Lack of profitability keeps investors away from affordable housing

“Landing an apartment at $500 or less is like finding gold,” says with a touch of irony France Desroches, an agent at ACEF (Cooperative Action for Family Economy).

According to a recent report published by the Canada Mortgage and Housing Corporation, in 2007 there were more high-end ($900 or more) apartments than affordable units ($500 or less) in Laval and the North Shore.

With construction costs rising 3% to 4% a year, says Hans Brouillette, responsible for communications at the Quebec Corporation of Real Estate Owners, “$500 a month apartments don’t interest investors. It’s not profitable.”

“It would be better to support low-income families with direct subsidies rather than promote public housing which costs “between 25% and 35% more to build,” pleads Mr. Brouillette.

And seeing as how the Rental Board estimates for increases are incomplete and confusing for tenants, the motivation of property owners to invest in low-cost housing is weak. If profits are not likely, why put money into affordable housing?

Same for rent controls, says Mr. Brouillette, “with the condition that rent increases reflecting inflation and reasonable mortgage rates.”

The rental Board actually concedes a 4.3% adjustment for every $1000 spent on major work, $43 per year. “It takes 23 years to recuperate $1000,” Mr. Brouillette emphasizes. At such low returns, property owners are reluctant to renovate and the rental facilities deteriorate, he adds.