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Multi-family housing back in vogue in Edmonton

After years of being overshadowed by the single-detached market, multi-family housing is back in vogue with Edmonton-region builders and homebuyers.

The first three months of 2013 have seen multiple-family starts soar by 54 per cent over the first quarter of last year, to 1,724 units.

The trend shows no sign of slowing either, as permit applications for new multi-family buildings have shot up by 92 per cent in the first three months of 2013 over the same period last year. There were 48 applications this year compared to 25 a year earlier.

By comparison, single-detached starts in the Edmonton census metropolitan area totalled 1,125 units in the first three months, up only four per cent from the first quarter of 2012.

A surge in multi-family projects — apartments, duplexes, townhouses and condos — is being fuelled by increased demand from renters and buyers who are looking for an alternative to single-detached homes.

Observers point to a continued influx of newcomers migrating to Edmonton where the jobs may be relatively plentiful, but the rental housing is aging and increasingly scarce.

“I think the most noteworthy trend that those statistics would reinforce is that there’s been sort of a revitalization of the brand-new rental housing market,” said Greg Christenson, president of Christenson Developments.

While developers built mostly rental housing in the late 1970s and early ‘80s, the multi-family market nearly died between 1983 and 1990, he said.

But multi-family rental housing is now seeing a resurgence.

“What you’ve got right now, particularly in the newer suburban areas of the city, you’ve got larger builders who are building larger projects and focusing almost exclusively on rental,” Christenson said.

Richard Goatcher, economic analyst for the Alberta wing of the Canadian Home Builders’ Association, said low rental vacancy is starting to remind him of the tight markets seen in the middle of the last decade.

Stricter mortgage rules that took effect last summer, as well as higher costs for builders, are pushing the price of single-detached homes out of reach for many entry-level buyers, Goatcher added.

“I was speaking with one of our members in Calgary who’s a major player across the province and he was bemoaning the fact that his costs have gotten to the point that in order to stay in business and to sell product, they had to ramp up more multi-family,” Goatcher said.

“If you look at the average prices in Calgary and Edmonton, they’re well north of half a million dollars for a single-family home. For a lot of people, particularly younger families, that’s a pretty tough nut to crack.

“So in order to get buyers in the door, builders are obviously having to look at more medium-density product, where they’re economizing on land and keeping the costs down.”

Simon O’Byrne, vice-president of urban planning for Stantec, said multi-family starts are trending up largely because semi-detached housing is growing in popularity for people who cannot afford a single-detached home but want some yard space.

“Yesterday’s norm was single-family, today’s norm is duplex housing and I believe that tomorrow’s norm is going to become townhousing,” O’Byrne said.

“If I talk to our clients who are developers, they say they can’t supply row housing fast enough because it’s a very affordable product and it’s getting snapped up very quickly,” O’Byrne said.

“Apartments are also surging as well but I suspect a large number of the permits you’re seeing are rental, because there’s a huge demand for rental right now within the marketplace, in addition to condominiums as well.”

Over the last 10 years, more than 90 per cent of residential development was built to be owner-occupied but almost a third of housing in the region is rental accommodation, so the demand for places to rent is high, he said.

Meanwhile, baby boomers are downsizing, and generation Y — people aged 18-35 — are delaying marriage and lack a second household income with which to buy a house. Both populous cohorts provide additional buyers for multi-family housing.

Owners of rental housing are now able to receive more than the $2 per square foot to make the investment work for wood-frame construction, and the $2.20-$2.50 per square foot return needed for concrete highrise rental, O’Byrne said.

Demand from investors is also encouraging more multi-family development.

“Interest rates are so low right now that for the big pension funds and insurance companies, there’s not a lot of places to put their billions. So, there’s literally billions of dollars of large institutional dollars that are available right now and in some cases, developers are doing forward sales to them, saying ‘I’ll build the building, lease it up and then flip it to you for a set price.’

“You talk to all of our clients and they say the same thing, there’s a lot of institutional money out there looking for a place to go.”

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