Preserving and Increasing Affordable Housing Stock

Transcription

1 Preserving and Increasing Affordable Housing Stock Opening Doors Conference November, 2018 Prepared by Altus Group Economic Consulting

2 Affordable Housing for Whom? Shelters Temporary shelter food and other services Transitional Housing Non-profit housing providers offer stable housing as a step between shelters and permanent housing Non-Market Supportive Housing Housing providers offer permanent housing in purposedesigned buildings or in scattered sites with ongoing supports Social Housing Social or subsidized housing requires capital grants or ongoing government subsidies to reduce rents for low-income households Operated by housing providers, government Rental Assistance Provided in Private Market Rental Assistance Program Market Market Rental Housing Private housing make up most rental housing includes secondary market Home Ownership Fee simple, condominium ownership, shared equity ownerships High Level of Government Assistance None 2

3 Mind the Gap Source: Smarter Growth Initiative Altus Group Limited 3

4 Means to an End: Providing People with Affordable Housing Altus Group Limited 4

5 Thinking Like a Real Estate Investor 5

6 Private Development Depends on Demand and Absorption Annual Units Calgary CMA, Household Growth by Structure Type 0 Single Row Apartment Absorptions by Quadrant, Share of Total 2017 Centre 11% NE 14% NE 13% NW 27% outside of city limits 21% SW 14% 6

7 Real Estate is an Asset Private Real Estate Investor Decision Rule Analyze the Market to explore new opportunities Analyze the Portfolio to optimize returns Leverage to grow and maintain the portfolio Profit (or ROI) > 0 Non Profit Decision Rule Social = Economics 7

8 Take a Page from a Developer s Play Book Leverage Small amount of effort to produce a disproportionately big result Consider: 1) The ability to leverage or use assets as collateral gives you financial flexibility. Assets (land and buildings) Access to Capital (Money) Partnerships (private developers) 2) Leverage can increase cash flow. 3) Leverage can expand your total assets. 8

9 Portfolio Optimization and Growth Data Based Decision Making Market Dynamics (Supply) Demographic Trends (Demand) Portfolio Management Housing stock Household Income Operational performance Construction trends Changing Age Distribution Property Condition and Value Market Prices Population Growth Dynamics Property Life Cycle Economic Climate Household/Family Structure Holding Strategy 9

10 Real Estate Portfolio Asset Management 1) Important to Know for each asset: 1) Gross, rentable, and useable square foot by property 2) Number of units and RGI/market unit distribution, vacancy statistics 3) Revenues and occupancy costs per unit 4) Energy and water efficiency 5) Locations, building profile 6) Property Condition reports 7) Property value information 8) Site Size 9) Zoning 10) Community Characteristics 10

11 Real Estate Portfolio Management for Growth Real Estate Holding Strategy Options - Acquiring - Creating (New Building) - Redeveloping - Selling/Disposing - Repurposing - Refinancing Disposal Acquisition Key: Does the property support program service delivery requirements? (compare asset performance to service requirements) Does it make economic sense to invest in redevelopment or renovate? Re-investment/ Maintain 11

12 Market Dynamics DATA SOLUTIONS

13 Purpose-Built Rental Universe, Calgary CMA 55,000 Townhouse Apartment 50,000 Number of Units 45,000 40,000 35,000 5,322 44,557 5,281 5,203 4,797 4,759 43,167 43,245 42,336 41,416 4,513 40,333 4,122 38,150 4,008 4,017 3,896 3,843 36,858 36,174 35,512 34,814 3,960 3,878 3,895 3,932 34,212 33,933 34,362 35,227 4,017 36,523 4,037 38,348 30,000 25, Source: CMHC, Altus Group Economic Consulting,

14 Household Income Bracket Distribution by Primary Maintainer Age Groups, Calgary CMA, 2016 Total Population with the Age of 15 and Above 160, , , ,000 80,000 60,000 40,000 20, ,440 11,110 12,210 12,625 30,845 Under $5,000 (including loss) 7,220 6,215 8,085 9,765 21,615 $5,000 to $9, ,480 15,360 16,920 23,845 34,360 $10,000 to $19,999 16,285 17,620 21,135 20,610 24,110 29,570 19,390 $20,000 to $29,999 18,000 33,445 11,780 $30,000 to $39,999 17,945 22,420 25,340 14,815 19,020 10,980 14,980 9,000 24,500 32,305 22,170 12,735 7,185 18,015 10,425 32,825 5,085 29,415 15,005 7,680 24,765 12,425 19,380 13,345 8,535 6,125 8,330 11,360 2,610 1, , $40,000 to $49,999 $50,000 to $59,999 $60,000 to $69,999 $70,000 to $79,999 $80,000 to $89,999 $90,000 to $99,999 $100,000 and over Source: Statistics Canada, Altus Group Economic Consulting,

15 Historic Apartment Rental Trends, Calgary CMA Average Rental Rate $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 $500 $400 Average Montly Rent 5.9% 5.5% 2.0% $531 $520 $657 $ % Vacancy Rate $ % 2.8% 1.3% % $ $ % % 2.1% 2007 $1, % 2009 $ % 1.9% $1, % 2012 $1, % 2013 $1,213 $1, % % 2015 $1,143 $1, % % % 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Average Vacany Rate Source: CMHC, Altus Group Economic Consulting,

16 Apartment Rental Rates by Year of Construction, Calgary CMA $1,700 Before or Later $1,564 $1,500 $1,401 $1,413 $1,300 Rental Rate ($) $1,100 $900 $1,047 $1,281 1,157 1,059 1,034 $700 $ Source: CMHC, Altus Group Economic Consulting,

17 Case Study #1

18 Case Study #1: Midtown Townhomes Number of Units: 65 Structure: Woodframe TH Site Size:.48ha Current Zoning: M-C1 Max Units per ha: 148 Actual Units per ha: Upzone Potential: Yes No. of additional units (without rezoning) 13.5/ha or 6 Age: 49 years Analysis -woodframe buildings at 49 years old very likely in need of significant capital investment to extent the lifecycle -the site could be densified if rezoned, which would require demolishing the existing buildings and constructing new -the recommendation to renovate vs demolish and rebuild depends on the current condition of the buildings and the capital investment needed to modernize and upgrade the buildings and the estimated extended lifecycle of the buildings If the cost to renovate is more than half the cost of estimated current replacement cost (FCI) then it likely doesn t make economic sense to do so 20

19 Case Study #2

20 Case Study #2: City Centre Mid-Rise Number of Units: 46 Structure: Concrete Site Size: 19,526 sq ft. FAR: 5 Current Zoning: CC-MH Allowable Built Area: 97,630 sq ft Actual Built Area: 62,698 sq ft. Upzone Potential: Yes Age: 50 Analysis: -site has the potential to increase built area by 56% if demolished and rebuilt making it an attractive sale site -the drawback is that the site is relatively small which will limit building design -Located in a high-density area, close to downtown, near transit, services and employment centres therefore also desirable for both an affordable rental building -a major renovation to bring the building up to current efficiency standards could extend the life of the building by another 50 years. -recommend preparing comparative proformas to evaluate the two options 22

21 ? How Can Altus Group Help? Building Condition Reports Project Management Cost Management Needs And Demands Studies Municipal Finance Highest And Best Use Studies Portfolio Assessments Property Appraisals

22 Contact Elsa Sawatzky Senior Consultant National Economic Advisory 33 Yonge St., Toronto, Suite th Street SW, Calgary, Suite West Georgia Street, Vancouver, Suite