Brique par brique has raised over $300,000 in community bonds but plex units it hoped to get for $110,000 are now at $130,000.
The humble plex has become a hot commodity in Montreal, but there’s a dark side to the boom. Community housing advocates fear fast-rising prices are reducing the supply of affordable homes in neighborhoods already in dire need.
As director of the non-profit Brique par brique (briqueparbrique.com), community organizer Faiz Abhuani has seen for himself how cruel the plex market can be.
In the past two years, Brique par brique has raised over $300,000 in community bonds to cover the down payment to buy a mid-sized rental apartment complex in Parc-Extension. The goal of the project is to preserve sustainable, affordable rental housing for vulnerable people, like new immigrants or low-income single parents, who face discrimination in the rental market.
But although the organization raised the money it needed to buy a building, in the past year the plex market has picked up, making it harder to find a good deal. According to data from the Quebec Federation of Real Estate Boards, plex sales in Montreal were up six percent this year over last, while the average selling price increased by eight percent.
In Parc-Ex, two-thirds of families live below the poverty line and one-third live in substandard housing. But the makeup of the neighborhood is rapidly changing due to new development and investors are now hoping to cash in.
Not only have prices risen dramatically, but Abhuani said well-maintained buildings in Parc-Ex are now selling above asking as investors vie for a stake in the neighborhood.
When Brique par brique prepared their initial projections for the project, they anticipated paying about $110,000 per unit to acquire an eight- to 16-unit plex. A year later, Abhuani said they are now looking at spending between $130,000 to $150,000 per unit.
With a new Université de Montréal campus opening next year in the neighborhood, Abhuani fears prices are likely to rise even more.
“It’s really amazing how much the prices went up just in the one real estate season. I don’t know what’s going to happen next year,” he said. “It’s going to be wild. I’m not sure what to do.”
Many of the plexes in Parc-Ex are older and require substantial expensive repairs. Brique par brique has had offers accepted on several buildings, Abhuani said, but in each case, the sale fell through when inspections revealed significant deficiencies, yet sellers were unwilling to adjust the price.
Abhuani said in many of the buildings he visited, the previous owners ignored significant maintenance issues, making only the minimum repairs needed to collect rent or flip the property at a profit. In some cases, tenants were left living in unsanitary or even unsafe conditions.
At today’s prices, to make the necessary repairs and still make money, he said, investors need to raise rents. Many of the tenants affected, however, will struggle to find another apartment they can afford. Some will also likely face discrimination from landlords for being single parents, not having employment or good credit, speaking a different language, living with a disability or simply being poor.
It’s just these type of tenants Brique par brique hopes to help.
Although it has been challenging to make the math work, Abhuani is optimistic. One advantage over other buyers in the market for a Parc-Ex plex is that Brique par brique isn’t looking to make a quick buck, only to cover costs, he said.
If the project succeeds, he hopes its community-supported model can be replicated in other communities losing affordable housing units to gentrification.
“I think more and more investors are looking to invest outside the center of Montreal,” he said, “but I feel like more emphasis should be put on taking into account the effects of development on people who have made their lives for decades in these neighborhoods.”
The Quebec Federation of Real Estate Boards says plex sales in Montreal were up six percent this year over last, while the average selling price increased by eight percent. GORDON BECK / THE GAZETTE