Only 10 per cent of Kelowna rental building permits are affordable housing
Roughly 10 per cent of building permits for new rentals in Kelowna are going to be affordable, despite that the city's housing policy manager said the rental market is starting to make a turn for the better.
“We're going to be entering into an era in Kelowna in which rental housing is easier to come by, and doesn't jump up in price as rapidly as it has in the past,” James Moore said.
Affordable housing is housing with rents at or below the average rate and even though the vast majority of Kelowna’s incoming rental stock isn’t going to fit that definition, Moore said the new builds are going to lower rents across the board over time regardless.
There are currently 4,607 purpose built rental units that have received building permits from the city, and 473 units have been identified as affordable. Those homes are likely to be finished within the next three years.
Although that ends up being 10.2 per cent of new builds classified as affordable, Moore said new supply will still bring down the cost to rent older units.
“In a supply constrained market, older units rent for not that much less than new units because there is so little choice. People have to pay what they have to pay, but as the vacancy rate increases and people have a bit more choice, it's more difficult for older units to charge as much, because tenants will just leave for nicer, newer units for that price,” he said.
Kelowna’s rental market hit some good milestones in 2024. The Canada Mortgage and Housing Corporation reported the vacancy rate jumped from 1.3 per cent to 3.8 per cent. Rentals.ca reported that one-bedroom apartments were 0.8 per cent cheaper and two-bedrooms were 1.4 per cent cheaper than they were at the end of 2023.
These are positive trends, but Moore said renters won’t notice the impact in their bank accounts until the numbers are a bit better.
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“The general rule of thumb is that you probably won't start seeing broad-based declines in rent prices until you get above five per cent in the overall vacancy rate,” he said.
While the city has a general sense of how much rental stock is coming in the near future, Moore said it can’t track the exact scheduled occupancy dates. There have been 1,245 new units occupied in the last three months.
There are 3,733 purpose-built rental units that are under development application, and 603 of those units will be affordable, but most likely none of them will be finished within three years.
Moore said stacking policies that give bonuses to purpose built rentals has made those developments more appealing to builders. The city allows purpose built rentals to have extra square footage and require fewer parking spaces compared to other types of housing. The city also has tax exemptions for purpose built rental housing and zoning incentives to make the approval process easier for rentals.
“Considering we've had a real shortage of rentals for probably nearly 20 years, putting those incentive pieces together, I think will be very healthy for our local housing system. And I think we'll leave a legacy of a healthier housing system for many years to come,” he said.
Moore said the city council is going to get a report on rental housing in February.
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