Pace of Central Okanagan housing construction needs to pick up dramatically
The speed new housing is being built in the Central Okanagan is falling short of what is needed to cope with continued, rapid population growth.
“We need about 4,500 homes per year,” Jenn Podmore, a vice-president with the Rennie Group, told West Kelowna city council earlier this week. “That means we will be building at a rate that this region has never seen before and that will have to be sustained every single year for the next 20 years.”
The Rennie Group is a major real estate and advisory company that presented much of the same material to the Urban Development Institute of Central Okanagan in January.
In 2021, construction started on 3,266 new housing units in the Central Okanagan, according to Canada Mortgage and Housing Corporation data. That increased to 3,382 last year, which is still more than 1,000 short of what is needed.
READ MORE: Housing starts up more than 200% in Central Okanagan
And, while 20 years may seem like a long “runway” to get to the number of houses needed, the reality is that any developer who starts off now won’t be turning over the keys to a new home until at least 2027.
It takes 3.5 to seven years to get a four- to six-storey apartment built, Podmore said.
First of all, it can take three to 12 months to find land, do necessary evaluations of its suitability for housing and close the deal.
By then, developers have started to talk to the local governments and are racking up costs for planning and other studies.
That process can take a couple of years so it may be two to four years to get to the construction phase.
During that time, generally, the developers have to put up their own money since banks won’t lend them money until a strata unit is 70-80% sold.
That means that any delays in the application process increases the developers’ costs, which are then passed on to consumers.
Construction can take 12 to 24 months. There is still high inflation and supply chain delays so banks want them to show profit margins in the 15-18% range before approving financing.
Minimizing any delays in the process is essential if there is not only going to be enough housing built in tim to meet the demand but to produce housing that is affordable to moderate income earners.
Increased housing supply is essential as the Central Okanagan’s population is continuing to grow after being the fastest growing major metropolitan area in the country during the 2016-2021 census period.
“One of the unique things about the Central Okanagan area is we’re seeing positive migration from other parts of BC into the Central Okanagan,” Podmore said. “We’re seeing positive migration from the rest of Canada into the Central Okanagan and we’re seeing positive migration internationally.”
Of the 90,000 new people coming to the region, 49,000 will be workers and 11,800 will be children, she said.
It will be essential to focus housing on the 20- to 40-year-old demographic. It's at that age when children typically move out of home so need a place of their own (although that is starting to happen a little later than in the past).
Those are also the most mobile people and working people. If there’s nowhere for them to live, they will just leave or not come in the first place.
That age group also tends to not only be renters but often prefer purpose-built rental buildings that cater more to their interests.
Yet, 75% of new homes are owned.
“Per capita, there’s less rental here now than there was 20 years ago,” Podmore said. “Until we start building more and more rental, we won’t have that housing stock to allow people to get into the housing market and to be able to rent at an affordable rate.”
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