Canada’s Housing Crisis: Can Rent-to-Own Help Young Buyers? | Michael Ruge

We sit down with multifamily developer Michael Ruge live at The REI Summit at Sea and get blunt about why Canada’s housing crisis keeps getting worse. We talk through what actually unlocks new supply — from financing and approvals to better building standards and a rent-to-own path designed to restore hope.

In this episode:

• Committing to solving the housing crisis as a life mission
 • Scaling impact through joint ventures and developer collaboration
 • Why financing favors large players and how that shapes projects
 • How municipal approvals and zoning delays choke housing supply
 • Using people, planet, profit, and purpose to guide development
 • Building for the missing middle with durable materials
 • Why steel and concrete change maintenance and insurance risk
 • A zero-deposit rent-to-own model using CMHC-style financing
 • An investor structure focused on return of capital via loans

https://affordableapartments.ca/

Sponsored by:

Samuel Castillo & Associates Inc

https://local.cooperators.ca/samuel-castillo-associates-en 

Transcript

ousing Hope Is Fading

SPEAKER_01 0:00

Is three times last year I heard statistics that said that young people, people under 30, people under 40, have given up the hope, the belief that they will ever own their own home.

SPEAKER_02 0:18

Welcome to the Five Questions Podcast, where we unlock real estate and business insights one question at a time. I'm Sam Castillo and this is Sam Castillo and Associates.

unknown 0:38

Live!

SPEAKER_00 0:40

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SPEAKER_02 1:17

Welcome to the Five Questions Podcast. My name is Mary Lamar and I am your host. I'm very excited. Today we are filming a podcast episode at the REI Summit at C in front of a live audience. You guys can make some noise. From early projects in the Caribbean to building an 888-unit portfolio worth over$440 million. He's on a mission to help solve the housing crisis through impactful, community-driven multifamily development. Welcome, Michael Rouge. Michael, welcome to the podcast today. Thank you.

SPEAKER_01 2:07

Thank you for having me. Appreciate it.

ission To Solve The Crisis

SPEAKER_02 2:09

Michael, the concept of the podcast is real simple. Five questions, either about real estate or business, and we get straight to the point. You ready? Born ready. All right. First question I have for you Affordable Apartments is clearly rooted in solving the housing crisis. What was the defining moment that made you commit to this as a life's mission? And maybe you can develop a little further the question where do you see this going five to ten years down the road? Maybe give some examples of how many units you'd like to see or or communities transformed.

SPEAKER_01 2:48

That's an interesting deep question. And as you go through with experience, you you change what's important to you, your values, etc. So, you know, went through the Ferrari stage and the all all of that stuff, and you say, how do you give back? Right? You know, and uh and seeing the the housing crisis, I mean that's that's basically the mission is to solve the housing crisis. So doing that with with what we're doing, but also we share with other developers our so-called competitors. We don't view them as competitors. I mean, the housing crisis is so deep. You need collaborators.

SPEAKER_02 3:36

That's right, that's right. So you need uh partnerships to make this development or this this vision that you have with your uh solving the housing crisis. You're not doing this on your own.

SPEAKER_01 3:49

No, and but I don't like partnerships because I view partnerships as sinking ships. Okay. We're on a ship right now, we don't want that. No, exactly. But joint ventures is, in my opinion, my experience, you know, doing this for 45 years, partnerships can dissolve, but joint ventures where everybody has their own specific task and and it's laid out, that that is a better formula for success.

SPEAKER_02 4:19

Aaron Powell And if we uh go into the second part of the question, your vision, how many units or maybe what type of communities you'd like to see in in your ideal vision world that that you you have in your mind?

SPEAKER_01 4:33

Okay. Well, locally, uh as you mentioned, we've got the 888 that are already done in joint ventures. So other big developers are handling all the heavy lifting on on that. But we've got another 2,000 units underdeveloped. So we're doing a billion-dollar master plan community, and then a few other um, a couple other smaller projects in there. But then part of the bigger vision of encouraging our competitors across the country to do more is we we'd like to influence a hundred developers to go and do their thing. And and the the people that are listening to this are the people. It doesn't matter whether you're building five units or five hundred units. You know, the the housing crisis in Canada is between three and a half and five and a half million houses short, depending on who you listen to. All right. So that that's gonna take a thousand developers, two thousand developers doing all different sizes of houses. And and that comes back to the mission of solving the housing crisis, whatever, you know, whatever way it has to happen.

SPEAKER_02 5:46

So you you're you're showing the way you want to influence developers to follow your steps and and uh do this across Canada.

SPEAKER_01 5:55

That's right. I I want my tombstone, and I hope that's a long time away, but you never know. As you go through life, you get closer to one end than the other, right? So that's another reason why uh changing. But I want my tombstone to say, best grandpa, and help solve the housing crisis.

he Real Bottlenecks Behind Housing

SPEAKER_02 6:13

That's complete. That's amazing. Our question number two I have for you, Michael. Uh a lot of people talk about the housing crisis, uh, but you're actually building solutions. What do you think most people misunderstand uh about the real root of the problem? Uh maybe you can tell us a little bit the behind the scenes of of what slows down affordable housing. How many hours do we have?

SPEAKER_01 6:40

Well, about five minutes for this question. Okay. Well then uh then I'm gonna narrow it down to two. Okay. Number one is finance. Okay, the the the financial world is structured for the big boys. The big boys get much better interest rates, much easier, can go and do it that way. So, you know, uh I spend 70% of my time on funding the projects. Okay, then the second big one, as we all know in this game, is dealing with uh the cities, the municipalities, bureaucrats, they're just, you know, instead of instead of coming up with the you know, a hundred things on their checklist of which only 20 are necessary, they focus on coming up with the 80 instead of just coming up with the 20. Right? And and uh and the it's the time for that. I mean, there's there's a reason why people are just avoiding some big cities because it takes five years to get a approval on something. So if you look back 40 years ago, you could get approvals in three weeks on a lot of projects, and now it's years. So if that's one of the reasons we have this housing crisis. If you took, if you went back and said, well, if if the time to get all these approvals kept uh increasing, now you have whatever we would build in five years, that's how much we have short. Yeah, right. So working backwards that way.

SPEAKER_02 8:18

And so by people having people work with you, and and you've been doing this for 40 years now, uh, you can show them the ropes of maybe how to get easier financing for these types of of projects that they that maybe they want to work on. Also, what you do, how to approach a city, how to approach a committee to get your projects accepted that doesn't take five and plus years to get approved.

SPEAKER_01 8:49

Exactly. Well, you know, I may have been doing this for 45 years, but it took me 40 years to figure out how to do it, right? You know, the first 20 years I made some big mistakes. And then, of course, with experience and now, for example, I only go to where the city wants it. Don't don't don't fight City Hall. It takes forever. Just go to where they want it. If if where you're doing is against the zoning and whatever, don't do it.

uild Better Without Gold Toilets

SPEAKER_02 9:14

Just looking that's a good point because a lot of cities, when they want projects, they'll they will actually give incentives to attract developers, builders to grow the area of where they want. Yeah. They'll pay. I I had a an example uh in Regina, they were paying up to$40,000 a door of money and and money back that they were giving you credits towards your projects. Yeah. So they they uh they help out where, like you said, where they need it. Question number three, Michael. What fundamentally sets affordable apartments apart from traditional developers? Uh, how do you or how does your guideline principles allow you to balance affordability, sustainability, and long-term quality without compromising the mission?

SPEAKER_01 10:12

Well, you know, if you've heard of the three Ps, the people, planet, and profit. Okay, you know, a lot of people think profit is a dirty word. It's not. If you don't have profit, you can't be sustainable, you can't repeat. Right? So the people have to win, the planet has to win, and it has to be profitable. And I've added a fourth P P purpose. Okay. So, for example, on the things that we build, we make them greener than what the building code needs to be. Okay. You know, I I have uh some great competitors with that were friends, right? We talk, and you know, they build a five out of ten or a six out of ten, and that's great for their business model, but I only build seven or seven and a half out of tens, right? No, no gold toilets, right? You know, nothing like that. But I also don't go to the bottom end. At the beginning of my career, I built in the bottom end of the for the bottom end of the market, and it's nothing but a headache. So I build for the missing middle, right? But if you if you build with um the building is nice, the building is safe, the building is quieter, you know, things like that, then even when we're not in a 0% vacancy rate uh or 2% or or wherever, um, people are gonna stay in your in your buildings.

SPEAKER_02 11:46

Absolutely. People want to live in in comfort the most that they can. And uh if you provide that through a little bit upgrades without breaking the bank, like you say, you know, uh that's that's a win-win for everybody. Yeah. And uh so we talked about afford and what about the affordability? So how do you balance your projects on you want to put some upgrades, like you said, how does it not break the budget?

SPEAKER_01 12:16

Well, you know, profit is not the top of the list. Like I said, it has to it has to be there, uh, you know, but it's is it short-term profit, which most people focus on short-term profit. But if you focus on long-term, especially if you're keeping the building, you know, whenever you can, put in steel studs instead of wood. Build with with steel and concrete instead of wood, the cost difference is very little now, and your maintenance cost over time is night and day. And if it wasn't for the shortage of uh good places for the pension funds and the REITs to put their money, historically they have only bought concrete and steel. Like the A-level people only buy A-level busin uh buildings, but now there's such a shortage and they have so many trillions of dollars sitting that they have actually been buying wood buildings. But uh, you know, wood is going to be impossible to insure in 10 years. The premiums are already significantly higher than steel buildings, and yeah, as I said, the cost difference to build them. But when you build with steel, you don't have a uh mold problem, mildew, bugs, fire, floods. I mean, tenants are tenants. You are going to have fires and floods. Yeah. Right? And when you have when you have a steel building, it's often contained to just that unit, or maybe the little bit the one beside, and it can be fixed in two months. On wood, not only can you take out the whole building, you know, there's some places that have authorized 12 stories in wood. That's insane. I would not want to live on the 12th floor of a wood building. I'd be swinging like our ship.

hy Materials And Insurance Matter

SPEAKER_02 14:05

There you go. Um, I and I agree with you uh talking about insurance, which that's opens up another can of worms, but um, I I just had a quote for one of my buildings, and it went up 25% uh just from last year. It goes up tremendously. I agree with you there. Question number four, Michael. You ready? Can you walk us through a few of your projects that you're most excited about right now? Um, how strategic maybe partnerships can be or joint ventures can be uh put together and played a role in shaping the kind of communities you're building. Now, I said a few projects. Maybe one or two.

ent To Own Without The Trap

SPEAKER_01 14:51

Yes. Well, I I only have three ongoing, okay, right? Um, but the the big one is gonna take 10 years, right? So uh the the one that you know is more to my heart is um rent to own, okay, um, historically has been uh uh a predatory business. It hasn't been very good. Um uh uh the statistics are 27% actually complete, which is mind-bogglingly low. I had no idea it was that way because people can't afford the deposit, people that are in that position for rent to own, um, and then the increased amount monthly. So we figured out, you know, and the and the lawyers, when I'm asking, can we do this? They're you know, like the puppy twisting their head, right? Nobody's ever done that before. I said, good, right? Um is we figured out in let me step back. One of the reasons, like you said, what's near and dear to my heart is three times last year I heard statistics that said that young people, people under 30, people under 40, have given up the hope, the belief that they will ever own their own home. Yeah. Right. And I mean, that's just that's just wrong for society, right? It's it's you know, it's a very broad thing. So I get a brilliant idea about once a decade, right? Usually comes about three in the morning, and I said, Well, why can't we combine this cheap CMHC financing, two and a half percent, uh, you know, on a 50-year amortization? Why can't we combine that with rent to own? Where zero deposit for the people, zero, zero increased rent. So, in other words, if the apartment's fifteen hundred dollars a month, it's fifteen hundred dollars a month. But what we do is we get way better tenants, so it's not just about them, it's also about us. We get way better tenants when we say 20 years from now, we give you your apartment. So do we make less money than if we just built the building and went? Yes. But for 20 years, we have a great cash flow. It's an apartment building for 20 years. They do not have the rights. If they leave, they leave. All right. Uh so we don't tie them to it, but we give them that incentive and show them because the value of the of the place will be so much more in 20 years, and and the math works.

SPEAKER_02 17:43

And it's great for them to feel like you know, there's there's light at the end of the tunnel that this is actually their unit, and most of the time people will take care of it better exactly. Their mentality, they're just renting somewhere.

SPEAKER_01 17:58

It's part of that old win-win-win.

SPEAKER_02 18:00

Yeah.

SPEAKER_01 18:00

We have to win, they have to win, and society, everything around it has to win, right? And it works. And what about the other project? Um, the other project I'm doing um on the high end of what we normally do of the missing middle. Okay. And the reason that that one's different is you have to adapt in real estate, right? Yeah, absolutely. So we we are doing a 32-unit condo project on the water, and there's no one in our valley, we're all of our projects are southern Vancouver Island, okay, in the in the Duncan area. And we're doing these condos. It's the first condos ever done on the water side of the road, which is mind-boggling. How can that be? You know, I actually, even though I lived there, I went driving the whole coast going, there has to be something I didn't know about. So uh we're doing that, and uh yeah, that's amazing.

nvesting With Loans And Contact

SPEAKER_02 19:01

All right, Michael, we got one final question for you. For people watching uh who cares deeply about the housing crisis uh and want to be part of the solution, what are the most meaningful ways they can uh get involved, or maybe uh you can let the audience know or the camera, uh, an email or how to contact you.

SPEAKER_01 19:24

So we've all had good deals and bad deals.

SPEAKER_02 19:28

Yeah.

SPEAKER_01 19:29

Right? We've all had things go wrong, things go right. And what I've found is the the way that the deals I do have evolved is everything is a loan. When you buy equity in a project, you have no idea how much money you're gonna make. You can look at those spreadsheets and they go, Oh my god, I'm gonna be a billionaire tomorrow, right? You just never know what's gonna happen, right? So what we figured out to do, and it and it's so that you can sleep better at night and I can sleep better at night, is when we do when we do it as a loan, you know. Uh this is even before my time, but to date myself, Roy Rogers had a line, because he was a big investor, you know, the early Hollywood stars, right? He had a line is I'm much more concerned with the return of my money than I am the return on my money, right? Yeah. So so what we do is when we we do a project, people put in 250,000 and they get 10% interest compounded. And then whether we build the project, whether we sell the project, okay, the say we sell like the 888 units that I did, okay? Three different projects, three different developers, but they come in and they pay out all of the loans, my loan, your loan, with the compounded interest, plus we put a million dollars on top, okay, for a special dividend, and we retain a piece of the project. But the magic is that you've got all your money back with interest before anybody, before I get paid, before anybody gets paid, and now we have zero in that project. And whether we own one percent or five percent or twenty percent of that project, it's it's free. So I've got 888 units being built, and I don't have capital in those projects.

SPEAKER_02 21:33

That formula is amazing. I'm really I'm really excited that you put that together. And uh, how can people contact you? Because this is a very interesting way to invest in in real estate.

SPEAKER_01 21:46

I I don't do social media, but you can get reach me on WhatsApp or sell two five zero four six six five three six six. And the email is Michael at affordableapartments. So it's apartments with an S and dot C A. Because I had people call me. I emailed you, it didn't work. Well, it was.com. So Michael at affordableapartments.ca.

SPEAKER_02 22:13

Michael, thank you so much for taking your time to answer my questions today. It was a great uh podcast. I hope our listeners take a piece of your wisdom with them on their journey when they invest in real estate. And once again, thank you for being part of the Five Questions Podcast.

SPEAKER_01 22:29

And thank you for the great questions.

SPEAKER_02 22:33

Thanks for tuning in to the Five Questions Podcast. If you enjoyed today's episode, don't forget to subscribe, like, and hit the notification bell on our YouTube channel so you never miss an episode. Stay tuned for more insights and tips to transform your real estate and business game. See you next time.