What happened: New report says current rate of construction in Metro Vancouver could soon fill gaps in the rental market
Why it matters: The city has been caught in the midst of an affordability crisis for year
Metro Vancouver’s rental market has a shot at becoming sustainable in the coming years — if at least 40 per cent of new condos, or an equivalent supply of other units, make it into the rental pool, according to a new report from the Royal Bank of Canada.
The bank calculated that Metro Vancouver has a deficit of 3,800 rental units that it would need today if it were to achieve a vacancy rate of three per cent — what RBC considers to be equilibrium for the market.
The current vacancy rate is below one per cent, but the Sept. 25 report found that “strong construction activity” puts Vancouver on track to close this gap “within a couple years.”
“There are reasons to be optimistic about Montreal and Vancouver [metropolitan areas], where strong apartment and condo construction will send a wave of new rental units to the market,” the report stated.
Report author and RBC senior economist Robert Hogue told Business in Vancouver that the City of Vancouver’s 10-year housing plan has been a “positive development” for addressing the regional affordability crisis.
“The real key here will be to deliver and we’re seeing, for example, for purpose-built rental that developments over the last couple years have not met targets,” he said.
“But nonetheless, that approach would be something to be emulated in other places like Toronto, for example.”
The RBC report calculated that Greater Toronto has a deficit of 9,100 units, while Calgary has a surplus of 300 units, if those cities were to reach three per cent vacancy rates.
Looking ahead, the report said that Metro Vancouver would need 11,300 more units per year to meet new demand over the next two years (not including the current deficit of 3,800 units). Hogue confirmed that this would require a total of 26,400 additional rental units across two years to hit a three per cent vacancy rate.
As of July 2018, there were 28,700 condo units under construction and 9,100 rental apartments under construction in Vancouver. Hogue said that the 9,100 rental units under construction would bring the total gap to 17,300 across two years. "That’s in fact 60 per cent [of new condos under construction], but we assume that [condo] completions over the first half of this year have reduced the deficit," said Hogue.
When asked whether it was likely even 40 per cent of new condos would go directly into the rental pool, Hogue pointed out that “other sources of rental supply (e.g. laneway housing, basement apartments, older condos, etc.) will reduce pressure on new condos to close the gap.”
Hogue's report stated, "The resurgence of purpose-built rental apartment projects in the past three years has been encouraging. This set off a wave of new supply now coming to the market, which should eventually stabilize rent.
“Whether this brings real relief to families remains to be seen. Vancouver’s rental stock is the least ‘family-friendly’ among Canada’s largest markets.”
Hogue noted within the report that just over a quarter of purpose-built rental apartments and townhouses in Vancouver have two or more bedrooms compared with about 50 per cent in Calgary and Toronto and about two-thirds in Montreal.
— With files from Joannah Connolly, Glacier Media Real Estate