Vancouver-style high rents a drag on national economy: report

Ian Patton recently rented a new place in Vancouver after months of looking for a good deal for himself, his wife and their two kids.

Although a four-bedroom house for $1,900 a month is considered a good deal in the city, Patton, 41, said he thinks Vancouver’s low vacancy rate means the quality isn’t what it should be.

“It is a really old house and it’s falling apart,” he said in a telephone interview. The landlord is “not going to paint the place [and] they’re not going to refinish the hardwood floors that have been walked on for 30 years and are starting to come apart. The [garage] roof is falling in … and [the landlord] just wrote into the lease that the garage is not to be used.”

The lack of affordable rental housing doesn’t just negatively affect the bottom line and quality of life for people like Patton, it’s negatively impacting Canada’s economy, according to a report released Wednesday by the Federation of Canadian Municipalities.

The report specifically singles out Vancouver’s high real estate prices and low vacancy rates as pushing up rental costs and sapping households of their income.

A healthy rental market — defined loosely by the Canadian Mortgage and Housing Corporation as a three per cent vacancy rate and less than 30 per cent of household income spent on rent — is an “often overlooked” component of Canada’s housing system and the country’s economy, according to the FCM report.

Vancouver has one of the unhealthiest rental markets in Canada, said FCM president Karen Leibovici.

“When you’re looking at the median rent … for a two-bedroom apartment, Vancouver is at the top for costs at $1,400 [a month],” she said. The next closest market — in Halton Region, Ont. — is $325 cheaper, while the Canadian median was $883 in 2011.

Driving Vancouver’s high rents is a low vacancy rate, which the CMHC predicts will decrease to 1.1 per cent this year from 1.4 per cent in 2011.

Further, nearly 40 per cent of households in the city of Vancouver spend more than 30 per cent of their income on housing. For residents under 34, nearly half spend more than a third of their income on housing.

Despite these issues, only 385 new rental units were built in Vancouver in each of the last five years. The FCM report estimates Vancouver needs 1,070 new rental units per year to adequately address housing demand.

Not only will efforts to improve the market result in economic benefits through increased rental construction and related employment spinoffs, Leibovici said, a healthy market will also support a more mobile workforce and provide young families, new immigrants and seniors with better housing options.

The dearth of rental housing is also an issue elsewhere in the region.

West Vancouver-Capilano MLA Ralph Sultan noted the North Shore is expecting an influx of thousands workers as a result of Seaspan’s $8-billion shipbuilding contract. It will be great for the economy, he said, but it is a concern for the area’s rental housing market.

“Where are they going to live?” Sultan asked, noting that new rental construction in the area is minimal due to provincial pricing controls and municipal zoning restrictions.

The FCM report comes after Vancouver Mayor Gregor Robertson unveiled an ambitious housing plan last week to increase the city’s supply of affordable housing. The plan prioritizes rental housing and toys with the idea of building rental units on industrial land and in other non-traditional locations.

Although municipalities certainly have a role to play in creating healthy rental markets, the FCM report says the federal government should provide low-interest loans to finance new rental construction and reform the tax system to prevent the demolition of existing rental housing, among other initiatives.

Individuals are being forced to rent, Leibovici said, because they cannot afford to buy, a problem expected to get worse as recent changes to government-backed mortgages come into play.

Under the new rules — which lower the maximum amortization period to 25 years from 30 — first-time homebuyers could need to earn as much as $500 more a month and would have to pay an extra $209 monthly toward their mortgage. Consequently, up to five per cent of Canadians who might have considered buying a new home will likely no longer qualify for government-backed mortgages.

At the same time, Vancouver housing sales have hit a 10-year low and the benchmark price for detached properties increased by 3.3 per cent from June 2011 to June 2012, hitting $961,600, according to a report released Wednesday by the Real Estate Board of Greater Vancouver.

Patton said he and his wife do not make a lot of money and cannot afford to own a home in the Vancouver.

“What we could afford to buy for what we’re paying in rent … would be a 1-bedroom condo, maybe,” he said. “Which, with two kids, would be a little much.”

Source: The Vancouver Sun