Paul Liberatore

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Now that Vancouver Real Estate Speculation Has Chilled Out, When Will Rent Come Down?

So dark, so expensive. Vancouver photo via Flickr user Colin Knowles

 

Have you ever thought about calling your landlord and politely asking to pay less rent every month? If you apply standard "you miss 100 percent of the shots you don't take" logic, this should be a regular broke millennial practice—maybe even an annual hashtag.

It turns out this actually works in Calgary. Thanks to a tumbling provincial economy and fewer migrating workers, landlords are struggling to keep tenants, and are saying "yes" to the ones who ask nicely for a discount.

"I asked this summer, at renewal time," one Calgarian tweeted at a Calgary Heraldreporter earlier this week. "They offered a rate even lower than what I proposed." Another tenant said she got $375 a month knocked off her monthly housing bill. "That essentially puts almost $5,000 more net income into our household that we can save," she told the Herald. "It's huge."

Because I'm a naturally jealous person, I immediately tried to think of ways I could recreate this scenario in Vancouver. An aspirational reading of the news that Vancouver home sales "plunged" 38.8 percent in October suggested to me that my rental situation is surely about to follow suit. If the out-of-control real estate bonanza is finally over, shouldn't renters start to see some relief?

Obviously I didn't want to get too greedy, so I called up my landlord, and casually brought up a notice of rent increase he mailed me this week. It turns out the maximum rent hike in British Columbia is going up in the new year (3.7 percent, up from 2.9), which somehow gave me the impression this stuff is arbitrary and negotiable. Since detached home prices in the city just turned a corner—down 0.8 percent from last month—I legit thought I could talk him out of adding ~$500 to my annual rent.

 

Let's just say my skills of tact and persuasion were no match for a less-than-one-percent vacancy rate, and a landlord who pretty well understands he could still get away with charging $2,300 for a mediocre one bedroom apartments in the West End if he really wanted to.

Still worried that this might be some personal failing on my part, I called up Canadian Centre for Policy Alternatives lead economist Marc Lee to figure out how soon Vancouver rents will return to Earth, now that investors and speculators have chilled out. Unfortunately the news wasn't what I (or any renter) wants to hear. Bottom line: Toronto and Vancouver aren't going to get Calgary-style rent discounts anytime soon.

Lee told me that the rental problems in both Vancouver and Toronto have been decades in the making, and could take another generation to fully sort out. In the 1980s there were actually tax incentives for developers to build cheap rental stock, but those breaks evaporated in various rounds of budget cuts. Condos became the construction project of choice, which are easily marketed to out-of-city owners in pre-sales, bringing in yuppies from the US, China and other parts of Canada.

That population growth, driven by interprovincial and international migration, is what deepens rental shortages in Canada's major urban centres. On top of that, Vancouver's slowing market spurred by a recent foreign investor tax may actually make things worse for people in Toronto. Some investors are moving into other parts of BC or Seattle, but many are seeing Toronto real estate as the next best place to park their money. "We need more time and data," says Lee, "but we're seeing some or maybe a lot of what was coming to Vancouver now shifting to Toronto."

 

 

According to the latest numbers put out by the Toronto Real Estate Board, average one-bedroom condo rentals rose an unsettling 7.2 percent to $1,777 in the third quarter of 2016. The report looked at rental listings, and found about 500 fewer than this time last year. Fewer options increases competition and pushes up what landlords can charge. Though calculated differently, a Padmapper study of Vancouver found the median one bedrooms went for $1,800 in September, up from $1,750 the month before, and $1,700 the month before that.

These conditions are making young people poorer. So much of our income goes to rent every month, we're not able to save or move or think about the future. And according to Lee, Airbnb is actually having more of an impact on rent than we think. In Vancouver, where several thousand units are being diverted as short-term rentals, the competition among less than 5,000 empty units is unhealthy. Until the number of vacancies rises to a healthier three or four percent, you're not going to find reasonable apartments for under $1,200.

Vancouver in particular is so far off a healthy vacancy rate, lower home sale prices aren't going to move up enough renters into homeowners to make an immediate difference. There have been some efforts by our city government to tip the scales back in favour of renters, like bringing in a tax on empty condos, and the latest regulations on Airbnb, which together could add a few thousand new places to rent onto the market.

Lee says if cities are going to take affordability seriously, they're going to have no choice but to build a lot more rental stock. "If we just try to squeeze a few pieces from Airbnb and squeeze a few more pieces from what are currently empty condos, it will have a little bit of an impact, but it's not going to have the big long-term impact on affordability," he told VICE. If we actually want rent to be affordable for young people, Lee recommends Vancouver build somewhere in the neighbourhood of 5,000 to 10,000 rental-only units every year for the next generation.

While neither city's landlords are about to offer generous discounts, Toronto renters may soon have an argument that they're actually more screwed than we are. "On the buying side and rental side, it seems Vancouver is worse generally, but now that may be shifting so that Toronto will be getting worse," Lee said.

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