Construction is underway at a former Vancouver parking lot on the west side of Main Street between East 6th and 7th avenues.
Once complete, the site will have a multistorey mixed-use building and a new public park. There will be a social-service centre and a restaurant on the ground floor, and 145 rental homes above.
According to Catalyst Community Developments Society, the nonprofit real-estate developer behind the project, all of the homes will be offered below market rates.
This is one of the developments backed by a federal program administered by the Canada Mortgage and Housing Corporation (CMHC). Called the Rental Construction Financing initiative (RCFi), the program provides low-cost loans for the construction of affordable rental housing in the country.
Launched in April 2017 and running until 2027, the RCFi aims to offer up to $13.75 billion to enable the building of 42,500 rental units.
In its 2019 annual report released on May 20, 2020, CMHC indicated that it approved loans during that year to support the development of more than 15,900 rental units. The federal housing agency also reported that as of December 31, 2019, it had pledged almost $4.5 billion under the RCFi.
For Catalyst’s 188 East 6th Avenue development in Vancouver’s Mount Pleasant neighbourhood, CMHC committed $48.5 million.
David Hutniak is the CEO of LandlordBC, an organization that represents owners and managers of rental housing. According to Hutniak, the RCFi has spurred rental construction.
“It’s definitely been helpful. There’s no question about it,” Hutniak told the Straight by phone.
He explained that the cost of financing is a key factor in determining projects’ viability.
As part of the requirements to qualify for RCFi loans, developments must have at least five rental units.
Projects should also meet certain affordability requirements. For example, total residential rental income must be at least 10 percent below the project’s gross achievable housing rental income.
Also, at least 20 percent of the units must have rents at or below 30 percent of the median total income for all families in the project’s area.
“Without this financing, the reduced rent targets would not be achievable, but it also needs to be appreciated that rental homes built through this program only make sense for a rental developer who is looking at retaining the asset for the very long term,” Hutniak noted.
According to Hutniak, there is “very little margin for profit with projects built under the guise of this program”.
“We are pleased that rental developers are nevertheless taking advantage of the program to build this critically important housing,” he added.
Hutniak noted that one concern for developers is that they do not receive final financing approval from CMHC until construction is about to begin.
“As part of the municipal approval process, often a developer must commit to some below-market rents without knowing if they will receive the financing that is required to afford these below-market rents,” he said.
That elevates risk on the developer, Hutniak observed, adding that more below-market rentals could be built if developers could lock in this financing program earlier.
The LandlordBC CEO also suggested that CMHC needs to relax its affordability requirement in major urban centres like Vancouver.
“A nurse who works in Vancouver makes roughly the same as a nurse who works in Surrey, yet the nurse who lives in Surrey pays much lower rent than Vancouver, relative to income,” Hutniak explained.
In exchange for paying higher rent, tenants in big urban centres can give up cars and walk or take transit to work.
“There is greater demand for rentals in the urban core, where land and building costs are very expensive, yet this requirement pushes more rental construction into the suburbs, and therefore more time in cars and commuting to work,” Hutniak said.