Economists say there is no fix without increasing the supply of rents


Potential Government Intervention in Housing Markets Affecting Rental Demand: Report

News analysis

The affordable crisis in Canadian housing focuses primarily on the owned market, 30 percent Many Canadians live in rental housing, and their affordability is also deteriorating.

Housing market analysts have long pointed out supply shortages as an important issue to be resolved, and CIBC’s Deputy Chief Economist Benjamintal said the rental market has not been given due attention. increase.

“Without a rental solution, there can be no affordable solution. For Canada’s overall affordability, rents need to be a big part of the solution and we have to deal with it. There is a crisis, “he told The Epoch Times.

“Without a renter’s solution, we’ll never reach affordable prices in Canada, especially in big cities,” he said. “The more we talk about people who are willing to live in an apartment, the better the situation.”

According to Tal, more two-bedroom and three-bedroom rental apartments need to be built to accommodate families for longer rental periods.

He expects rent to rise from already expensive levels and demand to come not only from individuals but also from families.

Rental site Microsystems.ca And Bullpen Research & Consulting, a boutique residential real estate advisory company, reported in February. All national rent report The average rent for all Canadian real estate listed on AIX.ca was $ 1,807 per month, an increase of 4.4% per year.

“The biggest growth will continue to be single-family rentals, as many potential buyers choose to rent for fear that their markets are too bubbling,” the report said.February 17th Report from Parliamentary Budget Officer In December 2021, average home prices in Hamilton, Toronto, Halifax and Ottawa are estimated to be more than 50% above affordable prices.

But just as Vancouver and Toronto lead Canada in the affordable housing market, rents are also the highest in Canada, at $ 2,550 and $ 2,317 per month, respectively. Rents rose 16.2% in Vancouver and 14.5% in Toronto, according to the report.

The report warned that rent increases would be highly biased as average rents recovered from “falling off a cliff during the worst of pre-vaccination pandemics.”

Ben MyersThe president of Bullpen Research & Consulting points out many factors that can lead to higher rents. For example, as more people work from home, demand for larger properties increases, resale markets overheat, and interest rates rise.

The Microsystems.ca The report states that another factor influencing the increase in rental demand is “the possibility of government intervention in the owned market.”

If house prices soar, the government could intervene, Myers said. Fair Housing Planning in Ontario Some of the latest measures discussed were taxes on speculative purchases, bans on foreign buyers, and capital gains taxes on the sale of major homes.

“I don’t know what that will be, but there is potential for higher prices. People want the government to do something,” he told The Epoch Times.

The effects of the pandemic wear out

The national vacancy rate for apartments built for rent leveled off at 3.1% in 2021. Canada Mortgage and Housing Corp. (CMHC) In the February 2022 Rental Market Report published on February 18, the pandemic caused a slight increase in vacancy rates in 2020, but is now in line with the long-term average.

“Affordable rentals continue to raise important challenges across the country,” CMHC said. Affordable homes are defined as homes where rent is up to 30 percent of the tenant’s total income.

CMHC said rent affordability has deteriorated in most major cities since October 2020. Wage growth outpaced wage growth, and after inflation adjustments, wages fell faster than wages.

Canada’s annual inflation rate in January 5.1%..

The shelter is the most important of the eight major components that make up the consumer price index (CPI), from which inflation levels are measured.Analysis by Statistics Canada In 2017, shelters were shown to account for more than a quarter of total spending within the CPI.

“This deterioration raises barriers to the transition from rent to owning homes and further supports rental demand, especially for low-income households, as CMHC generally outperforms rent in most urban areas. It’s likely. “

More demand comes

Immigrants are an important source of rental demand, as people tend to rent when they first arrive in the country. And that is a great impetus for the government.

Canada took over in 2021 405,000 new permanent residents— The most immigrants of the year in the history of the country.

The CMHC reported that by late 2020, net international migration had begun to recover as pandemic restrictions were relaxed after falling to historically low levels.

The Immigration level plan for 2022-2024, Submitted on February 14, envisions welcoming immigrants at a rate of approximately 1 percent of Canada’s population. This includes 431,645 permanent residents in 2022, 447,055 in 2023 and 451,000 in 2024.

“Pure international migration is likely to drive growth in rental demand and put further downward pressure on vacancy rates, assuming migration continues to recover to pre-COVID levels,” CMHC said.

CMHC also noted that the main driver of rental demand is the employment of people aged 15 to 25. This group was hit hardest during the pandemic.

Building more rental housing is a key factor in the government’s 2017 National housing strategy (NHS). The program includes initiatives to repair existing homes, make low-cost loans available to local governments and home developers, and provide rental assistance.

But so far, the NHS’s impact, if any, is minimal, Myers says.

“I haven’t heard much [clients] The national housing strategy has had some impact on their business and their decisions anyway, “Myers said.

Mr. Tal said it was at least encouraging that the government was talking about increasing the supply of private apartments.

Rahul Vaidyanath

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Rahul Vaidyanath is a journalist in The Epoch Times of Ottawa. His areas of expertise include economics, financial markets, China, national defense and security. He has worked at the Bank of Canada, Canada Mortgage and Housing Corp., and investment banks in Toronto, New York and Los Angeles.

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