As of September, construction has begun on 2,799 new rental apartments in Calgary this year. That’s the highest number on record, although 2021 was another year with 2,572 apartment starts, according to numbers from the Canada Mortgage and Housing Corporation (CMHC). Developers describe it as a classic Economics 101 scenario: supply rises to meet demand. For years, they say a lack of rental construction in Calgary has left that side of the market underserved. On the demand side, higher interest rates they drive more people to rent than to own. The province is also seeing a significant increase in people moving into the province, with more than 50,000 coming to Alberta to live in the first half of 2022 alone. Alkarim Devani is the president of RNDSQR, which started out building single-family homes but has since shifted to purpose-built rentals. (Paula Duhatschek/CBC) “We have this huge void compared to a lot of other major metropolitan cities in Canada for rental housing,” said Alkarim Devani, president of Calgary-based developer RNDSQR, which has shifted in recent years to exclusively rental buildings. “We’ve had almost a 20-year gap in rental products, which is why we’re seeing such an influx.” According to the latest numbers from Rentals.ca, the average Canadian rental apartment was $1,810 a month in September, up about 12 per cent from a year earlier. In Calgary, the median one-bedroom rent was $1,629, a 29 per cent year-over-year increase.

Prospects across Canada

Calgary isn’t the only city seeing some shift toward rentals. In many major cities, the share of apartments built for rent, rather than condominium ownership, rose in the first half of this year compared with the average for the same period over the previous five, according to CMHC figures.
One exception is Toronto, where the share of rental construction declined in the first half of 2022, which CMHC analyst Michael Mak says is likely due in part to high land costs in that city. “There are rising interest rates … and rising construction costs and labor costs, all of which play a factor in lower rental starts,” he said. In Vancouver, developer Anthem Properties is pushing hard for multifamily rentals, with about 3,000 units either in preliminary planning stages, under review or under construction, most of them in Metro Vancouver, according to Gage Marchand, the company’s chief investment officer . Note that More Canadians are renting, rather than owningtheir homes — a trend he expects to continue to grow. “I don’t see the affordability crisis getting any better anytime soon,” said Marchand, whose firm also has offices in Calgary, Edmonton and Sacramento. “I think moving into this next generation, renting will become more accepted as a kind of normal reality [and] Anthem wants to continue building homes for people.”

Politics also drives development

Public policy can also play a role in rental growth. In Vancouver, Marchand pointed to policies that give developers incentives to build near public transit or higher density allowances if affordable housing is included, among other benchmarks. Ken Toews is the senior vice president of Calgary-based Strategic Group, a development company that builds rental properties. Photographed outside the Barron Building, a historic office tower in Calgary that is being converted into residential units. (Paula Duhatschek/CBC) Another example is a City of Calgary program that provides grants to convert vacant office space into residential buildings, said Ken Toews, senior vice-president of Strategic Group, which is in the midst of converting one of the country’s first oil and natural gas office towers. city ​​gas in residential apartments. Toews said many developers also use one CMHC program called MLI Select, which offers insurance incentives if a rental development meets specific goals for affordability, energy efficiency, accessibility, or some combination of the three. “It’s a really good program and it brings more products online than you would normally have in a marketplace,” he said.

Future perspective

Opinions vary on whether rental growth will accelerate or decelerate in the coming months and years. High interest rates and construction costs are also putting pressure on developers, which Paul Battistella predicts will lead to some pullback in rental development going forward. “Rents aren’t going to be able to accelerate at the same rate to be able to make the math work on these things,” said Battistella, managing partner with Calgary-based apartment developer Battistella Developments, which also sets aside some of the units for rent. Paul Battistella, with Battistella Developments, says a long-term lack of rental supply has prompted developers to create more purpose-built rentals. But he warns that the current climate of high interest rates and construction costs could force some to back off. (Paula Duhatschek/CBC) “THE [projects] who are playing now, they’re under contract, their costs are locked in, they’re fine… I just think anything new is going to be very, very difficult to implement.” As for when and if the increase in supply will lead to relief for current renters — opinions also vary. Mak expects some buildings under construction now, especially low-rise buildings, to be completed in the coming months leading to some easing of the market.
But if demand continues at its current clip, Toews believes any new apartments added will be absorbed very quickly. “I think we’re undersupplied and it’s going to create challenges,” he said. “Less supply means your prices will go up.”