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What role does purpose-built rental housing play in our housing solution? Today’s guest passionately believes that it’s going to play a big part and that we need to recognize, prioritize, and support that both as a society and as policy-makers. Tony Irwin is the President and CEO of The Federation of Rental-housing Providers of Ontario (FRPO). Tuning in, you’ll hear his thoughts on the necessity of taking immediate action to promote purpose-built construction, the impact of population growth and immigration, and how affordability issues are impacting the rental landscape today. We touch on obstacles to building purpose-built rentals, renters’ stigma, and the positive evolution of the rental housing industry. Hear Tony’s take on the true root of the affordability challenge, barriers faced by smaller rental operators, and what he recommends for the next housing bill. Tune in today to hear all this and more!
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"Purpose-built rental housing must be part of the solution going forward. It's going to play a big part in our housing solution. We need to, I think, recognize that, prioritize that, and most importantly, support that as a society and as policymakers and longing going forward." - Tony Irwin
ANNOUNCER: Hello, and welcome to Sync or Swim, a weekly podcast brought to you by Rentsync, where we take a deep dive into the PropTech, multi-family and rental housing industry. In each episode, we uncover the technologies and strategies used to help overcome operational challenges and increase the value of your multi-family investments. Let's get into our conversation today.
[00:00:39] MH: All right, welcome back to another episode of Sync or Swim, a podcast where we take a deep dive into the PropTech, multi-family, and rental housing industry. I'm your host Matt Hildebrand, and today I'm proud to be joined by Tony Irwin, President and CEO of FRPO, the Federation of Rental-Housing Providers of Ontario. Tony, thank you so much for joining me today.
[00:00:57] TI: Great to be with you, Matt.
[00:00:59] MH: Now, with well over 2,000 members, FRPO is the leading advocate for quality rental housing in Ontario. Last month, FRPO collaborated with BILD, Finnegan Marshall, and our good friends at Urbanation to repair a report on the current state of the market for purpose-built rental developments. This report is a very important contribution to the ongoing discussions around how to increase purpose-built rental construction in Ontario. We wanted to have Tony on today to discuss this even further. Tony, my first question to you is really just how did this report come together?
[00:01:29] TI: Well, thanks, Matt. Again, thank you very much for having me with you today. This is another important report that looks at the state of the current rental housing market and this time with a focus on the GTA. Of course, there have been numerous reports, FRPO is commissioned several, but given the gravity of the situation that we're facing, relative to the need for more housing of all types, including more purpose-built rental housing, we thought it was important to partner with BILD, our friends at the Building Industry and Land Development Association, and work with Urbanation and Finnegan Marshall, to just do an update or on the state of affairs relative to rental housing in a very important part of the province and, in fact, indeed our country.
That's really, it was the impetus we want to continue to put data out for the public to see, really try to connect the dots between the situation we're facing relative, as I say, related to just the sheer number, amount of housing that we will require, not to be alarmist or not to be overly dramatic, but to really ensure that we're continuing to sound the alarm bells because I do think we need to do that. Then, of course, talk about solutions that we can look at for those of us who advocate at different levels of government, how we can continue to work together, advancing important policy ideas that will ultimately get shovels in the ground and get more purpose-built rental housing built that's desperately needed over the next decade and beyond.
[00:02:56] MH: Now, purpose-built rentals in the GTA, they're very common according to the report that they represent a 41% share of total rented dwellings, but we have started to see a shift with Condominium apartment rental seeing a 54% growth during the last 10 years. I'm hoping you can just take us through a bit of the current state of purpose-built rentals in the GTA.
[00:03:17] TI: Sure, that's great. It's good to have that frame of reference before we really dig into the conversation. We also, to be able to do that. Just a few weeks ago, CMHC released their latest rental market survey, which is, of course, another treasure trove of data that's collected in annually. So, from that, we can glean some important data. First of all, an overall decline in Ontario's vacancy rate from 3.5% to 1.8%. When you look at the great Toronto area, among newer purpose-built rental buildings, the vacancy rate, in fact, was 1.5% in the fourth quarter of 2022, down from a high of 5.7% in the last quarter of 2020.
What's that telling us? I mean, that's telling us that any thinking that markets softening during COVID, which we know it did, for many reasons that I'm sure you've discussed here and elsewhere, any thoughts of that might be here to stay for the medium or longer term is clearly no longer the case. We've returned to a pre-pandemic vacancy level, so very low. When I said whether you look at the provincial vacancy rate or the GTA vacancy rate, both numbers are below 3%. That's the number that's generally accepted as the baseline for a healthy rental market.
We're not there. We're below that, but demand, of course, as we know, continues to grow. We look at renter households, for example, in the GTA in our report now, grew more than three times faster than the number of owner households in the last 10 years. As you indicated, within renter households, purpose-built rentals are the most common form of housing, but they amount to the least new supply. Only 9% of the share of total rental supply in the last 10 years was purpose-built rental. It's no surprise, no secret to anyone, I think, who follows this or is a resident themselves and may experience the fact that the majority of our existing stock is ageing.
Almost 90% of GTA's purpose-built apartment buildings are over 40 years old. That's a little bit just to give you a sense for where we're at relative to vacancy rates are backed down very low. Turnover rates are also low. Why is that? There are limited options for people to go. In a healthy market where there are greater vacancies, people have freedom to move as their needs change, as their family circumstances might change, that is not the case from now. People are staying in place in their units, not moving around. Of course, we know what that's done relative to rents. All of this is a perfect storm that tells us we need to take immediate action to be able to incentivize more purposeful rental construction because it is desperately needed and just the final point, as I said, homeownership rates are dropping.
We know the difficulties of people being able to buy a home. While we at FRPO are supportive of all housing types, all housing types are important, whether they be single-family homes, condominiums, the laneway housing, whatever the kind of housing you want to talk about, but purpose-built rental housing must be part of the solution going forward. It's going to play a big part in our housing solution. We need to, I think, recognize that, prioritize that, and most importantly, support that as a society and as policymakers and long ahead going forward.
[00:06:26] MH: I couldn't agree more. We've been talking a lot about supply issues these last few months here at Rentsync. Of course, most places have been talking about that as well. I mentioned a few key points there about why we're entering this situation. Now, I think a big fundamental driver of rental housing demand has been population growth. I mean, in the 10-year period to 2022, the GTA population increased by 14%, and projections show this growth is only going to accelerate. I mean, how many rentals do you think the GTA really needs to build?
[00:07:04] TI: The report found that we need more than 300,000 rental units over the next 10 years, just to meet demand. That takes into account both units that are in the pipeline, projected in the pipeline, and knew that are not. When you take that number of 300,000 units and you know that in 2021, we saw the greatest number of rental starts in, I think, three decades, and that was 13,000. You can do the math based on that to say, if that was our greatest number in three decades and with 13,000, and we need 300,000 over the next 10 years, we're far off of hitting that.
I think that really should demonstrate to everyone the enormity of the challenge to even hit that number. As you said, I mean, there are a number of factors for that. This country was built on immigration and hugely important to the fabric of our communities, talk often within FRPA about the fact that we have a huge shortage of skilled trades, right? Even if all of the permits that our members have currently in the development approval process were miraculously approved today, and they had the green light to put shovels in the ground tomorrow, they couldn't do it. The big reason why they couldn't do it is because they couldn't find – the trades are simply not here to be able to do the work.
We need immigration to continue. We need to attract skilled trades, masons and bricklayers, and all kinds of skilled trades that are required to help build housing to come to our country and our province in our region. We also need to, this is a separate point. I know it's not related to immigration, which is I'm on the skilled trades point just for a moment. We, of course, also need to really encourage our young people here. I know that's something that the Ontario government and the Minister of Labour has spent a lot of time and focus on, and that is trying to change attitudes around skilled trades, that it can be great careers, and there's a huge need.
If people are looking for what can be a very promising, rewarding, and quite frankly, financially lucrative career, skilled trades, some of the people should definitely be considering. That's, I know a bit of a tangent, but getting back to the main point, which was immigration. That is going to continue, we know the federal government has had aggressive immigration targets. We know that history tells us that a lot of newcomers to Canada end up coming to the Toronto area, to Ontario and to Toronto, specifically the GTA. We know that those new Canadians are going to continue to come here, and we know that quite often if you're a new Canadian, a newcomer to our country, you do start by renting.
Renting is a very common way to find housing when newcomers first arrive. They may take a different path after being here for some time and establishing themselves, but renting is absolutely the way many start, and that's another topic we can talk about, just the whole attitudes of society around renting in general. We know that we're going to continue to welcome any newcomers every year, and we need to house them. As it currently sits now, if we're offering opportunities, we're offering a way of life for people to come here.
We also have to offer them somewhere to live. Right now, we may be succeeding on checks on those boxes, but the housing box is going to become increasingly difficult for us to check. We really need to prioritize and figure out collectively how we're going to house the people who we want to come here, and who we need to come here for us to be able to thrive as a society, to grow, and to do all the wonderful things that we want to do, we need to be able to house them.
[00:10:22] MH: I think that's a good segue into my next question. I mean, we discussed our population growth. It's only going to accelerate. I mean, most notably, population growth within the 35 to 44 age group is accelerating as well. With that in mind, bringing it back to purpose bill rentals, why is that such a major key point in our need for purpose bill rentals compared to just increasing rentals in general?
[00:10:49] TI: You mean, sorry, but respect to that particular age demographic?
[00:10:51] MH: Exactly. Yeah.
[00:10:52] TI: I mean what we are seeing, certainly in speaking with our members, is a real, I think, differences in terms of, from maybe in the past, in terms of who rents, what the renters or profile looks like. We do see a lot of different, whether it be young people, of course, starting out, whether it be older, generations who want to perhaps sell their home, unlock equity, give it to their kids so they can hopefully get to the housing market and downsize themselves into a apartment that doesn't require maintenance and more fits their needs. In terms of the demographic that you mentioned, we know that the housing market, of course, is extremely difficult to access for many.
I think we're definitely seeing shift in terms of, quite frankly, people who rent, and they rent for a long time. It's not a, I'm doing this when I'm in my early 20s and then I move on to buying a home. It's that, because all the affordability issues that we're seeing relative to inflation, it's impacting most of us, I would say. In many ways, it also is having an impact on housing and on choices they can make. I think the other point, too, about it is that rental housing, I would expect, you've probably been in some buildings, perhaps. It's not what people think or it's not what it used to be. If you go into rental apartments now, new or stock, your mind would be blown away by what you would see.
Recognizing that's new, of course, it's not necessarily accessible to everyone that's looking to rent, but certainly there are people who, for which that is very accessible. It provides the amenities that they want, and locations that they want, whether it's, to say, older folks downsizing, young professionals, or in the 30s to 40s demographic like you said, who think like this is what I want. This allows me to provide for my family, allows me to have kids in programs and do things that are, we want to do, travel, do all things you want, because it's an amazing building. It's one that's well-kept, well-maintained, good amenities. We're definitely seeing that shift, both in the product that's being offered, and quite frankly, what people want in terms of the lifestyle choice. All of that built factors into why we need to continue to get more rental housing built.
[00:12:57] MH: Yeah. With the demographic shifts, I think purpose-built rental offers a little bit more flexibility there more affordable units for the young adults.
[00:13:04] TI: Certainly.
[00:13:05] MH: That is well larger units that can accommodate families and downsizers like you just mentioned, especially with immigration more people are coming over with larger families. Purpose-built rental can accommodate some of those needs, I think, a little bit more than condos.
[00:13:20] TI: If I can jump in just now, but you're right about that, condos are built differently. They're often built smaller. Personal rental, it's a good point you make about larger-sized units, and that's absolutely a need. You look at other cities like New York and cities in Europe. They do have large apartments to accommodate families who live there, raise kids there. It's not a temporary accommodation. We have – certainly, if you look at older stock, a lot of older stock was built that way. They were built large bedrooms, large rooms generally.
Of course, over time, the economics have made that challenging to be able to continue to do that, which is why it's very important that, for example, in Bill 23, that the entire government passed last year. They brought forward DC discounts, which are on a sliding scale, largest discount for three bedroom and then down the line. That's important because we get into the conversation around the economics of building rental versus condo. We know they're very different. We know the rental has been very difficult. Personal rental is very difficult to build in a way that's economically viable, but you're absolutely right that people want more bedrooms in their units. We have members who want to build them.
There have been challenges related to time to get approvals, costs, government fees, and charges that are embedded into it. So those discounts, there's no one silver bullet here, but those discounts are very important. They were done, in my view, because of the acknowledgement that we do need to incentivize larger units, more bedrooms, and they are more costly to build. So, for those government said, look, we're going to provide some support here by way of a discount to help get those units constructed for growing families who want to have more bedrooms and more space.
Just part and parcel of what we've been talking about. That's why we're very supportive of government's legislation in Bill 23, because we do think we know from seeking to some of our members that it absolutely makes a difference between a project. In fact, some of our members who are contemplating building condominiums since these changes went into effect have now said, "We're going to build those buildings as purpose-built rental." That's, I think, very positive.
[00:15:19] MH: Yeah. You led right into my next question I had for you, and don't want you to repeat yourself there. I mean, why has it been such a struggle to develop purpose-built rentals, and why have Condo seen such an increase over the last decade? I mean, you touched on some policies and some construction costs there, but is there anything else that maybe he didn't touch on yet?
[00:15:37] TI: Yeah. I can add a few more points. A couple of things I think that are important to understand relative to project economics. Right now in the GTA, the average time it takes to get a project from initial application to completion is 100 months. I know, I just stop there, 100 months. I mean, that is a huge number to get a project through the pipeline. Simply not, if anyone wants to wonder, is wondering why we're not getting housing built. Quite simply, time is killing projects. Time is money. The fact it takes so long. During that time, of course, a lot can change. Construction costs can go up. There can be all other factors that can impact a project while this clock is running on this 100 months. That's one point that I would say has made the stress on purpose-built rental difficult.
The other challenge is, of course, with a condominium project, given that the units are sold, three-quarters of them are sold before the developer breaks ground, the rest are then held back, are able to be sold to help offset any additional costs that have been imposed by the municipality or other issues. They're able to offset some of those issues that might arise with the remaining units that they will sell. Then, of course, the project is done. Then move on to something else.
A personal rental building can take eight to nine years to turn a profit, to become profitable at all from the time that it's opened. You have to have the financial strength, obviously to withstand that. We do have members who have been in this business for 30, 40, 50 years, who can and want to, but again, that's the profit. They understand it takes that length of time to turn a profit. Then other factors have to make sense, relative to project costs to be able to say, we can take that risk. We can build this building, knowing it's going to take that long to turn a profit, the rest of the spreadsheet, if you will, has to make sense.
The major contributors to why purpose-built rental construction has not made sense is absolutely the time it takes to get projects approved. I think it's, quite frankly, I think most reasonable people will listen to that and say, "That doesn't make any sense. 100 months, that seems insane." So that, and then the costs that over time and certainly over the last five years, the government post fees and charges have grown exponentially. We all know everything's becoming more expensive, but again, we have to look at all those costs and say, "Is this being done in a manner that makes the most sense? Is this being done – is this fair?" There are other issues relative to taxation, for example, personal rental buildings are taxed to the same rate as single-family homes. That doesn't make sense.
There are other tax issues as well that make building rental challenging. All to say that that's the reason, though these are all the reasons why many developers over the last two decades have focused on condominiums, because quite frankly, it makes more economic sense, they can produce the return for their investors or in a more timely fashion. Get that return that's needed to be able to get the investment, because, of course, people will invest where it makes the most sense. They don't have to invest here. They don't have to invest in personal rental housing. They can take that capital and put it somewhere else.
We want to attract it here in this industry, so we have to say rental is a different model than condominium. So therefore, perhaps it needs some different regulations or different rules or different systems that allow for it to get built. Understanding those levers and why it's different is important for people to say, we're not looking for handouts. We're looking for playing field that makes sense when the two products are different. Can't have all the same rules quite both, when they are different products. That's really the point at the end of the day.
[00:19:10] MH: A lot of stuff in there. I think it needs repeating 100 months, 100 months. I think that's going to stand out to a lot of people there. It just doesn't make sense. Something you mentioned earlier, your members want to build. It's not that they're avoiding purpose-built rentals, because they're not into the projects. It just doesn't make sense for them. That's why condos have attracted a lot more developments over the last few years.
[00:19:32] TI: I think there's one other point that's really important here about this. That is the stigma attached to rental versus condominium. That is the stigma that's attached to renting and renters versus owners. Even though we both know that many condos are bought by investors and then in turn rented out. Not to say the condominium projects don't face steep opposition in neighbourhoods. They certainly do. Purposeful rental is a whole different level of opposition of resistance. I think I spoke earlier about really needing to change society's views around rental buildings and renting in general, that it does need to become more accepted.
When you hear about situations in the media, for example a parking lot on the Danforth in Toronto a couple of years ago, the owner wanted to redevelop into housing and the community group opposed it on the basis of the parking lot being culturally and historically significant. We're never going to get anywhere, if those kinds of – if projects are opposed for that or in the media frequently. I think in Ottawa, there's a project recently. I don't have all the details, but I just saw the headline that said it was to be building an affordable project. I'm not sure if it was fully affordable, but certainly there was an affordable component, if not all affordable, and it was being delayed, because there's not enough parking.
If you don't want to do something, you can come up with obstacles and barriers, whether it be a parking lot being culturally and historically significant. Parking is a big one because of course, building parking is very expensive in a project. We know, because we did use to be a very car-dependent society, regulations, bylaws were put in place that put in pretty significant parking minimums for buildings. What we know now, especially in large urban centres, getting around by car, that everyone doesn't have a car anymore. A lot of people don't drive, they use public transit. Of course, only a car, maintaining a car is very expensive, but those minimum requirements had not changed.
I meant, again, that's another obstacle to getting projects built. That's a little bit mixing up issues here perhaps, but the point was that Ottawa City Council is delaying improving this project, because on the basis of parking. Again, it's just, do we want to get housing built or don't we? Do we want to get rental housing built or don't we? FRPO did a report with all this group I believe last year, looking at different housing types in different markets to determine what the cost was of different housing. The study concluded that rental housing is the most affordable housing option relative to cost, when you look at the museum HC, what they deem as affordable. Those different variables, 30% income spent on rent or housing costs.
In the majority of markets that we looked at, rental was the most affordable housing option. Yes, within that, there are calls for deeply affordable and attainable and different words are used to describe different options that we want for people. Ultimately, though, within all the different housing types available, the purpose-built rental comes out as the most affordable. We should be supporting that. Delaying projects, because of parking, or because of a lot of issues that just seem quite frankly to be really more about just not wanting it than actually providing constructive criticism or having constructive issues that need to be raised with a project, which is all fair game, but when you hear things that quite obviously are not that, it's just because local residents have got to their local elected officials and said, "We don't want this."
Opposing come up with any reason you can to oppose it. You have to look at it and say, "This isn't reasonable. This doesn't make sense. It shouldn't be allowed to happen. We need to move forward." This isn't about not having proper oversight and environmental studies. Sure, you need those things to make sure that we're not damaging the environment. We're taking into account. Those important issues relative to infrastructure and environment and so on, but to come up with things that seemingly just look like they're just throwing obstacles for the sake of throwing obstacles in front of it, those things, in my view, that shouldn't be allowed to happen and there should be a way we can get around those sorts of things.
Really at the core, it is a mind shift, a change of attitudes in society that says renting is not the enemy. It's not horrible. It's a good thing. It's a necessary thing. I would say for people with kids like myself, where do you think your kids are going to live? If we oppose everything, if we say no to everything, where are they going to live? Are they going to live with you forever? I mean, I don't say that. Obviously, the age in which young people launch is older. So that's a reality for a lot of people. That may not be desirable, though, for anybody. So we need to be thinking more about how we can be supportive and not opposing for opposing sake.
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[00:24:15] MH: Not to get overly political here. You've touched on a few things. There are stigma, roadblocks. How is FRPO possibly navigating some of the most recent government's recommendations surrounding financialisation and demonising some of these other reads and really just delaying projects? Like you said, finding excuses not to push projects forward. What's your opinion on what we've been seeing the last few months from Ottawa?
[00:24:45] TI: Yeah. We're very concerned about any policy changes that the federal government might bring forward that in our view would disincentivize construction of new rental housing, would serve as further barriers. Again, everything we're talking about today, we're really trying to – to me, the conversation is all about how much we need to get housing built. Why we would then have governments talking about doing things that would do exactly the opposite really doesn't make any sense to me and FRPO and to our members.
The financialization conversation is one that is, I guess the way I look at it is, there seems to be this move to villainies large landlords, real estate investment trusts, corporate landlords. It's easy to do that to the nameless face with corporation. That's just corporate entity you can just criticise and throw a nut at. To what end though, there's no question that the rental industry has changed a lot over the last few decades. I mean, REITs, they've been around for a while now, but the emergence of corporate landlords and real estate investment trusts, they obviously haven't been here forever in this space.
The industry has evolved, and that's been a really good thing. I'll tell you why. This industry certainly in Toronto was, again, founded by a lot of families who wanted to get into building apartments, building housing, which was wonderful, because we certainly needed it. It went over time, of course, running those buildings, operating, maintaining those buildings has become very expensive. So we're at a point now, and certainly in the GTA, whereas mentioned to the outset, the age of our stock, it now requires significant, significant investment. In many of those cases, large corporate landlords, real estate investment trusts, who have the capacity, have the investment to be able to go into these buildings and do the work that's needed.
Quite frankly, some who may have built them or managed them over the years. Were no longer in a position where they could necessarily do that, so what would you rather have? I would rather have a scenario where there's someone who can come in, who does have the quite frankly, deep pockets necessary, to put major capital investment into those buildings, to be able to have them be sustainable for the next generation. I don't see that as – I see that, in fact, is a very good thing for the sustainability of the industry. There was a need for that shift to happen. There still are many family businesses doing wonderful things, providing great housing, but we now have a mix of different owners, different managers, different sizes, different capabilities. That's a net positive for a residence and for a prospective residence.
Pointing the finger at them, I really take objection to, because they are, are they turning a profit? Well, sure, but so were the people who were running the buildings before them. Every industry I know of, if you're a market provider of something, profit is part of the equation. That's what allows you to pay people, to reinvest in your business, to bring in new products and services, right, to contribute to our economy. That's a fundamental aspect of market economy and market systems.
I don't see that as a bad thing. I understand we all do that there are huge affordability challenges. So perhaps it's easy to pick on the big guy or the big guys because they somehow are seen as being a part of that. I don't see it that way. At the end of the day, the affordability challenges that we're facing in rental housing are first and foremost, because of the lack of supply, period. The numbers speak for themselves, in my view, while there may be some who still challenge, whether we have a supply crisis or not, it seems to me that the vast majority of economists, market watchers, politicians, public, understand that we do have a significant supply crisis. We need more supply, period.
Will that completely fix the affordability issues? Well, I'm not an economist. I don't know if any – one thing will completely fix anything, but I do know that the fundamentals of supply and demand as an economic fundamental. I think is a proven one over time. If you do have more supply, able to offset that demand. It is going to have an impact on price. I mean, I think that's understood and generally accepted. We need more supply to offset the rising demand that will moderate in prices somewhat. We have a bill housing industry that is very diverse. It's got a lot of different people who offer housing just in terms of the makeup of the industry, small landlords are still the largest segment of those who provide rental housing.
It's not the reach of the corporate landlords. They may be the one serving the news. They may be the ones that people want to target, but it's still small landlords who are renting out basements or renting out their homes or renting a home they bought an investment property or renting out a condominium or renting out laneway housing or whatever it be. They still are the largest share of landlords. So I think that's an important point. REITs are a very small percentage of rental units across Canada, but they are being targeted in this way that I think is unfair. We are spending a lot of energy with colleagues in different associations from real pack.
We're working with them very closely with our REIT friends and others within FRPO and within CFAA to push back on some of these ideas that whether it be changing the tax structure of REITs, whether it be instituting a proportional surtax on rent with post-renovation. You're going to basically say to someone, you're going to go in and renovate your apartments and we're going to swap some tax on you. I mean talk about totally demoralising and de-centivising anyone who might want to do that to a unit that's 30, 40 years old that is in major need of being updated.
I simply don't understand why government would want to do that. What it will have, in my view, the completely opposite effect of what they're trying to achieve. We hope that we will be successful in making our case to the federal government to say, "We need you to do things to help support us. Recognizing that rental housing and housing general is a more provincial jurisdiction, but please don't come in and start meddling with the tax system or doing other things that are quite simply going to just certainly not going to lead us down a path of getting more housing built at a time when we desperately need more housing to be built." Let's just leave that alone, not go down those roads, whatever issues that they think they want to address, relative to renovations and some of those matters that become a flashpoint to the news.
Let's talk about how provinces, rules that are in place, which I think, I'm sure you know. There's significant rules in place for eviction, different forms of eviction. I wish it wasn't always called that and some of these matters, renovating a unit allowing intent to return to that unit, but the rules around that. If you think those need to be enhanced, let's talk about that. Let's look at those sorts of measures around enforcement around ensuring that there are adequate rules in place for these situations, whether it be rental replacement, whether it be renovations or demolitions, which do need to happen.
Let's make sure that there are rules that operators need to follow and that appropriate notice and compensation is given to residents in those situations as opposed to bringing in some hammer down that's only going to just cause people to invest elsewhere and not build a housing that we desperately need.
[00:31:33] MH: Yeah. A lot of good points in there, one specifically, I think a lot of people miss is, I don't have the exact number in front of me, but we've reached only makeup around 10% of the landlords in the GTA.
[00:31:43] TI: Yeah.
[00:31:44] MH: Yeah. That's where Ottawa is attacking right now, but they have the capital to try and fix some of these issues. It's what they do. Capital is what they do.
[00:31:53] TI: Absolutely. Yeah. In many cases, they are taking over very old buildings that were quite frankly not in a state of repair that they maybe should be have been in. Again, because of the enormous cost and because, of course, in Ontario, for example, the vast majority of residents are rent controlled. Certainly, that is a challenge relative to being able to, from the rent that's collected, income there to be able to deal with all the routine maintenance and all the operating costs that are, of course, are required, but then to be able to put in all the major significant capital investments that they are not required, maybe annually, but isn't building it's older, those needs become greater and the need is that much more.
Well, that can't be gleaned out of when you're in an environment where rent increases can only go up by max to 2.5%. We know inflation's right much greater than that. It's simply not there for all of those purposes. If you're a smaller landlord, smaller operator, very difficult for you to be able to find those dollars to be able to make those investments, to the point, larger providers do have the investors and do have the financial wherewithal to make those investments. Then be able to turn that building to a better state of condition and go forward for the next, hopefully, 20 or 30 years.
[00:33:02] MH: Nice off the top, we don't want to be too overdramatic, but I do think it's worth ringing some alarm bells. You mentioned, let's start with supply first. Like let's fix some of these issues, get more units builds. I mean, it is projected that purpose bill rental supply will increase by roughly 47,000 units over the next year. This is still far below the number of units required to meet demand. Best case scenario, you smash some construction records, but even still, we're probably not going to hit the target that's set out for the number of people coming in. I mean, at the end of the report, everyone does a great job of outlining some suggestions and recommendations to the multiple levels of government. Why don't we get into those a little bit? There's some provincial recommendations, some municipal ones. I'll just hand it back to you like what are your main recommendations for the multiple levels of government to help this issue?
[00:33:57] TI: I'm going to focus on the province since that's where FRPO devotes it's obviously a majority of its time. Others work at the city and federal level, but I'm going to talk about the province as we're a provincial association. We've been working very closely with the four government now over the last five years. There have been a series of housing bills that have come forward that have started to make an impact. As I said, we started seeing that pre-pandemic. that was due in part to the 2018 exemption that the government brought forward, exempting buildings built after November 15, 2018 from rent control that provided some certainty around being able to get some of those projects moving forward.
In fact, we did start singing movement. That's what led to the 13,000 project rental starts in 2021, I believe that was. So maybe it was 2020, I forget, but we certainly did see that number. Then, of course, pandemic came and obviously it started to slow down. That was unfortunate, because we were starting to build positive momentum in the right direction. The pandemic, of course, no one could have predicted that and we all had to get through that. Now we're trying to see through to the other side. So the government is continuing to bring forward of course, they had their housing task force. They brought forward a series of recommendations for government to consider. Some of them have been included in bill 23 last year. There are more housing bills, if the government promised at least one, see them begin housing bill every year for the next four years.
What can we do or what are we recommending a FRPO for future housing bills to continue the positive momentum? As I said, I didn't touch on a lot of bill 23, but certainly DC discounts was a big, big item for us in there. There are many other items in bill 23 that spoke to trying to eliminate duplication, cut red tape, move some of the approvals more quickly. Those are all very positive. As I talked about the challenges around simply the time it takes to get projects approved and some of those costs.
Going forward, there are other things that we need to be looking at, a couple of suggestions that we have made to the government for consideration for their next housing bill which we expect to come in the spring. First, a density incentive program for purpose-built rental projects in communities with low vacancies, so if you've got a low vacancy rate, then we really need to look at the density incentive for purpose-built rental to be able to get more density in which, because more density, of course, does help the project economics work. So saying, look, if this is purpose-build rental, we're going to give you extra force to be able to make the economics on that project work and to not have you just by default, the go-to being in a condominium.
It can be structured as a multiplier on the baseline density available if zoning is up to date with the official plan, for example. We want personal rental projects available for families across Ontario. If we want that, which I think we do, then we need to improve those project economics, as I said. That'll be one. Second suggestion, we've talked with this at FRPO for a few years now. In fact, we did a report with Urbanation on this before the pandemic. Unfortunately, it got a bit lost in everything around the pandemic, but that is giving rental as of right in full development on existing purpose-built rental sites.
This study we did with Urbanation identified, I think it was 750 sites across the province, where Urbanation projected that as much as an additional 176,000 rental units could be built. We're talking with sites that were built in the 60s and 70s when land was far more abundant, and land use rules were much different. So you see these buildings, they've got big parcels of land, green space, the towers here, but they've got all this other land that's all adjacent to it. We're saying, these are the kinds of sites we should be saying, there's already a rental tower there. The infrastructure is there. People understand that housing is there at that site. There's enough area to build a second tower, and maybe even a third.
Those sorts of sites and those sorts of projects should be fast-tracked to say, let's get these shovels in the ground faster. We're not saying, come onto a street with single-family homes. We're saying these are sites where rental towers already exist. Let's support that. Let's not take 100 months to get those projects through. Let's get them through faster, get shovels in the ground, get significant thousands of units built more quickly. There's huge potential there. We think that could be unlocked to get more rental housing built.
Then third, I mentioned before around a tax system. I talked first of all about discounts for development charges, that's a great first step, but there's more we could do. So let's look at HST, for example, which is a sniffing at cost for new rental construction. We're suggesting that the province either explore options to rebate HST, or perhaps defer HST payments to a later period in the project life cycle, perhaps when the building is sold, targeting these financial incentives to build more attainable rental housing projects. With the high cost of land and construction, most of the projects being built today are mega projects or luxury rentals that can make those economics work.
We need those, as I said earlier. We need all kinds of housing built that can appeal different income types, different meet, different needs. That's why we're saying we need to look at some of those tax issues as well, that would of course just support the economic model for personal rental. Those are a few ideas we've talked about. Skilled trades, we do more to support that, getting people trained and getting people interested in trades. That's another idea. We've also talked before about appointing some a facilitator at the province whose position within the municipal affairs and housing is to get projects through.
We've seen this example in some municipalities where they have someone whose job it is, is to be that quarterback, to work with all the departments within the government, local government. This was a, for example, we saw this position existed in Kingston and it was very effective to get projects through bottlenecks to clear up issues between departments and get projects through. That kind of idea as well at the province to say like, let's have someone who, for which their role is to make sure to help get projects through the system. Those are some ideas at FRPOs put forward to the province. We're certainly optimistic. We have a great partner in the foreign government and we're optimistic that we'll get more achieved together to get more rental housing built.
[00:39:59] MH: I love that. I think that's a really good place to wrap this up, ending with some optimism there. Now, Tony, I just want to thank you again for joining us today, yourself and FRPO are doing a wonderful job at helping shine a light on the issues we're facing in the GTA. Also, like we mentioned before, trying to reduce that stigma around rental housing and renting period. Now, to the listeners, make sure to follow FRPO, Bild, Urbanation, and of course, Rentsync to just stay up to date with what's going on in the rental housing markets. Tony, thank you again. I'm hoping we can do this again sometime soon.
[00:40:32] TI: I'd be happy to come back anytime Matt. Great speaking to you today and we'll talk again soon.
[00:40:36] MH: All right. Have a good one, everybody.
[00:40:40] ANNOUNCER: You've reached the end of another episode of Sync or Swim. Make sure to visit us at rentsync.com/podcast to access show notes, key takeaways, and where you can sign up to our newsletter to receive free bonus content. If you found value in the show, please also remember to rate, review, and subscribe. Don't forget to join us next week for another episode. Thanks for listening.
January, 29 2024
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