Purpose built rental buildings are being bought by institutional investors as a means of driving returns to shareholders, rather than creating affordable housing. The owners of rental buildings are getting favorable prices from real estate investment trusts, pension funds, and institutional investors, whose goal is not only to generate a return, but to increase the rate of return to the shareholders of the fund.
Six of Toronto’s seven biggest institutional investors in multi family residential real estate are all keen on expanding their presence in BC’s rental housing sector, as they see huge opportunities for picking up existing rental properties and converting them into high return rental units.
The problem is that the increased return required translates into higher rents for tenants who cannot afford them. Rents have fast outpaced incomes in the last decade or more – this is especially true in the Greater Vancouver and Toronto areas respectively.
What has been happening over the last few years is that purpose built rental units that have been renting out at affordable rates of $750 a month or less, have been taken off the market by either demolitions, conversions, or simply been purchased by institutional investors so that rents can be increased as renovations occur.
What is also alarming is that when the numbers are run on some of the sale prices compared with their current rents, the only way they can be worthwhile investments is when the rents are hiked substantially.
Despite the provincial government’s drive and investment to increase the number of affordable housing units, more units are being lost at a higher rate than are being created. With every new low-to-moderate rental home being built in BC (which have a monthly rent of $750 or less), three units are lost. And this situation is not unique to BC, it’s happening in many parts of Canada.
If you are planning on entering the real estate market with the present conditions, it is advisable to talk to an experienced real estate company, such as ours, to guide you effectively. If you are looking to buy or sell a home, contact us by email or call us on 604 913 1000.