Core Development Group Ltd., initially under fire for its $1-billion plan to purchase houses for rentals in Ontario, is changing gears. The company now aims to construct new single-family rental homes from the ground up, citing an unmet need in the market for detached rental housing.

Two years ago, Core faced criticism for its strategy to buy existing houses, add basement units, and convert them into rentals. The backlash accused the company of contributing to rising rents, hindering Canadians from homeownership, and fueling the surge in home prices. Founder and CEO Corey Hawtin acknowledges the unexpected outcry and mentions the company is now exploring a different approach.

With higher mortgage rates making homeownership challenging, Core sees an opportunity to address the shortage of detached rental housing. Hawtin emphasizes the gap in the market, particularly for those who prefer renting single-family homes over apartments. The company is currently under contract for two sites, in Kingston and London, with permits for up to 250 single-family homes at each location.

Hawtin recognizes the challenges faced by first-time homebuyers and acknowledges the need for more rentals, especially in the single-family home category. Core presently owns 550 single-family homes in various Ontario cities.

While the controversy around Core’s initial strategy centered on the perceived impact on housing affordability, Hawtin asserts that the company is not causing the affordability issue. Instead, he argues that the demand for more rentals, especially single-family homes, is a critical factor.

The new direction proposed by Core aligns with the model seen in the U.S., where institutional investors own neighborhoods of detached houses designed for single-family rentals. Hawtin aims to introduce a similar concept in Canada, emphasizing the opportunity to bring new rental stock to the market at scale.

However, Core’s plans may hinge on Ottawa’s latest home construction initiative, specifically the waiver of the federal goods and services tax on new multi-unit rental-specific buildings. While the waiver applies to developments with a minimum of four units per property, the ambiguity in the legislation raises questions about its applicability to detached houses.

Hawtin remains committed to addressing the shortage of single-family rentals and plans to proceed with buying detached houses if the new-home construction initiative does not align with Core’s proposed strategy. Despite the opposition and challenges, he emphasizes the need for awareness about the shortage of single-family rentals as a crucial asset class in Canada.