Government policies ensure rentals will remain scarce

Stunting home buying, discouraging investors and stalling new residential construction make renting the only option for many in Western Canada

Western Investor
August 22, 2019

Vancouver Rentals

More than a third of Canadian parents say they are helping their adult children pay their rent, a level that spikes to 41 per cent in Alberta, according to a new survey from Leger for FP Canada. It is a relatively low 27 per cent in Vancouver – which has the toughest regulations for landlords in Canada – likely because even parents are scared off by the highest rents in Western Canada at an average of nearly $2,000 per month for a one-bedroom apartment.

It is no coincidence that provinces with the highest rents and fewest rental units also have the most robust anti-landlord laws in the country.

In B.C., for example, landlords are allowed to raise annual rents by only 2.5 per cent this year, though Metro Vancouver landlords report that property taxes increased 25 per cent, water charges rose 9.7 per cent, sewer costs jumped 11 per cent and hydro rates are 6.8 per cent higher than a year ago. 

B.C.’s misguided rate-cap regulations, combined with municipal building and zoning restictions, have persuaded many developers to abandon rental projects, even as tenant demand and rental rates skyrocket. 

Metro Vancouver has a rental vacancy rate of around 1 per cent.

In Manitoba, rent increases are capped at 2.2 per cent this year, but at least the legislation exempts new rental units. 

Winnipeg has a rental vacancy rate of 2 per cent, second tighest in the West. 

Alberta and Saskatchewan have no limits on rent increases: their major cities have the highest rental vacancies and some of the lowest rents in the country.

To apparently make sure existing landlords continue to   report positive cash flow, senior levels of government have stepped in to keep people renting, not buying, a home.

The federal mortgage stress test is a grand example. 

Right now mortgage lenders, including major banks, are slashing the bellwether five-year mortgage rate after new mortgage applications plunged by $15 billion since 2018. You can now get five-year home loans at 2.5 per cent at some lenders.

But under the federal mortgage stress test, homebuyers, including first-timers desperate to escape renting, must qualify for a fantastical five-year mortgage rate of 5.19 per cent. 

The number of first-time buyers in Canada has plunged by at least 20  per cent since the stress test was expanded to all homebuyers early in 2018.

The stress test has also stopped many investors from buying condominiums, which have been a stalwart sector of Western Canada’s rental universe for years.

If you are a landlord in Western Canada be assured that “progressive” government policy- makers are working hard to ensure that your apartments will stay fully rented because tenants are being left with few options. 

Copyright © Western Investor

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