An Open Letter to CMHC from a Vancouver PBR Owner and Developer
Multi-family Equity Take Out Restrictions Will Ultimately Harm Renters
I am writing in regard to the recent change to equity take-out provisions under the standard multi-family rental apartment insured loan program.
I have been involved with the ownership and operation of multi-family rental buildings in Vancouver for ten years. During this time, I have participated in one CMHC insured loan funding, and explored others via proforma to determine a project’s viability. These were all for smaller buildings (between 11 and 43 units). The ownership of these buildings was almost always comprised of individual investors or a pair of such investors.
The idea of having one’s equity locked into an asset indefinitely over the course of a 25 to 35 year time horizon without the possibility of a return of capital beyond monthly income is highly influential in the decision on whether or not to invest in a rental apartment building. Investors do have options. The inability to sell a building quite as easily because some buyers have decided to pursue other, higher-yielding investments in order to access equity take out (admittedly at higher rates) will have an impact upon the supply of new buildings and product in the marketplace, to say nothing of retro-fitting older buildings which are past their useful life and need systems replacement. Most of the multi-family rental buildings in the City of Vancouver and indeed across the country are outmoded and in need of major capital upgrades. This is thanks to changes in taxation and rent control which were enacted in many jurisdictions in the 1970s. These changes caused a dearth of new purpose-built rental for many decades. We are now experiencing the results of such policy changes with rock-bottom vacancy rates that restrict the ability of tenants on a budget to find suitable housing in their community of choice.
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