Condos that investors rent out privately are adding to Canada’s shortage of affordable housing, according to a report by the Organization for Economic Co-operation and Development (OECD).
“Condominium buildings compete for the same multi-residential zoned land as rental apartment buildings,” the international organization said in its report.
“Private developers have favoured condominium development over purpose-built rental buildings because of the higher returns and lower risk involved.”
The news is bittersweet for investors: it sounds like business is good, but reaction to the report could lead to a governmental correction if the problem persists.
“Maintaining a dynamic stock of good-quality and affordable rental housing is important for supporting labour mobility and immigration as well as good social, health and educational outcomes,” the OECD said.
The issue is rooted in the fact that developers find more success in building condos, as opposed to rent-controlled apartment buildings. Condo units can be sold before developers even break ground on the building, and taxes for condo buildings are lower than they are for purpose-built rentals.
Still, the report suggested that governments should either improve employment opportunities for low-income renters in the downtown cores that are reaching their density limits, or improve transit reach to suburbs where low-income housing is more common.
“As urban cores reach their densification capacity, planning efforts should be directed towards improving employment densities and suburban public transit connectivity,” the report said.