Canada’s Largest Landowner Plans Affordable Housing Developments

[00:00:00] Welcome to the Canadian Real Estate Investor, where host Daniel Foch and Nick Hill navigate the market and provide the tools and insights to build your real estate portfolio.

[00:00:12] You'll own nothing and you'll be happy. This ominous and somewhat threatening phrase originated in a 2016 video by the World Economic Forum summarizing an essay written by Danish politician, Ida, O'Kit.

[00:00:25] The phrase has been used by critics who accuse the whiff of desiring restrictions on ownership of private property.

[00:00:33] Now this phrase, which you may be familiar with in comment sections on YouTube or Instagram or TikTok, was also found prevalent in another comment section of some recent articles that were released announcing some new housing news.

[00:00:48] That news stated that Canada's largest landowner plans to bring over 50 buildings to market as affordable housing units.

[00:00:58] Now on the surface, that looks and sounds pretty good.

[00:01:02] But as we do a deeper dive which we like to do on the show, we have to ask the question, is it actually a good thing?

[00:01:10] Deep dives. We are once again scuba diving into the new Federal Initiative aimed at tackling Canada's housing crisis.

[00:01:17] The government announced 56 properties for conversion into affordable housing.

[00:01:24] We are going to explore the implications and potential impacts of this plan.

[00:01:28] What does that mean for the housing market and for affordability across Canada?

[00:01:34] Could this be the key to solving the housing crunch?

[00:01:38] And why do people seem so upset and concerned about it?

[00:01:41] And also what is the government's real estate portfolio made up of in what types of buildings are these that they're proposing?

[00:01:49] Welcome back to the Canadian Real Estate Investor podcast. My name is Daniel Foch and I'm Nick Hill.

[00:01:54] Thank you so much for joining us today.

[00:01:56] Let's start things off by setting the stage.

[00:02:00] Okay, Canada has a housing crisis. We're pretty sure everyone is aware of that at this point.

[00:02:06] And solving a housing crisis is hard. A crisis is by its very definition, a complicated time of intense difficulty.

[00:02:15] There's usually no quick fix for a crisis.

[00:02:17] Exactly. And you need multiple solutions, multiple fixes.

[00:02:22] And this recent one seems to be the newest possible solution put forward by the current Canadian government.

[00:02:28] Okay, so let's start off by looking at this article from CTV titled FedsC to convert dozens of government properties for affordable housing.

[00:02:39] Dan started me off with a quick excerpt from this article.

[00:02:42] The federal government has added 56 properties to a new public land bank of locations that are suitable for long term releases for developers can build housing.

[00:02:53] A move that housing minister says will help boost the supply of homes Canadians can afford.

[00:02:58] Sean Frazier made the announcement in Halifax making public lands available for home construction is going to reduce the cost of construction and in turn,

[00:03:06] produced the cost of living.

[00:03:08] Frazier said so former military bases, Canada post sites and federal office buildings alike are among the properties currently included in this public land bank.

[00:03:20] Many of which were previously set aside for sale and they don't know longer in use. Now, the plan is to offer most of them for long term leases rather than a one time sale.

[00:03:35] That is in order to keep the lands in public hands and ensure that housing built on them remains affordable.

[00:03:42] The current list includes properties in 28 municipalities in seven provinces what will grow over time through an ongoing review of underused or vacant federal land and buildings.

[00:03:52] And this was outlined in the housing plan they did say they were going to do this so nobody should really be surprised that they were going to do that they did this per se, but they finally actually come out and announce it and listed the properties and we did have.

[00:04:05] And we also had the shadow housing minister so his opposition. Scott Henson on to kind of critique it as well. So I feel like if you ever get a chance go back and listen to that as a good episode on sort of the whole thing both sides of that that picture.

[00:04:19] Both both gentlemen very well spoken and both actually quoted in in the next couple paragraphs here and Dan, I'd argue I think people are surprised when governments actually two keep their words there's a lot of announcements.

[00:04:31] The end up nowhere so I think this is this is interesting regardless of what happens now five of those properties that they mentioned out of the 56 that were proposed are now moving into the development phase with governments asking developers for expressions of interest or request for proposals otherwise known RFP's.

[00:04:53] For them are on a former military bases in Calgary Edmonton, Toronto and Ottawa well the fifth is on the site of a former national film board building in Montreal.

[00:05:06] Conservative housing critic Scott Henson dismissed the latest plan as a repeat of something liberals have been promising to do since 2015.

[00:05:13] The story is pointed out both the 2015 Liberal platform and 17 platform promised in inventory of public lands to make more properties available for affordable housing.

[00:05:22] It took nine years after he promised to build homes on federal lands for Justin Trudeau to actually identify the few parcels of land he would build on agents and said in a video statement shared to social media Prime Minister Justin Trudeau took a shot at Pierre Paulie have over the use of federal lancing the conservative party leader wants to sell it all off and make a quick buck.

[00:05:40] I would actually not mind if our government made a quick buck.

[00:05:43] It's wrong with me.

[00:05:46] Why they need money said that does nothing for you.

[00:05:50] I mean in fairness if it balanced the budget it could help on the tax.

[00:05:54] I'd maybe have not enough of the balance as itself.

[00:05:56] Yeah, I mean for those long time listeners you know data and I don't enjoy getting two political on the show but I mean honestly it's impossible today's day and age with the subject matter that we cover.

[00:06:10] So well, I would also say like the biggest the biggest person who can impact the outcome of your investment right now or the biggest group is is the government right like you look at look at you know in the last episode we're talking about Calgary.

[00:06:22] They up zone to eight units on residential lots across the city like if you owned a lot a year ago you just your output value just went from one unit or two units and maybe doplex to eight.

[00:06:34] Yeah, so like that's a significant impact. So the government is worth discussing in that context and and it just so happens that everything that they're battling about right now is related to what we're talking about because housing right.

[00:06:48] Now on that note the conservative housing plan involves the sale of 15% of all federal buildings to be turned into homes now minister Sean Fraser said construction of housing on the first five properties could be gain in the first half of 20 25.

[00:07:04] So I think this is where some of the maybe chirps from the opposition are coming here day and right. I mean we saw this all the way back in 2015 and we're now looking at the first five properties beginning construction 10 years later in 2025.

[00:07:21] You know, it's interesting because like even when I had the conversation with minister Fraser on on the podcast I sort of said like you know I think you guys are kind of got your backs up against the wall here like you have to deliver before 2025.

[00:07:34] You know and polls are showing that is going to be very difficult regardless but the I think Canadians are sort of like lost faith in their ability to execute on this so you know I mean it's pretty you only really have to wait less than a year because if they don't deliver in the first half of 20 25 I think people are just going to be like that that's pretty ambitious timeline to build look I built stuff before.

[00:07:56] It's like I don't know so anyway just just a thought there under the new plan the government plans to partner with those in the housing with the with the housing sector and communities to build homes with a novel long-term release not a one time sale.

[00:08:10] To ensure every site is affordable housing and the public land stays public so I'm going to make sense because you know if they're the land owner and this isn't uncommon by the way like.

[00:08:18] The world trade center like all of those office buildings in in New York are owned by the port right so land leads from the port authority to the developer.

[00:08:28] Yeah, so many of the six 56 properties across the country were listed as housing solutions in budget 2024 including the five properties for which the Canada lands company is seeking proposals.

[00:08:39] Yeah, now back in April of this year the liberal government announced their larger housing plan which aims to create 3.87 million new homes by 231.

[00:08:52] Through the public lands for homes plan they hope to unlock a 250,000 homes alone and yes don't worry we are going to provide some context on what the heck those plans are.

[00:09:06] Yeah, so so let's pause here and and provide that context and unpack some of this so does anyone believe we're building 3.87 home million new homes by 231 which is just over six years away now that's number one number two.

[00:09:21] What does a long-term release from the government look like number three what is public lands for homes plan and number four what are these 56 properties.

[00:09:29] Yeah, okay well why don't we start with your first question there Dan because he went think these homes are getting built look I as an entrepreneur and optimist I love a grand ambition okay.

[00:09:42] But some simple math and a hard look in the mirror and what we've been able to produce I don't know if the math is math and so here here's some rough stuff and again I'm not a math genius but let work with me okay 3.87 million homes six years or rather.

[00:10:00] If you're talking about your child 72 months or that's 2,190 days now that means that we need to be building 1767 so 1767 homes per day every single day nonstop for the next six years straight now.

[00:10:19] And there's boy math there's girl math but the most undefeated math of all time seems to be government math real-term math is up there real-term math is yes it's it's wedged in somewhere between boy math and.

[00:10:32] And so okay before we jump in on what a landleases the one thing that I would also mention is like the last time that we saw an iteration of this in 2017 do you remember I think we talked about this on the show your member side walked around of course yeah so.

[00:10:44] Google was supposed to build this like super city you know they said it was going to be a new kind of mixed use complete community and it was it was a great site the quay side site which was federally owned.

[00:10:56] But waterfront Toronto was tasked with the process of getting these RFPs to solicit bids for an innovation and funding partner but then it kind of came out when they presented the plans that it was like.

[00:11:07] very much uh there's kind of like this like dystopian state right like it was all I mean they might fly today honestly but it was all like cameras everywhere you know completely it was it was like yeah I think you wouldn't have to have like a metro pass because it would just like watch your face as you get on to stuff and so anyway people like it sounds like a surveillance state experiment and.

[00:11:26] I mean honestly like it on in a post-COVID world that might fly but but back then it did not so anyway that would be like one of the good examples that I would say yeah or or the new one that's that's prevalent in a apologize for our listeners across the country where we're really just using Toronto centric examples right now but.

[00:11:44] What's the there's putting a new spa down by there may be on the old grounds of Ontario please yeah on to replace so that again is a 99 year lease yeah and it's not a good example.

[00:11:59] Yeah good bad example because that one's definitely riddled in controversy as well so you they said they tend to be these these long government leases yeah.

[00:12:10] But talk to me about what a land lease is doing because traditionally you know we we like to buy real estate one of the main reasons I like to better this is because.

[00:12:18] You like the land right I don't I don't want condos because I don't want to box in the sky like something that I can.

[00:12:23] Develop and not have big brother say no so we're I'm going to watch you on your metro.

[00:12:29] Or yeah a land lease is a home ownership model where individuals can own their homes without purchasing land making these homes about 30% cheaper than others in the area popular among first time buyers families and retirees it allows them to allocate funds to other priorities while building equity.

[00:12:46] So let's look at maybe some key features now again the land least that we're talking about is not in the same traditional sense that you know Ontario place would be taken over but land leases do exist.

[00:12:58] Now some of the key benefits of those are affordability right rising construction cost rising housing costs land lease properties present a cost effective solution so for instance.

[00:13:08] A home on a land lease community may cost significantly less than the average freehold home across the country.

[00:13:15] We also see lower mortgages and taxes since you know off the by the land that your property is actually on mortgage payments and property taxes are lower.

[00:13:26] Also you'll likely have less maintenance homeowners obviously maintain their homes but community managers handle upkeep of common in public areas so.

[00:13:36] And land lease properties provide a bit more of a feasible option for only in a home and desirable locations without having to incur that high.

[00:13:45] Typical cost associated with some of those areas yeah one of the things that I thought would be worth mentioning I'm actually in a committee for a project like this in the city of Toronto with Brad Bradford it's like their missing middle pilot project and create T.O.

[00:13:58] is trying to do something similar but in the city of Toronto so it's lands owned by the city of Toronto and they want to support local developers and kind of do this similar type of model.

[00:14:10] So I think the government's finally realized oh like all these real estate folks have been making all this money over the last couple years with with real estate so maybe we should get into that business which is.

[00:14:20] I think we should make that a government and real estate to all anyone's going to mess up a market but anyway no but but by creating always doing some great work around this and if you're.

[00:14:30] If you're a developer in Toronto looking to do some missing middle stuff and you're looking for land leases of this nature reach out and and I'd love to connect you with create T.O. because they're kind of they're looking to get some feedback from developers on this project right now.

[00:14:43] Perfect okay great great to hear that then now a couple minutes ago you'd ask me a series of questions and one of them was about that public land bank so let's take a look at this so called public land bank now.

[00:14:56] If you find yourself on the government of Canada's website which I know most people just peruse there for fun then I want you to head over to the public services procurement tab then from there the real property services and parliamentary.

[00:15:11] Infrastructure tab then you're finally going to end up on the public lands for homes landing page now then what does this page read like.

[00:15:22] The public lands for homes Canada Public land bank page says there are currently 56 listed properties representing the potential construction of thousands of housing units on a total of 305 hectares of land across Canada.

[00:15:36] Now as a Canadian you're probably thinking what the hectares 305 hectares of land look like well.

[00:15:44] They the government to get into this a favor here and said hey this is actually on the government.

[00:15:48] These types of swearing you can pull this up it is right there they said hey don't worry we know that Canadians have no idea no spatial awareness.

[00:15:56] 305 hectares is the land equivalent to 2,000 hockey.

[00:16:01] Or a 400 Canadian football fields because I guess they're a CFL or a small order of the land.

[00:16:08] It's around 10 years somewhere in the end and the poster at the front.

[00:16:14] There you go imagine 2000 a hockey rinks worth of land now then well we're on the topic of land.

[00:16:23] Yeah the majority of all lands in Canada are held by governments as public land and are known as crown lands about 89% of Canada's land area is crown land which may either be federal 41% or provincial 48% the remaining 11% is privately owned.

[00:16:42] The largest land owners are the provincial governments who hold all unclaimed land in their jurisdiction how do I get to come in just like offer on that.

[00:16:49] I think you can't and you can just submit it off for that.

[00:16:51] 99% of the least.

[00:16:53] Over 90% of the sprawling boreal forest of Canada is provincial crown land.

[00:16:57] Provincial lands account for 60% of the area of the province of Alberta 94% of land in British Columbia that's because like the rest is just the lower main land.

[00:17:07] There's like some cities kind of just scattered there.

[00:17:09] It's wild to think about that the late 94% 95% of newfound land in Labrador which is more popular with most than humans actually I think that's true.

[00:17:20] I think there's a real stat.

[00:17:21] More moose than humans.

[00:17:24] And 48% of new brands of it so the largest single land owner in Canada by far and by extension one of the world's largest is the government of Canada.

[00:17:34] Wow so look at that no wonder we love real estate Canada's got one of the biggest poor full lives in the world.

[00:17:38] On that note this is kind of crazy it occupies more than 6% of the earth's surface.

[00:17:47] So let's circle back then you asked me earlier again about these 56 properties that the government wants to turn into affordable housing so I got kind of fascinated with what the government portfolio in total what that looks like.

[00:18:03] It's funny I would I just go back because I was getting really curious what who owns the most land in the world and it ends up being king Charles but it's because he they say because it's not the kind of land.

[00:18:14] That's 90% of the land anyway so I interrupted you a great flow there I bet you're going to tell me about what this government's portfolio looks like in total.

[00:18:21] I sure am so again I know you all spent a lot of time perusing the candidate government website so if you had to order to that website go to the directory of federal real property.

[00:18:34] This is the core reality property system of the federal government contains common real property data for 73 custodian organizations including.

[00:18:43] Now these are the real numbers the portfolio here okay 19 920 owned and least properties.

[00:18:52] How many doors they count that as 40 what does the candidate government now just put in their bio you know 50,000 doors 100,000 doors they've also got 41 million.

[00:19:03] 109,275 hectares of land area 38,541 buildings and 296,269,174 square feet of floor space.

[00:19:19] There you go that's pretty hefty portfolio you think it cash flows.

[00:19:24] By the sounds of it I doubt it but I did go down a deeper rabbit hole here and just add some fun and I found myself on another page in the directory of federal real property.

[00:19:37] And what was that one well it seems to be the centralized federal database for every single property in peace of land owned by the government and they are ranked interestingly by organizations with the most number of buildings or the most number of properties or the most land area.

[00:19:53] Anything interesting on there yet kind of so I don't really know what the significance of this is but it's interesting to me regardless so organizations with the most building some of these may not come as a surprise got number one national defense almost 15,000 buildings okay parks Canada agency got a lot of parks here in Canada.

[00:20:13] So that will make sense drastic drop off from the almost 15,000 but a third we have just over 5,000 parks agency buildings Royal Canadian mountain police so the RCMP just under 3000 buildings Canada post that one makes sense as well just under 3,000 and global affairs Canada at 2,392 buildings now does that that's the one that includes that New York penthouse that I reached out to me.

[00:20:38] That'll be 2000 to your 91 very quickly. Now Dan if you could read me the organization that apparently has the least amount of buildings this is what things seem to get interesting.

[00:20:50] Yeah number 66 on the list as infrastructure Canada with a total of zero buildings last on the list is like government organization that I you would think or at least hope would have one building not just several more people.

[00:21:04] According to the website they have no buildings or land or anything okay so interesting random takeaway do with that what you will but let's climb back out of the rabbit hole together and get back on track here.

[00:21:15] So as Canada's largest land owner the government promised in its 2024 budget to reduce its office portfolio by 50% the document said that the public services and procurement Canada had over 6 million square meters of office space with the known to have either being underused or just completely vacant.

[00:21:40] Now earlier in the show Nick you mentioned that the liberal government had a larger housing plan which aims to create 3.87 million new homes by 2031.

[00:21:49] Yeah exactly Dan and we did a full episode on that housing plan as well as one of our webinars so go check out that episode episode 193 five of the most important changes in Canadian real estate and that's where Dan and I pull I think it was five with a few bonus.

[00:22:05] Thw either things that we thought were the most important out of that housing plan but overall here's a very quick highlight refresher now again this is a very robust document so this is really high level stuff but the plan outlines several initiatives to address housing challenges and boost the construction of affordable homes across Canada the first one being public lands.

[00:22:28] For homes plan so something we just discussed which is utilizing federal provincial and territorial and municipal lands for affordable housing developments in partnership so we have that public private partnership with builders to maintain that long term affordability.

[00:22:45] The next one is the apartment construction loan program which is 15 billion in loans to construct a minimum of 30,000 new rental units with a goal to create over 131,000 new apartments by that deadline.

[00:22:56] The next on the list is Canada builds initiative which aims to build affordable middle class homes on under utilized lands using a mix of both federal loans and provincial investments.

[00:23:08] The next is indigenous housing support providing targeted investments to improve housing conditions for indigenous peoples in various areas.

[00:23:15] Home ownership and a rest rental assistance make the list as well where launching tenant protection funds and leveraging rental payment history to enhance credit scores for tenants.

[00:23:28] As well as to increase the home buyers plan with draw limit by 25,000 and to extend mortgage amortizations for first time buyers.

[00:23:37] It's interesting that credit score piece say like because I feel like that infrastructure already exists like we did some videos on social media for checks.

[00:23:44] I know the advertised on the Canadian investor podcast as well but basically you can pay rent with your credit card and they have a program to.

[00:23:55] If you're a points collector, I always understand the risk that potentially if you don't pay credit card off like you know could be a debt trap but I think the idea is that if you're a points collector whatever you can build credit get some points get some bonus back so check them out as well.

[00:24:11] I can't remember the website but they're doing great work and kind of I feel like any of those companies like them there's a couple of other ones are all really well poised to take advantage of this program that the government's first sure and about time that something that comes up.

[00:24:55] I mean, maybe that sound like it was for tenants but it definitely was for the whole system.

[00:25:00] The next one is affordable housing and homelessness elimination one billion for the affordable housing fund in a 1.5 billion dollar Canada rental protection fund.

[00:25:08] I don't really know any details on that one but just sounds like throwing big billion dollar numbers that stuff.

[00:25:13] I'm going to have a billion here billion there what's it for who knows but serves with a B they kind of final one that we're going to touch on here something kind of near and dear to Dan and I as heart is the skilled.

[00:25:23] I think that's a lot of the things that we're going to do is to make sure that the government is going to be able to provide a lot of work for us development so that aims to provide 90 million dollars for apprenticeships 10 million dollars for trade awareness and 50 million dollars for credential recognition focusing on residential construction now.

[00:25:39] I don't see a billion there you know 10 million 90 million compared to a billion dollars is absolutely nothing I think there should be way more attention.

[00:25:48] Put on skilled trades workforce development like literally how are we going to get out of this mess that we're without skilled trades right so we're talking about to see more allocation of funds and attention here they just need to make hard hats I can fit the broccoli here.

[00:26:06] I'm talking about Jen's year. How do we get that's why it's perfect terms to to mess them up and put a heart at that's not going to be right there.

[00:26:14] I'm going to make a 17 safety on the construction site and tubes oxygen for two blocks short shorts and broccoli here on site.

[00:26:24] Okay, so those seven things that we just outlined from again a very robust plan but forward by the current government aim to increase housing supply improve affordability protect tenants and expand skilled trades.

[00:26:39] That are necessary for their construction projects that are going to get out of the mess that we found ourselves in here. Yeah, now let's get to a quick summary of the public lands plan I guess.

[00:26:48] Yes, so Canada is addressing its housing crisis by leveraging underused public lands to build affordable homes.

[00:26:54] The government's housing plan, which was outlined in budget 2024, which we also covered at Eons to again create that what I consider at this point to be probably an impossible number of 3.87 million new homes by 2031 included in that 3.87 million is that 250,000 homes that we've mentioned in and that'll be via the public lands for homes plan now this plan involves utilizing surplus federal lands and acquiring more of that land for housing.

[00:27:24] And we've been releasing lands to keep homes affordable for the long term. So again, really banking on that public private partnership and facility and faster development with legislative support and mapping tools.

[00:27:39] So you know, legislative support would be ideally cutting back some of that red tape that were so wrapped up in here in Canada.

[00:27:46] Yeah, the planning includes building on lands owned by Canada Post and National Defense and converting bacon federal offices into housing. So a little bit of the office residential conversion.

[00:27:56] A $500 million fund will help acquire additional public lands for development. I thought they already owned them, but I guess I got to buy them also sounds like a bit of a pawn Z to be.

[00:28:06] Yeah, you know I remember that when I worked in the public sector sometimes I would be seeing in voices and I'm like, I guess like it does make sense. Like these guys all have to pay each other still, you know, like they can't much to be an accounting nightmare, but yeah, I mean, like so if it is owned by one side of the government, they got to make the other side on it. I don't know anyway this part of that.

[00:28:24] Yeah, this comprehensive approach. You know we have an AI for that yet. The comprehensive approach relies on collaboration across various government levels to ensure for the housing for future generations like the broccoli here non hard at wearing folks that we mentioned.

[00:28:41] So here's what you need to know Canada is huge. The government has has a big portfolio that isn't in great shape because really like what are you going to do with this stuff and we mentioned the last episode government employees aren't going back to the office as much as other sectors.

[00:28:55] I think they have the lowest returned office and so they have these loose plans to utilize existing infrastructure. So the question remains, is this a good thing? What do you think?

[00:29:05] Yeah, I mean before we jump into that, I do have a quick example of a little piece of government affordability which which again was just right with the the web comments, but you know,

[00:29:24] the colliers cap rate report is one of our most recent episodes and within that we talk about the different asset classes, right? We've got class A office but then we've got class B office which is traditionally obviously not as attractive as the class A.

[00:29:41] But class B I feel like as we're government liais right government's not out there like you know the pension funds and the tech companies getting the sexiest offices.

[00:29:49] They can't really get away with it. Yes, small windows kind of brutalist architecture. Lots of concrete maybe really outdated systems so you know I think I don't know.

[00:29:59] I just let's just give these small windows to some condo dwellers apartment dwellers. Yes, I guess so so before we get to because I do want to kind of close out this this with a bit of a conversation and we got some questions that I want to ask you and you can ask me and then get the get our audience thinking here but before we do that there is one example we can look at of recent government affordability, which actually made some content on on my Instagram,

[00:30:24] which was met with the same reaction. I can't count the amount of times I've had the yellow nothing and be happy in my Instagram comments now

[00:30:33] I'm probably less than you at a soon, but I'm sure we both get that that a lot now this can be found for me

[00:30:39] Am I my response whatever people post that that comment on my TikTok or whatever? It's always on TikTok for me, but I just say when do I get to the be happy part

[00:30:49] Yeah already I already own nothing when do I do the be happy part very good point yeah, they don't think talk about that

[00:30:54] They just talk about only nothing. I guess the be happy that is that carrot that you'll forever seeking

[00:30:58] So this is from a national post article called Freeland as an Christian Freeland finance minister Freeland tells a

[00:31:05] Portable development renting 330 square foot units for $1,600

[00:31:10] Dan I took this article. I put it into chat GPT. I got it to summarize it for us

[00:31:16] Can you read this quick summary? I will but one of it's funny

[00:31:22] Actually let me already didn't then I would have give you my comments every good comment on this so I

[00:31:27] New rental high rise in Victoria BC highlighted it as a part of the government's effort to provide affordable

[00:31:32] Low and middle class or middle in middle income Canadians with

[00:31:37] Through the apartment construction loan program Hudson House 227 units the rents are considered high

[00:31:42] Bicostal BC standards two bedrooms at $3300 in the smallest studio rents for 1680 despite steep rents

[00:31:48] It meets federal affordability criteria by having 20% of the units aligned with local income standard

[00:31:53] So this is an uncommon right like you often see this with this people using the CMAC program to get

[00:32:02] Use really small suites like there's no it just has to be 30% of median household income

[00:32:06] So you're basically just saying oh like that sucks for you if you're the affordable

[00:32:09] The person who needs affordable housing you're just reserved to a really small unit because much like the way I play golf

[00:32:15] Like this is gonna be good here we go. Oh

[00:32:18] If you ever want to have a lower golf score

[00:32:20] This is a really really good secret for all that

[00:32:23] No, no play fewer holes

[00:32:27] So I just play nine right and and they're doing the same thing with these units

[00:32:32] It's like oh well why build a 600 square foot unit and rent it out for $3300 a month

[00:32:37] When we could just build half of that and then we were just used the rent

[00:32:41] So it's you know you were talking about government math real-term math. That's Dan's golf math before you

[00:32:46] You know, they use the exact same principle which I don't know what it's called

[00:32:49] But it's this magic thing that happens when I only play half the course my score improves significantly

[00:32:55] I I should take that tactic because my golf score is is knock you, but you know what it is not as bad as a 330

[00:33:01] Square foot apartment for $1,600 that is being sold to Canadians as affordable

[00:33:07] Developments because I don't care what political rhetoric you shape around something like this

[00:33:15] You're not really fooling anybody at these days right?

[00:33:18] Canadians are too smart for this kind of stuff. This is all in the public. Yeah, you've got people such as ourselves and

[00:33:24] much smarter people

[00:33:26] Commentary providing commentary on this stuff and you know Canadians overall aren't I'm happy so I got a couple of rapid fire questions

[00:33:34] I'll spit them out so everyone can kind of get thinking about them

[00:33:36] And then let's let's spend the next couple minutes chatting about these so first things first

[00:33:41] Will this even do anything?

[00:33:43] Second thing will this ever happen or is this just kind of kicking the can one more year down the 10 year row that that can has been kicks since the first time

[00:33:53] All this stuff was announced back in 2015 second or sorry third thing is you know, and we've got an episode coming up with this

[00:33:59] We won't go too into detail because it is a detailed process, but how harder some of these buildings

[00:34:04] Going to be the convertible national post office mode military site. I just demo them right yeah

[00:34:09] Exactly, okay, so we're demoing but you know

[00:34:10] I guess are we turning some of the stuff in auto up maybe into

[00:34:14] For like the office to to rest of well there like their buildings all over the country

[00:34:19] So and then final question. Yeah, how do we think developers in the private sector are gonna respond to the government kind of reaching out saying hey

[00:34:28] Getting a business with me for the next nine years. I mean, I've said this a number of times on the show

[00:34:33] You know like I publicly basically called through a bailout of developers recently

[00:34:38] Much about a spay you will love nothing. It was not an idea. Don't don't ever do that, but

[00:34:43] This is not a bad idea like

[00:34:46] Whether the execution remains to be proven and I understand why Canadians don't have faith in the existing government to

[00:34:53] In their ability to execute especially on the timeline that they've mentioned like early starting in early 20 25

[00:34:58] Because these are many of these are brownfield sites like it's

[00:35:03] It sounds to me like a

[00:35:06] Like policy makers who just don't understand how complex it is to get real estate developed to be like oh, yeah

[00:35:11] Like let's just you know like when somebody's like oh hey, can you do this project for me?

[00:35:16] But I need it done like tomorrow and you like oh well, no, but that's a 30 hours with the money

[00:35:21] Only guy who's gonna do it for you. So you pretty much put me in that position anyway

[00:35:25] And they get mad when I don't do it so there's a lot to unpack here

[00:35:29] The first question was will this do anything if they deliver?

[00:35:32] It should right like they can technically control the rents

[00:35:35] If they're gonna ask developers or builders to do to do that piece

[00:35:38] They're taking one of the big risks out of it from my perspective, which is as soon as the government does

[00:35:43] Anything really they overpay no offense if you're in the government, but you tend to do that

[00:35:49] Like you know I mean contractors just know like even if you go to the altis cost

[00:35:53] Construction cost report there's literally different prices for public sector private sector

[00:35:57] You build the exact same thing. You charge the public sector twice as much and like on recent public takes always way longer

[00:36:04] There's always yeah

[00:36:05] Excess up delay is end of the idea

[00:36:07] It's just because you don't really have experts in the space. So assuming they outsource it properly that

[00:36:11] That could could do something, right? So first question world is doing anything in a ideal world

[00:36:16] Yes, yeah, it should if they do it the way that they that they say they're going to yeah, okay second question

[00:36:22] If this you know ideally has to have something but will this even happen right going back 10 years

[00:36:28] We started the year about this stuff imagine

[00:36:31] If even these first five projects had been started 10 years ago or eight years ago or five years ago

[00:36:37] Yeah, I think that this was borrowed from Pierre's platform actually like a lot of the things seem to be and again

[00:36:42] Like no offense intended it just like it seems like they tend to agree on more things when it comes to housing than they then they let on and

[00:36:49] I would say that it would probably it could happen it will happen

[00:36:53] Maybe not at the scale that they're saying but like

[00:36:57] This isn't is necessary like when I said like

[00:37:00] Builders were gonna need to be bailed out like that's what's happening right now

[00:37:04] They're just doing it by giving them land rather than by buying the units that I'm saying right like

[00:37:09] And so a little bit of a red hair, and it's like hey, we're not gonna give them money because that way

[00:37:13] It's everybody off but how about 99 year lease and we have a great term

[00:37:17] Now that doesn't solve a ton of the problem, right? So you know if you're developer and you let's say your your sites are

[00:37:23] $100 available foot you bought all of your sites and Toronto for $100 available foot

[00:37:29] And you get this now at zero, but you have to pay it over time or you're paying a lease or whatever

[00:37:33] assuming you're building a rental

[00:37:35] It still doesn't solve for the $800

[00:37:38] Remaining total creation costs for high rise, right? So

[00:37:42] Something else needs to be done for that. Maybe that's where the apartment loan construction program comes in or something like that

[00:37:47] But what this like I think it will happen

[00:37:51] I think that it will probably be this will probably be a program that will continue to happen throughout like I'm

[00:37:55] Expecting a political change. I think polls just are indicating that so that's I

[00:37:59] I honestly don't really love to get into this stuff

[00:38:02] I like talking policy and it fascinates me, but like you know

[00:38:05] Who's good who's bad whatever?

[00:38:08] I don't I just kind of try and model my investment decisions based on what I think is the most likely outcome right like when people are like

[00:38:14] Oh Dan like you're you think like your your weft like shell like because you think like honestly people say that

[00:38:20] Because because you because you think that like we should multiply

[00:38:23] Except everyone's houses and like make force boomers to sell their homes and put

[00:38:27] Turn it convert them to multi-lexes or whatever like just dumb stuff like that right

[00:38:30] But it's like no I just I just can see what's happening and that's the most likely outcome of what like

[00:38:37] You can't just keep growing the population at this rate without needing to take existing supply and cut it up

[00:38:42] Unless we're building a ton of new supply which we weren't well unless we didn't have all the other

[00:38:47] Problems what we're facing on the rubber construction construction materials right that side of things right and so when I'm when I was talking about the builder bail out

[00:38:56] Originally I was saying I wasn't saying that I feel that this isn't maybe something that has to happen

[00:39:00] I was just saying that this is something that is going to

[00:39:03] Right that I think that should happen because I think that economic Darwinism should be allowed to

[00:39:08] Exist right you know survival of the fittest

[00:39:11] Evolution by economic selection you might call it right. I think that that should be allowed to exist

[00:39:16] But it will be something that is necessary to say the Canadian economy and this is the shape that it's taking because now all these builders who like if they're saying

[00:39:24] What is it tens of thousands of units all these builders who have will have nothing to build in

[00:39:29] 26 and 27 right because nothing selling today and last year

[00:39:33] 2324 there's no sales in the pre 75% reduction in pre construction sales

[00:39:38] Which would you would assume is a 75% reduction in pre construction

[00:39:42] Activity or construction activity for for residential in 27 26 27 28 maybe I don't know whenever those projects should have started

[00:39:49] That's what they're

[00:39:51] Trying to create

[00:39:53] The solution for from my perspective at the same time you get to create the solution of

[00:39:59] You got some houses out of it. Yeah, so I think I'm actually expecting a good response from developers

[00:40:04] I think well, I mean look at the green belt like you mean

[00:40:07] If you if you give people a good incentive to to do something like you're you dangle the right

[00:40:12] Carate for them to develop housing as an example because the green belt was that they're going to go after it

[00:40:17] Right like especially in a market where they can't they can't economically build anything else

[00:40:23] Like without this program

[00:40:25] You're gonna like this will this will save quite a few builders from bankruptcy to be honest with you

[00:40:29] I really feel that and and I think that that's honestly probably an underlying piece of this policy

[00:40:33] Like yeah, it's gonna get a bunch of houses built with the buy products is that it also keeps all of those trades

[00:40:39] Employed right like imagine you're building a high rise right now

[00:40:42] Like there's no new holes being dug right so if you're building a high rise right now

[00:40:45] You're probably not in a hurry to finish it because as soon as you're done that project

[00:40:49] You got to know more work right like you're hearing about we talked about this on the show

[00:40:53] You're hearing about union trades moving out of province out of country

[00:40:56] There's unions like you know I've heard of unions moving like Seattle they're cool right like on some of these projects for

[00:41:02] Electrical and plumbing, you know, I mean, you know, it's funny because we look at so you know the big developers also

[00:41:10] Speaking of land banking the big developers a lot of the time have that

[00:41:14] You know pipeline of land that they're playing on building

[00:41:17] But I completely agree I think a lot of the you know smaller to mid-capped developers that you know

[00:41:23] Either

[00:41:24] Group substantially or maybe grew too fast over the last couple years that they're are gonna play a critical role in in

[00:41:30] Working and building our way out of this problem. I think this will be a great

[00:41:34] Public private partnership and you know, I guess my my only last thought is what what is it?

[00:41:39] Look like to get in bed with the government and on a lease for 99 years

[00:41:43] You know what kind of stipulations what kind of fine print that would be the only thing that that I would want to see

[00:41:49] So as this whole policy and and plans start to come more into effect

[00:41:55] Maybe we see some of those first five buildings actually get worked on

[00:41:59] I'm really gonna be interested to see who teams up with the government what that looks like it's a

[00:42:04] Deforetable so with all that being said

[00:42:06] This probably won't be the last time we talk about this. I hope everyone got a ton of

[00:42:12] Value out of today. Dan any closing remarks on this subject matter?

[00:42:16] No, no really I think it's interesting. I don't be watching it very closely. I'm certainly going to be

[00:42:20] Talking about it on social media. I'm sure so

[00:42:23] There you go stay tuned. Thanks so much for listening. We'll talk to you soon

[00:42:27] The Canadian real estate investor podcast is for entertainment purposes only and it is not a financial advice

[00:42:34] Nick Hill is a mortgage agent with premier mortgage center and a partner in the G and H mortgage group

[00:42:41] Licent number one zero three one seven agent license m two one as zero zero four zero three seven

[00:42:49] Dino photos is a real estate broker license with rare real estate

[00:42:54] A member of the Canadian real estate association the Toronto real estate board and the Ontario real estate association