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Affordable housing and the multifamily investment opportunity

The average house price in Toronto hit $1M for the first time in March 2021 and over the past decade the average rent for a 1-bedroom apartment has increased as much as 50% to $2,300 per month. With an average salary of little over $4,500 per month, it’s evident how Canada has an affordable housing crisis on its hands.

The gap between income and housing costs has been growing for a long time, certainly predating COVID. ‘Better Dwelling’ stated that in Q4 2018, Canada’s house price to income gap ratio was the highest in the developed world. COVID has caused an even wider imbalance between pay and the cost of housing; job losses were largely concentrated within lower income groups and those paid on an hourly basis, plus, despite expectations for house prices and rental rates to fall, they did precisely the reverse.

Residential Property Price Index Canada

Failures to address housing supply

The reason for the affordability crisis is that very little has been done to rectify the lack of supply in the housing market. Although the government has taken measures to ‘cool’ the spiraling market from time to time, by way of stricter mortgage stress tests for example, these short-term fixes don’t go far enough in fixing the fundamental issue - demand outstripping supply.

The Ontario Non-Profit Housing Association estimated that aside from any backlog, around 137,000 additional affordable rental properties would be required by 2027 to satisfy population growth alone.

Much of the funding allocated under the budget 2021 measures which were announced this month by the federal government are not incremental funds and will not help to alleviate the shortfall in housing stock for low to middle class young families in Canada.

Budget 2021 Housing Measures

Flooding the market with new builds is no quick fix either. As the cost of building increases, the cost of owning or renting a property will increase accordingly and to make a dent in the problem likely requires private investment paired with ongoing federal subsidies for low-income individuals who simply can’t cover their basic expenses based on their salary. This could look like a more permanent version of the benefits that have been extended to individuals during the pandemic, perhaps in the form of a national basic level of income as was debated again recently.

A national housing strategy is needed for governments to stop relying purely on private investment and adopt a joined up approach; in this way, housing actually becomes affordable and property owners can be reassured of stable incomes and reduced turnover rate.

What’s the opportunity for MultiFamily Investment?

As an asset class, multifamily has sailed through the virus relatively unscathed, after all, housing is a basic need and steps to support the worst-affected families through the crisis has meant that vacancy rates are lower than ever and rental rates are actually on the up in many areas. If developers can successfully and profitably integrate affordable housing into a project, there could be a growing number of catalysts to do this.

Repurposing for the wider community

Right now, Ontario is still in the throes of a third wave of lockdowns and true economic conditions are still being masked by the inflated level of government support. As vaccines accelerate and that level of financial underpinning is gradually phased out, we could see the rise of delinquencies in the office and hotel sector and in certain types of retail property. In the midst of this unpredictability, there’s scope for commercial real estate developers in adapting these under-utlized assets to provide much needed affordable housing options.


There is widespread debate as to how much and how quickly ‘normal’ activities will resume and hotels will not disappear altogether, however many could be ripe for the picking when it comes to adaptive reuse from hotel to residential accommodation.

It’s probably more conceivable for independent, non-chain hotel operators to run into cash flow difficulties the longer doors remain shut and the layout of these buildings generally leans towards ease of redevelopment to apartments. Former hotel suites usually have all the appropriate facilities required for a bathroom and living area and the hardest work is potentially adding a small kitchen and removing walls to make the units bigger (that and some vision of course).

The historical Genosha Hotel in downtown Oshawa completed its transformation in 2019 with the development attracting property tax and improvement loan incentives from the city for completion. This 1929 building not only houses 86 apartments on the upper 5 floors, it has conference room space in the basement and the main floor is home to commercial units so it boasts several different income opportunities. With apartments starting at $900, there is very much affordable accommodation on offer for students and professionals alike.


Once life as we once knew it resumes, the office sector is also predicted to rebound to some extent as soon as employees can safely return to work. With more flexible working patterns and a split of the working week between home and office, some organizations will look to reduce the amount of occupied space and move to smaller premises. Some larger properties may present favorable opportunities for multifamily or even multi-purpose development similar to hotels combining residential housing, recreation and business into one property.

Not all properties will lend themselves to this opportunity but nevertheless, they will materialize for alert investors. Calgary city has an office space vacancy rate of around 32% and architects for their downtown regeneration, identified that of this 12 million square feet of property, approximately half would be suited to conversion. There’s a compelling argument for converting for sustainability too. Estimates are that it would cost around half as much to convert as it would to demolish and begin again, not to mention the landfill problem this would exacerbate.


Retail plazas with office space on upper levels could be a prime opportunity for redevelopment. These older lackluster properties usually benefit from convenient, city center locations, parking and features such as huge windows which make appealing residences for student demographics but also vulnerable and senior sectors of society.

Retail will start to perform again, albeit a different, omni-channel and or, experiential version of what it resembled previously. We could see a shift from pure retail to mixed-use properties and affordable residential properties and social housing will be a major factor in this in an effort to densify existing properties and returns whilst creating an urban experience for users. An example of one such development on a grand scale is Stratford City in London, UK, which is adding additional property types to an already well-connected retail destination and is believed to have taken its cue from the Oakridge Centre redevelopment underway right now in Vancouver.

2018 artistic rendering of the Oakridge Centre redevelopment. (Oakridge Centre project team)

Time for change

Quite simply, house prices are outpacing income growth and this is unlikely to change very much in the foreseeable future. The commercial real estate industry has a real opportunity to effect change at a time when we’re actually getting used to the fact that change is here to stay. Investors and developers, whether philanthropic in ambition or not, have the potential to show fortitude and help to put an end to decades of housing under-supply, achieving for themselves and the communities they invest in.

Reach out to Private Capital Group to understand your multifamily commercial real estate opportunities in Canada.

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