Real Estate

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The record arrival of more than one million new immigrants and non-permanent residents (mostly international students) last year has further fuelled the demand for rental housing while the growth in rental supply has been deficient.

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Large rent increases have been reported in large and small towns across the country, and that affects low-income households more. College and university students constitute a large segment of the low-income population, so they are facing increasing hardship because of insufficient affordable rental accommodation on or near campus. Furthermore, most international students come from countries with lower incomes than Canada, making them even more susceptible to rapidly escalating rents.

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Rental housing shortage is a big concern for students in large housing markets such as Toronto and Vancouver, but shortages can be an even bigger problem in small university towns. The housing stock in less populous towns simply does not provide enough safe and affordable off-campus housing opportunities within a short commute. Students, therefore, must compete for space with higher-earning would-be renters.

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Already, on- and off-campus housing shortages are restricting the growth of universities and colleges. In Sydney, N.S., Cape Breton University had to cap admissions to its two-year post-baccalaureate program because of a lack of housing opportunities in a town that is home to fewer than 20,000 residents. The program was hugely popular with international students, but the housing shortages got in the way.

Until recently, the United States was the destination of choice for hundreds of thousands of international students. But policy changes under former president Donald Trump made the U.S. less welcoming to international students, who shifted their attention to Canada, among other places, as a result.

Those international students who choose to stay will help address the impending labour shortages in Canada since the pandemic motivated many workers to retire sooner. But that’s a double-edged sword. On one hand, tens of thousands of international students are needed to help sustain innovation in engineering and other labs. On the other hand, they are exacerbating the rental housing shortage.

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“International students get hit particularly hard as they are ineligible to collect the $500 top-up to the Canadian Housing Benefit, which is designed to help households facing surging rents,” Mike Moffatt, founding director of Smart Prosperity Institute, said in a recent assessment of the 2023 federal budget.

Student housing shortages have already attracted the real estate industry’s attention. A trade conference by the Student Housing and University Real Estate Initiative (SHURE) will be held later in April at the University of British Columbia that will bring together representatives from universities, colleges, real estate management firms, investors, institutional landlords and others.

Numerous new student housing initiatives are in the works in British Columbia. For example, Vancouver Community College is building 3,300 apartments to provide affordable housing alternatives for students.

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The initiative benefits from a 2018 promise by the B.C. government to invest $450 million in 5,000 additional student housing spaces. A crucial part of the B.C. government plan was to enable colleges and universities to take on debt for new student housing initiatives. Before 2018, such institutions (except UBC) were not authorized to do so.

In Hamilton, McMaster University plans to construct a 30-storey academic hub downtown, which will include 600 graduate student housing spaces. The $100-million hub will be accompanied by another $150-million project offering 1,366 beds for undergraduates. In addition, the mixed-use buildings will house supporting facilities, such as fitness centres, to help meet students’ shelter and related needs.

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Universities across Canada offer an extensive portfolio of student housing spaces and services. For example, McMaster provides 4,000 student beds spread across 13 residences, and UBC houses 13,000 students in Vancouver and 2,120 students at its Okanagan campus.

Providing additional student housing should be a priority to attract the best talent from across the globe to Canadian universities. Provinces such as B.C. have taken steps to expand student housing facilities, but much more is needed, especially from the federal government, which regulates the flow of international students, but does not do much to assist with student housing.

Murtaza Haider is a professor of real estate management and director of the Urban Analytics Institute at Toronto Metropolitan University. Stephen Moranis is a real estate industry veteran. They can be reached at the Haider-Moranis Bulletin website, www.hmbulletin.com.

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Harry Mitz was an elementary school dropout, but a streetwise, wheeling-and-dealing entrepreneur who could make “money out of crap,” according to his son, Lewis.

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That “crap” might have been an old beater of a car that he would buy, say, for $100 and repair with some strategically placed wire coat hangers and tinfoil prior to selling for double what he had paid. The handshake deal would go down at his office in the building he owned at 185 King St. East in downtown Toronto.

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But Mitz’s true bread and butter was dealing in quality heavy machinery: punch presses, metalworking lathes, shears and other industrial gizmos that helped make the workshops and factories of yesteryear Toronto hum.

He earned a fair penny at it, too, more than enough to buy a Cadillac for his wife that, given his humble beginnings, he was too embarrassed to drive himself. Instead, he preferred the mid-range Buick that he parked in the narrow laneway directly behind 185 King, securing access to the spot with a lock and chain.

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Mitz passed away in 2000, whereupon his son, who spent Saturday mornings in his father’s machine shop as a child but grew up to be a real estate lawyer with a thriving practice in the building his father paid $4,500 for in 1941, started parking his Chevy Suburban in the laneway. He would move his vehicle, as Harry had before him, when the neighbours to the west, the Lazareks, asked for permission to access the rear of their furniture store.

Strange discovery

Such was life, and commerce, until the younger Mitz sold his property for about $4 million to developer Steve Gupta, who subsequently bought the Lazareks out for several millions more and proposed to build a 33-storey, mixed-use tower on the site — with parking for 33 cars.

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That’s when Mitz learned the laneway he and his father had collectively been parking in since 1941 was not their laneway at all, but a forgotten sliver of land owned by Henry John Boulton, a prominent lawyer, politician and well-established member of the Upper Canadian elite who died 150 years ago.

“This was strange,” he said.

What transpired next was a most unusual Toronto real estate drama, featuring a professional genealogist, some lawyers and, ultimately, a courtroom tiff where some of Boulton’s great-great-great-grandchildren — who may or may not have heard of the man prior to the summer of 2022 — argued that the lane, and presumably whatever monetary value could be attached to it, was theirs.

“The lane was a critical part to Gupta’s future,” Mitz said. “Gupta didn’t have a future without it.”

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If Gupta and his company, Easton’s Group of Hotels, didn’t own the lane, they simply couldn’t build a 33-storey tower on top of it.

Hidden gems

Canadians have a particular enthusiasm for residential real estate, given both its intrinsic and financial value to those lucky enough to be homeowners. But not a lot of attention is paid to the thousands of small property chunks sprinkled about the urban landscape, sometimes in laneways, and Toronto has more than 3,000 of them alone, sometimes not. And sometimes these parcels are so inconsequential that their owners, like Boulton, die without leaving them to an heir.

Known as “orphaned” land in the industry, these properties tend not to attract much notice from anyone — assuming they have been noticed at all — until someone comes along to build something upon them, such as a condominium.

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A developer, or even the guy next door, requires absolute title — a.k.a. ownership — over the land they are building upon. Should some 19th-century ghost pop up in the paperwork to put a wrench in the plan, the builder is legally obligated to try to track down any living descendants to ensure that anyone with ownership rights on the property has an opportunity to claim it before the shovels dig in.

The stakes are high. A hypothetical heir emerging from the woodwork waving a will, or other legal document, that proves the lone-gone relative bequeathed the land to their great grand-dad who, in turn, left it to their grand-dad and so on would put that heir in position for a major payday, particularly in Toronto or Vancouver, where prime downtown real estate doesn’t come cheap.

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“If somebody had shown up and said, ‘I can prove title,’ I would have had to have said to the client — had that happened — ‘Well, you know, you have found the owner now, and now you have to buy it, you have got to negotiate a deal,’” Sanj Sood, the lawyer for Gupta’s group said.

That explains the friendly voicemail Vanessa Grafi received last summer from Jeff Stewart, a forensic genealogist and a generally polite, soft-spoken man, who earns a living rooting around in the past for clients, including Sood and his colleagues, at Aird and Berlis LLP.

It turns out, Henry John Boulton originally bought a chunk of land known as Lot 21 at the corner of King and George Street in 1824. This was prime, practically waterfront Toronto land. At the time, Boulton, a barrister’s son and grandson of Sir John Strange, a “master of the rolls,” was just a few years shy of being appointed attorney general of Upper Canada. In other words, he was an extremely well-connected bigwig.

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In dealing with Lot 21, Boulton subdivided the property into 185, 183 and 181 King Street East. He sold 185 King in 1833, but kept the narrow strip of laneway behind it, just wide enough for a horse and buggy to squeeze through. He later sold the other two properties, but the strip remained.

There is no mention of the laneway in his last will and testament dated Dec. 17, 1869, and when he died the following year, he left the “balance arising” from the sales of his property to be divided among three of his children, Sophia (Boulton) Forlong, Clara Louise (Boulton) Cayley and George D’Arcy Boulton, all of whom were dead by 1898. (Adding to the mystery of the laneway is why Boulton cut five of his kids out of his will, but we digress.)

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George D’Arcy Boulton had a daughter named Florence, whose great-granddaughter is a York University administrator. Grafi and her relatives have a few “knick-knacks” from the Boultons of old knocking around: a brooch with a lock of Florence’s hair inside and an oil painting.

Grafi’s mother was an enthusiastic amateur historian and enjoyed stories of the past, but there was never any talk about an orphaned laneway until a genealogist called to fill Grafi in.

“It was a fun find,” she said. “And it happens: a long-lost lot looking for relatives, for plans to develop.”

Alas, there was no smoking will in a safety deposit box indicating Grafi had, by way of her ancestors, inherited the lane. Learning more of her family’s history was payment enough, she said, and she left it at that.

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“I had no interest in pursuing it further,” she said.

But not every Boulton descendant was willing to let go of the lane, or the past, so easily.

Courtroom drama

Patricia Hertzberg, an artist, and a handful of other members from the Boulton bloodline several generations removed, went to court to oppose the developer’s application seeking a declaration that they owned the laneway behind 185 King.

It did not go well for the descendants, none of whom could produce a will, or any paper evidence, proving they had any legal right to the lane.

“The land does not belong to them as a group or individually because they trace roots to an owner 200 years ago,” Ontario Superior Court Justice Fred Myers said in a December 2022 decision. “This is not a close call.”

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Hertzberg initially agreed to be interviewed, but later begged off, explaining it was a family story without a best before date, and that story would just “have to wait” since she was the only one who truly knew it.

But in court filings, she more fully articulated her motivation to fight for ownership.

“When we learned there was property in downtown Toronto, belonging to our ancestor, where a high-rise development was planned, we were expecting potential compensation,” she said. “However, when we received an application asking the court to simply grant the developer full title to the land, with no compensation to the descendants, we were offended. It felt like an egregious affront to our family.”

Squatter’s rights

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What clinched the deal for Gupta was Harry and Lewis Mitz and the ancient concept of squatter’s rights, formally known in modern jurisprudence as “adverse possession.”

An entrepreneur with a keen eye for action, but apparently not for the fine print, Harry mistakenly believed he had bought the lane behind 185 King when he bought the property. Lewis believed the same. They parked in the lane for 75 years to the exclusion of anyone else, save for those occasions when they gave a neighbour, contractor, friend or anyone else express permission to park in the spot.

The chain securing the lane appeared in the early 1970s. Claiming, however mistakenly, the lane as their own, and occupying it as such for a decade (and more) “shows that they exercised the rights of an owner,” Myers said in his decision.

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The Mitzes took adverse possession of the land, did so peacefully and not a single Boulton appeared over the years to say, “Guys, you can’t park there. That’s our lane.”

In March, Lewis Mitz stood across the street from the lane that caused the whole kerfuffle. There were three orange construction pylons set in front of it. The chain he and his father put there was still in place.

The 77-year-old was tanned, having recently returned home from a trip to the Bahamas. He wore a brown leather jacket, scarf and stylish glasses, and carried an old leather briefcase that you could imagine a practicing lawyer with more than 50 years’ experience lugging around.

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Mitz takes a wholly unsentimental view of the building he grew up around.

“It is inventory,” he said. “You carry the memories with you.”

His recollections of the Boulton descendants who surfaced in court after the genealogist had done the legwork of finding them were unsentimental, too.

“I am going to be 78 soon, I’ve been around, it is not my first rodeo, and when it comes to money I don’t have to say anymore: they were looking for a payoff,” he said. “They couldn’t prove anything. They thought, ‘Aha, this is my opportunity.’”

Tacked onto the front of 185 King today is a City of Toronto development proposal depicting a tower rising on the land Henry John Boulton purchased in 1824.

The notice makes no mention of the laneway out back.

• Email: joconnor@postmedia.com | Twitter: oconnorwrites

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New figures released by the Canadian Real Estate Association (CREA) on March 15 show that the slowdown in Canada’s housing market might be turning around with home sales increasing 2.3 per cent month over month in February.

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The agency, which represents more than 100,000 realtors nationwide, reported that the number of homes sold in February decreased by 40 per cent from the record-breaking February experienced a year earlier — just before the Bank of Canada began its interest rate tightening cycle.

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New listings also declined 7.9 per cent month over month in February, and the Home Price Index (HPI) ticked down by 1.1 per cent to $704,300.

Traditionally, February is not a busy month for home sales or new listings, but it is a month when buyers are just beginning to explore the market. According to industry watchers, this year’s traditionally busy spring housing market is among the most anticipated in recent history.

“February’s data contained the potential of a more robust market to come, but to repeat the bottom line from last month, we won’t know what the 2023 market has in store until the spring,” Jill Oudil, Chair of CREA said in the report. “While we’re not seeing it in the sales or listings data just yet, I would expect homeowners are getting properties ready for the market and prospective buyers are getting mortgage pre-approvals.”

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As CREA’s Senior Economist explains, there are parallels between 2019 and the forecast for spring 2023.

“The similarities between 2023 and the recovery year of 2019 continued to emerge in February, with sales up, the market tightening, and month-over-month price declines getting smaller,” CREA’s Shaun Cathcart said in the report. “But the biggest similarity was a sharp drop in seasonally adjusted new listings. Future sellers, many of whom will also be buyers, are likely biding their time until the optimum time to list and buy something else. For most, that’s in the spring. Will buyers jump off the fence to snap homes up in 2023 once they finally start to hit the market? They did in 2019.”

While there is plenty of optimism for the spring housing market, the shortage of inventory cannot be ignored. Christopher Alexander, president of RE/MAX Canada said the decline in new listings over February is the most concerning detail to come out of CREA’s report.

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“We need more product,” the RE/MAX president said in an interview. “One concerning thing about the CREA report is that inventory went down again month over month.”

One factor that could bring some relief on the supply front — albeit with other potential ramifications — is that homeowners hold a tredemendous amount of real estate debt.

Although lenders are doing their due diligence to help keep their clients in their homes, interest rate hikes have left many with more debt than they can handle, raising the possibility of an increase in distressed home sales.

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But those alone would not be enough to satisfy the demand, Alexander said.

The market would still need a rush of new listing from would-be sellers who have been sitting on the sidelines, something some economists have predicted will transpire.

“Even if we get what economists have predicted … I think it’s just going to be enough to create a balance where some homes will sell at asking, some will sell below and some will sell over,” Alexander said. “Balance would be really good for homeowners right now who would consider moving but feel trapped because there’s just not enough properties that meet their criteria — and obviously, interest rates are higher and so it’s a lot more expensive to buy what you want.”

• Email: shcampbell@postmedia.com

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The rental markets in the United States and Canada cannot be more dissimilar, especially when it comes to apartment rents, which have fallen in most U.S. cities, while spiking across Canada.

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U.S. renters “with new leases in January paid a median rent that was 3.5 per cent lower than they would have paid last August,” the Wall Street Journal, using data from Apartment List, reported. Rents have fallen every month over a six-month period for the first time in five years.

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By comparison, rents in Canada have been rising quickly. Year-over-year rent increases for one-bedroom apartments were 24.2 per cent in Vancouver and 20.8 per cent in Toronto, according to Rentals.ca data. Even in less populous cities such as Kitchener and London in Ontario, rents for one-bedroom apartments were up by more than 25 per cent.

The average annual increase across major rental markets tracked by Rentals.ca was about 15 per cent for one-bedroom apartments and 14.4 per cent for two-bedroom apartments.

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The worsening rental situation in Canada prompted the federal government to offer low-income renters a one-time $500 rental benefit. By late February, more than 500,000 renters had applied for the benefit, and it is estimated that an additional 1.2 million renters will also apply.

Despite similar demographics and economic structures, the drastically different rental markets in the U.S. and Canada may be explained by the differences in their respective rental housing supplies. Whereas rental housing supplies have been on the rise in the U.S., large housing markets in Canada, with a few exceptions, have not had any meaningful increase in rental housing construction.

The result of this supply-and-demand mismatch has become quite apparent in Canada. Higher mortgage rates and falling housing prices have caused sales to decline since early 2022. A slowdown in the resale market meant that many first-time homebuyers extended their rental tenures for longer than they would have had the markets facilitated their transition to ownership. This resulted in lower rental vacancy rates, which have inadvertently pushed up rents in most housing markets.

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However, the problem is not necessarily the higher demand for rental units; it’s Canada’s inadequate rental housing supply.

In the U.S., the Wall Street Journal cited CoStar Group Inc. data that forecasts “the biggest delivery of new supply since 1986” and that “half-a-million new apartments are coming on line” in 2023. “The crush of new apartments will give renters more choices, making it more difficult for landlords to raise rents at rates seen early in 2022.”

The recent decline in rents in the U.S. could be partly because markets reached their upper limit in rent tolerance last year, so a decline in lease renewals followed, putting downward pressure on rents.

In Canada, however, the construction of purpose-built rental housing took a nosedive in the early 1970s and has not recovered to levels commensurate with demand. Back then, 25,000 purpose-built rental units were annually completed in the Greater Toronto Area (GTA), according to a recent report by Building Industry and Land Development Association, an industry group representing the development industry in the GTA, but less than 5,000 rental apartments came on line in 2022.

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The decline in rental construction is even more dramatic when you note that the earlier higher supply of rental housing was for a much smaller population base in the GTA, whose population has significantly increased since the early 1970s.

Of course, housing affordability is a more significant concern for low-income renter households than homeowners or those aspiring for homeownership.

For example, renters in the GTA were two to three times as likely to be in core housing need (a metric for housing affordability) than homeowners, according to a recent report by the Centre for Urban Research and Land Development.

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The federal and Ontario governments have recognized housing supply as the prime culprit behind worsening affordability. The governments have since identified the need to build millions more homes than what would have been built under business as usual.

It would be wise to target subsidies and incentives to produce affordable rental housing first, so that the shelter needs of those most vulnerable can be met sooner.

Murtaza Haider is a professor of real estate management and director of the Urban Analytics Institute at Toronto Metropolitan University. Stephen Moranis is a real estate industry veteran. They can be reached at the Haider-Moranis Bulletin website, www.hmbulletin.com.