CAM October 2022

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IT’S A TIGHT MARKET FOR RENTERS

In August, the national average rent in Canada reportedly reached $1,959, topping the August 2019 peak by a few dollars, just as postsecondary students were returning to school. It was not an easy time for anyone seeking rental housing—particularly not low-income earners, new arrivals to Canada, or full-time academics. As we head into winter, affordable housing continues to be a hot topic from coast to coast. But the good news is, more purpose-built rental apartments are currently under construction in Canada than we’ve seen in decades. Still, imbalances are likely to persist. Contributor Barbara Carss reports on the housing supply-demand imbalance and the corrections needed to restore affordability in her feature story on page 14.

In our cover story for this issue, we’ve chosen to highlight a commendable conversion project that recently wrapped in Calgary, which saw a 10-storey vacant office building transform into housing for families in need. You can read up on how this first-of-its-kind project came to fruition on page 16.

In other news, Hurricane Fiona wreaked havoc on Eastern Canada, and given the further devastation caused by Hurricane Ian (not to mention a slew of other storms), our insurance expert warns that insurance rates will be impacted. Otherwise, apartment owners and investors can anticipate a solid outlook as we head into the last quarter of 2022.

In the meantime, have a wonderful fall season, and we look forward to hearing from you via our social channels and in the comments section at REMInetwork.com.

Erin Ruddy @cdnapartmentmag

Apartment

Editor Erin Ruddy

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HOUSING

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third quarter.

of rental properties have been able to command higher rents on vacant units,” observed Keith Reading, Director of Research at Morguard. “Vacancy has trended steadily lower. As a result, prospective tenants have found it more challenging to source options available for rent.”

Investment market

Multi-suite residential rental properties remain a prime target of various investment groups. For the first time in recent

rental demand patterns

in-person classes

an increase in

history, cap rates have increased, albeit slightly. Investors have re-priced investment risk due to the combined impacts of higher interest rates, rising long-term bond yields, and an increasingly uncertain economic outlook. Investors will continue to source properties in this sector given its history of relative strength during periods of economic weakness.

Starlight acquires 10 Ontario rental properties

early September, Starlight completed the acquisition of

Morguard

10 Ontario assets located in Ottawa, Kingston, London and Welland. In all, the acquisition brings 1,178 new units to Starlight’s residential rental portfolio.

“This is a robust portfolio and will be a strong addition to our multifamily

residential platform,” said Daniel Drimmer, Starlight Founder and Chief Executive Officer. “Ottawa, Kingston, London and Welland are all growing communities and some of the province’s strongest markets. We are thrilled to be able to continue expanding

offerings and provide quality homes

well-maintained

All 10 Ontario assets are equipped with on-site laundry and parking, while some of the properties have electric vehicle (EV) charging stations. Several of the properties include commercial retail units, providing added value for residents. The portfolio consists of low-, mid-, and highrise buildings with a mix of layouts and sizes ranging from bachelors units to three bedrooms.

According to Starlight, all 10 Ontario assets are located in lively, thriving communities near major highways and public transport, providing residents with easy access to high-quality schools, restaurants, grocery and retail amenities.

This acquisition came just a few weeks after Starlight announced it had purchased a new 120-unit purpose-built rental property in Nanaimo, BC, known as “Cascade Residences.”

ARE YOU CONTEMPLATING THE SALE OF YOUR APARTMENT PORTFOLIO/PROPERTY?

Consider the following:

• Who will represent

• Who will give

best

property

• Who will deliver the highest value

With over 30 years of

The growth of renter households outpaced the growth of owner households in 2021, according to the latest Canadian Housing Survey from Statistics Canada. In addition to sharing data from the 2021 Census, the new report includes housing tenure trends of the past decade and looks at the change in housing affordability since the onset of the pandemic.

Key facts & figures

The proportion of Canadian households that own their home—or the homeownership rate (66.5% in 2021)— is on the decline after peaking in 2011 (69.0%). The growth in renter households (+21.5%) is more than double the growth in owner households (+8.4%).

Adults under the age of 75 were less likely to own their home in 2021 compared to adults in that age range a decade earlier—especially young millennials aged 25 to 29 years (36.5% in 2021 vs. 44.1% in 2011).

Newly built dwellings are increasingly likely to be occupied by renters—40.4 per

cent of the housing built in the last five years were tenant-occupied.

Over one-third of recently built dwellings (those constructed between 2011 and 2021) were occupied and primarily maintained by millennial (36.6%) renters or owners in 2021, the largest share of any generation. Millennials also represented the largest

New data from the Canadian Housing Survey reveals growth in renter households outpaced growth in owner households in 2021

RENTING ON THE RISE

share of condominium occupants (30.2%) compared with the other generations.

While condominium construction continues to surge, the majority of these buildings (90%) are located in Canada’s largest cities. Condominiums made up 39.9 per cent of the occupied stock in the primary downtowns in 2021, and half of these downtown condo units were being rented out by investors.

The Canadian Housing Survey also noted the significant rise in home values in both large and small municipalities in Ontario and British Columbia between 2016 to 2021; 77.8 per cent in Ontario and 46.1 per cent in British Columbia saw the average expected value of their homes rise by over 50 per cent.

Differences in the impact of temporary COVID-19 benefits on household incomes were a key contributor to the different degrees of improvement in housing affordability seen for renters and homeowners from 2016 to 2021.

The rate of ‘unaffordable housing’, or the proportion of households that spent 30 per cent or more of their income on shelter costs, fell from 24.1 per cent in 2016 to 20.9 per cent in 2021. The rate of unaffordable housing in Canada specifically for renters fell from 40.0 per cent in 2016 to 33.2 per cent in 2021, with most of the decline occurring among renters earning below the median household income of all renters (68.4% in 2016, compared with 56.0% in 2021). Unaffordable housing rates were highest in downtowns, where the percentage of renters spending more than 30 per cent of their income on shelter costs was above the national average.

Almost 1.5 million Canadian households lived in “core housing need” in 2021, defined as living in an unsuitable, inadequate, or unaffordable dwelling and not able to afford alternative housing in their community. The core housing need rate fell from 12.7 per cent in 2016 to 10.1 percent in 2021.

In 2021, 10.0 million households in Canada owned their home, which is more than at any point in the country’s history. However, while the number continues to grow, Canadians overall were less likely to own their home in 2021 (66.5%) than they were a decade earlier, when a record high (69.0%) were homeowners.

Factors at play

Some of the factors that play into whether a person is a homeowner or renter include age, income, location in Canada, and marital status. Residents of Atlantic Canada have historically been the most likely to be homeowners, and this remained true in 2021. However, from 2011 to 2021, Nova Scotia (down from 70.8% to 66.8%) and Prince Edward Island (down from 73.4% to 68.8%) saw the largest declines in homeownership rates.

British Columbia had the thirdlargest decline (from 70.0% to 66.8%) in

Labour shortage expected to impact housing construction

A new report from CMHC looks at the skilled labour shortage and how it may impact Canada’s 2030 housing objectives. Using the housing supply targets outlined in ESG 2030, the report examines the skilled labour capacity in Ontario, Quebec, BC, and Alberta, and assesses each one’s ability to deliver on their level of housing need.

In the best-case scenario, CMHC projects that housing starts will fall well below the 2030 affordable supply targets in three of the four provinces. While Alberta is expected to be successful, Ontario, Quebec, and BC will all need to double their best-case labour capacity in order to adequately reach their targets.

Proposed solutions outlined in the report include shifting the focus towards converting existing commercial structures into residential units; increasing the construction of multi-unit housing vs. single-detached homes; creating more incentives to develop a new generation of skilled construction workers; and developing more targeted immigration programs to encourage skilled, temporary and/or permanent foreign workers to bridge the labour shortage, particularly in Ontario and BC.

A

homeownership rates over this period, while Ontario had the fourth-largest decline (from 71.4% to 68.4%). Quebec had the smallest drop (from 61.2% to 59.9%). Quebec has historically had lower homeownership rates than elsewhere in Canada, and this remained the case in 2021.

Homeownership rates in the territories have also typically been lower than the national average. Among the territories, Yukon (64.4%) was closest to the national average in 2021, but its homeownership rate had fallen by 2.1 percentage points since 2011. The homeownership rate in the Northwest Territories (53.5%) was unchanged from 2016, but up by 2.0 percentage points from 2011. In Nunavut, fewer than one in five households (19.2%) were owneroccupied in 2021, the lowest rate nationally.

When the homeownership rate goes down, the rental rate goes up. The decline in homeownership rates from 2011 to 2021 was attributable to the number of renter households (+21.5%) growing at over twice the pace of owner households (+8.4%). By comparison, the number of owner households increased by almost onequarter (+23.7%) from 1996 to 2006, while the number of renter households decreased by 0.7%. In 2021, there were 5.0 million renter households, or a rental rate of 33.1 per cent.

Rental housing supply

Recent discussions of shortages in housing supply have focused on the importance of building more rental housing. In fact, the housing market has been responding to this need, and there are now more rental units than ever before. The number of units in the purpose-built rental market grew by almost one-fifth from 2010 to 2020, rising from about 1.8 million units to almost 2.2 million units. In comparison, about 14,000 net units were added from 1990 to 2010.

The growth in the rental rate reflects the increased construction of multi-unit buildings, such as apartments and condominiums. Before 2011, apartments accounted for less than 40 per cent of building permits. Since the start of 2011, multi-unit building permits have accounted for 68.1 per cent of units created, and 73.2 per cent in 2021 alone. These construction and real estate trends address the greater demand for these types of dwellings, fuelled by population growth through immigration, an aging population and a gravitation towards the downtown lifestyle—particularly among younger Canadians.

Housing supply-demand imbalance set to persist

Market fundamentals should favour development, but challenges abound

by Barbara Carss

Rising interest rates and a sluggish supply chain pose added complications for new housing development, but industry insiders and economic analysts alike maintain that Canada’s market fundamentals should reward investors in the longer term. Speaking during the Bloomberg online Canadian finance conference in late September, commercial real estate players assessed the opportunity and tallied some of the current challenges, while one of Canada’s top housing strategists outlined the federal government’s efforts to invigorate producers and stabilize consumers.

Correcting the supply-demand imbalance is the best way to restore affordability,” asserted Romy Bowers, president and chief executive officer of Canada Mortgage and Housing Corporation (CMHC).

“We need to create more homes for Canadians to buy, but we also need to create more rental units for Canadians to live in across all price points.”

Recent CMHC analysis concludes that approximately 3.5 million additional dwelling units are needed to meet demand and pull prices back into closer alignment with purchasers’ and tenants’ incomes. That underpins a federal target for 400,000 housing starts annually, which is roughly double the current Canada-wide level.

The private sector is tapped for a crucial role in filling that gap, given that it builds

95 per cent of the housing coming onto the market. However, it’s a performance expectation that’s intrinsically tied to development costs, the availability of labour and the receptiveness of the local governments that control planning and permitting.

“Demand is so high, there should be a supply response, but that supply response is not happening,” Bowers mused. “So we

have to, really, as a country, look at what is preventing the supply response and take actions urgently to address those issues.”

Encumbrances and counterbalancing efforts

From developers’ perspective, Brian Rosen, president and chief executive officer of Col liers Canada, cited some common encum brances, including prolonged timelines for obtaining development approvals and de velopment charges and fees that drive up costs. Varying planning requirements, po litical agendas and staff resources present lesser or greater hurdles across a myriad of urban municipalities, but opposition from lo cal residents and/or politicians is typically uni versal. And, if the slow process and persistent conflict seems tiresome, so, too, can be the resulting output.

“You end up with a very binary effect — you get a tower or you have a single-family home, but there’s a lot of stuff in between (those two forms) that can be done,” Rosen observed.

Recent, and perhaps future, interest rate increases bring higher costs for borrowed money, changing the break-even point for new projects. For condo developers, that also comes with concerns about consumers’ buying powers.

Bowers confirmed that CMHC’s revised outlook, slated to be released in October, will chart a year-over-year average national decline in house prices in the range of 10 to 15 per cent. That’s steeper than the 5 per cent dip projected earlier this year, but she places it in the context of “rapid, unsustainable price increases” over the course of 2020 and 2021 and contends there’s little fear of a crash.

“We believe there is a very significant supply shortage in Canada and there is significant demand that is being unfulfilled,” she reiterated. “In our view, the supply-

demand mismatch is what is going to sustain the housing market in the long term.”

The dynamics are the same in the rental housing market. “There’s a direction multifamily rental rates are headed and it’s not a downward direction, which is tough on people from an affordability standpoint,” Rosen said.

Through its financing arm, Bowers reports CMHC is striving to “keep the construction pipeline going” as inflationary pressures subvert developers’ pro formas and undermine project viability. Meanwhile, to tackle lamented obstacles in the development approvals process, CMHC has been tasked with rolling out the new Housing Accelerator Fund for municipalities — $4 billion over five years, promised in the 2022 federal budget — aimed at spurring the construction of 100,000 new housing units.

“We hope that this incentive will provide municipalities with the support to break down local-level barriers that do exist to supply creation,” Bowers said. “This funding could be used to accelerate permitting processes or to modernize planning processes. It could also be used to educate local residents about the benefits of more density in their communities and more transit-oriented development.”

Prospects for strong investment returns

The latter is the type of project for which investors and developers are enjoying success and foreseeing strong continuing demand. Michael Emory, president and chief executive officer of Allied Properties REIT, sketched out trends in Montreal, Toronto and Vancouver where urban mixed-use development is flourishing.

He suggests the prominent presence of post-secondary institutions and knowledgebased organizations draws a constant supply

of young people to Montreal’s core, nurturing spinoff synergies of business start-ups, job growth and demand for housing, retail and leisure pursuits. Along with the noticeable towers — including in-progress, purposebuilt rental projects that will deliver thousands of new units as they are completed over the next few years — he sees more subtle “soft densification” augmenting Toronto’s supply, while Vancouver continues to churn out new condo and multifamily rental developments.

“There may be some dampening of creation because of interest rates, and because of perhaps inappropriate behaviour on the part of municipalities, but I think Canada will continue to propel forward because there’s a deep need,” Emory submitted. “Our populations are growing and we do have to find dignified ways of creating living space.”

Rosen concurs that housing is an integral component of what he terms “placemaking” or redeveloping and repositioning areas within the existing urban fabric. He predicts investors will continue to reap strong returns from mixed-use projects that package housing and retail with walkable or easy transit access to residents’ workplaces and other services and amenities.

“That’s where a lot of investment is going to be going — to creating those neighbourhoods where they’re now currently not highest-and-best-use, as well as intensifying and densifying in those areas and transitioning malls and reimagining what retail should look like,” Rosen said. “If you can get in on that, and it may take a multi-year investment, that is a real future growth area for all different types of the asset classes, and that’s where we’re going to see communities thrive.”

Barbara Carss is editor-in-chief of Canadian Property Management.

By Erin Ruddy

HomeSpace Society, a non-profit housing provider in Calgary, has finished converting a 10-storey vacant office building into rental housing for vulnerable residents. Renamed Neoma—a word that represents kindness and the first phase of the lunar cycle, known as the New Moon—the former Sierra Place building now features 82 units of affordable rental housing, 10 units of shelter spaces and transitional housing, amenities for residents, and programming space for the non-profit group, Inn from the Cold.

FILLING HOUSING NEED

brings more affordable housing to downtown Calgary

The $30 million office-to-housing conversion project received funding from multiple sources, including $16.6 million via 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 initiative. Private donors also raised nearly $6 million toward the conversion, which completed in September.

“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 Jyoti Gondek, Mayor of Calgary. “The city, in partnership with HomeSpace, private donors, and the federal government, provided significant investment to convert a vacant office building into affordable housing units, which is the first conversion of its kind in Canada. Calgary is proud to be leading the country with this project that will serve as a

Calgary’s conversion program

blueprint for cities looking to address both the housing crisis as well as downtown revitalization.”

“First-of-its-kind”

According to HomeSpace Society, Neoma is considered a “first of its kind” project in Canada for a few reasons – namely that no other major office tower has been converted into affordable housing and a family shelter under one roof. This makes it somewhat of a demonstration project for what is possible in the affordable housing space. It also addresses the glut of vacant offices since COVID that many cities, like Calgary, are struggling with.

Additionally, it’s still considered unusual for non-profits to collaborate on such a massive capital campaign. Neoma isn’t just a housing development; it also consists of the Inn from the Cold family shelter and office space, 10 units of transitional housing, and

Launched in 2021, the Downtown Calgary Development Incentive Program supports the downtown core’s economic recovery by encouraging the elimination of excess office space through conversion into residential uses. So far, the city has provided grants for seven conversion projects under the program’s first phase, with more announcements expected later this year. Five of the seven projects currently underway will remove approximately 665,000 square feet of office space from the market and create 707 homes.

a floor dedicated to amenities for the residents living at Neoma. The project is unique in that families can go from abject homelessness (i.e. emergency shelter) to transitional housing, to permanent housing all in one place as they stabilize and gradually require less-intensive supports.

All this aptly sums up why the building was given the name Neoma instead of leaving it as Sierra Place—because new beginnings are exactly what these residents are looking for.

“Neoma represents hope for families to have a new chance at life supported by a community that cares,” said Bernadette Majdell, CEO of HomeSpace. “Together, with collaboration between non-profits, all levels of government, and generous donors, we have created a space that offers families a pathway to stability through safe housing. This will be life-changing for those in our community experiencing homelessness and shows what’s possible when we approach vacant office space with creativity and innovation.”

Ideally situated in the downtown core at 706 7 Ave SW, residents of Neoma will benefit from easy access to transit and use of the area’s essential amenities. From ground-breaking to completion, the renovations took just 12 months to complete,

thanks in part to the expedited process made possible through the Rapid Housing Initiative.

Neoma will soon be welcoming the folks from Inn from the Cold, followed by shelter families at the end of October. The permanent units will be filled through the remainder of the year with families on waitlists for affordable housing. HomeSpace says it typically works with a local social services agency to handle leasing efforts and provide ongoing social supports for its tenants.

This unique, and commendable, conversion project was developed under Project Thrive—a fundraising campaign created in partnership by HomeSpace and Inn from the Cold. Using a holistic approach to housing insecurity, with transitional housing, affordable housing and social supports all under one roof, homes are provided for families who need them the most. Simultaneously, the downtown core benefits from the investment and revitalization.

Project Thrive was conceived as a practical and creative partnership to directly address issues in the city of Calgary, including lack of affordable housing options, depressed economic conditions, and the competition for funding between community organizations.

“Neoma represents hope for families to have a new chance at life supported by a community that cares.”

HVAC maintenance for small building owners

As most small building and homeowners know, the transition from air conditioning season to furnace season isn’t as simple as flipping a switch. Some pre-winter HVAC maintenance will help ensure your building’s systems operate efficiently and effectively for the long term.

Here are a few suggestions from the heating/ cooling experts at Napoleon Canada to help prepare you for the cold days to come:

1. Winterize your A/C units

The first step in your pre-winter maintenance plan is to get those air conditioners prepared for their long, dormant period in storage. Clear units of any debris — this includes leaves, twigs, dust, dirt, and any critters that may gotten inside, particular around on the condenser coils. Cover the cleaned

units securely and store them in a safe, dry place for winter.

2. Clear the vents

Once you’ve removed and dealt with the A/C units, check the vents for your furnace. These are likely white PVC pipes coming out of the building just above ground level. Make sure they are clear of obstructions and that no rodents or birds have gotten inside and made a nest. It’s a good practice to check these regularly over the course of winter to ensure they remain clear of ice and snow.

3. Check your batteries

Most newer thermostats are battery powered, and you wouldn’t want them dying in the middle of a blizzard. Also, this is a good time to check the batteries in your carbon monoxide and smoke detectors.

4. Change the furnace filter

The furnace filter is an important system that keeps dust and allergens from spreading around the building. Ideally it should be changed every three months, and fall before the furnace goes on, is the ideal time to start.

What to do before the snow falls…

Minding Your Indoor Air Quality

Your building’s HVAC filter is instrumental in improving indoor air quality and reducing the number of allergens, dust, dirt, bacteria, and other airborne pollutants your residents will be exposed to. Yet, filters are often out-of-sight-outof-mind and get neglected in the preventative maintenance process. In the fall, HVAC units introduce more outdoor air (for free cooling) and get dirty faster, needing to be changed more often. Also, depending on your location, you may have a build-up of pollen to get rid of now that summer has come to an end.

5. Clean your ducts

On average, duct cleaning should be done once a year. With prolonged use, your ductwork will accumulate a significant amount of dust and irritants. Every time air blows through the ducts—like the moment you turn on the furnace for the first time— these particles will circulate throughout the building.

6. Get an inspection

A professional inspection of your HVAC system will ensure everything is in good working order, and will flag any potential problems that may arise over the upcoming winter.

7. Turn it on

Finally, with all of that done, turn your thermostat to the heat setting and set the temperature a few degrees above normal to get the system to kick on. Check the vents in the building to ensure warm air is coming through. Once you are satisfied, go back to the thermostat and program it to a comfortable setting, one that will best serve your residents even on winter’s coldest days.

For more information on HVAC maintenance, visit www.napoleon.com.

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Investing in Canada’s EV charging infrastructure

The need is rising at multi-residential properties

Multi-residential buildings are seen as a cost-effective option to expand EV charger access and reduce required investment in pricier public infrastructure. A recent federally commissioned study from the research firm, Dunsky, projects Canada will potentially need upwards of 1.3 million Level 2 charging ports in multifamily buildings by 2030 to stay on track with the target for electric vehicles to comprise 100 per cent of new sales and 40 per cent of the total national fleet by 2035.

That’s based on the premise of a complementary balance of at least 195,000 publicly located chargers, with a mix of Level 2 and DC fast charging (DCFC) capabilities, to attain a nationwide ratio of three EVs per charging port. Alternatively, the researchers sketch out a lower reliance on home charging options, which would involve about 152,000 charging ports in multi-residential buildings along with more than 200,000 public chargers, for a higher ratio of 14 EVs per charging port.

Both scenarios are still highly theoretical since there are currently only about 16,640 publicly available chargers on fewer than 7,000 sites across Canada. Nearly 35,000 more EV chargers are pending, and slated to be installed within the next 15 months, with support from the federal zero-emission vehicle infrastructure program (ZEVIP), while a new allocation in the 2022 budget is expected to underwrite another 50,000 by 2027.

However, much is riding on other players getting involved. The Dunsky report estimates a $20 billion investment in charging infrastructure will be needed between now and 2050 when 90 per cent of the national vehicle fleet, or upwards

of 31 million vehicles, is projected to be electrically powered. That’s based on current costs of approximately $8,000 per Level 2 port, which takes four hours to deliver a charge adequate for 120 kilometres of travel, and about $150,000 per fast-charger port, which accomplishes the same outcome in about 30 minutes.

“It is crucial to have adequate charging infrastructure to meet this increasing demand,” observes François-Philippe Champagne, Canada’s Minister of Innovation, Science and Industry. “This report highlights important opportunities for the private sector to leverage the foundation we’ve already built to further increase the number of chargers available.”

The significantly higher cost of fast chargers underpins the case for focusing on improving at-home access to Level 2 chargers. Dunsky researchers calculate that an approach that favours denser multiresidential saturation could ultimately save billions of dollars if it reduces requirements for public charging hubs. Bolstering the argument, more than 40 per cent of Canada’s population is expected to live in multi-residentials building by 2050.

“Charging at home overnight is the most convenient option for EV owners and can also be the most cost-effective option when charging infrastructure is deployed at scale and incorporated into new buildings during construction,” the report states. “Ongoing efforts by the federal government to retrofit existing buildings and to ensure that new buildings are designed with EV charging in mind will lead to significant cost savings through reduced needs for public charging, while also making EV ownership more

convenient for a broader range of Canadian households.”

More than 1 million EVs are projected to be on Canada’s roads by 2025, while a much steeper increase is foreseen over the next 10 years to push the tally up to 4.6 million by 2030 and 12.3 million by 2035. Dunsky researchers calculate the installation of 1 million EV chargers in existing buildings coupled with building code requirements for EV charging capabilities in all new construction as of 2025 would result in about 34 per cent of multiresidential buildings providing access to charging by 2030. However, a slower rollout of just 100,000 installations and a five-year delay in mandating EV-readiness in new construction would mean that just 4 per cent of buildings could offer residents access to EV charging by 2030.

Multi-residential dwellers who do not have on-site access to EV chargers are identified as a prominent user group for public charging sites, particularly creating demand for community-based services (as opposed to those geared to highways). That might also be an initial pull for private investment.”

“While the business case for public charging infrastructure can be challenging due to the prevalence of residential charging, increased utilization over time thanks to a growing EV population should improve charging infrastructure economics in the coming years. Analysis of the potential profitability of different types of charging infrastructure in different contexts could help the federal government and other stakeholders to focus their efforts to encourage private investment as much as possible, while filling gaps in areas that are likely to be underserved by private investments,” the report recommends.

Industry Hot Topics

Inside Canada’s one-time renter payment plan

The federal government has proposed several new measures to help make life more affordable for Canadians, including providing a one-time renter payment of $500 to an estimated 1.8 million people struggling to pay rent. According to an update in midSeptember from the Department of Finance Canada, the new plan will double the federal government’s Budget 2022 commitment and reach twice as many Canadians as initially promised.

This benefit is in addition to the Canada Housing Benefit currently co-funded and delivered by the individual provinces and territories. If passed, the payment will be available to applicants with an adjusted net income below $35,000 for families, or below $20,000 for individuals who pay at least 30 per cent of their income on rent.

Representatives of the rental housing industry have reacted favourably to the announcement so far, with advocacy groups

Report identifies inequities in Ontario rental process

such as the Federation of Rental Housing Providers of Ontario (FRPO) and the Canadian Federation of Apartment Associations (CFAA) having long advocated for a plan that links housing benefits directly with people rather than units.

“As the housing crisis continues and inflation makes life more unaffordable for many, we need solutions [like this] that work for all,” said Tony Irwin, FRPO President and CEO. “Let’s continue to work together to make sure that everyone can find a safe, affordable home in our community.”

If approved, the program will consist of a single tax-free payment of $500 that would be paid by the end of the year directly to low-income renters—those most exposed to inflation and experiencing housing affordability challenges. The payment will be available to renters with adjusted net incomes below $35,000 for families, or $20,000 for individuals. The Canada Revenue Agency (CRA) would deliver the money through an

attestation-based application process. To determine eligibility, the CRA would require verification of the applicant’s income, age, and residency for tax purposes, and applicants would need to have filed their 2021 tax return, attesting that they:

• are paying at least 30 per cent of their adjusted net income on shelter;

• are paying rent for their own primary residence in Canada, which would include

• the address of the rental property, the amount of the rent paid in 2022, and the landlord’s contact information; and

• consent to the Canada Revenue Agency verifying their information to confirm eligibility.

Additionally, the one-time top-up would not reduce other federal income-tested benefits, such as the Canada Workers Benefit, the Canada Child Benefit, the Goods and Services Tax Credit, and the Guaranteed Income Supplement.

The majority of consumers and realtors in Ontario believe the rental process suffers from discrimination, according to new research from the Ontario Real Estate Association (OREA) in partnership with Ipsos. Looking at diversity, equity, and inclusion in housing, the Fighting for Fair Housing report found that 93 per cent of Black realtors and 60 per cent of all consumers surveyed believe that discrimination exists in the rental process, while four in 10 realtors said they’ve seen a rental deal fall through due to discrimination.

“There is a saying in real estate: today’s renters are tomorrow’s homeowners. For disadvantaged communities who have a hard enough time finding a great rental in a thriving community because of all the obstacles they face along the way, the dream of home ownership is just that – a dream,” said 2022 OREA President Stacey Evoy. “We cannot hope to solve Ontario’s housing affordability crisis without addressing the systemic racism that undermines fair and equitable access to homes across the housing spectrum.”

Through research and consultations with brokerages, REALTORS®, government officials, regulators, consumers, sector-related organiza tions, and Ontarians, the Fighting for Fair Housing report makes 19 rec

ommendations to eliminate racism and inequality in real estate and the rental process. These recommendations include:

• Advocating for a review of Ontario Residential Tenancies Act (2006), with the goal of improving access to affordable homes for disadvantaged communities

• Reducing government-imposed costs on new rental projects, including duplexes, triplexes, and walk-ups

• Building 99,000 community housing units over the next decade, to clear the current backlog and accommodate future growth

• Encouraging expansion of affordable homeownership programs for disadvantaged communities, including rent-to-own programs

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“As the rising cost of housing and lack of supply continue to push prospective buyers out of the market, homeownership remains out of reach for many – and disadvantaged communities are at risk of falling even further behind. Building more homes alone isn’t going to improve accessibility to housing for BIPOC and LGBTQ2S+ communities,” said Davelle Morrison, Broker at Bosley Real Estate Ltd. and Chair of OREA’s Presidential Advisory Group on Diversity, Equity, and Inclusion. “As professionals in the industry, we have a unique opportunity to help more people in our province find a place to call home. The Ontario Government also has a key legislative role to play, especially when it comes to increasing equity and reducing discrimination in Ontario’s rental market or offering new, affordable ownership programs.”

In 2020, OREA struck the Presidential Advisory Group (PAG) on Diversity, Equity, and Inclusion (DEI) to better understand, address, and dismantle systemic racism in Ontario’s real estate and housing sectors. Through this work, the PAG identified three areas for action that seek to change policy, perceptions and attitudes around sector systemic racism through education, advocacy, and research. One early achievement to emerge from this work was the addition of a discrimination provision within the new Trust In Real Estate Services Act (TRESA) Code of Ethics, which explicitly requires compliance with the Ontario Human Rights Code. This change is a direct result of the PAG’s work and recommendations. OREA will also be taking steps to review internal governance structures, board selection processes, policies, and more in order to increase BIPOC in leadership positions within real estate associations.

Alberta set to divest social housing portfolio

The Alberta government is reaffirming plans to divest much of the provincially owned social housing portfolio through transfers to municipal or community-based operators and the sell-off of up to 200 units. A newly released asset management framework also hints the government will facilitate new supply either through intensification of some of its existing holdings or underwriting more affordable units in new mixed-income and mixed-use developments, but few details have been revealed ahead of the launch of an Affordable Housing Partnership Program, which if promised for this fall.

The asset management framework sets out the criteria for transferring, selling or retaining the Alberta Social Housing Corporation’s approximately 3,000 units. It follows from the provincial government’s announced intention in its 2021 affordable housing strategy to transition from “significant owner and operator of housing stock” to a more indirect role as a “regulator and funder, enabling and facilitating partnerships and collaboration”.

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Under the criteria, transfers would be contingent on: assets being in “fair or good condition”; new owners possessing “the capacity to own, manage and leverage the equity in the property”; and the building continuing to operate as affordable housing for at least 20 years. Assets would have to be “vacant, significantly underused or no longer functional for affordable housing” and located in an area of high supply or low demand for affordable housing before they could be sold.

It’s projected that fewer than five properties will be sold in 202223. However, the 2022 provincial budget forecasts $90 million will be realized from sales over the next three years. This is earmarked to be reinvested in social housing.“Every decision about our assets will focus on how to best serve the housing needs of Albertans with low income,” declared Josephine Pon, Alberta’s Minister of Seniors and Housing. “We will protect vulnerable Albertans, get the best value for taxpayer dollars and strengthen the long-term sustainability of the housing system.”

Average rent eclipses peak in September 2019

The national average rent in Canada reached $1,959 in August, topping the September 2019 peak by a few dollars ac cording to the Rentals.ca and Bullpen Re search & Consulting latest National Rent Report.

“On a national level, average rents in August topped the pre-pandemic record high from the fall of 2019, with prospective tenants looking at properties that are $200 more expensive on average than a year earlier,” said Ben Myers, president of Bullpen Research & Consulting. “With several economists calling for an extended ownership housing market correction, demand has shifted dramatically to the rental market, which is significantly undersupplied in many major Canadian municipalities. Rentals.ca pageview data suggests rental demand is up by nearly 40 per cent from last August nationwide, and 70 per cent from the locked-down August 2020 marketplace.”

In addition to interest rate hikes from the Bank of Canada dissuading Canadians from buying houses, the rental market has been further crowded by booming immigration, students returning to university, and workers moving back to city centres. Since last August, the national average rent has increased by 11 per cent overall, while rents have gone up by more than 20 per cent in the following five cities: London, up 26.5 per cent to $1,979; Calgary, up 24.7 per cent to $1,751; Vancouver, up 24.4 per cent to $3,184; Toronto, up 24.2 per cent to $2,694 and Hamilton, up 21 per cent to $1,961.

Toronto finished second on the list of 35 cities for average monthly rent in August for a onebedroom at $2,329 and second for average monthly rent for a two-bedroom at $3,266. Year over year, average monthly rent in August for a one-bedroom in Toronto was up 17.1 per cent and up 24.3 per cent for a two-bedroom.

At the provincial level, British Columbia had the highest average rents for all property types at $2,578 per month in August, an annual increase of almost 24 per cent. Nova Scotia had the second highest average rents at $2,380 in August with a year-over-year increase of over 43 per cent. Ontario was close behind with August average rents at $2,367, an annual

increase of almost 16 per cent. Quebec average rents were $1,732 in August, up 6.3 annually, while Alberta average rents rose almost 12 per cent year over year in August to $1,349. Saskatchewan average annual rents also rose almost 12 per cent in August to $1,01. Manitoba average rents were virtually unchanged in August, up 0.8 per cent to $1,396.

Other key takeaways:

• The total number of listings on Rentals.ca is higher than one year ago, with the average listing getting 38 per cent more pageviews, suggesting there is significantly more demand.

• The average rent for condo rentals increased dramatically this August in Vancouver, up $1,319 a month to $3,651 and up from $2,332 in August 2021

• In Toronto condo rents have gone up $892 a month to $2,945 from $2,053.

• The national average rent for single-family

homes in August was $3,061 per month, up 13 per cent over August 2021.

• Rents for the largest units in the market continue to see higher annual appreciation than smaller suites. It is possible more upper-middle class renters are in the market than in previous years because so many Canadians have been shut out of home ownership with higher interest rates.

• Ontario experienced strong rent growth in 2019, but during the pandemic, rents in the province plummeted, Rents for two-bedroom apartments in Ontario declined by 8 per cent from August 2019 to August 2020. Fast forward to this August, two-bedroom apartments in Ontario have increased by 13 per cent annually, while one-bedroom apartments have increased by 8 per cent. One-bedroom rental apartments have a lower rent in Ontario in August ($1,956 per month), in comparison to three year earlier ($2,052 per month).

The Trouble’s Only Getting Worse

by Andy Schwartze

It is becoming increasingly difficult to maintain a positive outlook on national and global developments, which doesn’t bode well for insurance rates. As all property owners are aware, the insurance world prefers to embrace stability and steady economic conditions as a backdrop for being competitive. Actively willing competition for our business evaporated around the time of COVID, but COVID wasn’t the reason. It was the decision by experienced underwriting managers to pull in their horns and become more protective of their balance sheets that buttressed growing statistical alarms. In every direction we look, we cannot miss seeing the slow, steady deterioration that seems to be nibbling away at our civilized world, and this throws huge obstacles in the way of predicting claims against which premiums can be properly assessed.

As weather and economic uncertainties persist, expect your insurance rates to reflect it

Whenever a new form of insurance enters the picture, there isn’t much in the way of reviewable evidence on which sensible underwriting and policy decisions can be founded. This was the case years ago when “pollution insurance” was introduced in the wake of environmental protection acts. Reviews of certain newly enacted provincial acts (specifically in B.C. and Ontario) made for the quick realization that government ministers, empowered to enforce the provisions of such legislation, were enormously powerful, as they were able to impose clean-up orders on almost anyone directly or even remotely associated with an event. The determination of legal responsibility was no longer a guideline; it came down to the right to empty the pockets of all those tied to the event that had the resources to pay. The only “excluded” parties were mortgage lenders who were spared exposure to this new authority, albeit at the last minute.

When a development like this comes into play, there is generally an inclination to turn to the insurance world and demand that it “do something.” The pressure built as the topic became an added conversation in commercial dealings, and before too long, demands began to surface requiring one party to a contract to procure and provide evidence of pollution insurance. In the early stages, the definition of this new form of coverage was not very clear. But in time, the first players in this space began to develop and offer coverage. Policy wordings were quite limited, and premiums were, by today’s standards, high. Inevitably over time, statistical information grew and today we have a well-informed underwriting community from which reasonably priced liability and clean-up insurance can be had. Interestingly, the early demands for this type of insurance has since receded. As in every new insurance area, time ultimately settles the industry into a manageable equilibrium of coverages and premiums.

Lately, this equilibrium has been adjusted in the area of weather and natural disasters. Since September, there have been several horrific hurricanes—including Fiona, which pummelled the Maritimes, and Ian, which devasted Florida. These events are significant, and the reinsurance folks have been seriously impacted. We have seen the reinsurer costs imposed on insurance companies rise significantly for three years in a row. Loudly claiming an exceptional “no claims” history falls on deaf ears. Everyone is required to contribute to the world’s problems.

We are also in the throes of developing cyber-related insurance, and like what we saw with the pollution insurance, some of the early entrants to this niche area haven’t been a success. A couple of years ago, one major entrant suffered $4 of losses for every $1 of claims taken in; this doesn’t offer much job security for the corporate decision-makers behind that call. The surprising wild card in cyber claims turned out to be ransomware—that’s where the bad guys seize control of your computer and request you send a lot of bitcoins to a mysterious destination. While many buyers of this type of insurance (and their insurance brokers, too) are still learning about the complex world of cyber criminality, we are beginning to see the industry mature in its approach to

underwriting and pricing this complex coverage. There are still some who are losing their enthusiasm and backing out, but by and large the market is stabilizing with legitimate underwriters whose knowledge and understanding of this niche have grown a great deal over the past few years.

The next big hurdle for insurers will be both upsetting and impactful on pricing. Societal developments in North America are contributing to growing instability in our communities. It is not necessary for us to engage in any political commentary here, just to point out that new imbalances in the rule of law, the changed manner in applying legal standards and precedents, inevitably result in a deterioration of our lives. That is, without question, being noticed by insurance and reinsurance underwriting managers. As they struggle to understand and manage the future relationship between claims and premiums, one cannot easily imagine that they are positively inclined to envision a brighter future. Where that will take us is hard to predict, but as has been said in the past, insurance reflects our society, it does not ignore it.

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

Contending with the rising costs of construction MAKING IT WORK

According to Statistics Canada, the construction price index for residential buildings has increased by 56 per cent between Q1 2020 and Q2 2022. While this index is not entirely predictive of cost increases related to repairs on existing residential buildings, it does provide some proxy for those considering capital upgrades. So what’s underpinning this surge in costs? There are several known factors, including the labour shortage, material shortages, supply chain challenges, global events, and even extreme weather events. With so much uncertainty impacting every step of the construction process, experts advise that building owners take the right steps before launching their next capital repair project.

1. Plan ahead.

Once you’ve secured your contracts, have the contractor order construction materials immediately so that there are no hold-ups when your project is ready to go.

2. Take possession of materials as soon as possible.

This step will help mitigate the risk of costs rising further between the time of the contractor bidding the project and securing the materials. Contractors can typically store these materials in their facilities or on site to ensure they have them available when needed.

3. Avoid deferring projects, if possible.

There are no guarantees that prices will come down, or that more contractors will be available at a future date. Proceed according to your schedule unless there is a significant hurdle preventing you from doing so.

4. Contact a professional

Always consult a building expert before undergoing a restoration project. There are numerous assessments available to help owners determine what’s needed, what will be needed, and what work can be done simultaneously to reduce costs and inconveniences.