Policy makers could thwart their own best intentions if they scapegoat multifamily investors for rising housing costs. Commenting during the online launch of CBRE Canada’s annual commercial real estate outlook report, Paul Morassutti, the firm’s vice chair, valuation and advisory services, warned rental housing supply and affordability prospects will worsen if market interventions divert institutional capital elsewhere.
“Debates about affordability and the financialization of housing are taking place in major cities everywhere. The gist of the argument is that homes and apartments should be for people to live in, not financial assets for investors to speculate on,” he recounted. “To be clear, rents are not high because of institutional ownership. Canada has a structural housing shortage.”
For now, some trends bode well for chipping away at that shortage. A recent uptick in purpose-built rental production is linked to strong market fundamentals, including the appeal of Canada’s socioeconomic stability and world-leading pace of immigration for both domestic and foreign investors. For example, it’s predicted that a substantial chunk of Akelius’ €9 billion (CAD $12.5 billion) payout from the recent disposition of European assets will be redeployed in Canada.
Meanwhile, Canada’s strategy for attracting permanent residents and new citizens from its pool of international students enabled it to achieve a target for 400,000 immigrants in 2021 despite the complications of the COVID-19 pandemic. Benjamin Tal, deputy chief economist with CIBC World Markets, noted that Canada’s immigrant intake was six times greater per capita than in the United States last year, with approximately 70 per cent of the new arrivals already in the country and simply requiring a change in their status from previously holding shorter term visas.
“Basically, you get international students, you educate them and then you provide them with the option to stay in Canada,” he summarized. “This means that they are younger; they are more educated; they speak the language; and they have some job experience. They are more employable and more likely to buy a house, or at least they will do it faster than the regular arrival. That’s very, very important for economic growth.”
However, Morassutti suggests policy makers have failed to pair that immigration strategy with a plan for, or even appropriate signals to prompt, delivery of the housing that a growing population will need. He sees mounting calls for rent control measures and/or moves akin to the recent Berlin referendum endorsing the seizure of 240,000 private housing units for public ownership as an ominous brake on development momentum.
“If there is one concern that we have about multifamily, it is government intervention in a manner that helps neither owners nor renters,” Morassutti affirmed. “Taxing owners more, curbing excessive profits — whatever that means — will only dissuade capital from building more units, and more units are what we desperately need.”
