Rental Housing Stats in Edmonton and Calgary: A Look into 2023 Trends
In Alberta's bustling real estate market, the cities of Edmonton and Calgary have been experiencing remarkable growth in rental housing starts. With an increasing number of Canadians and international migrants searching for affordable housing, both cities have seen consecutive years of peak-level starts. However, as we delve into 2023, there are indications that these two markets could be on divergent paths. In this article, we will examine the current status of rental housing starts in
Edmonton and Calgary, explore their potential trajectories for the year, and analyze the impact of recent changes in financing policies.
Past Performance: Over the past few years, Edmonton and Calgary have achieved impressive records in rental housing starts. Edmonton has maintained a streak of four years of successive improvements, while Calgary has set back-to-back records. The upward trajectory in both markets highlights the efforts to accommodate the growing influx of new arrivals to the province, including Canadians seeking affordability and international migrants in search of a Canadian city to call home.
Divergent Paths: As we step into 2023, the rental housing starts in Edmonton and Calgary might follow different paths. In the first five months of the year, Calgary's results suggest the potential for another 5,000 units to be started throughout the year, indicating a 40% increase over 2022's figures of 3,600 units. On the other hand, Edmonton has started slower than the previous year, with only 1,624 units initiated during the same period, which may result in a 25% year-over-year decline.
Quarterly Perspective: When analyzing the quarterly perspective, Calgary has shown a more consistent level of starts over the past three years, gradually working its way toward stability. Edmonton, in contrast, has maintained a relatively consistent pattern throughout the first three quarters, with a significant boost in starts during the fourth quarter. Typically, between 35% to 55% of the starts occur in the closing quarter, potentially enabling Edmonton's total for 2023 to outpace the previous year's figures.
Impact of Financing Policy Changes: One factor that may impact the estimated trajectory of rental housing starts is the recent decision by the Canadian Mortgage and Housing Corporation (CMHC) to increase multiunit mortgage loan insurance premiums. This change, implemented on June 19, affects both the "Standard Rental Housing" and "Multi Unit Mortgage Loan Insurance Select" (MLI Select) programs. Premiums for the former will increase between 0.75% and 0.85%, while the latter will experience a 1.55% increase.
The higher premiums will add substantial costs to rental development projects. For instance, a $50 million construction loan could incur additional premiums ranging from $425,000 to $775,000. These added expenses, combined with the midyear effective date, have led to a rush of 2023 applications to city planning departments to qualify for the older rates. This surge in application activity may result in longer planning timelines, potentially affecting rental rates for portions of the proposed developments that aren't required to be affordable.
Current Market Rental Rate Growth: In terms of current market rental rate growth, Edmonton and Calgary bookend the major markets across Canada. Edmonton's rents have climbed by 6% compared to the previous year, while Calgary leads the nation with gains of 11%. However, forecasts indicate a downward trend in rent rate growth for all Canadian markets in the upcoming year. Calgary is projected to experience 6% growth, while Edmonton is expected to see 5%.
Observations and Future Outlook: The increased costs associated with CMHC financing programs raise questions about the potential impact on rental unit construction and the pace of rent growth. Has the mandate of CMHC's MLI Select program been undermined by these higher rates? Only time will reveal the answers as we closely monitor development applications in each municipality, particularly those participating in CMHC programming. Observations in the Western markets, known for longer planning processes, may take considerable time to unfold, potentially spanning one to 1.5 years.
The real estate markets in Edmonton and Calgary have demonstrated exceptional growth in rental housing starts. While both cities have achieved consecutive years of peak-level starts, 2023 could mark a turning point. The divergent paths of Edmonton and Calgary, along with the recent changes in CMHC financing policies, pose uncertainties for the future. As the industry evolves, it is crucial to monitor the development applications and observe how the market adapts to these challenges. Stay informed to navigate the evolving landscape of Alberta's real estate market.