Canada’s largest landlord has endorsed a controversial $500-million fund to buy older apartment buildings and retain them as non-profit assets.
The idea is that when an older, inexpensive apartment buildings comes up for sale, the provincial fund would help non-profits, co-operative housing groups and First Nations buy and retain them as cheap rentals.
In announcing the Rental Protection Fund in February, B.C. Premier David Eby said it’s meant to “protect vulnerable renters from speculators who can drive up rents and evict tenants who have lived there for years.” Eby specifically named large corporations “such as real-estate investment trusts” as the potential villains.
But Mark Kenney, president and CEO of Canadian Apartment Properties Real Estate Investment Trust, told a multi-family panel at a Real Estate Forum in Vancouver last week that he fully backs the Rental Protection Fund.
“It is a wonderful, wonderful acquisition plan,” Kenney said.
While it does nothing to increase supply, “at least it keeps a segment of apartments affordable,” he said.
Kenney said the costs of building a new apartment in Vancouver can total $600,000 or more, but older rental apartment buildings sell for around $300,000 per suite, and often rent for $2 per square foot or less, compared to $5 per square foot in new rental buildings.
The trust — Canada’s largest residential REIT, with 67,000 rental units and a near-$8-billion market cap — has more than 5,400 rental units in B.C. Of those, about 1,000 are in older rental buildings that the trust has made available to the Rental Protection Fund, Kenney said.
In the past four years, the trust has been disposing of its older rental stock, selling $400 million in assets across Canada, most of it older buildings with, presumably, the lowest rental income and the highest maintenance costs, and has put that money into developing and buying new rental buildings.
Kenney said it has the potential to build 250,000 new rental units across the country, though he doubted it would be able to hit that target.
According to Canada Mortgage and Housing Corporation data, approximately 97,000 purpose-built rental units in B.C. were either redeveloped or converted to more expensive units between 1991 and 2021.
Eby’s Rental Protection Fund has been met with scepticism from both private and public sector housing advocates.
David Goodman, a partner in Goodman Commercial Inc., a specialist in multi-family rental sales, said the plan will stunt development of modern rental housing, adding taxpayers or non-profits could be stuck with expensive and ongoing maintenance and repair costs.
Ken Fraser, executive director of the Vancouver Resource Society, a non-profit rental housing group, called buying “old dilapidated 50-year-old apartment buildings” a waste of taxpayers’ money, noting that it is difficult to even get insurance on aging stock that needs expensive wiring, plumbing and HVA upgrades.
A better approach, he said, would be to allow a developer to buy an old 20-unit property on a large lot and build 60 to 70 units of modern rentals that would last another 50 years.
