In Toronto, having difficulty finding a place to rent is as much a guarantee as the sun rising each morning. Fortunately, one company is endeavouring to change that.
RioCan Living, arguably the largest real estate investment trust in Canada, will address the rental dearth head-on by building six purpose-built rental buildings throughout the city. It also represents a marked change in attitude from property developers.
The reintroduction of rent control in last April’s Fair Housing Plan had the unintended consequence of dissuading developers from building purpose-built rental buildings in a city that’s desperate for them. However, that supply crunch has also driven up rental prices, perhaps incenting developers to reconsider.
“I think for many years with the development costs the way they were, and the demand of the supply cycle, a lot of developers would have been apartment developers, but they couldn’t make sense of the economics because rents wouldn’t justify the extremely high cost of building,” said RioCan’s Senior Vice President of Investments and Residential Jonathan Gitlin.
“Because of the supply shortage, there’s been an upward pressure on rents, which has made it more viable to build these purpose-built apartment buildings. There aren't a lot of players, like RioCan, who already owned the land, so once you take out the expense of buying that land it makes it more economically viable. I think there’s also the fact that when you have such a shortage, it creates a demand, which means, from an economic perspective, it will keep our buildings full.”
But RioCan isn’t merely taking advantage of desperate renters by entering the purpose-built rental market. Instead, it’s identified key areas with exceptional transit around which to build rentals.
“There are a number of factors that went into us aiming to build rental units, but RioCan Living can address the housing shortage by developing transit-oriented properties,” said Gitlin. “It’s important for cities to have transit and densification near mass transit. It’s good for developments, communities, and residents who live there. They won’t need a car because they’ll have mass transit. It’s very good city building.”
Toronto’s aged rental stock, much of which dates back to the 1960s, is in dire need of replacement, and RioCan—which has many retail holdings, as well—will include first-class amenity packages.
“We’re trying to match amenities to the communities around them—there’s no one-size-fits-all program,” said Gitlin. “Different environments will want different kinds of amenities, and ours will have longevity, durability and will be always be needed by residents, instead of just being passing trends. What RioCan will bring is what we’re good at, which is retail, and we’ll put first-class retail at the base of our residential buildings and build great communities by virtue of the convenience of shopping opportunities. We have a tremendous track record in the retail space, so we’ll seek out cross-promotional experiences. Maybe we’ll have a movie night, or have a national book store have an author do a reading. We have those connections within the retail world and residential world.”
While the developments will include some condominium buildings, rentals will be the lynchpins in every development.
“For the most part, our focus is on building up a best-in-class rental portfolio.”