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NOVEMBER/DECEMBER 2022 BCBUSINESS 29 SOURCE: CMHC STARTS AND COMPLETIONS SURVEY previous eras will remain as renters for lon- ger periods—or indefinitely—and all levels of government are pivoting to find ways to encourage rental-apartment construction, providing everything from low-interest financing (the federal National Housing Strategy) to the power to zone for rental only (B.C.) to various incentives or require- ments for rental developments (Vancouver, Burnaby, New Westminster, Coquitlam, the City of North Vancouver, notably). And there's a new surge of interest from those who now see rental as a potential profit centre. Real-estate investment trusts and pension funds have been ramping up steadily to capitalize on this suddenly more attractive new asset class. "Forty, 50, 60 years ago, it was blue-collar people who started building and buying apartments," says David Hutniak, CEO of the advocacy group LandlordBC. "It's not like that any- more. The merchant developers have a growing presence in development." Developers who had built nothing but condos for years have re-discovered the formula for financing and building rental apartments. And a new wave of small-time private investors has moved into the game. S H I F T I N G M O D E L S At a recent all-day real-estate forum put on by real-estate-investment evangelist Ozzie Jurock at the Pinnacle Hotel in downtown Vancouver, the room was filled with the new wave, listening attentively to the pre- dictions of where to invest next—where to buy properties that down-paymentless renters will pay the mortgage on for years, making the new owners rich. There was also advice on avoiding city crackdowns on Airbnbs, the benefits of evicting existing renters, and how to gain control of strata councils. The new investors were all there: men with man buns or in blazers, women in sharp suits or T-shirts and jeans, all of the city's diversity of age and race and sartorial style on display. In spite of the interest and the incen- tives, rental is not an easy product to churn out. Life has changed since B.C. (and all of Canada) saw the country's biggest-ever KEY OBSERVATIONS R E A L E STAT E HOUSING STARTS BY TENURE, METRO VANCOUVER REGION 2002 TO 2021 ➔ In 2021, there were 6,683 rental starts in the region, accounting for 25.7% of all housing starts. This is the third highest number of rental starts in the past 20 years, after a high of 6,841 rental starts in 2016 and 6,727 rental starts in 2019. ➔ The proportion of rental starts has been increasing in recent years, though it has been low historically, hitting an all-time low of 2.7% in 2006 and remaining under 10% for the following five years. 30,000 25,000 20,000 15,000 10,000 5,000 0 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 RENTAL FREEHOLD OWNERSHIP CONDOMINIUM OWNERSHIP % RENTAL wave of rental construction during the post-war decades. The federal tax breaks for rental-construction investment that launched thousands of four-storey wood apartments disappeared long ago. The cal- culus for building rental has become much more complicated, as rules and regulations have increased. In Vancouver, experienced developers say they now go into projects expecting no more than a 3-percent return on whatever money they invest. That's less than what someone could get on a conser- vative five-year GIC. And there's general agreement among anyone who has ever had anything to do with housing—nonprofit housing organizations, policy advocates, developers—that it's impossible to build apartments that can be rented for a price that's affordable to anyone making less than about $50,000 a year unless there is one or more boosters: free land, direct gov- ernment subsidies, low-interest financing, development-fee rebates. And back then, renters and homeown- ers didn't look that different when it came to socioeconomic status and income. Now, renters, who account for a third of house- holds in B.C. and more than half of the population in cities like Vancouver and Vic- toria, are a big, diverse group with a much wider range of incomes and circumstances than homeowners. They are impoverished seniors or people with disabilities living in subsidized apartments, families that may have relatively good incomes but not $200,000 for a down payment, students camping out for a few years in university towns, service workers and young profes- sionals occupying basements or homes bro- ken up into multiple suites, well-paid tech workers arriving in droves who plan to stay only for a short while before flitting off to San Francisco or London or Shanghai, and much more. In a shift that has many developers in the province reluctantly learning to love him, incoming premier David Eby has said that private industry will have to supply a lot of the housing that is needed—government can't do it all. At the same time, he's not naive about the pitfalls of the private sector. Like everyone, Eby has been hearing the word "financialization" a lot—a term that's surging these days among academics, econ- omists and advocates to describe how large corporate, investment and institutional