MONTREAL ― Canada’s major cities are short of thousands of rental housing units and will see affordability worsen unless construction speeds up considerably, a new report is warning.
The report comes as a new breakdown of data from the Canadian rental housing index shows the worst rental housing affordability crises are in some key battleground ridings in this election.
The rental shortage is most dire in the Toronto area, RBC Economics said in a report, where it estimates the amount of new rental housing ― including condos destined for the rental market ― amounts to less than half what the city needs to be building to stop rents from rising.
Watch: Why rents are soaring in Canada, and what can be done about it. Story continue below.
“Strong demand has pushed rental vacancy rates to historically low levels and rents are now reaching uncomfortable highs,” senior Royal Bank of Canada economist Robert Hogue wrote in the report.
“In the coming years, rental demand is only set to go up — way up in the case of Toronto and Vancouver, where high home prices have crushed some home-ownership dreams. If big cities have any hope of tackling affordability issues, rental supply must increase significantly.”
Hogue’s report assumes that the home ownership rate in most large cities will continue to fall because of high house prices, putting more pressure on the rental market. It also assumes these cities’ populations will continue to grow as rapidly as they have.
While there are “reasons to be optimistic” about Montreal and Vancouver because construction of condos and rental apartments is catching up, Toronto will need to build at a much faster pace, Hogue warned.
The federal Liberals recently put into place two new programs to incentivize developers to build rental housing, but the experts aren’t convinced they alone will be enough to make much of a difference.
“Despite mounting developer interest in rental apartment projects and heavy investor involvement in the new-condo market, the number of new rental units making their way to the rental universe falls way short of what’s needed in Toronto,” Hogue wrote.
Meanwhile, the Canadian rental housing index, which tracks housing affordability at the neighbourhood level, recently put together a list of the federal ridings suffering from the worst rental affordability issues.
Not surprisingly, the top 20 are dominated by ridings in and around Toronto and Vancouver. Notably, some of these around Toronto are battleground ridings for the Liberals and Conservatives, but those two parties have largely focused on helping homebuyers during this election cycle.
And also notably, areas in Montreal, Winnipeg and Halifax made the list, highlighting that affordability problems exist outside the priciest cities as well.
“When we break it down by communities, we really do see the affordability crisis touches every corner of the country,” said Jill Atkey, CEO of the B.C. Non-Profit Housing Association, one of the co-founding groups of the rental housing index.
Among the groups particularly hit by rental affordability problems are seniors, under-30 households and single-mother households, the index data shows.
Recent immigrants and Indigenous communities are suffering from overcrowding problems, with 21 per cent of immigrants reporting overcrowded housing, compared to 9 per cent for all Canadian renters. Among more recent immigrants — those who arrived since 2011 — overcrowding affects 31 per cent.
Indigenous communities also experience higher levels of overcrowding, at 12 per cent.
Atkey sees Quebec as the “bright spot” for affordability in Canada. Despite some problem areas in Montreal, fewer households in Quebec are experiencing a housing crisis.
“Quebec has been investing in social housing. The feds pulled back in 1993, but Quebec has maintained its (spending),” Atkey said in an interview with HuffPost Canada.
Affordability an election issue
So far in this election cycle, the NDP has been the only party focusing on rental affordability issues, with the Liberals and Conservatives promising relief for homebuyers, of one form or another.
The NDP’s promise this week of a rent credit of up to $5,000 a year “would make an immediate impact in the numbers in the rental housing index,” Atkey said.
Hogue argues policymakers need to do more if they want to convince developers to build rental units instead of other kinds of housing.
“To really make things happen, the policy scale must be tipped in favour of building new rental supply (of both below- and at-market rent units). This could mean sweetening existing rental-housing construction funding programs or offering new incentives (e.g. development charge rebates) to project developers,” he wrote.
Atkey said he would like to see more co-ordination between different levels of government in getting rental housing built, and “a deepening of the investments that they’ve already committed to.”
She added: “What’s encouraging right now is that this has become an election issue in a way it was not, even in 2015 ... We’re seeing a real commitment to addressing the problem.”