The Real Estate Espresso Podcast Development Incentives
On today’s show we are talking about the impact of construction cost saving on rental affordability.
The narrative among tenant’s rights groups is that landlords are out there just getting rich and exploiting tenants. Developers need to be building more affordable housing.
In Canada, the government in the province of Ontario has finally been recognizing that the cost of housing is linked to a few inexorable facts.
- The cost of rental housing is partly a function of supply and demand. If there are too many impediments to increasing supply, then the price of rental housing will go up.
- The cost of new construction that meets the building code is determined by the cost of materials, the price of labor, the cost of land, and the fees that governments charge developers for the infrastructure to support those projects.
Cities have been progressively implementing more and more bureaucracy when it comes to new development applications.
My home city of Ottawa requires a long list of deliverables. They require almost the entire project to be detailed. The city requires the envelope of the building. But not only that, they require shadow studies, wind studies, noise studies, traffic studies, utilities reports, school loading, public transit impact, bicycle storage ratios, parking ratios, amenities, meeting affordability criteria. The list goes on and on.
But it’s not just my home city. Many other cities with affordability issues have implemented similar hurdles.
Municipal impact fees can vary widely and they directly affect affordability. These fees are designed to pay for infrastructure like roads, schools, utilities, that are forced to expand as a result of growth. Our development company recently went through a detailed analysis of the relationship between development cost and rent. The results were surprising and so I thought they would be worth sharing with you, the listening audience.
-------------
Host: Victor Menasce
email: podcast@victorjm.com