Not since the 1970s has Vancouver seen the surge in investment in purpose-built rental apartment buildings.
Back then, it was the federal government’s “MURB” program (Multiple Unit Residential Buildings) that encouraged development in the sector by allowing investors in new apartment buildings to claim their annual depreciation against other income for tax purposes.
Today, it is the municipal government – the City of Vancouver – that has created incentives for purpose-built rental buildings through its rezoning policies. For instance, in the West End and East Vancouver, the City will relax its parking stall ratios and provide additional density, to encourage development of purpose-built rental. These incentives, combined with rising rents, historically low vacancy rates, a low interest rate environment and an aging building stock are stimulating a boom in purpose-built rental properties in Vancouver.
Since 2010, when the City first launched its incentive program under the banner of “STIR” (subsequently replaced by “Rental 100”), the City has approved 3,783 units of new market rental housing.
All things being equal, the profit margin for condominium development will supersede the capitalized value of income that purpose-built rental properties create. However, as the City of Vancouver demonstrates, it only takes minor changes in rezoning policy to tip the scales in favour of building rental.
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