Executive calls on further action
The federal government’s allocation of $15 billion for rental construction loans is insufficient to have a significant impact in speeding up homebuilding, according to a prominent development and asset management company CEO.
Adrian Rocca of Fitzrovia told BNN Bloomberg that further action was needed to “move the needle” on the sluggish pace of construction.
Rocca said Fitzrovia has been working with the three levels of government for the last nine months in order to change the economic profile of new rental development. While he commended the government’s efforts to engage with the private sector, margins have been squeezed thanks to bond yield fluctuations and cap rate pressure.
That pressure on margins meant the supply of new inventory was curtailed, Rocca said – with the government’s recent fall economic statement giving little in the way of additional assistance to homebuilders, in his view.
Rocca said he hoped developers would be assisted through two primary incentives that he said could help triple or quadruple the supply of rental units. One of those was protecting current rental housing stock, with 30,000 units currently in place which have been pursued for conversion into condo units by developers or landlords.
“We have to protect that stock. It has to stay as rental,” said Rocca.
He said such products were backed by institutional capital as they were fiduciaries to either pensioners or investors, which would protect the equity investment in those projects. Rocca said a HST waiver needed to be applied to existing stock.
Another incentive would be a property tax abatement strategy which Rocca said had been effective in producing new rental supply in the US.
Being provided an affordable access to land would be a huge help when it comes to building more housing supply, according to Rocca. He also noted that the current key issues alongside the insufficient rental supply are the increase of construction costs, the increase of interest rates, and the effect around valuation.
