Here’s some data (via Jeremy Withers) explaining that a large portion — about 61% — of new condominiums built in Ontario between 2016 and 2021 were not owner-occupied. In the case of low-rise houses, the figure is lower — about 24%.
Now, the premise of Jeremy’s tweet storm is that non-owner-occupied housing is bad and that the government should be doing more to discourage this. Simply taxing and restricting foreign buyers is not enough (and I agree that this is mostly symbolic).
But is non-owner occupied really such a bad thing?
First of all, non-owner occupied implies that somebody else is renting the place. I don’t think that a significant chunk of these homes are being left vacant. So isn’t the fact that somewhere around 61% of all new condominium apartments are becoming rental housing something that is potentially positive?
One counter argument would be that these investors are bidding up new home prices and squeezing out end users. But that brings me to my second point: small-scale individual investors are a critical ingredient in the delivery of new condominium housing in Ontario.
This point cannot be overstated.
The lender requirement to pre-sell suites in order to obtain construction financing means that developers rely heavily on buyers who are willing to purchase many many years before occupancy. And this is generally a lot more challenging for end users, as we have talked about many times before.
So if it weren’t for investors, I am certain that we would see a lot less new housing getting built. And in turn, that would mean a lot less new rental housing getting built.
BRANDON DONNELLY 
Honest Q: how do you account for the fact GTA’s condo supply boom pre-dates the rise of investor ownership?
The condo supply 📈 since mid/late-90’s, but the number of condos rented actually declined until the mid-2000’s, & the overall % rented didn’t really📈until early 2010’s. Throughout the mid-90’s and 2000’s, that boom in condo supply typically provided affordable starter homes for higher income tenants exiting rental. This supported a rising rate of home ownership, healthy vacancy rates, & below-inflation rent rises through much of the 2000’s.
The rise in multiple-property ownership over the past decade coincides with the historic decline in the home ownership rate. When an investor succeeds in adding a condo or house to their portfolio, they’ve also succeeded in outbidding a prospective owner-occupier. As wealthy investor bid up and buy out a growing share of housing, a growing number of upper income residents are being crowded into a relentlessly low vacancy rental market. From this perspective, condo investment properties don’t simply expand access to rental supply – they expand the # of renters.
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What do you think of a reduced purchase price plan for condos? Obviously, this would open up condo purchases to a larger pool of buyers; how much larger depends on the discount. How much of a discount depends on the economics of a particular project, and it might only be a percentage of the total condos, like, say, using the MIH guidelines in NYC, 30%. How much would you save on marketing costs, prolonged vacancy costs to carry condos? There is a glut of high end condos that don’t sell for months, even years, in NYC, at least not for the asking price of either individual owners, or because the lender has an enforceable clause in the construction loan that the condos must be sold for X dollars psf. I wonder if there isn’t a trade-off in holding these condos vs. having condos that don’t need expensive brokers – which are paid for by the owner/developer at first.
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