop a high-density asset is the same as when you, or previous family member had acquired the asset. It’s still the 25 per cent ratio of a down payment to financing needs; all projects are unique but the similar rule/ratio applies. In fact, the federal government recognizes the desperate NEED for rental purpose assets to be developed and have very favourable lending terms for apartment owners such as yourself to develop. If you have held the asset for many years and have substantial equity, this is recognized towards down payment security towards the financing.

ZONING AND THE CITY, WHAT DO I NEED TO DO TO GET APPROVALS?
Chances are that your multifamily asset is already a valued component of your city’s rental supply. There is also a very good chance that your municipality has already designated your area as higher density within their OCP (Official Community Plan). If not, nearby high density redevelopments can set the precedent allowing you to submit and get approval from your municipality to redevelop high density as well. Approval requires: architectural drawings, landscaping plans, engineering schematics, community amenity contributions. There is a lot of dialogue and back-and-forth with city planners. Remember, if there is a shortage of rental supply in your municipality, they want your project to succeed, they need it.

WHAT ABOUT THE CURRENT TENANTS; HOW CAN YOU HELP THEM?
Tenants are the lifeblood of our success and it can be difficult to make the decision to redevelop and ask your tenants to go through the certainly painful process of moving. Unfortunately to create a modern high-density solution for the overall benefit of the community, as well as your portfolio, you will need to end the tenancies of the existing tenants.

Ending tenancies is never a positive experience but when ending tenancy for redevelopment requires some additional consideration and sensitivity. Regardless of where the rental units are located there will be the need for compensation and some municipalities have tenant relocation programs in place that require the landlord to relocate and further compensate tenants for the significant impact that ending a tenancy can have. Additionally, your municipality may have terms that allow tenants to return to the new building at similar rates from the current tenancy agreement. Construction financing can also provide financial support to compensate for tenant relocation expenses. The new development can also be seen as a long-term benefit to the tenant in which they will have a modern building to return to and enjoy the amenities and quality of life for the long-term.

HOW LONG IS THIS GOING TO TAKE?
The timing wildcard in any development currently is the approvals and processes through your municipality’s city hall. This could take 6-18 months depending on: current zoning, OCP, capacity of the city planners to meet the demand for their time and approvals. Construction time, depending on the size and scale of the project could be 18-24 months. Preliminary financing approvals could take 6-12 weeks; in which triggering construction financing would be dependent on civic approvals for development. Five-years in total is the conservative outside time limit that we work backwards from depending on optimal timelines at each step.

Once the building is nearing completion and occupancy, marketing of the suites for rent should commence. Develop your database for viewings as soon as possible after occupancy. Rendered drawings of units and virtual reality (VR) presentations are great tools to showcase your new, modern suites offering lifestyle not just a roof over one’s head. Lease-up is key if the goal is to sell the final complete asset. Maximum sale price is achieved with full lease-up and stabilized revenue achieved.

The final, cherry-on-top benefit of your new development is the naming rights. This is an opportunity of the legacy of the family trust or flagship property of your portfolio. Recognize a loved-one, founding family member, champion of your community, or branding opportunity of your hard earned portfolio.

As daunting and intimidating the idea of developing a high rise, concrete, purpose-built rental building is, it’s the natural next step as a real estate investor.

IDS GROUP is a real estate development management company based out of Vancouver. Their are-as of expertise include project financing, architectural design; project, construction, property, and as-set management; sales and leasing; land assembly, and investment. For more information, visit www.IDSgroup.ca

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The maintenance costs for an aging and deteriorating apartment building may grow exponentially over years. Hence, this factor contributes to the need to redevelop these aging properties. In fact, many property owners may not be aware of the values that their existing property may create for them, in contrast, they are more concerned about the expenses involved to upgrade or redevelop their properties. This article will discuss the advantages of property redevelopment and how property owners may take advantage of the services provided by real estate development management companies to maximize their economic well-being.

• Increase of supply benefits the tense housing market

While the economy is recovering from the pandemic and people’s lives are going back to normal, the population in the Vancouver area has increased significantly. According to McElroy’s (2022) posting in CBC News, “the shortage of housing supplies drives the cost of housing to a crazily high rate in comparison to the other metro areas in Canada”. As such, transforming the aging properties into modern high-density properties will increase the market supply and put downward pressure on housing prices.  

• Enhance the community’s living quality

As reported by Beattie (2022) in the CBC News, aging buildings cost millions of dollars to preserve, also, other apartments collapse like the Champlain Towers in Surfside can happen. Undeniably, the old-fashioned properties can be liabilities from the inside out. The unforeseeable potential safety issues threatened the health and safety of the tenants in the building. Therefore, it’s time for the property owners to decide between: 

(a) protecting the well-being of the tenants at the same time maximizing the property value or; 

(b) leaving the buildings to deteriorate, putting the tenants in a potentially dangerous situation, and doing nothing with the shrinking property values.

• Create job opportunity

Another amazing thing, property owners may not be aware that their decision to develop can feed the stomachs of many families. The construction phase in property redevelopment to build a high-density property requires huge efforts from the professionals like engineers, plumbers, designers, etc. Not only that, upon finishing, an office, restaurant, shop, or any business operating in the new property are going to create more opportunities in the job market. Hence, as property owners and real estate developers are constantly taking up property redevelopment projects and each of these projects lasts years, the contribution to the job market will be sustained. 

• Save the forests

Regardless of an individual or a corporation, we always owe the responsibility to take care of the environment. Since the supply in the housing market is scarce and the Government of BC encouraged more property development, especially in the Greater Vancouver area, it is obvious that new property development requires more and more land clearing for the properties. According to Somma (2021), land clearing is likely to contribute destructive consequences to the environment such as erosion, pollution, or flooding. In fact, sacrificing environmental health to cure the housing crisis must not be something that everyone expects. Thus, property redevelopment seems to be the most suitable solution to deal with this situation, in which the necessity for land clearing is minimized, and housing supplies can be boosted. If people can build a better community with minimal harm to the environment, how could they say no to that?

• Conclusion

The future of Greater Vancouver’s housing market is in the hands of property owners. By joining part of the property redevelopment movement, property owners could make a symbolic contribution to social, cultural, and environmental issues. Additionally, to reduce the negative consequences of the housing crisis, the Government of BC is even easing the requirements for rezoning, so that property developers can work on their best abilities to solve the housing crisis (Fletcher, 2021). 

While some owners might hesitate to take the next move due to the concerns of losing property ownership, financial constraints, or technical limitations, IDS Group could be the best option for these property owners to proceed with. This is mainly because IDS Group provides exceptional support and solutions to inexperienced property owners in the redevelopment process, including but not limited to financing, design, construction, and asset management. IDS is committed to helping clients to create developments that are attractive, economically viable, socially responsible, and environmentally sensitive. Apart from that, previous clients of IDS Group also left an excellent review to the company for the services they received. 

IDS GROUP is a real estate development management company based out of Vancouver. Their are-as of expertise include project financing, architectural design; project, construction, property, and as-set management; sales and leasing; land assembly, and investment. For more information, visit www.IDSgroup.ca

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After a while most people looked for ways to protect or sustain their good fortune; while others took a more aggressive path and later became known as, dare I say it? “Developers.”

I actually don’t recall when I first heard the word, “developer,” I suppose it was around the time when the “Condominium Act” was put into law in 1966. By 1972, words like, “Strata lot,” “Prospectus” and “disclosure statement” were popping up all over the place, but to be honest, I was never a fan. I really wonder what Real Estate would look like today if “developers” had continued to build apartment buildings instead of condos that offered “tax shelters ”in the late 70’s/80’s to spur on the small investor.  Perhaps we would see a lot more homes; perhaps not, but I can’t help thinking we kind of shot ourselves in the foot on that one.

Dwelling on past mistakes doesn’t accomplish much unless you’re focused on learning from them, does it? So, let’s leave memory lane for the faint of heart and center our resolve on finding solutions that undress the elephant in the room known as, GREED!

You can nicely refer to it as being ambitious, or driven, or even ruthless, but to me “money hungry” is the most appropriate definition. Money, money, money; the great motivator and possibly the “root of all evil.” Yet without it, the world as we know it could cease to exist; a Pandora’s box revealing Man’s true nature and the last thing we want to see under the tree on Christmas morning. 

I like money. I think everybody should have some. I think money can do a lot of good but it can also do a lot of bad; especially if you have too much or too little of it. I think having “enough” money is best; but for some people, “The world is not enough.” For others, just having enough to eat is enough. I’m not judging them, in fact, I’m grateful to them and many like them who have helped remove 1.2 billion people from extreme poverty in less than 30 years according to a United Nations report. I just don’t think it’s enough, do you? The truth is, enough should never be enough if it means making the world a better place. 

So for the developer “greed is good.” But for many who aren’t focused on greed and would still like to make the world a better place, I would ask yourself, this; “Do I care about the housing crisis?” If the answer is “yes” then ask yourself, “Do I own an apartment building?” If the answer is “yes,” ask yourself, have I spoken to a professional to discuss the redevelopment potential of my building?” If the answer is “no” perhaps now’s the time.

Reality bites the hands of time; it doesn’t care who feeds it, it only cares when. History is made by the stroke of a pen or the firing of the first shot; Real Estate transactions occur in much the same way and oftentimes the only way to tell if the deal is good or not is after it happens. Being prepared for the worst but expecting the best is a sound basis for investing in property. However, “information” is key. The best decisions are informed decisions and fundamental to predicting the outcome. 

Did I mention I’d been around a long time? I’ve experienced three major market collapses, none of which were predicted and none of them lasted very long, thank God. Economies expand and contract but at the end of the day the only thing predictable about Real Estate  is that it’s unpredictable. However, one thing is predictable; people will always need a place to live. 

From caves to castles to condos to the Moon and to Mars; will it ever stop, or will we go “gently into “the good night”? I don’t think so, but it’s up to you, the apartment building owner, to explore the possibility of redevelopment. If you care about being part of the solution to the “housing crisis” and at the same time increase your cash flow and net worth, I implore you to reach out and take advantage of government backed financing programs specifically designed to add thousands of new rental units to BC’s housing shortage.

There are challenges to face for the apartment building owner contemplating redevelopment. not the least of which is coming to terms with the numbers. A fifty year old building assessed today at say $20 million dollars would, when redeveloped under current OCP (Official Community Plan) guidelines, be valued at (Approximately) an astounding $150 to $200 million dollars. This alone on the surface will seem at first, unfathomable and maybe more than double or quadruple your current net worth. But in reality, it’s only another zero; the numbers are the numbers. The bottom line is that if the numbers show the project to be viable, then the project is viable; and viable means that the projected revenues are sufficient enough to service the debt and earn the owner a positive cash flow along with oh ya, a brand new building. 

I can think of dozens of reasons for an apartment block owner to reject redevelopment. Some are common to all while others are exclusive to individual circumstances. Family trusts, inheritances and partnerships can complicate matters but would not in most cases interfere with the proposed development. Although every potential project is different; the variables are easily addressed during the project analysis stage, but of course it isn’t going to matter unless the owner has enough money. How much money depends on the project but as in the example above, it is usually the amount of equity the owner has in the existing building.

I’m rather certain that the information provided in this article is not nearly enough to light a fire under the average apartment owner, but I am hopeful that there’s enough here to make you gather the kindling. Remember, this is Real Estate and time is always of the essence; so, in the spirit of good intentions, don’t wait; do it now while the fires’ hot and the phone call is free. 

Dave Adelberg

IDS GROUP is a real estate development management company based out of Vancouver. Their are-as of expertise include project financing, architectural design; project, construction, property, and as-set management; sales and leasing; land assembly, and investment. For more information, visit www.IDSgroup.ca

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