It’s less viable building purpose-built rental apartment buildings in the City of Delta compared to other Metro Vancouver communities.
That’s what a recent report to Metro’s Regional Planning Committee concluded, noting the region’s purpose-built rental development has been facing financial feasibility challenges. Those challenges include increases in interest rates and construction costs, which have resulted in higher equity requirements and lower returns on investment for developers of rental housing.
In Metro Vancouver, there were fewer than 10,000 new purpose-built rental units built between 2011 and 2021, compared to about 87,000 new renter households.
The report notes that a new resource guide, “What Works: Local Government Measures for Sustaining and Expanding the Supply of Purpose-Built Rental Housing, reflects current challenges, barriers but also opportunities for purpose-built rental housing in the region.
The guide “incorporates a land economics analysis to illustrate the importance of supportive tools and incentives for new or existing purpose-built rental housing. The guide profiles measures such as fee waivers and reductions, design and parking requirements, and zoning and regulatory actions that can have an impact on new rental housing supply, and rental protection measures that can contribute to the preservation of existing rental housing.”
The guide explains how a six-storey mid-rise market rental building was modelled under “typical” and “alternative” conditions in three representative market tiers in Metro Vancouver, including higher priced markets, moderate priced markets and lower priced markets.
The City of Delta, along with Surrey, White Rock, Pitt Meadows, Maple Ridge and Langley, is in the lower priced market.
“Under ‘typical" or baseline conditions, a six-storey market rental project in these parts of Metro Vancouver are not shown to be viable according to return metrics outlined above. While land acquisition costs are relatively lower than the other two market tiers, market rents are also comparatively lower,” the guide notes.
“Overall, the baseline scenario is unlikely to be deemed attractive to most prospective builders/investors. While rental housing development is still occurring in this market, it is more financially challenging under the current market conditions.”
The guide also looks at alternative scenarios to make rental projects more attractive such as the combined impacts of pre-zoning, reduced parking, financing , reduced development fees and even providing land.
