OTTAWA — The Canada Mortgage and Housing Corporation’s (CMHC) 2024 Canadian Rental Housing 鶹ýion Survey shows there’s improved conditions for purpose-built rental development in some regions of the country, but it’s not so favourable in others.
“Larger developers are expanding their pipelines with optimism, while smaller developers remain cautious due to financing challenges,” a release states.
“High-cost areas like Toronto and British Columbia, however, still struggle with project feasibility.”
The improvements seen stem from slowing cost increases for construction, high rental demand, greater government support and lower interest rates, compared to 2023.
Quebec developers are more optimistic, while those in the Toronto CMA continue to face high costs that render projects unviable.
The report also states developers are continuing to adjust their strategies.
“Rental housing developers have historically preferred a longer-term ‘develop-and-hold’ strategy,” it states. “While this approach remains common, improving market conditions are leading some developers to favour shorter investment horizons. The outlooks encouraging this shift vary by market area.”
The removal of the GST/HST had seven out of 10 respondents stating it will have a positive effect on long-term investment and development planning.
As a result of the tax removal, developers are increasing their development pipeline with 52 per cent of respondents stating they had over 1,000 units under construction or set to begin construction within the next five years.
With that said, there still remain some obstacles.
“Getting financing for projects remains difficult for many rental developers given the large equity contribution needed at the start of projects,” the report reads. “Unlike condominiums, which benefit from the sale of pre-construction units, rental construction developers need to secure this capital in other ways. A rental building can start to sustain itself financially only once the development cycle is finished and the building is occupied by tenants.”
Eighty-five per cent of developers report difficulties getting financing for their projects. However, developers that manage a smaller amount of assets (less than $100 million in assets under management) are struggling much more to get financing than those with more than $1 billion in assets under management.
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