Why U.S. Multi-Family is Likely to Turn the Corner in 2025

Introduction Canadian farmland hasn’t posted a single annual decline in value since 1992 . Take a second to soak that up. More than thirty years, multiple recessions, inflation spikes, a housing crash and a tech- bubble. Through it all, farmland kept climbing. In a world where many asset classes appear vulnerable to technological disruption or shifting consumer preferences, the core value in farmland is tied to a necessity that will always remain constant. Food. In this edition of the Bird’s Eye View , we discuss the case for investing in Canadian farmland and share the most compelling points and potential risks from our due diligence on this asset class. The Investment Case for Canadian Farmland In our view, farmland has six main features that make farmland investment attractive: 1. Consistent Performance and Low Volatility - A 30+ year track-record of positive annual returns is astounding, even more so when you consider that the average annual increase over that period has been 8.1%. Past performance doesn’t guarantee future returns, but there is merit to the fact that farmland has been remarkably consistent through periods of high market volatility. When considering that the figures above don’t account for any profit from the land, farmland has done an impressive job of delivering returns comparable to U.S. equities, but with a volatility profile that more closely resembles bonds. 2. Natural Scarcity - Most cities are established near fresh water and fertile soil. Thus as populations grow and cities expand, that development inherently reduces the base of potential farmland. While most provinces have some level of agricultural land protection program in place, the fact remains that there is a finite amount of farmable land, and each year there is less of it. 3. Diversification and Inflation Hedge - Farmland has a long track record of holding its value when inflation eats away at other assets. Rising food prices translate directly into stronger farm revenues, which in turn support rental income and land appreciation. Additionally, over the last 50 years, farms have averaged an increase in productivity of ~1.5% per year by adopting new technology and processes (machinery, irrigation, nutrient management), which serves as a natural inflation hedge. Unlike equities or bonds, farmland’s performance has shown little correlation with public markets , giving it genuine diversification benefits. 4. Investor-Tenant Alignment - For anyone feeling exhausted with the rhetoric about ‘greedy developers’, it may come as welcome news that investors and landlords aren’t automatically the bad guy in the farmland space. Research shows that farmers are able to drive higher levels of profitability per acre when renting compared to when purchasing farmland , and that trend is accelerating. While renting doesn’t necessarily outperform ownership over the long-run when accounting for land appreciation benefits, it does improve cashflow. Since farming is capital intensive, renting land allows farmers to allocate funds that would have otherwise gone to land, toward equipment and operations that improve yield and profitability. Since farmers’ profitability depends on sustaining yields, they are naturally incentivized to care for the soil and manage the land well, which not only supports their own returns but helps preserve and even enhance the underlying land value. As a result, the ‘renter’s mentality’ sometimes seen in other real estate sectors is far less common in farming. 5. Comparative Affordability - In housing, the current challenge is that people can’t afford to pay what developers can feasibly build. In comparison, while farms are comparatively less affordable than they were 5 years ago, the gap is far less dramatic than it has been in housing. Farm values and rents have rapidly increased, but the revenue generated by those farms has also substantially increased , which has slowed the loss of affordability. While current affordability levels are still a concern in the space, farmers can still operate profitably at current price levels and as shown on the chart below from Farm Credit Canada , we are nowhere near the peaks of unaffordability that farmers experienced during the 1980’s:

Capital doesn’t flow to markets where demand is slow and supply is surging, it goes to places where demand outpaces supply and prices are rising. That’s not a flaw, it’s the system working as designed, rewarding investment in those markets that most need it.

Canada’s $26B prefab housing bet promises faster, greener builds — but claims of affordability gains don’t hold up under scrutiny.

Introduction The Liberal Government is in and we are starting to get more clarity on what that means for housing in Canada. In our last article, we compared the Liberal vs. Conservative Housing Platforms , and discussed how the majority of the Liberal housing platform would be positive for housing investors, but that the Build Canada Homes program had the potential to negatively overshadow everything else. One month later, our opinion has softened. The limited documentation available about Build Canada Homes indicates that the government will be (directly) building far fewer homes than we initially anticipated, which has materially lowered our level of concern. Build Canada Homes looks to be far too small to displace private builders or upset private markets. In this edition of the Bird’s Eye View, we review publicly available information on the Build Canada Homes program to determine its scale and potential impact. We then turn to the secondary question of how successful that program is likely to be as we review two of the models that the Liberals have used as inspiration for Build Canada Homes; the Wartime Homes Limited program that saw the Federal Government get directly involved in homebuilding post-WWII, as well as the Singaporean Public Housing model. Build Canada Homes “The Liberal housing plan will double Canada’s current rate of residential construction over the next decade to reach 500,000 homes per year”. Liberal Housing Plan, March 31, 2025 We begin as we so often do with a caveat. It’s important to recognize that there is uncertainty about what this program will look like, as the entire housing plan (at least what is publicly available) is a mere two-page document. The truth is that we really don’t know what this program will look like, even if we know its goals and now have cost estimates. Canada built ~245,000 homes in 2024, which is near the all-time high for annual construction (257,453 units were built in 1974). Getting to 500,000 units by 2036 feels like it borders on impossible, and is potentially much higher than what’s necessary. When we saw the 500,000 homes per year target, alongside the words “deeply affordable,” and the announcement that “the Federal government will get back in the business of building homes”, we saw a very real potential for the heavy disincentivization of private development. If the government is going to compete with private industry while subsidizing costs, why would private industry build anything? Why would private investment fund it? On further review, those concerns are now much smaller than we initially feared. Since we won’t see the 2025 federal budget until the fall , we are limited to the Liberal Housing Plan as well as the Liberal Fiscal and Costing Plan to get a sense for the program itself and how much money the Feds will be allocating to it, but those documents indicate that funding allocations will be small. Here are some of the housing highlights from the Liberal Fiscal and Costing Plan: 

Introduction Election season is here, and while housing affordability and availability have taken a backseat to how Canada should approach its relationship with the United States, changes to housing policy still feature as central pillars of both the Conservative and Liberal party platforms. What makes their proposed changes particularly notable is that since the 1980s, the Federal Government has played a smaller role in housing compared to Municipal and Provincial governments, influencing markets indirectly through immigration and monetary policy. Those days look to be over, as both parties have introduced proposals that would see the Federal Government take a much more active role. In this edition of the Bird’s Eye View, we review the housing platforms for both the Conservative and Liberal parties, and offer our opinion on how these policies will impact development generally, and real estate investors specifically. Note: We recognize that other parties also have housing platforms, but for brevity, we are only covering the Conservative and Liberal platforms. Policies in Common Between Conservatives and Liberals Before we dive into the novel proposals from each party, we begin with three policies in common: 1. Elimination of GST on new homes Both parties have proposed to eliminate GST on new homes, but there is a massive difference in the size and scope of the two programs:

Most investors would be thrilled with the outcomes forecasted in the CMHC 2025 Housing Market Outlook given the level of uncertainty ahead. The question is, how likely is CMHC to be right?

While GDP isn’t a perfect predictor of housing prices, the two tend to run in the same direction. If we do in fact see a decline in GDP from 2024, it would take a unique set of circumstances to see anything more than flat housing prices in 2025.

It doesn’t take a genius to hypothesize that population decreases could cause rental rates and housing prices to soften over the next two years. However, a look at historical data shows that changes in population growth often don’t result in immediate housing price changes

"We may never know where we’re going, but we’d better have a good idea where we are." - Howard Marks