Canada's Condominium Magazine
It may be good news for landlords and investors, but with “nearly half of renter households spending more than the recommended” percentage of income on housing — rental shortages and prices have reached a crisis-level in Canada. Nor, is there relief in the suburbs, once the refuge of renters.
Many experts believe that no amount of legislating and tinkering in markets will help. The main long-term solution is to build more condos and purpose-built rentals, increasing inventory, easing shortages and pressure on prices. It is also in the best-interest of the real estate industry to support solutions to high rentals — as lack of affordability sometimes has the effect of delaying entry into the purchase market.
Although British Columbia has taken an agressive position, with regard to “tinkering with the market” — taking the view that a hot real estate market drives prices up, many experts argue the opposite: that a healthy real estate market provides the incentive to create the inventory needed to ease pressures on both sale prices and rentals.
Canadian Rental Housing Index
Last month, the BC Non-Profit Housing Association released its 2018 Canadian Rental Housing Index, in which they discussed rising rent across Canada, which has reached crisis levels. Many have welcomed the new Index, hoping that it might provide valuable insight into current market trends and hope that it might soon balance out.
According to Federation of Canadian Municipalities President Raymond Louie, the FCM “welcomes the new Rental Housing Index. The Index brings important attention to the need to make housing more affordable for the one-third of Canadians who rent. It provides valuable information for all orders of government who need to do more, together, to fix Canada’s housing crunch.”
“Nearly half of Canadian renter households are spending more than the recommended 30 per cent of their income on housing,” read the statement in part. If that were not bad enough, one in five are estimated to be spending over 50 per cent of their income on housing, leaving many struggling with massive debt and increasing the risk of homelessness across the country.
“Traditionally, spending 30 per cent or less of household income on rent has been viewed as the benchmark of what is considered affordable,” said BC Non-Profit Housing Association’s Acting CEO Jill Atkey. “However, the data shows that spending more than 30 per cent of income on housing has become the new normal for individuals and families in almost all areas of Canada.”
The Index ranked the 10 most critical rental housing markets, both municipal and regional districts. The municipal ranking listed Toronto as #4, while the regional list ranked the city at #1:
- Toronto, Ontario
- York, Ontario
- Peel, Ontario
- Metro Vancouver, BC
- Sunshine Coast, BC
- Squamish-Lillooet, BC
- Division No. 11, Alberta
- Greater Victoria, BC
- Ottawa, Ontario
- Middlesex, Ontario
The Index tracks rental costs, compares those with average household income, and more in over 800 cities and regions across Canada. Statistics are gathered through data taken from an easy-to-access web portal, which is designed for governments, local planners, housing organizations, and the general public to view accurate information regarding the rental housing market in various communities.
According to the Index, approximately 23 per cent of renters in Toronto spend over half their household income on housing, with the average rent including utilities reaching over $1,200. Even some 1-bedroom units averaged at $1,449, and studios ran as high as $1,138.
Suburban rentals no longer affordable
The most concerning information released in the Index is that affordability issues are spilling out of urban areas and into suburban and rural areas. “Although large urban centres have long been associated with higher rental housing costs relative to income levels, in the past, renters have been able to find suitable housing by looking in nearby suburban communities,” said Ontario Non-Profit Housing Association’s Executive Director Marlene Coffey. “The 2018 Canadian Rental Housing Index shows the suburbanization of poverty where major affordability challenges are just as prevalent in the surrounding communities as they are in those urban centres.”
“With escalating prices keeping many Canadians from affording home ownership, as well as a lack of affordable rental housing supply, more people are entering the rental market or staying in the rental market longer,” said the Canadian Housing and Renewal Association’s Executive Director Jeff Morrison. “This marks the first time in a generation that the rate of Canadian renters has outpaced the number of Canadians buying a home and speaks to the need to increase the supply of affordable housing.”
Many areas have begun to seek drastic solutions in order to provide some relief. In Vancouver, politicians are leaning toward taxing the real estate market into submission. Surprisingly, even homeowners are on board, though they will lose money if home prices fall. Other solutions tossed around in many parts of Canada and the United States include tenant protections, housing subsidies, new regulations and actions that will enable developers to build higher and faster in order to provide adequate housing options as quickly as possible.
British Columbia more aggressive
British Columbia, however, has gone above and beyond in its goal to relieve the pressure of a crippling real estate market. A provincial election last year saw a major shift in power that ended a 16-year run in a move that citizens hoped would bring about a great deal of change in the housing sector. Some of the changes that voters hoped to see include increased housing supply and measures aimed at curbing housing demand, while chasing out overseas buyers.
A foreign buyer’s tax raised home purchase prices from to 20 per cent, compared to Ontario’s 15 per cent tax. Additional plans include imposing higher property taxes on second homes, families with primary incomes coming from overseas, and homes valued at over $3 million.
The province has also started investing in housing with the Building BC Community Housing Fund, an initiative that seeks to provide 14,000 new rental homes throughout the province over the next decade in an effort to assist low-income renters, seniors, and families.
“We’re building British Columbia by investing in homes for people who live and work in our communities,” said BC Premier John Horgan. “Fixing the housing crisis is not just about ownership. It’s about making sure that British Columbians who rent rather than own can find homes they can afford and have a future in.”
The 2018 Canadian Rental Housing Index paints a grim picture of rental housing affordability and its effects on households across the country. However, many remain hopeful that measures taken by provincial and federal governments will go a long way in providing relief and offering hope for future homebuyers and renters alike.
According to Stéphan Corriveau, Executive Director of Réseau Québécois des OSBL d’habitation, the Index “demonstrates the need for all levels of government, communities, and housing providers to work together to ensure the timely delivery of a variety of housing options to address the diverse needs of Canadians.”
“The health of all communities is dependent on affordable rental housing, and the Canadian Rental Housing Index underscores the need for new investments,” said Linda Morris, Senior Vice-President of Vancity Credit Union. “Financial institutions have a strong role to play in supporting local affordability initiatives, but we need to see strong leadership from our senior levels of government to ensure that all Canadians have affordable housing.”