$108 million in federal financing for new Oakridge rental housing

Artistic rendering of the W42 rental housing towers at 5780 Alberta Street, Vancouver. (Rositch Hemphill Architects/Marcon Developments)

The federal government has announced it is providing Marcon Developments with significant low-cost construction financing for one of their major secured purpose-built rental housing projects in Vancouver’s Oakridge area.

Through Canada Mortgage and Housing Corporation (CMHC), the developer is receiving $107.5 million in fully repayable low-interest loans through the Rental Construction Financing Initiative.

This will specifically enable Marcon to realize one of its two W42 rental housing towers at 5780 Alberta Street — located at the northeast corner of the intersection of West 42nd Avenue and Alberta Street, just one block east of Oakridge Park (Oakridge Centre) mall and SkyTrain Oakridge-41st Avenue Station.

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W42 entails two towers occupying a full city block, but each tower was approved through separate rezoning applications at different junctures.

The west tower will be 19 storeys with 215 rental homes, including 175 market units and 40 below-market units. Its rezoning application was approved by the previous makeup of Vancouver City Council in April 2021.

The east tower will also be 19 storeys, containing a total of 211 rental homes, with 169 being market units and 42 being below-market units. The rezoning was approved by the previous makeup of City Council in March 2022.

Artistic rendering of the west tower of W42 at 5780 Alberta Street, Vancouver. (Rositch Hemphill Architects/Marcon Developments)

Artistic rendering of the west and east towers of W42 at 5780 Alberta Street, Vancouver. (Rositch Hemphill Architects/Marcon Developments)

CMHC’s financing will specifically go towards supporting the cost of the west tower, which is now expected to reach completion in June 2025. Marcon contributed $6.6 million in cash equity.

“Marcon is proud to build complete communities and spaces that blend diverse housing types. Through the Rental Construction Financing Initiative, we are able to make a collaborative effort to address some of Vancouver’s housing challenges and enrich the urban landscape of our city,” said Nic Paolella, executive vice president of Marcon, in a statement today.

Taleeb Noormohamed, the MP of Vancouver Granville, added, “Today’s announcement is one example of our commitment to investing in safe and secure homes with better access to community services and public transit. Together with our partners, we are providing more rental housing for all Canadians.”

The federal government’s support for Marcon’s project is part of the August 2023 announcement of allocating $500 million in low-cost construction financing for 1,100 new rental homes across Vancouver. Earlier this month, the federal government announced the first three projects worth $150 million in federal financing.

Such low-cost repayable loans provide private and non-profit developers with construction financing at a lower interest rate than what the market, such as banks and investors, would otherwise provide.

The Bank of Canada’s consecutive policy interest rate hikes are intended to slow down inflation and the previous heightened real estate market activity, but they have also had the effect of greatly increasing the cost of borrowing for all aspects, including construction financing.

With higher borrowing costs and escalating construction costs for building materials and labour, projects are increasingly at risk of becoming financially unviable, with rental housing being particularly vulnerable.

Secured rental housing vacancies in Metro Vancouver are now hovering at or below 1%, with low new supply, high immigration volumes, a growing number of international students, and poor attainable homeownership opportunities, keeping vacancies extremely low and propelling rents.

A recent market update shows the average rent for a one-bedroom unit in Vancouver has now climbed past $3,000 monthly, based on the compiled data for at least one online listing website.

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