New legislation in Ontario is signalling that the province is serious about addressing structural inefficiencies in its housing market and institutional investors could play a role, says Michael Tsourounis, managing partner and chief investment officer at Hazelview Investments.
“The province’s goal on this is to enable developers to start building faster, . . . the faster we can get more projects built, the more constructive situation [it] will be for builders and for developers.”
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In May, the Ontario government introduced a bill designed to speed up the construction of new homes and infrastructure by streamlining development processes and reducing costs. In a press release, Municipal Affairs and Housing Minister Rob Flack said the policy was designed in response from recommendations from municipalities across the province.
Lower construction costs and low interest rates give institutional investors an opportunity to participate and earn some diversification in their portfolio, says Tsourounis.
“We think right now is great time where developers should be putting shovels in the ground, where investors who have a long-term outlook and are looking for multi-residential to be a great diversifier in their institutional portfolio — [since] it provides long term, predictable and stable cash flow that is well hedged to inflation.”
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A research note from Osler, Hoskin & Harcourt LLP said the government is proposing to remove “unnecessary barriers” to the current building environment with changes to development charges and regulation standards required.
Real estate allocations have cost Canadian pension funds, with a bulk of the leading plans reporting losses in this category for the past two years. However, Tsourounis says residential real estate isn’t poised for a structure change like office real estate was with the lingering impact from the coronavirus pandemic.
“We know at the end of the day, it doesn’t matter where people work, it doesn’t matter where people shop, it doesn’t matter where people recreate. At the end of the day, everyone needs somewhere to live.”