Sunday, July 21, 2024

Housing problems in Canada, some initiative some controversy

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Core Development Group is a Toronto based developer which benefits from years of experience in the industry In fact their founder and CEO Corey Hawtin comes from old developer stock and is the third generation of real estate developers in his family He has been surrounded by the real estate development industry and has learned the ins and outs of building successful real estate projects in Toronto

Toronto-based Core Development Group’s plan to buy $1 billion of single-family homes and renovate them into multiple rental homes and a potential investment in Canada’s housing market has sparked intense controversy.

The company aims to buy 4,000 homes in Ontario, Quebec, BC and Atlantic Canada by 2026. The idea is to buy single-family homes and split them into two units, for example with a second unit in the basement and put both units back on the rental market.

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Canadian corporate investors, such as private equity firms, real estate investment trusts (RITs) and financial institutions, currently have an increasingly large presence in the multi-family apartment rental sector. Subject to or proposing to convert single-family homes into rental units, vision registration can be an investment strategy. Although already common in the US, Canada is believed to be the first. While it may seem lucrative, experts say it’s also likely an invitation for other corporate real estate investors to follow suit. But Core is positive that the plan will enrich housing supply to meet the growing demand for rental homes.

“Each single-family home that comes on the market will provide two rental units, thereby doubling the housing supply,” Core Group told Global News via email regarding their proposed strategy.

“There is a significant lack of rental availability in these single-family homes. “Renovating existing homes will add to the supply of rental housing units and is the most effective way to alleviate the housing problem,” says Core.

Commentators say the move could fuel concerns that rental property investors will try to monopolize the rental market. On the other hand, the supply of single-family homes will create a shortage for new buyers. At the same time, Canada’s rental market is likely to become unaffordable.

The Canadian Real Estate Association has already reported that home prices in May 2021 increased by 24 percent over the previous year, so buyers can’t help but be upset. And in some regions or communities, particularly in southern Ontario, the gap has grown to an unprecedented 40 per cent or even more than 50 per cent over last year’s prices.

As a result, potential home buyers are increasingly turning to renting houses or apartments as an alternative.

Corporate investors bought properties cheaply after the financial crisis of 2007-08. In contrast, Core today is planning to buy homes at a time when housing prices are rising or reaching record highs.

As large investors become heavily involved in single-family housing, the supply of homes for regular buyers interested in such homes will decrease or a shortage will be observed. Although it is not possible to say anything clearly about this right now.

Paul Anglin, professor of economics at the University of Guelph, notes that investors like Core will likely focus more on buying single-family homes that are already in the rental market.

According to the Globe and Mail, Core is currently eyeing mid-sized Ontario cities for its proposed strategy of renting single-family homes. The company is said to have started buying properties in Kingston, St. Catharines, London, Barrie, Hamilton, Peterborough and Cambridge, and will soon begin buying in Guelph.

Anglin believes the agency will likely focus on owner-occupied homes where the majority of homes are actually rentals, such as cities like Guelph that have many single-family homes rented to university students.

If so, this investment will not have a significant impact on supply. He noted that this would mostly transfer homes from the single-family home rental market to retail to corporate landlords.

But Global News consulted with several experts, saying the single-family home market is unlikely to get affordable or affordable housing or improve conditions under corporate drivers. Rather it could be worse.

But Anglin said large investors buying a cluster of single-family homes in the city would be able to provide high-quality housing at a lower cost than small individual owners, because they would have their own professional expertise to manage the properties.

Core told Global News that they are substantially renovating the units they purchase, maximizing home heating and cooling performance, and providing a safe living environment with improved lighting.

But University of Waterloo planning professor Martin August said big corporate landlords have a track record of systematically raising rents to invest in housing and extract more profits.

Demand for housing continues to rise, with the influx of new immigrants and the enrollment of thousands of international students not only driving the rental market, but housing demand as well.

A significant number of these students will try to settle permanently in Toronto simply because of immigration to Canada or the easy availability of jobs, all in all Toronto is a good choice city for newcomers. As a result, the housing problem in and around Toronto is becoming evident.

While these students are a necessary resource for the Canadian labor market and economy upon graduation, they also create a housing demand that all levels of government still fail to plan for. Considering that, this initiative of the core is somewhat hopeful.

Toronto is a major driver of Canada’s economy and affordable, affordable housing has been a key factor in the city’s economic success. It played a major role in helping to create employment and attract business investment. But currently, housing rent growth and home price growth are the highest in Toronto among Canada’s two largest cities. So its positive solution is definitely important.

Strong economic prosperity, attracting immigrants and a skilled labor force, encourages businesses to locate and expand locally. But for progress, we want to build affordable housing.

Livable neighborhoods, strengthening neighborhoods and suburbs, making streets safer, and encouraging neighborhood businesses and other investments are all inextricably linked.

5 Reasons Behind Toronto’s Housing Crisis

1. The supply of new homes is low.
The Canadian Urban Institute, the City of Toronto and the Canadian Center of Economic Analysis have endorsed a report on the undersupply of new homes in the city of Toronto. The report confirms that demand for new housing in Toronto far exceeds supply. There are also long waiting times for both social and community housing, which can be as long as five to seven years.

2. Housing is not readily available or affordable, and is said to be at a crisis level.
The 2019 report notes that owning a home in Toronto is extremely difficult for most people. The housing market has cooled slightly in 2018, but remains out of reach for the general public.

Moreover, the rent for a house in Toronto is $ 2,385 per month, which is about 50 percent or more of the average salary or income of the general public. It is very clear that there is a definite lack of affordable housing in Toronto.

3. Population continues to grow.
The population of Toronto and Canada is increasing every year. But the housing supply in the city is not increasing that way.

4. Ongoing rise in house prices.
Condo housing prices have skyrocketed over the past few years, while single-family home values have skyrocketed. This had an immediate impact on Toronto’s housing market. In 2017 the regional government then imposed a 15% tariff on foreign buyers and the price drop was significant. But again in 2020 house prices have gone up abnormally during the covid-19 pandemic, experts have also failed to give an acceptable factual analysis.

5. Shortage of rental houses.
An analysis of the Toronto housing market was published in January 2019 by the Canadian Center for Economic Analysis. It claims that the housing market is seeing no relief for middle-income residents due to rising prices.

New rental units are unlikely to increase significantly at this time. The trend was that investors would build condos and rent them out, but that didn’t happen.

Investors come into the business where making money seems to be their only priority, providing affordable or affordable housing is not their main goal. Therefore, the government should play a key role in solving the problem.

Another proposed solution to the crisis
Ontario Premier Doug Ford believes Toronto’s housing crisis needs to be solved with a “sneaky” solution. His government immediately moved to add 10,000 homes. The effort is to bring home supply closer to demand.

Mortgage stress tests have had a strong impact on Toronto housing and home values since 2017. Toronto and surrounding cities need more than 50,000 new units each year to meet housing demand. However, only 40,000 new units were being delivered. That means there is a shortfall of about 10,000 units per year.

Various analysts in Canada believe that the housing supply in the Toronto area is suffering due to infrastructure delays in the construction and stabilization of sewers, highways, etc.

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