In the 2000s, only about 1,000 PBR units a year were being built in the GTA. By 2019, that number exploded to 7,800 units under construction and 50,000 in the pipeline

By Lia Grainger

At first glance, The Livmore development coming to High Park this summer looks a lot like a typical Toronto new build. Steps from the TTC station, the property will consist of two 25-storey towers featuring plenty of amenities, including a business centre, a music room, and a fitness centre complete with yoga and dance studio — all the trappings of an upscale condo tower. But the catch is, it isn’t a condo at all. This building, like many in the works in the GTA, is designed to be rental only.

Distroscale

The Livmore offers everything from studios to three-bedrooms and will be GWL Realty Advisors’ flagship luxury rental.

“We used to say that we were building ‘condo quality,’” says Todd Spencer, the vice president of national operations for GWL Realty, who is overseeing the Livmore. “Today we say that purpose-built rental (PBR) is actually higher quality than a new condo.”

The move toward PBRs has been building momentum. And Camrost Felcorp is another developer which is embracing the trend. The company launched their first rental-only tower One o One, at 101 St. Clair West, two years ago and has three more in the pipeline.

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With these new rental buildings, you’re getting the equivalent of a new condo or better

“When you say ‘rental,’ everyone thinks of a 1970s-style building or older,” says Joseph Feldman, Camrost Felcorp’s director of development. One O One is billed as “hotel-inspired.”

“With these new rental buildings, you’re getting the equivalent of a new condo or better,” he says.

In the 2000s, only about a thousand of such PBR units a year were being added to the GTA market. By September 2019, that number had exploded: 7,800 units were under construction with 50,000 more in the pipeline.

A multitude of factors are fuelling the boom. Rapidly rising rents and a spike in population are creating demand. Meanwhile, developers are getting the incentives they’ve waited decades for, in the form of relaxed provincial rent control on new builds; low-interest federal loans for the development of new rentals; and large institutional investors willing to sink money into them.

As more of these projects are completed, a growing number of home hunters will find themselves weighing the benefits of renting a condo from a private owner over choosing a suite in a PBR. So what’s the difference?

According to Drew Sinclair, an architect and urban designer and principal at SvN Architects and Planners, a key consideration is that rental developers must think longer-term than their condo-building counterparts.

“For condos, the greatest concern is the sale and delivery of the product itself and what might happen while it’s under warranty,” he says. In Ontario, that’s typically somewhere between one and seven years – but rental operators must think further into the future “about the durability of the suite.”

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Photo by Handout

He points to the inside frame of a kitchen cabinet as an example. In most condos, these are made out of fiberboard, but a high-end rental might opt for hardwood that will last through numerous tenancies.

A real-estate management-firm exec who didn’t wish to be named said that’s true of a PBR his firm manages. There, baseboards are made of hardwood, while those in condominiums are often medium-density fibreboard. As he sees it, in the rentals business, going high-quality makes business sense. “We have to sell [a PBR] multiple times and we don’t want to spend the money to constantly replace these products. So we’ll spend more up front in order to avoid costs down the road,” he says.

According to Feldman of Camrost Felcorp, another possible benefit of choosing the PBR route is that when things do go wrong, “from a repair and maintenance perspective, you’re dealing directly with the property manager.”

His company’s 26-storey One o One building, which has 229 units, boasts of a 24-hour concierge who deals with issues as they arise. “If your dishwasher is broken, you’ll see the maintenance guy right away, because he’s always in the building,” Feldman says.

Camrost Felcorp employs the services of the Forest Hill Group, a professional management company with branches in Toronto, Vancouver and Miami. Their president and CEO Robert Klopot says calls for service should receive a response within 10 minutes. If a tradesperson is required, the work order goes out immediately and the resident can expect service within three hours.

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“We have a list of about 130 trusted suppliers working in the neighbourhood or nearby,” Klopot says.

When you say 'rental,' everyone thinks of a 1970s-style building

However, there’s no guarantee of stellar management in PBRs or condo rentals, says Geordie Dent, executive director of the Federation of Metro Tenants’ Associations (FMTA).

He points to the example of corporate rental landlord Akelius Canada Ltd., who in 2014 eliminated onsite supers from several buildings, replacing them with a centralized tenant hotline.

On the condo side of things, Dent commonly hears complaints from renters who have a relationship with the unit owner but not with condo management or the board, which often handles repairs. Those renters can get caught in arguments over liability between the owner and the board, he says. Meanwhile nothing gets fixed.

When it comes to security of tenure, however, PBRs could be the safer choice. That’s because private condo owners have the right to evict tenants at any time for renovations or if they or a family member want to move in. “We saw a huge spike in these ‘own-use’ evictions starting in 2017,” Dent says, adding that in 2018, own-use became the No. 1 eviction reason cited in calls to the FMTA, supplanting “late rent” for the first time ever.

“It’s massive,” says Dent, “and a lot of these evictions are happening in bad faith.”

PBR buildings owned by corporations (the majority of them fall into this category) can’t evict for own-use. They may also be less likely to evict for renovations because stipulations in the Residential Tenancy Act mean managers of multi-unit buildings must compensate reno-victed tenants a minimum of three months’ rent, making it a pricey prospect.

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On balance you’re definitely safer in a purpose-built rental

Still, it does occasionally happen. At the eight-unit rental building at 795 College St., the development company Circa evicted several tenants for renovations in 2019, but never granted them the right to reoccupy their units. Instead, they rented the remodelled suites to new tenants at three times the price. Circa was fined $75,000 for violating the Residential Tenancy Act, but given the jump in the rents they’re collecting, the fee may have seemed worth it.

The most clear-cut issue, for most home hunters weighing their options, is rent control. And due to changes to provincial regulations, whether you’re protected by it now depends not on whether you choose a PBR or a condo-owning landlord, but on when exactly your unit was first occupied. Under the recent changes, any rental unit first occupied after Nov. 15, 2018 won’t be rent controlled. That will have an impact on PBRs and condos alike — and the impact has the potential to be considerable.

More than 70 tenants at a 30-storey rental building on John Street, near Weston Road and Lawrence Avenue West, that was completed in 2019, received notices late the same year stating that new one-year leases would be subject to a 6.5 per cent rent increase, while month-to-month renters would see as much as a 25 per cent jump. Advocates eventually convinced the landlord to scrap the 25 per cent premium for short-term leasing, but the 6.5 per cent increase is still well above the 2.2 per cent prescribed by the RTA.

As Dent sees it, “on balance you’re definitely safer in a purpose-built rental.” But as the John Street scrape proves, for Ontario renters, timing matters every bit as much as who you’re renting from. And as far as that’s concerned there are more PBRs on offer all the time.