Is there a rental crisis?
We keep hearing the term we are in a rental crisis in Canada. First, what is a rental crisis?
I think what it means is that we don’t have enough housing or enough affordable housing for people to live in. Governments are saying we need to build more to meet the need to eliminate the rental crisis.
This confuses me a little. Even during covid when you looked at the number of properties for rent there were lots of properties for rent. Now that the economy has slowed, the number of rentals has exploded, so why do we need more? It is now taking at least three months to find a tenant in the best case scenarios for our clients. Tenants have the time to take a look for the right fit for them and to negotiate the rental rates. These factors are quickly reducing the rate of rental prices.
As the economy slows developers slow the amount of product they build which eventually will also catch up to the market and there will be a reduction of the amount of new product entering the market. If this is going to happen then why do we need more rental properties?
Maybe we don’t need more rental properties, maybe we have been building the wrong properties. For the past thirty years in Canada. The majority of properties built in the lower mainland of BC have been condos for ownership. The number of purpose built rentals has been far and few between. In other parts of the county like southern Ontario many properties being built are still single family homes.
In both of these markets we have missed what the needs of today are. Vancouver is a very transient market meaning people come here then move on elsewhere. This means we need more rental propeperties than owned properties. Ontario building mostly single family homes except in downtown Toronto is not understanding that the household has changed. Families are not as large as they were before and people are living on their own for longer which means the product needs to change to meet the demand of the current market. In both markets we are missing what the market needs and building what the seller wants to make and feels they can make the most profit selling.
In the Vancouver market developers have built many rental buildings in recent years, but are they meeting the market needs?. Many of the new rental buildings look very similar to new condo buildings with, in unit laundry, high end appliances, and many building amenities we find in condo buildings. All of these items increase the cost of maintaining the buildings, which makes it difficult to reduce the rental rates to meet the tenants demand to have lower rental prices. It is difficult to have quality and lower prices at the same time. In those scenarios something must give, if you want better quality it will cost more money. If you want something less expensive you must concede something of quality in exchange. That can be less features in the unit or less amenities in the building. In Ontario people are trying to find less expensive and the only way to do that is move further away to less expensive property, instead of a smaller property.
In both markets we have not built enough purpose built rental properties which leads to cases like covid where when the sales market takes off many investors take the opportunity to sell their property for a profit and this takes needed rental properties out of the market. Other government controlled factors affect the market including the amount of immigration entering the country, the people allowed to buy products like foriegn buyers and how houseing is used including short term rentals. When governments change the laws affecting these factors they eventually have effects on the rental market.
What a rental, and housing market needs is stability. The interesting thing is that all the issues that people complain about in today’s market have occurred before, and will happen again in the future.
Building more housing may not solve the “rental crisis” if we continue to build the wrong product for the market.
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