Equity firms, REITs, & private investors have long been active in Ontario housing markets.
A Toronto-based developer made headlines in Canada’s business world last month when it announced its intention to pour $1 Billion into residential housing markets across the country. The plan, as laid out by Core Development Group, is to buy up to 4,000 homes in targeted resale markets where they’ve identified a shortage in rental housing. These individual properties would then be converted into legal duplexes with both units made available for lease on the rental market.
The timing of the news release prompted considerable backlash both in our national media and from advocates for affordable housing, coming as it did in the midst of a market already weighted heavily against buyers. Key concerns are that a large-scale buying spree by a private company would only exacerbate the existing imbalance by making home ownership an even more difficult goal to achieve for buyers who are already struggling with a historic lack of resale housing. Here in Kitchener-Waterloo, we’ve already seen average sale prices for single detached homes rocket above the $900,000 mark again just this past month, and a frustrated pool of prospective homebuyers makes a very sympathetic audience for media excoriations of ‘greedy’ investors.
While I can certainly appreciate the annoyances of aspiring purchasers who are seeing themselves being priced further and further out of the housing market with each passing month, private investment in the rental market is hardly a new phenomenon – especially locally here in the Waterloo market. In regions where demand for rental housing has been so high traditionally (i.e. Waterloo’s off-campus student housing sector), organized investors of all scales have been active for decades in repurposing under-utilized detached properties as multi-unit rental properties. Interests of all sizes – from solo investors laying the groundwork for their own retirement all the way up to sophisticated REITs (Real Estate Investment Trusts) – have owned a significant percentage of the Waterloo housing market going all the way back to the 1960s and 1970s, when rental housing became a big business with the growth of both the University of Waterloo and Wilfrid Laurier University.
This time, the only difference in the proposed influx of private investment dollars is in its scale and in the timing of the announcement. There’s no disputing that $1 Billion is a figure that commands attention, and the target of 4,000 properties is more than small potatoes. But let’s put things in context before we grab the pitchforks and torches. This investment isn’t going to take 4,000 homes off the market in Kitchener-Waterloo alone. It’s not even going to take 4,000 properties in the entire Province of Ontario (population 14,789,000) off the market. Rather, these properties will be distributed in markets across British Columbia, Ontario, Quebec and Atlantic Canada. There’s no doubt that the timing of the announcement could likely have been better judged by Core’s PR department, but this isn’t anything our markets haven’t experience before, and the direct impact on Kitchener-Waterloo’s resale market will be negligible.
As I’ve emphasized before, Waterloo Region’s best long-term plan for growth is a responsible approach to urban intensification and increased housing density in the heart of our community. Residents are increasingly adopting walk-able lifestyles, as the popularity of shopping local and supporting small businesses is gaining steam. Developing higher density housing means more opportunities for families to put down roots nearby workplaces and amenities and, ultimately, is the key to maintaining a high standard of living for a rapidly increasing population.
You’ll have to excuse my cynicism, but our media has a history of identifying issues with potential for polarization and hyping them up – making normal investment practices and market trends seem destructive to the fabric of our community. We’d all do well to take a deep breath and remember that the media bases its business on stirring up controversy and generating advertising dollars from ‘rage-clicks’. So, before you get started on that angry letter to your member of parliament, take a step back and understand that increased private investment is a natural result of the remarkable growth of our community these past several years.
The immediate discussion aside, there are people and companies out there who are actively seeking to remedy the housing shortage facing our area. But government red-tape has long been the bane of builders and developers, and bureaucratic delay is playing a significant part in holding up the pace of new housing starts here in Kitchener-Waterloo. This is a subject I’ll be tackling in my next post.
