In the current heated race to buy a home in Canada, we probably shouldn’t have been shocked by the wave of outrage sparked by a major real estate developer’s plan to buy thousands of single-family homes and rent them out.
Nonetheless, many players in the real estate industry were taken aback by the reaction, including those at Core Development, the very company that plans to invest $ 1 billion in the purchase, repair and rental of around 4,000 homes. suburban ground floor in Ontario, British Columbia. , Quebec and Atlantic Canada over the next five years.
“I’m really shocked,” said Faran Latafat, president of single-family developments at Toronto-based Core Development, which has historically focused on building condos.
Although interested in making a profit, like any other business, when Latafat announced the company’s plans, she was convinced that Core was indeed rendering a public service, meeting a need by creating more affordable rental housing in places where people wanted to live.
“For every single-family rental home put on the market, two rental units are provided, thus doubling the rental supply,” she wrote in an email after we spoke over the phone.
Those who follow the real estate market say it is difficult to disentangle all the reasons for the scale of the anger shown this week. But that anger is unmistakable in many media reports that followed the announcement – and in the reader comments at the bottom of those reports.
The profit dealers?
For anyone who understands what drives the ownership game, an op-ed in The Globe and Mail on Thursday calling Core a “profit dealer” was a bit of a stretch. Whether you call it ‘the laughing stock’ or something more prettier, earning a profit is at the heart of housing creation in Canada.
Earning a profit is the reason builders built the house most of us live in now. It’s also why giant real estate investment trusts buy or build most rental apartments in Canada – and have done so for years, said BMO economist Robert Kavcic.
What’s different this time around is that Core’s new proposal is to buy ground-floor single-family homes that people are impatient to own right now.
With a surge in densification, the property of the old-fashioned house with garden has become an object of desire, the appeal of which is only heightened by the scarcity of such properties. In some ways, this is a psychological fixation unknown in places like Hong Kong, New York or many major European cities.
“From a psychological standpoint, it’s the wave of young families running up against something – in part because of these policies – that we don’t have enough supplies,” Kavcic said.
It’s similar to the great corporate move towards farmland sourcing that exploded nearly a decade ago; the move from private property to rented land came as a shock to those who had imagined the family farm as sacrosanct.
As Canada’s urban population grows, people are struggling to cope with a change that has already happened elsewhere in the world.
“It’s not that families can’t afford to stay here,” Kavcic said. “It’s just that the housing they can afford doesn’t look like their parents or grandparents.”
Several experts, including Carl Gomez, Toronto-based chief economist for US real estate company CoStar Group, said what Core is doing is not entirely new, even in Canada. Companies like Parkbridge have already started buying land in recreational areas like Wasaga Beach, Ontario, and renting it out to residents.
In the United States, where house prices are lower and capital more available, Gomez said, the practice of buying and renting single-family homes is common. In Britain, the tradition dates back over a century, with colleges like Oxford and Cambridge earning income as landlords in cities across the country.
The reason Core is considering buying and building their homes in mid-sized Ontario cities like London and Guelph is that real estate prices for single-family homes in major centers like Toronto are just too high. , Gomez said. Even after dividing them into several lucrative units, the return on profit is simply not enough to compete with the prestige prices of owning a traditional home.
From houses to condos
Still, that hasn’t stopped a number of developers from trying to buy single-family homes, replace them with multi-family homes, and then sell them as condos in desirable areas of large cities.
Helen Wojtowitsch has lived in Toronto’s Bloor West Village for 53 years, next to a tiny house she says the developers want to turn into a condo.
She said she feels there is simply no room for a multi-family home on this one lot – and neighbors have put up posters and collected signatures in an attempt to stop the development , claiming that this threatens the character of the neighborhood.
Yet urban development experts insist that what Core Development does is exactly what Canada’s crowded cities need.
Covered by a multitude of single-family homes built in the days when ordinary wage earners could afford them, the staggering price increases of recent years mean that those same neighborhoods are turning into elite neighborhoods where ordinary people can afford them. can just never hope to buy an entire house.
Longtime private real estate analyst Ben Rabidoux has sympathy for those who fear the effect and price competition for single-family homes when giant corporations enter the business, not only earning rents but the increase. speculative of property values.
But he also understands the plight of tenants who might actually benefit business owners versus small landlords.
“What you get is a lot of moms and pop investors who because the cash flow in single family properties isn’t great they are betting on [price] appreciation, ”said Rabidoux, who runs North Cove Advisors.“ And they’re more likely to sell when you get a big price increase and it upsets the people who are renting. “
Follow Don on Twitter: @don_pittis