Why It's So Tough to Develop Rental Buildings
The city’s in desperate need of fresh rental stock, with vacancy at 0.5% downtown and only 281 suites out of 56,000 available to rent, according to the just-released Goodman Report. But while more developers around town are showing interest in constructing purpose-built rental apartments, HQ Real Estate Services principal David Goodman (here with son/business partner Mark) tells Bisnow the city's been doing a lousy job of facilitating delivery of new supply. “There are formidable challenges to get a building out of the ground.” Among them: roadblocks for developers seeking to add density to existing sites; a “snail’s-pace” vetting process; and “social engineering” demands for rent control and larger suites.
Amid the city’s aging rental apartment stock, new purpose-built projects are proving attractive to investors—pension funds and life insurance companies in particular—owing to the higher rental incomes they command (often 50% more than in older rental buildings), and the reduced maintenance and capital expenditure they require. Mayor Gregor Robertson pledged during the election to deliver 1,000 new rental units per year—but David says that won't cut it. “There should be three or four times beyond that. They’re not doing enough to advance the process.”