'affordability gaps' mark metro vancouver's volatile housing market, says new report for mayors
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earlier this week, the federal government announced a $763 million low-interest loan to help developer grosvenor finance construction of about 1,300 rental units in two rental towers in burnaby's brentwood area.
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a new metro vancouver report offers a mixed outlook — from hopeful to bleak — on how the region is faring in its housing objectives.
while construction of purpose-built rentals is at an “historic high,” most units are being rented out at market or premium rates, “leaving affordability gaps.”
while all levels of government have taken meaningful steps to increase housing supply, the condo market has cooled and some segments of the market have slowed substantially, resulting in stalled projects. high construction costs and “permitting volatility” are some of the reasons cited.
“senior governments have introduced major measures to influence housing demand and supply, which have had implications for municipal decision-making and financial capacity,” the report states. “these changes have created both opportunities and challenges across the region, including shifting development patterns, increased financial pressures and complex implementation requirements.”
here’s what the report found:
a surge in rental developments
there has been a shift to building dedicated rental units, which are supported by provincial incentives, density bonuses and federal financing programs.
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“while this has added thousands of new units, most are at market or premium rents, leaving affordability gaps,” the report states, adding that rents are on a “slow but steady downward trend” as supply starts to increase.
earlier this week, the federal government announced a $763 million low-interest loan to help developer grosvenor finance construction of about 1,300 rental units in two rental towers in burnaby’s brentwood area.
there is a shift to build dedicated rental units, which are supported by provincial incentives, density bonuses and federal financing programs. while this has added thousands of new units, most are at market or premium rents, leaving affordability gaps, the report states.
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to qualify for this loan, at least 20 per cent of these 1,300 units must have rents at or below 30 per cent of the median total income of all families in the area for 10 years.
if you divide the size of the federal loan by the number of units, it yields a back-of-the-envelope estimate for the cost of building each unit at about $587,000. but if you factor in land and other fees, the cost is likely much higher and closer to $700,000, says rick illich, chair of the urban development institute, which represents developers and builders, and founder of vancouver-based developer townline.
“it’s a very big commitment by the developer,” said illich, referring also to the time it will take to recoup costs through collecting rental payments.
“the whole issue around affordability is pretty simple to articulate and pretty difficult to solve. incomes have not kept up with the cost of housing. when you look at what you can do to either increase incomes … or to reduce the cost of producing housing, the only way to do that is through policy change.”
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he said as various levels of government layer more requirements for developers, such as new building codes for energy efficiency and reducing carbon footprints, there are higher costs and the result is mostly market or luxury rental.
he argues there needs to be consideration by governments to prioritize building more modest rental units.
highrise condo market slowdown
the staff report describes metro vancouver’s condo market as “experiencing a pronounced slowdown.”
unsold inventory is projected to rise by 60 per cent by the end of 2025, reaching its highest level in years, due to sluggish presales, higher borrowing costs and reduced foreign investment following the federal ban on non-resident purchases, which has been extended to 2027.
“some developers are converting condo projects to rental to maintain viability,” the report states. “interest rates are coming down, which may have some positive effects on project viability.”
challenging market conditions
the cost of building residential housing and infrastructure continues to be high due to labour shortages, volatility in prices and changing regulatory requirements.
construction costs, which make up between 48 per cent to 73 per cent of total costs, have increased 58 per cent from the second quarter of 2018 to the same period in 2025.
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land costs are the second biggest driver of overall costs that are impacting the viability of projects.
the volume of building and permitting is in line with overall trends, but there has been a lot of volatility in the number of housing starts in the last three years. numbers have fluctuated significantly as developers face financing challenges because of high interest rates, rising costs and reduced demand, the report states. some are delaying and cancelling projects as it has become harder to meet thresholds for the number of units that have to be pre-sold in order to qualify for construction loans.
community amenities taking a setback
many municipalities, the report notes, are on track to meet or exceed housing targets.
however, a weakening condo market will also impact the ability of municipalities to capture public benefits through so-called amenity cost charges — contributions from developers to pay for things like daycares and libraries.
a weakening market “means municipalities face pressure to relax or eliminate amenity contributions, bonus contributions, inclusionary housing requirements or other policies to support project viability, particularly for highrise developments where margins are tightening,” the report states.
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and as municipalities enact legislative changes to mandate minimum densities, that could lead to “new and previously unanticipated growth patterns, with implications for infrastructure and growth.”
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