Building and investment key to fixing Yellowknife rental market, experts say
The North’s rental market has high prices, few choices, and bad buildings — is a better market possible?
Full disclosure: One of the reporters involved in the creation of this series lived in Northview housing.
In Yellowknife, the rental apartment buildings' days are numbered.
Take a tour through its existing multi-family rental housing, and you'll find that many of the buildings are aging fast.
According to the Canada Mortgage and Housing Corporation, just one in four rental buildings in Yellowknife were built this millennium — and of rental structures built before that, more than 40 per cent are in need of repair.
But construction of new rental units has slowed to a crawl — in fact, in the last five years, Yellowknife has added only 20 new rental units, compared with nearly 600 in Whitehorse over the same period.
That's contributed to the city's hostile rental market, where rental housing is often in a state of disrepair and is largely controlled by one company.
Read the other pieces in this series:
To an outsider, this might seem puzzling. Yellowknife has some of the lowest vacancies and highest rents in the country — surely that should be attractive to investors.
And its rental market is certainly profitable to some — the city's biggest landlord, the Northview Canadian High-Yield Residential Fund, isn't called "high-yield" for nothing.
"In most markets, like in Calgary or Edmonton or whatever, you would just build more stuff," said Rob Warburton, co-founder of CloudWorks, a Yellowknife real estate investment company. "There's high demand, which we generally have, and rental rates are high."
"But you can't here…. You can't because construction's too high, costs are too high and access to land is challenging."
The good old days
It wasn't always thus. Gordon Van Tighem, mayor of Yellowknife from 2000 to 2012, says he remembers a time when Yellowknife families were buying new plots and developing new properties every year.
"What you really need are young people that are upcoming, looking at how they can invest in the local marketplace, and doing such things," he said.
But for today's developers, it isn't quite so simple.
"The economics is such that it's really hard to replace that old housing stock when … you're paying 2021 construction [costs]," said Wayne Guy, a Yellowknife architect.
In the 1970s and '80s, Guy said, construction costs were "anywhere from $80 to $90 a square foot."
"Now you're dealing with construction costs, for new, anywhere up to $450 dollars a square foot," he said. "It's a whole different ball game."
That makes the math much harder for rental properties, which need to be able to ask enough in rent to cover the costs of buying land, construction, and financing.
"You can't build it cheaply enough," said Guy. "That's why the housing market has sort of gravitated towards condominiums."
High costs concentrate ownership
That financial reality is one reason the housing market has grown more concentrated over time.
Adrian Bell, a Yellowknife realtor, explained that most developers plan to sell their buildings to rental companies after a decade or so.
"When local developers, back in the day, built their … buildings … that was their exit strategy, because the [real estate investment trusts] are the only ones buying," Bell said.
But in the North, only one REIT was buying: Northview.
"We have a very hard time attracting anybody to invest in real estate in the North, in commercial and multi-family residential," he said. "If they don't understand a place, if they're not in the habit of doing business there … they want nothing to do with it. It's an unknown. It's risky."
Taken together with Yellowknife's high construction costs, it's one reason why Bell and others think government intervention is the only thing that will disrupt Yellowknife's rental monopoly.
"It's not realistic to say we want somebody to build shiny, new, and affordable [buildings] unless the government is involved," Bell said. "It's important to be realistic that the math just doesn't work."
Where is the government?
In part three of this series, we explored how the government was largely uninvolved during Northview's rapid expansion in the North, and how many politicians today are reluctant to comment on its market dominance.
Housing Minister Paulie Chinna, Infrastructure Minister Diane Archie and officials from the Northwest Territories Housing Corporation, for example, all declined to comment for this series.
But in an interview with CBC, N.W.T. Finance Minister Caroline Wawzonek did suggest that "there can often be ways to use government dollars to influence the market."
"There can be opportunities to … use your [tax] dollars in a way that can support, say, a local landlord or other local company," Wawzonek said.
If the government does want to get involved in encouraging competition in the rental market, observers say there is a lot they can do.
For Guy, any level of government could step in to make it more affordable to build, offering subsidies and tax abatements to those willing to add to the housing stock.
Reassessing the value of expensive but "underutilized" downtown lots could also make it more attractive to build, he said.
Yellowknife Mayor Rebecca Alty suggested the city could also revisit zoning bylaws that require seas of parking for multi-residential buildings, which often force developers to buy adjacent plots at high cost.
Be a choosier tenant
But perhaps the most effective intervention would be if the government was simply more selective about who they rent from.
As we explored in part three of this series, the territorial government is actually one of the biggest contributors to Northview's coffers, paying tens of millions each year in rent for office space and public housing.
To Yellowknife North MLA Rylund Johnson, "that is millions of dollars that should be going to local landlords, to Indigenous development corporations, and to anyone willing to make sure that our government's rent money stays in this territory."
Critics like Johnson say instead of signing leases with massive southern landlords, the government should build its own housing — which a 2017 housing corporation report found was actually cheaper most of the time. (CBC was denied access to that report.)
Where it can't build, Johnson wants the government to adopt a procurement process that gives a leg up to local and small-scale owners when looking for space.
"I think the [territorial government] has really been lazy in looking at leasing both commercial and residential," Johnson told CBC. "[It] could really break down some of its office space requirements [and lease from] smaller landlords."
'Not the same planet'
In places where the government has partnered with local landlords, the benefits are clear.
On its ground floor, Yellowknife's Northern United Place hosts a church, a community hall, and the Yellowknife campus of Aurora College.
Above, it offers subsidized rental housing and student accommodation geared to residents' incomes.
Lloyd Hamilton, president of the N.W.T. Community Services Corporation, which owns NUP, says that regular rental income from the territorial government is the only thing that makes its subsidized housing possible.
"It's critical to it," he said. "There's no question about it."
But when other local landlords try to strike a similar deal, they find they must compete with a massive southern landlord that can offer dozens of units and thousands of square feet of commercial space while taking on significant financial risks.
Warburton says, in effect, that means the city has "two unique markets": Northview, and everyone else.
"The territorial government and federal government who lease all spaces, they don't differentiate between those two models," Warburton said. "They treat it like it's all the same."
"This is very solvable … but it requires a hard conversation where you've got to acknowledge that it's not the same planet," he said. "It just doesn't work for locals the way it's currently set up."
Times are a-changin'
There are signs that all levels of government are taking notice of the issues in Yellowknife's rental market.
On May 31, the federal government made its first investments in new multi-family housing in the Yellowknife area in years, announcing nearly $19 million for the Yellowknives Dene First Nation to build 19 units of made-in-the-North affordable housing.
The City of Yellowknife committed $800,000 of its own federal funding for a local non-governmental organization to buy a building for affordable or transitional housing.
A new inter-government committee has been struck to examine the housing issue. And recognizing the territory's sway in the rental market, Wawzonek said she was open to revisiting how leases were arranged as part of an ongoing review of the government's procurement practices.
"There may be a way to influence the local real estate market in a positive direction and to deliver better value," she said.