Navigating Canada’s Housing Crisis: The Role of REITs as Part of the Solution
Published On: October 30, 2023Categories: Insights
Canada’s housing crisis remains an ongoing topic, gaining significant attention in the media and everyday conversations. As a necessity, there is little doubt that housing plays a critical role in everyone’s lives. Some of the multifaceted challenges the housing market is experiencing currently include increased prices, escalating mortgage and interest rates, and a persistent shortage of available housing. These challenges have wide-ranging implications for all Canadians.
Are there housing affordability concerns in Canada?
Housing affordability issues are undeniably prevalent nationwide. The Bank of Canada has attempted to control inflation by implementing multiple interest rate hikes, which has had a significant impact on mortgage rates. Due to this, aspiring homeowners not only need sizable savings for a down payment but, also must factor in increased monthly payments due to these high interest rates. For many, the dream of homeownership continues to slip away.
Demand for rental housing remains strong
Federal immigration targets are set to increase annually up to 8% by 2025. This influx will only further increase the demand for rental properties in our already limited selection. Our federal government believes our housing issues are solvable: the first municipal agreement has been reached within the Housing Accelerator Fund, and 5% sales tax will be from the construction of new rental apartment buildings across the country. Despite these positive steps, the question remains: will it be enough to provide much-needed relief for Canadians in the future?
Multi-residential dwellings can help improve Canada’s housing market
Private Real Estate Investment Trusts (REITs) have emerged as a potential solution to try to help alleviate some of the current market pressure. Private REITs can address affordability, increase housing supply, and provide innovative solutions; all of which can be integral in navigating Canada’s current housing market trends toward a more sustainable future. Private equity firms, like Equiton, see the impact multi-residential apartment buildings have on the market. Not only do we include these buildings in our investment offerings, but we also actively manage them through Equiton Living. When combined with effective management, REITs can positively influence the rental market through various means, including:
Developing purpose-built rental units
REITs can contribute to increasing the rental supply by undertaking multi-residential development projects and incorporating them into their offerings. This can effectively address the pressing need for additional rental units to meet growing demand.
Preserving and elevating property standards
REITs, with access to substantial capital across multiple properties, are set to provide continuous maintenance and enhancements to their real estate assets. These enhancements include added amenities and improved efficiencies, resulting in higher-quality rental housing opportunities throughout Canada.
Leveraging underutilized space to add units
Private real estate investment funds, like Equiton’s Apartment Fund, possess the financial capacity to undertake substantial renovation projects. This capability enables the transformation of previously underutilized spaces within multi-residential buildings into valuable residential units.
This case study illustrates the lucrative opportunities that value-add buildings present for real estate investors.
Be part of the housing solution
As we continue to navigate our ever-evolving real estate market, private REIT investors can find themselves becoming a part of the solution. Contact us today to learn more and explore Equiton’s current multi-residential and development investment opportunities.