The federal government's project will be used to acquire existing buildings and to grow Canada’s languishing non-profit housing sector.DARRYL DYCK/The Canadian Press
It started when housing researcher Steve Pomeroy released data showing that, for every new housing unit built, several more existing affordable units were being lost.
In Metro Vancouver, for example, for every new affordable apartment unit built, 10 existing affordable units are lost in the cycle of redevelopment, renovictions, conversions, rent increases, deferred maintenance, short-term rental and the other repercussions of a speculative property market.
The pursuit of affordable housing has been one of diminishing returns, say housing experts, so we need to do something entirely different if we’re going to get a handle on the crisis. Mr. Pomeroy said that even private developers acknowledge that they can’t deliver all the affordable housing people need.
“The private sector, by its own admission, will never build housing at affordable rates – even the moderate rents, you know, the average rent level – because they simply can’t make any money.
“So, it’s a non-starter, this notion that all we have to do is build lots of new supply, which we have been doing. We’ve quadrupled the level of new rental construction over the last five years, from less than 20,000 a year for the last 20 years to over 80,000 the last two years. But you look at the rents on those new units that are coming onto the market, and they’re coming on the market at 150 or 160 per cent of average market rent. That’s how the market works.”
In response, B.C. was the first province to launch a fund to preserve existing rental housing. Now, the federal government is about to launch a rental protection fund (RPF) of its own. That project will be used to simultaneously acquire existing buildings and to grow Canada’s languishing non-profit housing sector. The goal is to make the sector self-sustaining through the refinancing of its holdings independent of taxpayer funds. The federal government has been looking to B.C.’s pioneering fund, hailed by housing advocates as a success story, for guidance.
Ottawa launches $1.5-billion fund to protect existing rental apartments
Once an operator is chosen for the national RPF this year, non-profit housing providers will apply for approval and acquire funding for existing, occupied, generally older buildings across Canada. If it emulates the B.C. model, they will be expected to run the buildings on a break-even basis.
Mr. Pomeroy said it’s a promising start, but a small one. The federal five-year fund is only $470-million, in addition to $1-billion in low-interest loans.
B.C.’s $500-million fund has so far enabled the purchase of 35 buildings, or almost 1,600 units, in the 18 months since it launched. B.C. Rental Protection Fund (BCRPF) chief executive officer Katie Maslechko said that they provide housing for more than 3,000 people. She oversees the fund, with a staff of nine, as a non-profit society operating independently of government. Ms. Maslechko has a background in the private sector.
“The investment allows non-profits to build equity while protecting affordability and reducing their reliance on government,” she said. “That equity can be leveraged to create new affordable housing, multiplying the impact of the initial investment.”
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The B.C. fund can match the Canada Rental Protection Fund dollar for dollar, which would mean twice as many people get affordably housed, she said.
Reversing the trend on lost affordable housing will be a long process: from 2016 to 2021, B.C. lost almost 100,000 apartment units renting below $1,500, according to a BCRPF report. Most were located in the Lower Mainland.
Kira Gerwing is chief real estate investment officer for Sacha Investments, which has invested around $50-million toward non-profit housing projects in the BCRPF.
“We are big fans of what the BCRPF has been about, because it’s actually the first time we have seen public investment directed into the non-profit sector in a way that is building their balance sheets and giving them a chance at becoming financially self-sustaining as non-profit entities,” said Ms. Gerwing.
There has been criticism, from academics and those in the real estate industry, who see the acquisitions as an inefficient use of taxpayer money. They generally favour high-density redevelopment. Ms. Gerwing does not agree.
“The premise underneath that criticism is that the only sector that can redevelop older stock in cities is the market [developer], and I don’t think that’s true,” she said. “There is nothing stopping the non-profit sector from building their version of it. And arguably their version of it would be more helpful because they would be sensitive to existing tenants in these buildings, because they see them as homes, not ‘units.’”
Condos and apartment building in Burnaby, B.C., on Dec. 18, 2024.DARRYL DYCK/The Canadian Press
Ottawa-based Ray Sullivan is executive director of the Canadian Housing and Renewal Association (CHRA), formed in 1968, which advocates for social and non-profit housing. The CHRA was among those who responded to the government’s request for proposals to operate the Canada Rental Protection Fund. The CHRA bid would create a partnership with the Co-op Housing Federation of Canada and the National Indigenous Collaborative Housing Inc. Mr. Sullivan said the CHRA plan was inspired by the B.C. model.
He said it’s not economically viable for the private market to build so much supply that prices fall, and then continue building and selling at a lower price.
How rental-protection funds can help stem a vanishing supply of affordable units
“And this is what we are seeing in Vancouver and Toronto and urban centres across the country right now; the private sector is slowing because rents have levelled off,” said Mr. Sullivan.
He’s also heard the argument that new housing stock will become the affordable housing of the future, as it gets older. But that idea hasn’t played out in major markets.
“I’ve heard that argument for the decades that I’ve been working in this area. And actually, what’s happening is those apartment buildings from the seventie, from the eighties, are the places where people are getting renovicted now.”
New construction is inherently expensive, which makes it nearly impossible for the market to deliver even moderately affordable housing, say housing advocates.
“We’re trying to take those rental assets that are providing affordability now in the marketplace and at an affordable level – that is hard and expensive to replace – and we’re moving them into the non-profit column and the owner [of the building] gets the market value for the sale. So, it’s a win-win,” said Mr. Sullivan.
Ms. Gerwing cautions that the Canada Rental Protection Fund, and others like it, won’t be the panacea for the crisis.
“There is no silver bullet here,” she said. “Is the Rental Protection Fund going to solve it all? No. Is it going to at least prevent us from moving backward in the progress we are trying to make to meaningfully address the affordability crisis in this country? Yes. It is.”