It’s official— rentals are booming after experiencing little to no growth in recent decades. Daniel Greenhalgh and other merchant builders specializing in purpose-built rental apartment construction are seeing a surge in demand for rental properties and units, and by most accounts, Canadian housing experts agree.
Home Ownership is On a Decline
For the first time in many years, there’s a greater demand for rental housing than home ownership. 753,000 new households were formed between 2011 and 2016. Rentals accounted for about 396,000 of those. And according to the 2018 Canadian Rental Housing Index, 32% of Canada’s homes are now in the form of rentals.
One of the main reasons is that average-income workers simply can’t afford home ownership anymore. Rental housing presents a more affordable option for many Canadians today.
Another factor is changing attitudes toward housing. Before, home ownership was one of the ultimate goals for many retirees. Not so much anymore. More and more people prefer flexibility when it comes to their housing options, choosing not to be tied down to decades of paying a mortgage. Rentals offer that flexibility while allowing for long-term accommodation.
Rental Construction is On the Rise
Construction of rentals took a deep dive during the mid-90s. However, Canadian interest rates shortly reached a record high of 16%, which meant that much fewer people wanted or could buy their own properties.
This combo proved beneficial to both builders and buyers of rental buildings and units. Construction of rental properties has been on the rise and continues today, and many now see renting as a more viable choice than owning a home outright.
Another factor fuelling the construction of rentals is they present fresh investment and revenue streams for investors and stock holders. Canada has been in the middle of a stormy economic situation in the past years, but the real estate market remains healthy.
Because of this, builders are continuing to build rentals in record numbers. For their part, investors are partial to the reliable and steady income they receive from renting out properties. And with rental demand outpacing the supply, it makes sense for construction management companies to focus on the purpose-built rental industry while the market is hot.
Renting is In
To put it simply, many people have been priced out of homeownership. It’s too expensive to be a realistic option for many Canadians, especially the younger demographic.
In addition, the traditional direction of working tirelessly, sacrificing, and spending the rest of your life paying a mortgage to live in one place just doesn’t have the appeal it used to.
And it’s not just about the money— the mentality of short-term enjoyment, or living in the moment, has steadily superseded long-term financial goals.
It’s not all good news, however.
The critical shortage of supply for rental housing means higher rents across Canada. Additional investments, incentives, and building plans for more rentals has been rolled out by the federal government, but experts predict that the effect won’t be felt until after a few years. In the meantime, a significant number of renters spend more than 50% of their pay check on rent, which the Canada Mortgage and Housing Corp. calls crisis-level spending.
Experts agree that the Canadian housing situation will naturally get worse before it gets better. For now, however, rentals still offer a fantastic option for many people who are seeking out alternatives to traditional homeownership, as well as a rich opportunity for construction management companies.