CAM November 2022

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PUSHING INNOVATION

Since March 2020, the world has changed considerably. But through it all, the conversation surrounding housing has remained steadfast on the supply-demand imbalance and lack of affordable housing options for Canadians with lower incomes. According to Anita Kramer, senior vice president of ULI’s Center for Real Estate Economics and Capital Markets, the pandemic-driven factors that upended the global economy for more than two years are starting to fade, but factors like the rising cost of housing, increased climate risk, and declining socio-economic mobility will pose continued uncertainty for the long term, both here in Canada and in the US. Building innovation, naturally, will play a huge role in how we design, build, and operate apartment buildings in the future—and that future starts now. On our cover, we showcase one of Canada’s most highly-anticipated rental projects currently underway in downtown Ottawa. Featuring two striking high-rise towers, the project by Dream LeBreton checks all the boxes for building a largescale, sustainable, connected and inclusive community where a range of residents of all income levels will soon live. On page 18, we take you behind the scenes of this exceptional new project.

In other news, the rental market in Canada remains as strong as ever, and for investors in this asset class, it’s been a year to remember. Though the future remains uncertain, and COVID-19 continues to pose a threat, all eyes are focused on what’s to come in 2023. Let’s hope the new year brings happiness, health, and prosperity to all.

Erin Ruddy @cdnapartmentmag

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Graphic Designer Thuy Huynh

Production Coordinator Ines Louis

Contributing

National

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The Canadian multi-suite residential rental market continues to improve driven by healthy demand characteristics. Rents continue to hold at record-high levels in the nation’s larger urban areas as demand outpaces supply.

“New supply has helped to alleviate the supply shortfall to some extent, but not enough to offset the demand-supply imbalance,” said Keith Reading, Director of Research at Morguard. “In the GTA, competition for limited vacancy has been fairly intense. Students and families have struggled to source vacant units at an affordable price point. Nationally, I expect conditions will remain tight.”

Investment Market

Multi-suite residential rental properties remain a prime target of various investment groups. However, activity levels have slowed, as investors enter a period of price discovery.

“Property yields have begun to rise given a combination of higher interest rates, fears of a recession, and inflation pressures,” Reading said. “The rental sector has typically been an asset class

Source: Morguard

that has performed relatively well during periods of economic weakness. Therefore, investors will continue to look for opportunities to invest, given the sector’s track record of stable and secure returns and its defensive investment attributes.”

Reading adds that despite the housing market correction, purchasing a home is still out of reach for many renters who struggle with rising prices. As a result, many will remain in the rental market that otherwise wouldn’t have.

Avenue Living reaches milestone

In mid-October, Calgary-based Avenue Living announced it has reached a milestone of 15,000 multifamily homes under ownership following the acquisition of a 386-unit property in Columbus, Georgia. The $52 million-purchase was in keeping with the company’s consolidation strategy, which focuses on low-to-medium density workforce housing located in key markets.

“Since entering the multifamily space in 2006, we’ve focused on creating an operating model that puts the residents’ needs first,” said Anthony Giuffre, Founder and CEO at Avenue Living. “Our experience has shown that these needs transcend geographies, which presents opportunities to expand our defensible model across key locations in Canada and the United States.”

Avenue Living has a track record of adding value to its buildings promptly after purchase, in what it calls “the first step” towards improving resident satisfaction.

“We proactively implement service and technology improvements, like security, proptech, fin-tech, and capex investments,” said Giuffre. “Through our innovative solutions and operations-first approach, we have bolstered our reputation and investor confidence. Word-of-mouth referrals have increased, and our Net Promoter Score has risen consistently — a strong hallmark in the rental industry because it represents 365 days of good service, not one simple transaction.”

“We use a rigorous research and analysis process to select each and every one of our multi-family properties,” added Jason Jogia, Chief Investment Officer at Avenue Living. “We understand local market conditions, industry and employment opportunities in the region, level of demand, and of course the potential of each property we acquire.”

Consider the following:

• Who will represent your best interest?

• Who will give your property maximum exposure?

• Who will deliver the highest value for your property?

The Toll of Government Charges

Input costs associated with housing development add to complexity

In its new Housing Market Insight Report, CMHC digs into government charges and input costs associated with producing new housing in three of Canada’s largest metropolitan centres. Specifically, it looks at the number, complexity, and cost of government fees for six development scenarios in Vancouver, Toronto, and Montréal where the highest housing demand and affordability pressures in Canada currently exist, and where affordability challenges have been ongoing.

In terms of land and construction, there are several charges associated with new housing development in addition to input costs levied by governments. The report finds that the collection and administration of such fees introduce two main challenges: first, the fees add a direct cost to the production of housing, and second, they may add complexity and uncertainty to the development process as construction timelines hinge upon the successful collection of fees.

By comparing cost variations across municipalities, dwelling types, and tenures, the report intends to identify examples of policies that result in housing being supplied at a lower cost. This may help inform policymakers of lower fees and simpler processes in other jurisdictions and bring to light alternative options that may speed up residential development.

“We will not be able to build our way out of the housing supply problem as significant

labour capacity constraints exist across most large provinces in Canada,” said David Carruthers, Senior Analyst Economics. “All levels of government and industry will need to collaborate to solve this mammoth task and make housing affordable for all Canadians.”

Methodology

When conducting this study, CMHC examined all input costs associated with developing housing, which are broadly categorized as follows:

• land costs

• hard construction costs

• soft construction costs

• developer profit

• government charges

In terms of government charges for new residential development, these have a variety of purposes. Some are designed to recover the cost of providing services to the new building — like water and sewer — while others are used to raise revenue for broader amenities or public goods in the community.

In this report, government charges are broadly categorized as follows:

• warranty fees

• municipal fees

• development charges

• density payments

• permit fees

These charges vary by jurisdiction and should not be considered an exhaustive list. They represent one of the few channels for municipalities to raise revenues. Lowering input costs — specifically government charges — would require broader changes by municipalities to maintain the current level of municipal services.

Highlights from the analysis:

• The number and magnitude of government charges on residential development vary substantially by municipality. This signals differences in processes and approaches across centres and presents an opportunity to identify best practices.

• At the upper end, government charges

Number of government charges levied, by dwelling type (average across select municipalities* in each Census Metropolitan Area)

Source: Altus Group, CMHC calculations

can represent more than 20 per cent of the cost of building a home in major Canadian cities. Charges were found to be highest in the City of Vancouver and the City of Toronto and lowest in the City of Montréal.

A larger number of government charges may lengthen the development approval process and, in turn, lengthen the delivery of new supply to market. Municipalities in the Montréal metropolitan area generally had fewer government charges and shorter development approval timelines than those in Vancouver and Toronto. The primary implication of a longer timeline is the slower provision of new housing supply to market and the people needing it.

• Once a subdivision agreement is registered, the singledetached home tends to be the housing type subject to the lowest government fees. This seems to run contrary to densification efforts being pursued by municipalities, which are necessary to increase housing supply within existing urban areas.

• The City of Toronto has the highest average government charge per square foot, while the City of Montréal has the lowest. The average government charge per square foot varies considerably across the three municipalities, both overall and by the different government charge sub-types.

• The average government charge per square foot is highest in Toronto ($86) because of its higher development charges. It is second highest in Vancouver ($70) owing to density payments, which comprise a particularly large component of government charges there relative to the other two centres. Montréal has the lowest average government charge per square foot ($24). This is because the magnitude of most government charge sub-types in Montréal is generally much lower.

• The same pattern tends to hold by dwelling type. In other words, across dwelling types, the government charge per square foot is typically highest in Toronto, followed by Vancouver, and then Montréal. This does not hold for low- and high-rise condominiums, where Vancouver has the highest government charge per square foot owing entirely to density payments.

Tax incentives key to driving housing innovation

by Richard Hoy

There’s been a lot of talk lately about the housing shortage and the need for solutions that bring more homes to market faster. At the same time, climate change is impacting how we build homes, requiring that they be “future ready” and more able to withstand severe weather. To achieve this—while also protecting revenues and the planet—property developers are turning to smart building solutions and eco-friendly technology. However, with commercial finance conditions tightening, the sector is going to need to rely on government tax incentives to achieve the most cost-effective outcomes. The problem is awareness of these incentives remains low.

Scientific Research & Experimental Development tax credits — or ‘SR&ED’ for short — are administered by the Canada Revenue Agency (CRA) and are often worth hundreds of thousands of dollars. But there’s still a pervasive view that the people claiming these valuable tax incentives wear lab coats rather than hard hats. That isn’t the case.

What does qualifying innovation look like? Innovation that qualifies for SR&ED can take many forms. Typically, companies applying for these credits have tried to overcome challenges related to construction through research and development (R&D). One

company that successfully qualified, for example, had been seeking to diminish the number of unsightly concrete pillars that run through apartment blocks. As a structural component, these pillars run from floor to ceiling and are key to the integrity of the building. Through innovation, the company was able to solve this problem by developing a steel studding system which slots together and has the strength to remove the need for these pillars. As a result, the system cuts construction time of a building down by 30 to 40 per cent and can be used on structures ranging from single to 11-storeys.

Another example pertains to the fire suppression systems found in apartment blocks. As temperatures drop in the winter, water-filled fire suppression systems are vulnerable to freezing, which can ultimately lead to floods. To contend with the issue, the company developed high-pressure dry systems that do not fill pipes with water until there’s a fire.

A third business found a way to reuse wastewater coming out of buildings as a heat source. By installing a device where the brown water exits the building, heat is transferred from the wastewater to supplement the needs of the property. This results in less reliance on the hot water tank and lower greenhouse gas emissions.

What exactly is SR&ED?

SR&ED remains the main source of external funding for innovators in apartment construction. The amount a business receives from the tax incentive depends on the amount of eligible work being carried out. It must involve some form of research and development, but the work itself doesn’t necessarily need to be about creating new devices, products, or processes. It could just be an improvement to the existing approach.

When assessing whether activity could be eligible for SR&ED, construction firms should be asking if their innovation does any of the following:

• Further technical knowledge in construc tion or create advancements in the devel opment of new apartment blocks;

• Overcome any scientific or technological uncertainties in the building process;

• Accomplish something by design that others would find hard or not obvious to achieve.

Finally, don’t assume that only large firms will carry out qualifying activity. Much innovation in all sectors comes from SMEs; you will only know if you ask a competent person to assess your activities.

How much can these tax credits be worth?

Depending on a company’s corporate structure and the province in which it is based, applicants can claim a refundable Federal Investment Tax Credit of 35 per cent directly attributed to innovation. Alongside this, the provincial refundable Investment Tax Credit rate varies by location. Most expenses linked to the R&D itself will attract SR&ED, which is one of the most generous tax incentive schemes for innovation in the world.

Canada’s urban areas are sprawling with apartment blocks and condos with new projects kicking off each week to meet the demands of consumers. Not only do they need to be built to last, but they also need to satisfy increasingly stringent environmental benchmarks to support the race to net zero by 2050, a major reason why innovation is booming. If every company that qualified actually made use of these generous incentives, we’d get there even sooner.

Richard Hoy is president of specialist tax consultancy, Catax Canada; he can be reached at richard.hoy@catax.com.

SR&ED remains the main source of external funding for innovators in apartment construction.

DYNAMIC APPROACH TO

PEST

APARTMENT MANAGEMENT

Q&A With Paolo Bossio, President and CEO of Advantage Pest Control Inc.

In the world of pest control, no two multi-residential buildings are the same. Every apartment is home to unique communities, living spaces, public areas, and environmental factors that require tailored and sustainable solutions.

Paolo Bossio has been working with multifamily managers and owners for years to create and execute bespoke pest management strategies. Ahead, he shares insights into what it takes to keep the pests at bay.

FIRST, WHAT MAKES PEST CONTROL IN AN APARTMENT A UNIQUE CHALLENGE?

One of the biggest reasons multi-residential properties pose a unique challenge for us is the fact that there are so many shared walls and vents, which makes it easy for roaches, bedbugs, and all manner of crawling insects to move from one unit to the next. In fact, we’ll often find that the unit we’ve been called in to tackle isn’t even “Ground Zero” for the infestation and that they are actually getting invaded by pests who have traveled from neighbours who are units down the hall.

That’s another factor, too: Infestations in an apartment may originate in units with people who either don’t know they have an issue, have a cognitive disability and can’t express their issue, or are maybe too embarrassed to say something. Some of the worst infestations we have seen have been from units that have a zero history of complaints.

And that’s the crux of the challenge; the fact that apartments are home to different people living right next to each other, each with their own unique factors that need to be considered. This is why we will start by doing block treatments and inspections to assess each issue in a more comprehensive manner and hone in on everything that may be contributing to the infestation.

HAS THE PANDEMIC BEEN A FACTOR IN MULTIFAMILY INFESTATIONS?

It has, in its own way. Due to the pandemic, many restaurants, plazas, bakeries, and food providers like that shut down and transferred solely to delivery through services like Uber Eats or Skip the Dishes. That increased delivery traffic played a part in relocating roaches, mice, and rats from commercial buildings to residential properties. There is also the fact that people were working from home and eating more inside their units, which caused a huge rise in pest control-related issues in residential properties.

WHAT IS

A “DYNAMIC,

INTEGRATED APPROACH” TO PEST MANAGEMENT, AND WHY IS IT MORE EFFECTIVE FOR MULTI-RESIDENTIAL BUILDINGS?

A dynamic approach simply means that it takes all factors into consideration and that you need a tailored and ongoing strategy based on the building’s specific issues, requirements, and populations. It is an approach that recognizes the fact that insects and people are very dynamic and that, because of this, a dynamic integrated pest management technique is best practice for multi-residential, which we know to be true through experience. For example, we can’t treat an apartment where the tenant is bedridden the same way we would treat an apartment that has a newborn baby.

TAKE US THROUGH A TYPICAL MULTI-RESIDENTIAL ENGAGEMENT

We always like to start with an inspection and generate welldocumented notes on problematic units. By doing this, we can design and conduct the appropriate remediation strategy, as well as follow up as necessary.

Again, the idea is to do that upfront assessment and legwork to figure out exactly what’s going on and how we can stop it using our integrated services and technologies.

WHAT ARE COMMON QUESTIONS/CONCERNS CLIENTS TYPICALLY HAVE DURING THIS PROCESS?

There are always questions, and that’s part of the process. Property managers, owners, and residents alike will naturally want to know the extent of their issue, what we’re doing in terms of remediation, and how it will impact the building. That’s why communication is key with building staff, tenants, and homeowners. It’s also why we always provide reports and preparation documents so that there are no surprises and everyone has confidence in what we’re doing. That’s the thing with pest control; proper preparation is 80% of the program.

HOW DOES ADVANTAGE PEST CONTROL HELP CLIENTS PREPARE FOR THE WINTER?

We self-audit at Advantage Pest Control. What this means is we hire a specific technician to visit all of our accounts in the fall to make sure that stations are being placed correctly and filled properly as well as check for structural issues on the properties to ensure points of entry are addressed before insects and rodents look for access.

Paolo Bossio is the President and CEO of Advantage Pest Control Inc. , a family-owned and operated business specializing in Dynamic Integrated Pest Management programs.

A HIGH-TECH MODEL INCLUSIVE, SUSTAINABLE HOUSING

Parcel” pushes boundaries

By Erin Ruddy

Downtown Ottawa’s

neighbourhood has been a work-in-progress for decades. Home to the new Canadian War Museum since 2005, extensive revitalization has already changed the area from an industrial zone to a residential hub—work that will continue for at least 10 years to come. This includes plans for a stunning two-tower rental development currently known as “the Library Parcel.”

LeBreton Flats

Dream LeBreton’s “Library

MODEL FOR SUSTAINABLE

boundaries of innovation

Envisioned by Dream LeBreton, a partnership between Dream Asset Management, Dream Impact, and the local non-profit group, MultiFaith Housing Initiative, when complete, the mixed-use, transit-oriented community will consist of two towers rising 31 and 36 storeys apiece. With 601 rental units in all, 41 per cent will be affordable and earmarked for five target populations: Indigenous communities; women and children; immigrants/newcomers; veterans; and adults with cognitive disabilities.

“Our vision for the Library Parcel exemplifies how we can meaningfully address the country’s affordability crisis while creating

A landmark in the making

inclusive spaces that push the envelope on sustainability,” said Justin Robitaille, VP Development of Dream Asset Management. “We’re proud to work alongside like-minded partners, including MultiFaith Housing Initiative, the National Capital Commission and the Canada Mortgage Housing Corporation, to deliver a community that’s deeply rooted in a mission of positive impact.”

Building on its expertise in the National Capital Region, Dream is also the company behind Zibi, the 35-acre master-planned community that opened in 2021. Like Zibi, the Library Parcel has gotten a lot of buzz for the steps taken to push the limits of sustainable design; also

Acting as a gateway to Lebreton Flats, the Library Parcel towers are intentionally rotated to ensure all units benefit from views of the city, including Parliament Hill, Gatineau River, Dow’s Lake and more. Perkins&Will and KPMB Architects designed the towers’ vibrant red façade in collaboration with renowned Canadian artist, Margaret Priest. As the towers rise, the colours lighten, creating a slender appearance and drawing the eye to the sky. Lebreton Flats connects to the Pimisi LRT station as well as nearby cultural destinations including the Canadian War Museum and the upcoming central library, Ādis ōke. The area also offers abundant retail, parklets, and community spaces.

like Zibi, the project is pursuing certification through the One Planet Living (OPL) framework.

“OPL looks at sustainability in a holistic way, leading to built spaces that are highly impactful while minimizing the negative consequences to the environment,” said Dan McTavish, Associate at Perkins&Will and one of the lead architects on the Library Parcel project. “Without a comprehensive approach to community, apartment living can become isolating. Dream’s vision is to break down barriers, creating opportunities for gathering, working, and playing together—all goals that align with the OPL framework.”

Using what he describes as “thoughtful planning and a range of high-tech and low-tech solutions,” the Library Parcel will offer a mix of amenities integrated into the podium below the towers and on the terrace rooftops—from community gardens, a daycare, and a bicycle repair facility to community kitchens, fitness areas, co-working lounges, and homework rooms.

In terms of construction, McTavish said that pursuing Dream’s ambitious targets for the performance of the exterior walls meant turning to innovative solutions. “The towers will be clad with a prefabricated, panelized wall system that optimizes energy performance, reduces thermal bridging, and takes advantage of increased offsite production where quality control is easier to maintain,” he said. “This will accelerate the speed of construction, bringing the project to market faster than with conventional, site-built wall systems.”

Energy conservation

One important outcome of the OPL framework is to deploy smart technology that allows residents to control their own energy use. As such, controls at the Library Parcel will be conveniently located at each suite’s exit allowing residents to shut off lighting and nonessential electrical equipment with a single “all-off” switch—something that also eliminates the “phantom power” consumed by electronic devices, even when not in use.

Meanwhile, to offset power from the grid, each tower will be crowned with a solar photovoltaic (PV) array, producing nearly 200MWh of annual electricity generation. The project also intends to take advantage of its location next to the Albert Street Sewer by incorporating a carbon-free heating and cooling system soon to be known as the LeBreton Community Utility (LCU).

“LCU will provide low-carbon heating, cooling and domestic hot water to the LeBreton Library Parcel, satisfying nearly 100 per cent of the facility’s energy needs,” said McTavish. “Peak heating loads will be supplemented with electric boilers, so there will be zero combustion sources on site.”

If all goes according to plan, the LCU plant will be the first of several potential nodes in a scalable low-carbon district energy system that operates at near ground temperatures, connecting various sources of thermal energy supply and storage beyond this project throughout LeBreton Flats. To realize this ambitious goal, Dream is partnering with Theia Partners, who will build and operate the district energy system.

Collaboration

It’s no secret that major, mixed-use projects require a shared vision by multiple parties and stakeholders to move forward toward a successful outcome, especially when the project will be home to a diverse group of individuals. The design team behind The Library Parcel includes KPMB Architects, Perkins&Will, Two Row Architect, and landscape architect PFS Studio, all of whom worked closely with Dream so that the project could take flight.

As Bruce Kuwabara, Founding Partner at KPMB Architects, put it: “To create a connected and integrated future, a sustainable lens is essential. I am proud to partner with team members who are committed to transit-oriented design, active mobility, and zero carbon buildings that will make LeBreton Flats Library Parcel one of the most environmentally conscious, inclusive communities in Canada.”

Inspiration

According to Kuwabara, the approach for the design of the two rental towers reinforces the connection to nature and highlights the importance of Indigenous culture and perspective. “Through our work with Two Row Architect, the buildings intentionally respond to the historic landscape as it was when the Algonquins were there,” he explained. “The podium is meant to be evocative of the escarpment, organic in its shapes, and employs this precast that is like the bedrock.”

At the ground level, every block of the tower will feature gardens and foliage, and as the tower ascends, the theme of the natural environment will grow with each floor providing ample access to light and striking views of the surrounding urban and natural context.

“We’re also very proud to be creating a community that champions democratic design: nearly half the units will be offered at an affordable rate without compromising on quality or design sensibility,” he said. “This community will be an inclusive, welcoming environment for individuals and families from diverse backgrounds and will set a new and meaningful example for harmonious community living.”

Find out more by visiting dream.ca

“Without a comprehensive approach to community, apartment living can become isolating. Dream’s vision is to break down barriers, creating opportunities for gathering, working, and playing together.”

FROM OFFICE TO RENTAL HOUSING

How viable are building conversions as a long-term housing solution?

Office-to-residential building conversions have been gaining momentum in some jurisdictions, particularly in urban centres hard-hit by the economic fallout of COVID-19. As subvariants of the virus continue to circulate and many workers resist returning to the office, some cities, like Calgary, have been left with a surplus of unused commercial space amid the interrelated housing and climate crises.

To contend with the glut of vacant commercial buildings and revitalize its downtown core, the city launched the Downtown Calgary Development Incentive Program in 2021, offering grants to help facilitate office-to-residential building conversions. As of mid-October, a total of seven projects had received a grant, and 665,000 square feet of unused office space had been replaced with 707 new homes.

Among those projects was Neoma, an office-turned-affordable-rental-building run by the non-profit housing provider,

HomeSpace Society. As reported in our last issue, the conversion took about six months to complete at a cost of $30 million. Funding came from multiple sources, including $16.6 million from the Rapid Housing Initiative; $2 million through the Canada-Alberta Bilateral Housing agreement under the National Housing Strategy; and $5.5 million from the City of Calgary’s downtown revitalization program. Private donors also raised nearly $6 million toward the extensive renovations required to repurpose the 10-storey building into private, livable homes.

“By investing in projects like Neoma, we’re creating a downtown where low-income families, seniors and newcomers can build their lives with access to key amenities just a short walk away,” said Calgary Mayor, Jyoti Gondek, at the official opening in September. “Calgary is proud to be leading the country with this project that will serve as a blueprint for cities looking to address both the housing crisis as well as downtown revitalization.”

While not all building conversions will offer this same noble mix of affordable rental units, shelter spaces, and transitional housing to

help families in need, there is no question that more rental housing is needed arguably everywhere. Will building conversions pick up speed and be widely embraced as a viable housing solution? The answer, according to Sheila Botting, Principal & President, Americas Professional Services, Avison Young, is complicated.

“Given most governments are taking an active role in spurring rapid housing development, we could certainly see more conversions happening in Canada,” she said. “On its own as a single solution, it won’t deliver the substantive number of new housing units needed to meet the demand across Canada’s major cities…but every little bit helps.”

First off, Botting points out that some properties—i.e., those of a certain vintage— are more likely to be considered for an officeto-residential project than others.

“Office tenants today are drawn to trophy, A-Class buildings with higherquality amenities like fitness centres, cafeterias, and coffee shops—spaces that foster opportunities for collaboration, brainstorming and engagement,” she said. “Employers and building owners that want to attract back their current employees and bring in new talent are relying on these things to help them achieve that goal.”

Increasingly, older C-Class buildings will be challenged by this flight to quality as leases come up for renewal, making them obvious targets for office-to-residential projects, especially those buildings with historic significance or character in downtown and midtown areas. But regardless of age or quality, Botting says there are some practical challenges building owners should be aware of before considering a conversion.

“Floor plates should be in the 8,000 and 14,000 square feet range for a project to be feasible,” she said. “Buildings with very large floor plates are impractical in that they are too deep with limited windows. Also, inserting plumbing for kitchens and bathrooms can be expensive, and older buildings may not have the required infrastructure for a residential

environment, with sufficient parking, staircases, access, etc.”

In some cases where the infrastructure is inadequate, it might make more sense to demolish the pre-existing building and replace it with a brand-new high-rise apartment to deliver the needed housing units, particularly in Toronto and Vancouver where higher density land values justify conversion.

“Challenges in these cases might arise from municipalities reluctant to give up commercial space and employment land with high tax-paying, job-creating tenants,” she warned. “So, while this strategy represents one of many options to bring more housing to market, it isn’t a viable solution on its own to meet housing need

across Canada. Other solutions include unlocking surplus land and dedicating this to future affordable housing, which we are now seeing happening by the City of Toronto and Province of Ontario. Converting employment land could provide another similar option from the private sector.”

Ultimately, Botting’s take on building conversions is that if the project checks all the boxes in terms of the physical asset, infrastructure, zoning, location, and having support from partners and government funding, it will likely see a successful outcome worthy of the initial investment. But unless all the boxes are checked, the risks of undertaking a conversion project will likely outweigh the rewards.

of

(l-r)

Canadian

This September, Kelson Group became the first property management company in Edmonton and Northern Alberta to have its multifamily apartment buildings recognized under the Canadian Certified Rental Building Program (CCRBP); specifically, its buildings in Edmonton, Leduc, Sherwood Park, and Grande Prairie, AB.

The Kelson Group celebrated its first CCRB-designated buildings in BC in 2016, shortly after the program expanded to BC in 2015. Kelson Group President Jason Fawcett says its newest certified properties in Alberta represent a win-win for its apartment renters and all property management companies, noting, “Our objective with the national CCRBP-approved apartment building program is to provide Edmonton, Sherwood Park, Leduc, and Grande Prairie renters with the peace of mind and a clear quality assurance alternative when selecting their rental apartment home.”

CCRBP is North America’s first quality assurance program that specifically promotes and acknowledges quality for rental housing consumers, as well as professionalism for multifamily property managers and their staff. The program is a huge game-changer when it comes to the rental industry in Canada. Apartment shoppers who choose a CCRBP building enjoy enhanced peace of mind, knowing that their apartment community meets defined standards for quality and service.

In short, says Ted Whitehead, CCRBP Certification Director, “The designation means tenants can rent with confidence. With the added impetus of an increasing number of multifamily companies adopting Environmental, Social, and Governance (ESG) as a strategic business imperative, we expect that over the next 18 months this program will help build a national network of professional multifamily property managers whose focus will go far beyond financial measures to incorporate factors measuring the sustainability and ethical impacts of their investment.”

Proudly holding congratulatory messages from the three levels

government are

Kelson Group’s Alberta Property Manager Denise Cave, President Jason Fawcett and Canadian Certified Rental Building Program Director Ted Whitehead. (Photo: Dustin Delfs

For a multifamily apartment building to qualify as a Canadian Certified Rental Building, it must meet five mandatory requirements:

Abide by the Program’s Member Code of Conduct

• Adhere to the Program’s Mandatory Standards of Practice

Successfully comply with a mandatory thirdparty audit process

Have identified staff successfully complete the program’s training and education component.

Agree to market and identify their building as a Canadian Certified Rental

• Building to prospective tenants.

“We are happy to have our members participate in this important ‘for-renters’ initiative,” said Donna Monkhouse, Executive Director of the Albert Residential Landlord Association (ARLA)” At the heart of the Canadian Certified Rental Building Program are 54 standards of practice and associated requirements to which all organizations and buildings must adhere. These requirements translate the concepts of environmental, social and governance into concrete measures that focus on environmental and social responsibility and enhanced corporate accountability.”

“We want renters to recognize that ARLA landlords care about their renters and the buildings in which they live,” Monkhouse adds.

A COMPETITIVE EDGE

In today’s competitive real estate marketplace, internationally recognized ESG benchmark programs like the Global Real Estate Sustainability Benchmark (GRESB) are taking on increased relevance and importance. Not only can CRB certification help enhance an organization’s

GRESB benchmarking score, but now, in line with its national expansion, the program has moved from a recognized and approved green building certification program to officially becoming a GRESB Real Estate partner.

Explains Whitehead: “As all levels of government gain greater awareness of the ESG mantra across all industries, there is little doubt that they will soon be asking – or perhaps, demanding – what our industry is doing collectively on this front. Ours is the foremost ESGfocused accreditation program supporting the multifamily industry. And, with many of the REITs, institutional and investor-driven members leading the multifamily industry’s transformation to an ESG discipline, it became imperative to expand this program across Canada.”

“Adopting a strong multifamily ESG framework across the industry is necessary for the industry’s longterm regulatory survival,” he continues. “The multifamily industry provides apartment homes to one in three Canadians, or approximately 4.4 million people. When you take in these numbers and couple them with Canada’s strong public commitment to environmental stewardship and mending the social issues of the day such as diversity, equality housing shortages, income disparities.”

Whitehead says there is little doubt that there will be increased pressure on the multifamily industry to demonstrate what it is proactively doing to address these challenges on all fronts. To date, he adds nearly 13 per cent of multifamily industry companies in Canada have adopted a formal ESG way of doing business.

“That number must dramatically increase if we are to proactively state our case on these fronts,” Whitehead said. “The good news is that most professional property management organizations practice ESG-related activities daily and they just don’t think of them that way. We believe the Canadian Certified Rental Building Program provides a visible grass-roots pathway for professional property managers/ owners to move forward with confidence and success on the ESG front.”

Kamloops, BC-headquartered Kelson Group is the first property management company in Grande Prairie, AB to achieve Canadian Certified Rental Building Program (CCRBP) certification.

Kelson Group Property Management’s President Jason Fawcett and Alberta Property Manager Denise Cave unveil their CCRBP Living Green Together signage for residents at their Heatheridge Estates community in Edmonton, AB. (Photo: Dustin Delfs)

Industry Hot Topics

Ontario’s “More Homes Built Faster” Act

On October 25, 2002, the Ontario government introduced the More Homes Built Faster Act, which promises to advance the province’s plan to address the housing crisis by building 1.5 million homes over the next 10 years. If passed, the province says the new measures will enable the construction of a greater mix of housing types throughout cities, towns, and rural communities, from single-family homes to townhomes and mid-rise apartments.

“For too many Ontarians, including young people, newcomers, and seniors, finding the right home is still too challenging,” said Steve Clark, Minister of Municipal Affairs and Housing. “This is not just a big-city crisis; the housing supply shortage affects all Ontarians, including rural, urban and suburban, north and south, young and old. Our Housing Supply Action Plan is creating a strong foundation on which 1.5 million homes can be built over the next 10 years. Our government is following through on our commitment to Ontarians by cutting delays and red tape to get more homes built faster.”

The plan puts in place actions to support the development of “gentle density” –housing like triplexes and garden suites that bridge the gap between single-family homes and high-rise apartments. For example, it would remove exclusionary zoning that only permits one single detached home per lot, allowing property owners the right to build three units without lengthy approvals and development charges.

In all, the plan contains roughly 50 actions, including steps to “promote fairness to support affordable and other rental housing.” Currently, property tax assessments for affordable rental housing are established using the same basis as regular market rental properties. Ontario will explore potential refinements to the assessment methodology used to assess affordable rental housing so that it better reflects the reduced rents that

are received by these housing providers. In addition, it will consult with municipalities on potential approaches to reduce the current property tax burden on multi-residential apartment buildings in the province.

Other measures include: creating a new attainable housing program to drive the development of housing; increasing the Non-Resident Speculation Tax rate from 20 per cent to 25 per cent to deter nonresident investors from speculating on the province’s housing market and help make home ownership more attainable for Ontario residents; freezing and reducing government charges to spur new home construction and reduce the costs of housing; building more density near transit, unlocking innovative approaches to design and construction, and removing red tape to get shovels in the ground faster.

The government says it will also consult with the public, stakeholders and municipalities while engaging with Indigenous communities to review provincial housing and land use

planning policies to find ways to remove more barriers to getting homes built.

“Ontario’s housing supply crisis is a problem which has been decades in the making,” said Michael Parsa, Associate Minister of Housing. “It will take both short-term strategies and long-term commitment from all levels of government, the private sector and not-forprofits to drive change.”

In a press release issued shortly after the announcement, the Residential and Civil Construction Alliance of Ontario (RCCAO) said it approves of the measures outlined in the new act.

“RCCAO welcomes the Government of Ontario’s leadership to bring the much needed reforms to address Ontario’s housing crisis,” said Nadia Todorova, Executive Director of RCCAO. “Minister Clark’s bold proposals are strong next-steps to build momentum for more development to meet the critical infrastructure demands of a growing province and will enable more people to get to work to end Ontario’s housing crisis.”

ULI releases Emerging Trends in Real Estate report

The Urban Land Institute (ULI) released its annual Emerging Trends in Real Estate report highlighting what’s shaping the sector as we head into 2023. In its 44th edition, the report includes proprietary data and insights from more than 2,000 leading real estate experts, exploring shifts in the property sector since the pandemic, changing investor sentiment toward climate risks, the emergence of impact investing, and other current and pending issues within the United States and Canada.

Insights from the report reconfirm two bifurcated market trends: aspects of the real estate industry are “normalizing” and reverting to pre-covid patterns while others have permanently shifted to the “new normal” that was adopted during the pandemic.

“As we enter 2023, the pandemic-driven factors that upended the global economy for more than two years are starting to fade,” said Anita Kramer, senior vice president of ULI’s Center for Real Estate Economics and Capital Markets. “At the same time, structural changes like the widespread adoption of remote work will likely continue to inform investor behaviour. A series of long-term factors such as the rising cost of housing, increased climate risk, and declining socioeconomic mobility, pose continued uncertainty for the private and public sectors alike. There are also opportunities – the increase in federal infrastructure spending provides the chance to create greener and more equitable communities that can adapt to these challenges.”

This year’s report also highlights the real estate industry’s move to look beyond cyclical headwinds and focus on a long-term approach to real estate assets. In an environment with rising interest rates, declining GDP, and minimized deal activity, the industry is opting to ride out the slump and position itself for sustained growth and strong returns.

“The past few years have been historic territory for the real estate industry, and the pandemic has permanently changed how and where we use different types of properties,” said Byron Carlock, US real estate leader for PwC. “There are several factors at play determining both the near and long-term future of the industry. Although real estate capital markets are constricting, they are still open for business, investors are still buying high-quality properties, lenders will continue to lend, and companies should move forward with cautious optimism through this current cycle and prepare to adapt to quick market changes. The industry should also work closely with stakeholders to help assess they are addressing demands and shifting sentiments while building trust.”

Additional key insights:

• Economic forecasts remain cautiously optimistic. Despite the first half of 2022 seeing negative economic growth, incomes continue to increase, and consumer spending—which now accounts for twothirds of the economy—remains steady. Around half of the experts surveyed expressed a positive outlook as we head into the new year.

• Inflation remains a top concern, and it likely won’t abate soon. With the Federal Reserve raising interest rates, investors and developers are wary of the risk of future recession.

• Hybrid work is here to stay. Since last year, the average worker has only been working from the office three days a week—a trend that will continue to inform investor behaviour. However, a future recession has the potential to shift the dynamic.

• The housing affordability crisis is worsening. Rents are soaring even in more affordable metros. Without intervention from the government and private sector, socio-economic and racial housing gaps will widen even further.

• Investors are growing concerned about extreme weather. Climate risk will be a key factor when deciding where to invest in real estate across a wide swath of cities.

MOBILE FRIENDLY

Lucrative tax credits pledged for heat pumps

Building owners contemplating a switch away from gas-based space and water heating can now factor some lucrative tax credits into the business case. Canada’s newly released fall economic statement pledges $6.7 billion over five years to support uptake of a range of clean technologies, including active solar heating, air-source and groundsource heat pumps and energy storage.

“With major investment tax credits for clean technology and clean hydrogen, we will make it more attractive for businesses to invest in Canada to produce the energy that will power a net-zero global economy,” Deputy Prime Minister and Finance Minister Chrystia Freeland asserted as she introduced the fall economic statement in the House of Commons last week.

As proposed, claimants could receive refundable tax credits of up to 30 per cent of their capital investment in designated clean technologies. This would become available on budget day 2023 and be phased out in gradually diminishing percentages between 2032 and 2034. The tax credits will be targeted to specified electricity generation, electricity storage, low-carbon heating and industrial zero-emission vehicles and charging equipment, which is mostly already eligible for accelerated capital cost allowance (CCA).

“A tax credit of 20 to 30 per cent would certainly make the return on investment of projects more attractive,” observes Bala Gnanam, vice president, sustainability, advocacy and stakeholder relations with the Building Owners and Managers Association (BOMA) of Canada. “When you factor in the future price of carbon, transitioning to clean energy makes even more sense.”

The tax credits will be tied to yet-to-be-finalized labour conditions. It’s proposed that claimants would receive a 30 per cent rebate if they meet the criteria, but those that fall short would be eligible for a maximum 20 per cent credit. Further details are promised in the 2023 budget.

“Labour conditions will include paying prevailing wages based on local labour market conditions and ensuring that apprenticeship training opportunities are being created,” the economic statement advises. “The Department of Finance will consult with a broad group of stakeholders, but especially with unions, on how best to attach labour conditions to the proposed tax credit.”

Beyond potential applications within commercial buildings, zero-emissions construction machinery and associated charging infrastructure would be eligible. The electricity generation category covers equipment related to solar, wind and water-based power production and small nuclear reactors, while energy storage captures: batteries; flywheels; supercapacitors; magnetic energy storage; compressed air energy storage; pumped hydroelectric energy storage; gravity energy storage; and thermal energy storage.

“Potentially, every real estate segment in the private sector could benefit — multifamily residences, industrial buildings, office and retail,” Chisholm says.

IN 2016, NUMBERS NEVER LIE: BUT NOW, 2022

In 2016, I wrote an article for a wellknown property management company on what I believed the future held for the building restoration industry and its clients. It was my "best guess" after a 40year career, and now, after the last six years, my concerns have only multiplied.

Six years ago, the future issues I predicted were on-site labour shortages, a major shift in overhead costs, and a trend of contractors not understanding the financial risks associated with the restoration Industry. All these issues have added dimensions in 2022, and they have all been amplified by the pandemic, surging inflation, fast-rising interest rates, and supply chain issues causing delays and unprecedented price hikes in all sectors.

Back then, I also thought uneducated contractors would still be prevalent. Now, I am happy to report that most contractors now understand that the restoration industry is not for the "financial faint of heart." However, for owners, property managers and condominium corporations, the days of getting a "cheap" price due to a financially uneducated contractor are over. During the pandemic, all companies focused on survival and were forced to be more attentive to finances. Due to the tightening of bonding and insurance requirements, banking facilities, and the rising complexity of the safety, labour, and tax laws, those companies had no choice but to get with the program as these issues have very real costs and have to be addressed in their pricing.

In 2016, it was also easy to predict that there would be a labour shortage. At the time, I thought the labour shortage in the future would be for "on-site" skilled labour, but now we’re seeing increased demand for employees needed off-site or in the office. Project management, accounting, estimating, HR, and all administration positions have competition like never before. In the past, employees could double up on responsibilities to run a company. Now, the expertise needed in each position makes it near impossible for these responsibilities to be completed by one person. As companies have more inoffice employees, and are paying more for

those employees due to competition, the cost of overhead surges.

This, again, adds to the overall costs of all projects.

Of course, finding on-site skilled labour in construction is still an issue today. That said, it is exacerbated in the restoration industry by the fact that many people may be skilled workers, but asking them to apply their skills on a swing stage 300 feet in the air is a non-starter for them. As a side note: 99 of 100 people who respond to a help wanted ad say "no" once they find out they will be working on the side of a building.

"TIME TO KNOW," NOT TIME TO "THINK YOU KNOW”

After 46 years (not 40) in the restoration ndustry, I'll give those predictions another shot!

For one, as we advance, I believe many people do not yet understand the speed and extent that costs are increasing and how it will affect contractors, owners, property managers and their clients. As front-end buyers, the restoration industry has seen increases in labour, materials, and supplies that are unprecedented. We have also seen what the result of competition has done to the labour pool, and why the supply chain issues are so costly. As a contractor, we have to adjust quickly to this reality and, at the same time, try to predict what all of this means to our future.

No doubt, economic headwinds will continue to impact the industry. The condominium sector may be the area that needs the most focus, specifically at the Board of Directors level. Although keeping costs under control should be top of mind for everyone, there is a big difference between controlling everyday costs and reducing funding in a reserve fund to control costs. Controlling the daily, monthly, and yearly costs of a building is important and always top of the list since we see them constantly. Yet, in the past 20 years, with inflation at 2% or less and low-interest rates, reserve funds could be set up quite easily for future costs.

This isn't the case anymore. Inflation isn't around 2%; it's 8% or more. And borrowing rates aren't 2%; they’re triple. There are dramatic price increases for "out of sight, out of mind" services that are not seen by most people in the general public. Since mid2021, we have witnessed supplier price increases of 8, 10, 30, and 50% overnight.

My concern is not a guess. Some reserve fund studies I've seen recently are based on 2% or 3% increases. While this would suffice in the past, any corporation with a reserve based on these numbers or had their studies completed before 2022 should have those studies updated to present conditions. Moreover, their board should scrutinize the results thoroughly for their corporation's long-term financial health.

As in 2016, my prediction is that many will ignore my advice and many will be fine. Even still, how much will it cost to take a good look? I predict - no, guarantee - the cost of being sure will be far less than being blindsided.

Scott Byberg is President of Dominion Caulking and Langstaff Restorations., where he has watched the industry evolve since joining it nearly 50 years ago. He and his team look forward to celebrating Dominion Caulking’s 100th anniversary in 2028.

Computers Can’t Do Everything

Human interface continues to play a key role in insurance transactions

by Andy Schwartze

Ten years ago, I wrote an article entitled, “Technology and Insurance” for Canadian Apartment Magazine. With a few updates here and there, I’m pleased to share some of it with you again now.

We have become very “fashionista” over the years about the technological innovations that power our daily activities. Just witness the buzz in an Apple Store and you’ll see the unending fascination that new products can generate. The line-ups tell it all. A visitor from another planet might wonder what we humans do with our lives other than bow our heads in supplication to ever-shrinking new toys with lit-up screens.

I remember the first desktop computer I purchased in the early 80s. It came from IBM’s fancy new computer store in downtown Toronto for the enormous sum of $3,000. After unpacking it at

my office, I sensed something magical was about to happen— although, it needs to be said that this heavy beast, once turned on, sounded like a small Pratt and Whitney turbo. The black and white monitor displayed a host of computer engineergenerated hieroglyphics that were barely understandable. After a six-week, self-taught tutorial on the basics of this new business toy, the magic became evident, and the technology has been a focal point of my business that has served me well ever since.

From that time, nearly forty years ago, we have seen business make every attempt to incorporate the latest technology into

its processes. We’ve watched simple computer software programs evolve into complex “platforms” that allow users to conduct business almost entirely on computers. We’re at the point now in 2022 that military wars can be fought, in part, by remotely controlled creations. Without question, key elements of business life have improved drastically—especially since COVID transitioned so many of us to remote working.

No industry, however, remains attached to the human side of a business transactions quite like insurance does. This is a business that pits the cost-sensitive insurance buyer against the big balance sheet of the insurance company. It is a business that has, as its fundamental common denominator, a requirement for honest and open disclosure between the buyer and the seller. If the buyer can hide one or two material facts and save a few dollars without voiding the insurance contract, then the insurer gets less premium for a loss that inevitably must be paid. On the other hand, if the insurer is shrewd enough to be able to identify the higher risk insurance buyer, it is protected against needless losses and, of course, fraudulent attempts to tap into its bank account. There is no technology, in an era of significant privacy rights legislation, that can weed out the potentially costly insured that the carrier never wanted in the first place.

After all these years of technological innovation, human interface is the one element that continues to play an extremely important role in the insurance transaction. In service businesses, where this remains a key part of any deal making, we typically rely on intermediaries. Be they brokers, or agents, these people play a significant role in sorting out the partnerships between insurance company “supplier” and client “insured”. It remains a balancing act that requires personal skills which no technology can duplicate. Eyeball to eyeball dealings give humans the ability to take advantage of senses that help us decide who we want to do business with and who is best avoided. Intermediaries who do not develop the requisite skillset, that brings buyer and seller together in a mutually beneficial manner, quickly hasten their own professional demise.

The world of insurance, still very heavily dependent on human interaction in its unique business model, has added a great deal of technology to its delivery systems. What has happened since I first wrote about this issue 10 years ago, however, is the explosive growth of remote working, hastened by the covid years. Remote working was inevitably going to encroach on our very old fashioned “cubicle” style office structures anyway; Covid just moved things along at a much faster pace.

With this development, we have created a work environment that is much less influenced by human interaction and has

significantly been affected by screen-driven templates and electronic barriers to flexibility. The most important activity—the one that ensures the honesty and integrity of the partnership between carrier and client—is now somewhat subjugated to the rigidity of technology. This has resulted in a significant watering down of the business styles of the “good old days” when face-to-face negotiations could lead to a good deal for everyone.

Technology’s explosive growth, soon to be augmented by the almost scary concept of AI (automated intelligence), is slowly squeezing human interaction out of many business transactions. While that may be an efficient and more predictable way of doing business, it remains for me a very sad, albeit unavoidable, development.

For questions regarding multi-residential housing insurance, please visit: www.takecover.ca

THE MASS TIMBER MOVEMENT

Around the world, wood in construction is taking off

Mass timber buildings are continuing to increase in size, height, and complexity around the world. In B.C., for instance, legislation now allows for mass timber buildings up to 12 storeys and is driving change in the built environment by mandating mass timber construction for new buildings in public procurements.

At the recent “Building Transformation’s Timber in the Digital Environment: Spotlight on DFMA” event in Vancouver, mass timber experts gathered with technology innovators from across the globe to discuss the interface between design in the digital environment and the innovations happening within the design for manufacturing and assembly (DFMA).

There’s little doubt that those in attendance left with any impression but this: the combination of digital technology and mass timber is transforming the way we design and build structures. New digital design tools and material innovations are uniting to create more sustainable buildings and bring more affordable solutions to the table.

Overall benefits of using mass timber include:

1. Reducing our carbon footprint

2. Adding value to the forestry sector

3. Providing new opportunities for jobs, growth, and innovation

As a building material, mass timber is:

1. Safe

2. Cost-effective 3. A great insulator

4. Seismically resilient

STABILITY AND BALANCE AT THE