Weekly Buzz: Rental housing and mobile homes

Western Canada's top commercial real estate stories, featuring coverage on federal housing funding and new developments

By
Western Investor
March 9, 2018





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The week’s top stories shines light on Metro Vancouver’s rental housing market in the wake of the federal budget announcement, manufactured housing as a cheaper alternative to traditional housing and Powell River’s cheap investment potential. Will federal budget measures really lead to more rental stock? Are manufacturing homeowners – mostly seniors – in danger of not qualifying for refinancing?  And why is Powell River emerging as an affordable investment haven?

Get these answers and more in Western Investor’s pick of the top commercial real estate stories published this week.

 

Federal budget boosts rental housing; transit funding idles – Business in Vancouver

The feds have announced funding measures for rental housing, but will it truly help renters and streamline the rental housing development process. BIV’s Peter Mitham reports.

Ottawa’s latest budget declared Vancouver’s housing market to be more balanced, but times remain tough for renters.

“High demand for rental housing has not translated into an increase in supply,” the budget noted.

To encourage new development, Ottawa will give Canada Mortgage and Housing Corp. $113.6 million over five years to expand the Rental Construction Financing Initiative. The funding will help boost loans under the initiative from $2.5 billion to $3.75 billion over the next three years, leading to upwards of 14,000 new rental units.

But financing isn’t what rental housing developers in Vancouver need, said veteran apartment broker David Goodman, a principal at HQ Commercial.

“It’s helpful that they’re putting more money into rentals; I think it’s a good move,” he said. “[But] I’m not sure anyone’s going to take it – that’s the irony – because there are too many obstacles to get to the point where you want to borrow.”

Those obstacles include municipal policies and processes, access to land and, increasingly, workers.

Rather than offer financing, Goodman said, Ottawa could have helped B.C. builders by reforming the rules governing the GST on rental housing construction. The current regime kills a lot of projects, and industry groups including the Urban Development Institute (UDI) encouraged Ottawa to offer builders a full rebate or even an outright exemption for GST on new rental housing. UDI also encouraged the inclusion of GST input tax credits on the ongoing operation of rental housing.

Victoria is doing its part to reduce the tax burden on rental property owners. While residential properties worth more than $3 million will be assessed a new tax to fund school construction, rental properties will be exempt. (BC Assessment classifies multi-family rental properties as residential, just like condos and detached homes.)

When the province announced the new tax in the provincial budget, builders threatened to pass it along to tenants. This would have added an average of $125 to monthly rents. The province responded with assurances that multi-family rental properties would be exempt.

Transit wait

Two years ago, cheers went up as Ottawa announced $3.4 billion for transit projects across the country. Vancouver Mayor Gregor Robertson declared it “a game-changer for our region.” The formal city response applauded the designation of “at least $370 million” to accelerate design and engineering work in anticipation of new transit development in Metro Vancouver.

Two years on, the 2018 budget indicates that just $255 million has been invested across Canada. A further $683 million could be spent this year, while the majority – $2.5 billion – will be spent between April 1, 2019, and March 31, 2021.

While the funding is aimed at reducing “long commute times” to “give families more time to spend together,” delays in putting the money to work mean many children will have left elementary school by the time anything is built. Or, as in the case of Rheal and Sam (a couple mentioned in the budget), families will opt for less affordable housing close to work that reduces dependence on transit.

[Business in Vancouver]

 

First new rental housing in Coquitlam set to break ground – Tri-City News

Coquitlam’s first purpose-built rental building in 40 years is about to commence, but challenges and costs have risen since the project was first announced.

One of the tightest rental markets in Metro Vancouver is about to get a little looser with the soon to be built Residences at the Heights rising in the Austin Heights area of Coquitlam.

But what it will cost to rent a studio, one- or two-bedroom suite in the four-story market rental building at 945 Charland Ave. won’t be known until the building is almost complete.

That’s because the builder, Redbrick Properties, still doesn’t have all the construction costs locked down and needs to know the final numbers before committing to rents.

Still, Abdul Jiwan, president of Redbrick properties, is optimistic about the project, which has been acknowledged previously as the first purpose-built rental apartment constructed in 40 years in the city.

"We already have registrations to fill up the building more than twice,” Jiwan said, although he noted that applications for the 41 suites won’t be accepted until much closer to completion in August, 2019.

Excavation for the project began on Feb. 14 and on March 17 Redbrick is hosting a ground-breaking ceremony with Coquitlam-Maillardville MLA and housing minister Selina Robinson among the invited guests.

While the project will be at market rents, Jiwan said it will be more affordable than purchasing a home in the area.

COSTS RISE

While waiting for permits from the city, however, construction costs have risen 40 per cent, Jiwan said, making the project more expensive then originally envisioned.

“Today, construction costs are a major factor with housing. It is a lot higher than you realize — than people anticipate,” he said.

Still, there has been lots of interest in the project that will have units ranging from a studio at 464 square feet to two bedrooms at 816 square feet.

As well, he promised high quality finishings in the suites. “We believe renters deserve to live in high-quality housing.”

And because Redbrick is managing the apartment, he said renters can expect fair dealings. A resident caretaker will also be onsite.

The rush is on to start building more market rental units in Coquitlam. The recent Concert Properties project, which is now in the rezoning phase, is expected to bolster supply by more than 1,000 rental units, including market rental for seniors.

Providing more options for living in the Tri-Cities comes as the Canada Mortgage and Housing Corporation (CMHC) reports that rents in Coquitlam, Port Coquitlam and Port Moody rose 11 per cent in the last 12 months. That is the largest increase in the region, which saw a 5.9 per cent overall rise.

[Tri-City News]

 

Manufactured homes the last stand for affordability – Western Investor

Lower-cost housing also delivers healthy capitalization rates and appreciation potential for investors in manufactured home parks, but new regulations around refinancing may present challenges.

Manufactured home parks are offering envious capitalization rates and cash income for park owners, but a series of government measures is making it tougher for those who own the affordable manufactured homes.

“There is strong demand for the parks,” said Bill Summers of Lighthouse Realty Ltd. of Abbotsford, who lists and sells manufactured home parks across B.C. and Alberta.

Summers said cap rates can run as high as 6 per cent in rural areas and around 5 per cent in Kamloops, the Fraser Valley or Vancouver Island. This compares with residential multi-family investments that often have capitalization rates in the 3 per cent range.

Summers said demand for the parks extends from mom-and-pop buyers looking for a retirement investment to real estate investment trusts and pension funds searching for larger parks.

There are also existing park owners hoping to add to their existing portfolios, he said.

The problem is inventory, he said.

“People are hanging on to them,” Summers said, because of the steady cash returns and potential appreciation.

Summers recently sold a 46-unit park on 16 acres near Barriere in the B.C. Interior for $1.95 million and has a sale pending on a 21-pad park in Clearwater, B.C., at $1.18 million.

His listings include an upscale, 17-acre, 142-pad park in the Fraser Valley with an asking price of $8.5 million.

Here are examples of other recent manufactured home park listings, some still active, to give an idea of prices and potential.

A 34.5-acre park in Fort St. John, with 70 home pads and 14 RV pads, is offered by Klein Group for $3.75 million. It is grossing approximately $340,000 per year.

A manufactured home park is up for sale in Rock Creek, in B.C.’s Kootenay region. It has 15 pads and a 9.1 per cent cap rate, offered at $549,000 by Klein Group.

Mt. Sentinel Realty Ltd. has listed Saskatchewan manufactured home park with city services, 53 home pads and 13 RV sites, for $1.65 million.

AFFORDABLE LIVING

Summers said typical tenants in today’s parks are seniors who are selling a conventional urban house and paying cash for a quality manufactured home in a rural community, and often an RV, for retirement.

Such buyers would be paying as little as $300 per month for their pad rental in small towns of B.C. or on the Prairies, and up to $650 per month for pad rentals closer to big cities, he said.

But recent federal mortgage changes and B.C. rent control legislation are taking some of the advantages off the table for those looking to manufactured homes as an affordable housing alternative.

There are approximately 183,000 owners of manufactured homes in Canada and nearly all of them have been banned from accessing refinancing of their mortgaged homes, brokers say.

Last year, the federal government outlawed refinancing for all homeowners with an insured mortgage.

The federal government banned the three main insurers in Canada, Canada Mortgage and Housing Corp. (CMHC), Genworth and Canada Guaranty, from backing any kind of residential refinance transaction.

“As a result of Department of Finance changes, government-backed mortgage default insurance is no longer available for refinancing properties of any type,” explained Jonathan Rotondo, a senior media relations officer with CMHC. “There is nothing in the rules that is unique to manufactured homes – this change applies to all property types.”

“The overwhelming majority of mortgage lenders financing mobile homes [from chartered banks, credit unions or mortgage finance companies] require mortgage insurance. This mortgage insurance is required in just shy of 100 per cent of transactions involving a mobile home,” noted Dustan Woodhouse, a mortgage broker with Dominion Lending Centres in Coquitlam.

[Western Investor]

 

Mill town of Powell River becomes low-cost investment destination – Western Investor

Powell River is welcoming an influx of homebuyers and real estate investors looking for low-cost living and potential income growth.

Powell River, a coastal pulp mill town, is attracting homebuyers and real estate investors from 100 kilometres south as Vancouverites discover low-cost housing and income potential.

“Housing is a lot cheaper up here,” said Thomas Knight, director of planning for the city of 20,000 on the northern Sunshine Coast.

According to the BC Real Estate Association (BCREA), the average home price in Powell River posted the highest increase in the province in 2017, rising 31.7 per cent from a year earlier, but, at $356,000, it is still a fraction of the price in Greater Vancouver, where the typical home sells for more than $1 million.

Powell River also reported the second-highest housing sales increase in B.C. during 2017, as sales soared 80.3 per cent to 9,269 units, according to the BCREA.

The Powell River region population is expected to increase by more than 3,000 residents by 2040.

An influx of young families looking to capitalize on the cheaper home prices as compared to the Lower Mainland and new single-family homes coming into play are driving up housing demand and pushing real estate development to new levels, Knight confirmed.

Powell River property assessment increases for 2017 were the highest in the Vancouver Island, Gulf Islands and mid-coast region, making it a prime seller’s market for investors.

On the commercial side, building permits grew exponentially as more businesses moved into the area throughout 2016 and 2017.

Approximately 50 per cent of homebuyers continue to be from outside Powell River, with a mix of retirees and people who have relocated for work, according to Powell River/Sunshine Coast Real Estate Board president Neil Frost.

Despite its oceanfront location and proximity to large lakes, Powell River’s new developments are primarily not recreational but urban residential; albeit with ocean views, Knight said.

The latest manifestations include 39 new homes, all approved in December. One new project is the expansion of Pacific Point condominiums in the downtown; the second a plan from Abalone Development for a residential enclave in the city.

Knight said Powell River issued 122 building permits in 2016 worth about $15 million. In 2017, 145 permits worth $14.1 million were issued, but the slight decline does not indicate any slow down, he said.

 It is because city staff simply can’t keep up with the demand, he explained.

“We have $5 million worth of building projects that came in November and December that we haven’t even processed yet,” said Knight. “If we had the staff contingent here to be able to process, we would have had $20 million [last year].”

[Western Investor]


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