Rent too high? That’s the only way to finance such projects. And that’s the problem

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Addressing the massive equity requirements and high cost of building purpose-built rentals could yield immediate affordability

Toronto saw an enormous proliferation of apartment development in the 1950s and 1960s. However, since then, we have developed very little purpose-built rental housing, with condo construction representing the bulk of new multiunit product. This shift in the market, together with our population growth, has resulted in the current rental crises.

In other words, there is a large mid-market waiting to be served by developers of rental units, but because of the financial challenges of such projects, they are nearly impossible to make work. Lowering these costs will have a significant impact because it makes purpose-built rental projects easier for developers to finance. For reference, the equity in any residential

This means that, for a rental developer to put up a comparable amount of equity as a condo developer, the building would need to support high rents. By my firm’s calculations, for a 100-unit rental project in the GTA that targeted equity of 15 per cent of the total cost , the average rents per unit would need to be $3,770, much higher than today’s going rates.

 

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