Vacancy rate set to surge?
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Is Kelowna being saturated by rental developments?
As the city has fought to catch up with the construction of rental units over the past decade, the question was asked Monday: When is too much?
The city’s rental vacancy rate sits at 3.7%, with expectations it could soar above 5% this year.
Kelowna has also surpassed the province’s first year housing target in just seven months.
The topic came up as part of a discussion around a 361 unit rental development on Bernard Avenue. The project would encompass 12 properties bordering Bernard as well as Richmond and D’Anjou streets.
Citing an official community plan policy that encourages diverse housing tenures and a range of rental and ownership properties, Coun. Ron Cannan suggested about 1,000 rental units are under construction within a five-block radius of the planned Bernard project.
“I wonder, what policy does the city have to encourage developers to build ownership housing because it seems all we have is rentals?” Cannan said.
“We have been seeing a number of rental products come online because there were major incentives provided by CMHC. That came to an end in November, so the position right now is once the vacancy rate goes above four or five per cent we will look at changing some of these policies and incentives,” development planning manager Nola Kilmartin said.
“What we have heard from the development industry is if we continue to do a yo-yo scenario and remove incentives while the market is down, which it is now, then we will find ourselves in another precarious vacancy situation where our vacancy rates have dropped out again.”
The question prompted a brief back and forth concerning the free market between Cannan and fellow councillor Loyal Wooldridge.
“While we are starting to see fruitful results of a higher vacancy rate, it’s only because of the work that’s been done over the past five or six years to continue to focus on rental housing,” Wooldridge said.
“I fully believe we have to keep our foot on the accelerator when it comes to this because at the end of the day, a free market is going to decide what’s built.”
“I fully support the free market and allowing the market to determine the price but without direct government intervention,” Cannan said, citing both CMHA and city initiatives that incentivize rental housing. “I think we need to stay in our laneway and focus on providing a diverse housing stock and let the market determine appropriately.”
Coun. Luke Stack suggested there may be a time to revisit rental incentives, but this is not it.
“We have been focusing on rental housing for 20 years, and we have been constantly trying to catch up,” Stack said. “I do think it’s too early to pivot at this point. However, when we see next year’s CMHC report, that will give us at least a few years, and I think a more definitive, clear direction for us to reconsider.
“I do take to heart the point that we have seen a tremendous amount of rental, and if the vacancy does spike well beyond five per cent then definitely the market would want to pivot and we would want to be there to assist.”
Council voted 7-1 to support rezoning for the Bernard Avenue project, with only Cannan opposed.
While the vacancy rate has risen, rental rates are not falling. Castanet Classifieds data shows a two-bedroom rental in the Central Okanagan went for $2,263 in February, up slightly from $2,226 in February 2024.
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