VANCOUVER—For 30 years in Metro Vancouver, the condo has been king, a lucrative form of real estate development that pretty much replaced a 1970s and 80s-era boom in rental apartment buildings.

But as the region continues to struggle with a housing affordability crisis, real estate developers now say rental projects are increasingly sharing space with condos in their project portfolios.

“We always have one or two rental projects on the go, but at the moment we have half a dozen rental projects,” said Jason Turcotte, vice-president of Cressey Development Group.

“As a percentage of our overall makeup it hasn’t been this high in many, many years,” he said.

Abdul Jiwan, president of Redbrick Properties, said his company has always focused on acquiring rental buildings to manage. “But more recently, we’ve found it makes more sense to build new (rental buildings).”

One factor behind the trend is the incentives, such as extra density, fee waivers or relaxed parking requirements, that several municipalities have started to offer to developers who build rental.

But Metro Vancouver’s sky-high real estate market and high rents are also making building rental more attractive; more people are looking to rent because they can’t afford to own, and rental rates have risen at a rapid pace to meet that demand.

For rental developers, there’s a flip side to the high rents that make it economically feasible to build new rental: public backlash against rental projects that offer nowhere near “affordable” housing. Cressey Development Group’s project at 1715 Cook St. in Olympic Village used city incentives, and under an agreement with the city, rents are “capped” at $3,333 a month for three bedrooms and $2,539 for two bedrooms.

“On a new rental building closer to the core, highrise form, you’re going to get rents that are in excess of $2,000 a month for a fairly compact one-bedroom,” Turcotte said, adding that it’s not difficult to find renters to fill the new buildings.

“The cities are finding that they’re having a hard time selling to the public,” the idea of giving rental developers breaks, Turcotte said.

But, Jiwan said, without the incentives, there is no way the new projects would ever get built.

As more rental supply is added to the market, Turcotte believes rent rates will start to stabilize. But one cost he doesn’t expect to see fall is the value of land, and that’s a barrier to choosing to build rental over condos. Rental developers are hugely outbid by condo developers when it comes to buying land.

The province recently announced it would introduce legislation to allow municipalities to zone areas for rental construction only, a tool several cities have called for as one way to spur rental development and put a lid on land values.

Turcotte said the idea has promise, but warned it has to be implemented carefully because of “the very stark difference in land value.”

Another barrier for rental developers is in obtaining bank financing. Compared to condo development, where presales provide much of the early financing, banks are sometimes reluctant to provide loans to rental projects, Turcotte said.

Condo projects can often attract a larger loan amount than rental projects, said Bill Sherritt, director of community real estate with Vancity Credit Union. That’s partly because Vancouver condo values have risen so much in recent years, making them a surer bet for banks.

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But, he said, Vancity and other financial institutions are very interested in financing rental projects.

“We’re finding that, with the difficulty with housing prices for people to get into the housing market,” he said, “rental is becoming more and more a mainstream, realistic solution for many people.”

Jen St. Denis is a Vancouver-based reporter covering affordability and city hall. Follow her on Twitter: @jenstden

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