Economists point to zoning laws, not REIT profits, for rent increases

Click to play video: 'Boardwalk REIT reports strong results as rents climb; economist blames restrictive zoning laws'
Boardwalk REIT reports strong results as rents climb; economist blames restrictive zoning laws
Boardwalk Real Estate Investment Trust reported strong results for 2023. The company is reporting occupancy at 99 per cent, rising profits and declining expenses. As Carolyn Kury de Castillo reports, economists say don’t blame companies for making money off rising rents; blame municipal rules. – Feb 23, 2024

Nikhil Kulkharni likes where he lives in Calgary’s Beltline, but he’s looking for a new home now that his rent is going up.

“If we get some better deal, some affordable house, that’s what we’re looking for now. My lease (with Boardwalk) is going to end in April,” he told Global News.

Boardwalk Real Estate Investment Trust reported strong results for 2023 at a conference call on Friday in Calgary.

According to report to investors in 2023 Boardwalk had a profit of $666.1 million and that February shows a preliminary occupancy of 98.8 per cent.

“During the fourth quarter of 2023, lower vacancy loss and incentives, along with positive market rent adjustments, supported Boardwalk’s Calgary portfolio increase in same property NOI (net operating income) of 20.8 per cent in comparison to the same quarter prior year,” read the report.

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“That’s a very lucrative return, but that in itself isn’t indicative of exactly where the problem is. It’s not them that’s causing the problem,” said Concordia University economist Moshe Lander.

He said Boardwalk and other rental companies are not blame.

Lander said that the City of Calgary is not doing enough to pass zoning laws that encourage high density development.

“Part of the reason for the failure is that city council is at least partly being influenced by local taxpayers who say ‘The biggest asset I have,  if it’s not my pension,  it’s the equity in my home, and if you approve all this high density development, you’re going to push down housing prices and that will succeed to some extent, but you’re going to wipe out my equity in the process,'” Lander said.

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The City of Calgary is in the middle of an information campaign ahead of the April 22 public hearing for a proposed citywide rezoning to a single base residential zone. In September 2023, city council approved a new housing strategy aimed at increasing density citywide.

Lander said homeowners vote disproportionately more than renters, so city councils tend to favour homeowners.

Click to play video: 'Record rent hikes in Calgary: report'
Record rent hikes in Calgary: report

“They put up very restrictive zoning laws that lead to nearly 99 per cent occupancy rates and waiting lists as long as your arm, because there’s no incentive to bring on more housing,” Lander said. “Homebuilders would happily do it if they had the greenlight to do it, but it gets clogged up in the approval process and the zoning process, and that just discourages the development in the first place.”

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Lander said it’s easy for voters and politicians to blame the lack of rental homes and high prices on immigration to Alberta.

“If I blame it on immigrants, then everybody feels better about themselves. People feel better about themselves because you don’t want to tell the voter that you’re responsible for this,” Lander said.

Malik Shukayev, an associate economics professor at the University of Alberta, said Boardwalk’s rent increase is not a matter of gouging.

“I see the increases in rent as more catch-up with the general price level and of course it’s going to make it harder for people to pay, particularly people with fixed incomes,” Malik said.

“The big problem right now is insufficient supply of rental accommodation. So if we start blaming the companies that provides accommodation every time they make profit, I think we’re likely to make the supply problems even worse,”

Lander says there’s a bottleneck and it’s not the fault of the existing companies that are managing these properties.

“Homebuilders are going to start pressuring city council as well saying ‘Do you see the juicy returns that are available here? Why are you not letting us take advantage of them? Think about what this could mean to your tax base if you just let us in and start building,'” Lander said.

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Boardwalk CEO Sam Kolias said at the Friday conference call that Alberta is seeing record inflows from other regions of Canada and that rents in Alberta remain some of the most affordable in Canada.

A recent report from showed rental rates in Canada hit a record high, with the average monthly apartment rental rate in January at $2,146, an increase of 11.6 per cent from a year ago.

Click to play video: 'Feds commit $228M to Calgary to help build thousands of homes by 2027'
Feds commit $228M to Calgary to help build thousands of homes by 2027

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