Rents in privately-owned housing are continuing to skyrocket across Canada, according to the latest national rental market survey released today by Canada Mortgage and Housing Corporation.
A new affordability index developed by CMHC reveals that more than half the renter households in 11 of Canada’s 26 major urban areas cannot afford the average market rent being charged by private landlords. Windsor tops the league table for the least affordable rental market, followed by Victoria, Ottawa, Toronto, London, Hamilton, Oshawa, Sudbury, Calgary, Kitchener and St. John’s.
The latest CMHC numbers confirm that the private rented market (both purpose-built rental and rented condominiums) are unwilling or unable to deliver the affordable homes that Canadians so desperately need. The rise of mass homelessness in most parts of Canada in the 1990s is one sign of the nation-wide affordable housing crisis.
The average market rent in 2007 increased by 3.6% in 2007 – that’s more than 50% higher than the rate of inflation. While rents were up, median household incomes for renters (which include most of the low, moderate and middle-income Canadian households) have been stagnant or have dropped in recent years. (The median household is the statistical middle – half of renter households are below the median, and half are above – so it provides an important measure of the affordability of the rental market.)
This leaves renters trapped in an affordability squeeze between rising rents and inadequate incomes.
The latest CMHC numbers also show that the rental vacancy rate – the measure of the number of vacant units in the overall “private rental universe” in urban areas (where most renters live) is at a critically low 2.6% in 2007, down from 2.7% in 2006.
Many economists believe that a rental vacancy rate of 3% is the minimum level for a healthy rental market, though some suggest that the appropriate rate should be 5% or higher. In commercial real estate, a rental market with a vacancy rate below 10% is typically called a “landlord’s market”.
By any measure, Canada’s private rental market is failing to deliver enough homes (supply) at a rent that is affordable to renter households (affordability).
Rented condominiums are not providing any relief for beleaguered tenants. In the seven urban areas where CMHC surveys rented condominiums, rents are much higher in rented condominiums than in other rental units, rents increased faster in 2007 in the condo sector and the vacancy rate is much lower.
During the 1980s and 1990s, the federal government and many provinces (especially Ontario and Alberta) cut affordable housing spending, gutted affordable housing programs and downloaded responsibility for administration of existing affordable housing programs. Politicians hoped that the private rental market would pick up the slack and provide a good supply of rented homes at a price that was affordable to low, moderate and middle-income households.
In response to growing housing insecurity and increased homelessness, the federal government has created a patchwork of funding and programs. All three major federal housing and homelessness programs are due to expire in fiscal 2008. These include:
* the federal homelessness strategy (Homelessness Partnering Strategy) at $135 million annually;
* the federal housing renovation program (Residential Rehabilitation Assistance Program) at $128 million annually; and
* the federal affordable housing initiative, which was launched in 2001 with $1 billion over five years, and includes $1.4 billion over two years allocated in 2005.
Canada’s per capita spending on affordable housing was $65 in 2006. The United States spent more than double that – a total of $156. The United Kingdom spends $226 per capita.
Canada’s critically low level of affordable (social) housing spending is the key reason for the lack of new social housing. In the early 1980s, about 20,000 new affordable homes were funded by the federal government (about 12 out of every 100 new homes built across the country). In recent years, less than one out of every 100 new homes have been truly affordable.