Nick: Canada Mortgage Bonds increase designated to new rental housing construction

DAN: Recently, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, announced that the annual limit for Canada Mortgage Bonds is being increased from $40 billion to up to $60 billion. This change is the next step in the government’s plan to build more homes, faster, and will unlock low-cost financing for multi-unit rental construction. This new measure will help to build up to 30,000 more rental apartments per year.

NICK: The Canada Mortgage and Housing Corporation (CMHC) and the Canada Mortgage Bond program support the low-cost financing of new rental housing by providing mortgage loan insurance and securitization.

DAN: There is currently unmet demand from developers and builders to access low-cost financing, which is preventing them from building much-needed rental apartments. With the federal government removing the Goods and Services Tax on new rental housing, as proposed in the Affordable Housing and Groceries Act, the demand for financing is expected to further increase.

NICK: To ensure builders have the low-cost financing required to build more rental projects, the government is increasing the Canada Mortgage Bond issuance limit by $20 billion per year and designating the increased amount for funding mortgage loans on multi-unit rental projects insured by CMHC. Eligible rental projects must have at least five rental units and can include apartment buildings, student housing, and senior residences.

DAN: Now this is probably in response to the facts that CMHC is also predicting that Canada needs 3.45 million more homes by 2030 to cut housing costs as population continues to grows.

NICK :So let’s look at those three asset classes they want to focus on: Apartment buildings, Student rentals and senior housing & why,

Phone chime * Lets start with students,

It’s no secret that we have seen a massive jump in international students here in canada. In Fact, the number of international students in Canada has increased by 162.7% since 2010/11.

There were a total of 807,750 study permit holders in Canada in December, over 190,000 more than in 2021.

DAN: That’s like 2% of our population.

NICK: The new figures surpass by some way Canada’s target of 450,000 foreign students by 2022 set out in the country’s 2014 international education strategy.

So there are a ton of international students, but thats in addition to all the national students as well.

DAN: Here’s a Tweet - “Slow clap for Canada: Canada makes 22.3 billion dollars from tuition fees, that is more than their most major export (auto parts) at 19.2 billion. 76% comes from international students.”

NICK: Yes they were recently referred to as a lucrative asset by one our of lovely politicians,

DAN: Yeah, the minister of immigration himself.

NICK Anyways, this is becoming a serious problem across the country. Like serious.

I have spoken with people in BC, Alberta, and several other university towns in Ontario such as Peterborough, North Bay, Waterloo & Guelph, Kingston & more and some of the anecdotes are crazy. These students in some cases are living in hotels or airbnbs, commuting from home or far distances to get to school, and in some cases just piling into rooms or houses where we see 2 people or more to a bedroom, there are some real horror stories out there.

DAN: Impact - 200 apps - Yeah, the universities keep accepting these students but seemingly dont have an answer to the question “where do they live once they have been accepted”

NICK: Should this be on the schools? The University of British Columbia, UBC, is building more,

DAN: “With more than 15,000 beds across the Vancouver and Okanagan campuses, UBC is the largest student residence provider in Canada and plans to add another 4,800 beds (4300 at Vancouver and 500 at Okanagan) over the next 10-15 years at an estimated cost of $1.2 billion,”

NICK Experts say that international students are particularly vulnerable to housing affordability and availability issues, they're increasingly being blamed for worsening them, but it's not their fault. They were sold a dream, a promise, and now are facing this harsh reality

DAN : “Foreign students being tricked into thinking they can get permanent residency by studying in Canada, experts warn”

NICK : So when we start to look at these stats and understand the magnitude of this issue alone, it becomes quite clear why there is a push for this new funding to be used to build more student housing.

NICK: Ok SO HOW DO WE CAPITALIZE/HELP SOLVE THIS TREND WHILE ALSO LE- MAKE MONEY RENTING TO STUDENTS?

DAN: I really realized the impact of this when we got 200 applications from students for our rental that was over 1 hour from North Bay

NICK: We just did a number of student rentals over the summer at like 6.5-7.5 cap rates in markets within an hour of Toronto.

DAN: Typically rent by bedroom - $750 per bedroom for example which is crazy because when we were in Uni

NICK: This presents challenges because traditional lenders often see the houses as rooming houses or boarding houses which they don’t like

DAN: 2 ways to deal with this:

• so many people deal with this with a head lease or one single lease

• there are some lenders who specialize in this stuff - if you want to know they are message Nick

NICK: Lets talk Grandmas & Grandpas….

DAN: This is taken from stats can

A portrait of Canada’s growing population aged 85 and older from the 2021 Census - from stats Canada StatsCan

A few stats from the 2021 canadian census that outlines the population 85 yrs and older,

• Over 861,000 people aged 85 and older were counted in the 2021 Census, more than twice the number observed in the 2001 Census

• The population aged 85 and older is one of the fastest-growing age groups, with a 12% increase from 2016. Currently, 2.3% of the population is aged 85 and older.

• Over the next 25 years (by 2046), the population aged 85 and older could triple to almost 2.5 million people.

NICK: Okay now those are elderly people, 85 and older, lets talk about the 65+ population.

In 2010, 14.1 per cent of Canada’s population was age 65 or older. This number has increased to 19.0 per cent in 2022. Statistics Canada forecasts this trend will continue, reaching 22.5 per cent in 2030.

DAN: Again, as a result, the number of working-age Canadians (15-64) for each senior (65 and up) is falling. In 1966, there were 7.7 working-age Canadians for every senior—this ratio has fallen to 3.4 in 2022. These trends are ongoing and by 2027 forecasts suggest the ratio of working-age Canadians to seniors will fall to 3.0.

NICK: A decreasing ratio of working-age people-to-seniors is affecting government revenue and expenditures in ways that are already straining government finances and has been a major contributing factor in a long-term decline in the labour force participation rate. This trend is slowing the growth of government revenue over time.

Meanwhile, an aging population is also helping push spending higher at both the federal and provincial levels. For the federal government, the increasing share of Canadians over the age of 65 is pushing up the cost of income support for seniors on programs such as Old Age Security and the Guaranteed Income Supplement. At the provincial level, an aging population is putting upward pressure on health-care spending.

DAN: Lets look at this population pyramid

NICKSo this aging population causing issues in it own right.

But lets talk about the housing issues seniors are facing.

More than 20 per cent of Canada’s population will be 65 within the next five years, this generation is known as the Baby boomers, they were born between 1946 - 1964 are deciding to age in place. National Post

The majority of Boomer homeowners — 52 per cent — would prefer to renovate their current property over moving. Furthermore, 75 per cent of Boomers own their own home, and 17 per cent more than one property.

DAN: So boomers don't want to move, well, can you blame them? They sell their prized possession, their long time family home full of nostalgia that they bought for 150k that's now worth over 1 million or more.

If they do sell, they are now in competition with all the other buyers and have put themselves into this crazy inflationary market with interest rates and volatility etc.

So they stay, live in their larger, mostly empty houses. There are estimates that there are as many as 12 million empty bedrooms across the country.

NICK: So to get back why the financing is directed towards seniors housing.

Well, after looking at the data, and the compounding issues of older people not moving on because they don't have anywhere to go it starts to make a lot of sense why we need to see intentional development in that asset class.

NICK: SO HOW DO WE BUILD FOR SENIORS

Well we need to look at lifestyle,

What is important to seniors, both old and young seniors.

Walkability, livability, proximity to transit & healthcare, less space, more amenities, close to friends and family.

So building intentional communities, or intentional housing types and styles for these seniors could be a massive opportunity.

Build it and they will come…no, they are already here and looking for somewhere to go!

DAN Lastly - lets chat on Apartment Buildings. Specifically PBR’s

NICKPabst Blue Ribbons?

DAN No.

NICK Purpose Built Rentals

DAN Right.

NICK Yeah, so student housing and seniors are great, they kind of serve the very beginning and the ending of the housing ladder/ cycle or however you want to look at it. The bookends.

DAN Apartments serve the middle of that, the young professionals, the millennials, the young families, the people in transition, the people that can't afford to buy a home just yet, so many people fall into this category.

DAN: Class action against Toronto real estate industry over commissions gets green light

DAN: Federal Court has granted approval for a class-action lawsuit alleging price-fixing and

anti-competitive practices

NICK: The lawsuit, filed in April 2021 on behalf Toronto resident Mark Sunderland and anyone who sold a home in the GTA after 2010, alleges misconduct by several of the nation’s leading brokerages, The Canadian Real Estate Association (CREA) and the Toronto Regional Real Estate Board (TRREB) are also named in the lawsuit.

DAN: On Sept. 25, Chief Justice Paul Crampton permitted the case to proceed, positing that there exists a plausible argument that rules put illicit restrictions on the pricing of buyer brokerage services. The respondents had petitioned the court to dismiss the claim, citing a lack of merit.

NICK: The lawsuit contends that the brokerages engaged in an agreement to artificially increase buyer brokerage commissions, which were shouldered by home sellers in the GTA. It is also alleged that CREA and TRREB facilitated and contributed to the execution of this arrangement.

DAN: The article says commission structures for real estate agents and their brokerages differ nationwide, usually involving a percentage-based commission derived from a home’s sale price. In Alberta and British Columbia, the commission structure is typically seven per cent on the initial $100,000 and three per cent on the remaining balance. Conversely, in Toronto, commission is five per cent on the entire amount of the sale.