Canada Mortgage and Housing Corporation has confirmed this morning what Canada’s 3.9 million renter households already know: Private rental housing has slipped into a much deeper crisis. The national rental vacancy rate has dropped by a staggering 15% over the past year down to a critically low 2.2% – the lowest level in six years. Across Canada, rents are rising faster than the rate of inflation. As the economic tsunami crashes over the country, the federal government needs to follow the lead of a growing number of countries around the world and include affordable housing investments as part of its economic stimulus package.
Canada’s private rental market matters because it provides a home for almost one-third of Canadian households – and includes most of the low and moderate, and many middle-income households. About 31% of the homes in Canada are rented (3.9 million out of a total of 12.4 million dwellings); renter households have annual incomes that are, on average, about half or less of owner incomes, so the biggest portion of households that are precariously housed are in the rental sector; shelter costs represent the single biggest expense for low, moderate and even middle-income households, so the higher the rent, the less the money that is available for other necessities such as medicine, food, transportation, child care, clothing and so on; there is a direct link between lower incomes and poor housing and higher illness and premature mortality; rental housing costs have been rising faster than the rate of inflation in recent years, even though renter household incomes have been stagnant (or declining in some parts of the country), which means that renters are facing an AFFORDABILITY SQUEEZE; after dropping very low in 1996, the number of new rented homes has been growing and is now, across Canada, at 18,605 construction starts in 2007 – but that’s still just a little bit more than half the number of starts back in 1990, so there is also a SUPPLY SQUEEZE; and, of course, the growth in housing insecurity starting in the 1990s across Canada has led directly to an increase in mass homelessness throughout the country.
Here are some highlights from the national, Ontario and Toronto numbers:
NATIONAL NUMBERS: The private rental vacancy rate in Canada’s Census Metropolitan Areas (the larger urban areas where most renter households live) fell sharply from 2.6 to 2.2 – the lowest level since 2002. A vacancy rate below 3% puts the private rental market into the danger zone. Canada’s has been in the danger zone every year since 1999 – and the drop has been consistently down since 2003. The average market rent for a typical two-bedroom apartment in Canada’s CMAs jumped from $795 to $828 – an increase of 4.1%, well above the inflation rate. The private rental “universe” (the number of private rental units in metropolitan areas) in Canada has decreased by almost 3% from 1,573,876 in 2007 to 1,528,585 in 2008, even though the country’s population (and therefore the number of households) grew substantially during that time. There’s almost no relief in the secondary rental market (rented condos and secondary suites) with rents that are higher than the primary rental market and vacancy rates – for the most part – below those in the primary private rental market.
NATIONAL ANALYSIS: The millions of Canadians in rented homes are trapped in a double-squeeze. On the affordability side, rents continue to rise faster than the rate of inflation, even though renter household incomes has remained stagnant (below $30,000 annually) since the early 1990s. On the supply side, the overall number of rental homes (the “universe”) is dropping, and the number of vacant units is also falling, which leaves fewer and fewer options. Some renters at the higher end of the rental income scale were able to move into home ownership in recent years, but the qualifying income for ownership housing continues to rise in almost every part of Canada – which is closing this option. Canada remains the only major country in the world without a national housing strategy. Federal investments in affordable housing had a one-year spike in fiscal 2006 as the funds from Bill C-48 (2005 Parliament) were allocated. As of the end of fiscal 2007 (March 31, 2008), Statistics Canada reports that federal investments in affordable housing are at their lowest level on a per capita basis in two decades. And, CMHC in its financial forecasts projects that federal housing investments will drop sharply in the next three or four years. The federal government announced in September that it would extend three national housing and homelessness programs for five years, but froze the funding at the same level as the past decade. Even with those extensions, federal housing and homelessness spending remains painfully low.
ONTARIO NUMBERS: Ontario, which has posted rental vacancy rates above the 3% danger zone in recent years, has dropped from 3.3% to 2.7% – a major fall of 18% in one year. Average market rents are up 2.8% from $870 to $894 (slightly above the annual rate of inflation). The rental universe is up slightly in Ontario – from 622,284 to 622,460, but the number of vacant units in the province has fallen by a whopping 20% to 16,546 for all of Ontario.
ONTARIO ANALYSIS: Renter household incomes in Ontario have fallen sharply over the past 15 years – dropping by 9% over that time even as rents have risen by 37% – creating a very painful squeeze. It’s no wonder that the number of Ontario households facing eviction because they cannot afford to pay the rent has risen to more than 60,000 annually. Ontario has an “official” affordable housing waiting list of 124,032 (according to the Ontario Non-Profit Housing Association), and there are likely many more discouraged households that don’t bother to go on the list. With less than 17,000 vacant rental homes in the entire province, even if the province ramps up a major housing benefit program, a greater supply of affordable homes is urgently needed in most parts of the province. The Ontario government has promised that it will start a consultation on a new provincial housing strategy in the late spring – but that’s after the next provincial budget, which means that any new provincial housing investments could be a year or more away. And it will take a year or more after that to move from development to move-in day for the new homes. The provincial government is offering no relief for the increasingly hard-pressed Ontario renter households. Since 2002, the Ontario government has funded an average of only 1,237 new affordable homes annually, according to numbers from the Ontario Ministry of Municipal Affairs and Housing. At this rate, it will take 100 years just to provide homes for households who are currently on the provincial waiting lists.
TORONTO NUMBERS: There has been a catastrophic drop in rental vacancy rates in the City of Toronto – crashing by 41% to a painfully low 2% – well below the danger zone. Average market rents in Toronto rose over the past year by 3% to break the thousand-dollar mark at $1,014. The rent for a typical two-bedroom apartment rose by the same amount to $1,104. The private rental universe dropped by more than 400 homes to 254,877 while the number of vacant rental units fell by more than 40% to a mere 5,094 for the entire city with its tenant population of 447,000 households. While slightly more condominium units are available for rent in the secondary rental market, the average rents are well above the rents in the primary rental market – so no relief for lower-income households.
TORONTO ANALYSIS: Renter incomes in Toronto have dropped by almost 10% over the past fifteen years, even as rents have risen by 42%. The City of Toronto promises that it will deliver a 10-year housing strategy in the spring of 2009, but provided no new capital dollars for housing in its 2009 capital budget. In 1999, the City of Toronto adopted a target of 2,000 new affordable homes annually, then revised that down to 1,000 new homes annually in 2006. Based on numbers from the City of Toronto’s Affordable Housing office, it will actually fund 780 new affordable homes in 2008 and 570 new homes in 2009 (plus replacing 336 public housing units in Regent Park).
SUMMARY: Renters are facing the worst conditions in the private rental markets in years – rising rents, stagnant incomes, shrinking supply and fewer vacant units. The future looks bleak as the government investments in affordable housing at all levels remains soft. While a number of governments are using their economic stimulus packages of recent weeks to directly invest in affordable housing and related social infrastructure, Canada has failed to take this action. All eyes will be on the federal budget at the end of January for a significant investment in desperately-needed new affordable homes.