Front Burner - Everything is expensive Part III: Rents

Episode Date: August 16, 2022

Rents are on the rise in Canada, making it harder for tenants to find a place that fits their budget. The Canada Mortgage and Housing Corporation’s definition of "affordable" housing is a place that costs you less than 30 per cent of your household's income. But in Vancouver, where the average monthly rent for a two-bedroom is now $3,597 — you'd have to earn more than $150,000 for that rent to be affordable. In Toronto, your household would have to make more than $135,000. On today's episode of Front Burner, Andy Yan, director of the City Program at Simon Fraser University in B.C., breaks down what's happening with rents and what could be done to help make them more affordable.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi, I'm Jamie Poisson. Perhaps you've seen some of the charts, or experienced it yourself. Rents are on the up and up, making it harder for Canadians to find a place that fits their budget. The commonly held definition of affordable housing is a place that costs you less than 30% of your household income. But in Vancouver,

where the average monthly rent for a two-bedroom is now $3,597 a month, you'd have to earn more than $150K to fit that definition. In Toronto, your household would have to make more than $135,000. Today, I'm talking to Andy Yan. He's the director of the city program at Simon Fraser University in BC about what's happening with rents right now and what could be done to help make them more affordable. Andy, hey, thank you so much for coming by. Pleasure being here. So maybe we could start here. Paint me a picture of what's happening in the rental market in Canada right now.

right now? Well, I think that what's happening is that really trends and patterns that were already well in play before the pandemic are now reigniting. We saw, I think during the pandemic, there was a bit of a pause, even a increase in vacancy rates. There was a flattening of rents that is changing and changing rather quickly. We're now seeing a sudden increase in rents, almost double digit increases in rents, as well as a decline in vacancies. And I think that that is really something that isn't just happening in one or two markets in Canada, but it's happening across the country. And I think that that has further increases the stresses on a population that is coming out of this pandemic or hopefully coming out of this pandemic,

or hopefully coming out of this pandemic. Yeah. Where have rents been rising the most? They've certainly been rising in places like Vancouver and Toronto. But I think where they're rising the most by percentages are actually in the areas surrounding these cities. So that you have to say the central city of Vancouver, but then you also have places in the suburbs or what used to be called the suburbs in terms of Burnaby and Surrey that you really used to have a reprieve

towards higher rents that no longer exists. And similarly, in places like Toronto, you have a place not only say downtown Toronto, but then you're also seeing increases in places in the suburbs surrounding, whether it's Scarborough or really Richmond Hill, that you really see this increase in rents through which there is few places for refuge. Why do you think that is, that we're seeing these increases in these outer boroughs, these major increases? With anything in housing, it's, I think, a combination in three major areas. We're really talking about really changes and disruptions in supply, which I think have been a perennial challenge when we come into things like

rental. But then it's also demand that we certainly have, say, an increase and change in population, but then also disruptions in terms of financialization of rental housing, as well as the technological disruptors, things like Airbnb, mixed in with the third factor, finance. We've certainly seen changes in finances in terms of increasing interest rates, the decline of credit that I think have similarly not only affected things around the homeownership, but then also, of course, into the development of rental. Pull some of that apart for me.

Let's talk about the credit issue that you just talked about. The Bank of Canada's hiking rates a lot more than people thought that they would. Is that a good thing for the rental market? Certainly home prices have gone down. Well, I think that that's exactly part of the challenge is that home prices may be going down, but then the ability to purchase that home has also gone down in terms of increasing interest rates. The fact that some renters who were, say, on the bubble between being a renter and going into home ownership are now staying as renters for a longer period that

it similarly has maintained pressures on the rental market. We also have to acknowledge that before the pandemic, we already have this challenge in terms of affordability of home ownership, that people were staying as renters and for much longer periods that you didn't have, say, that kind of flow in and out of the rental pool. That has been, I think, a pattern. And with increasing interest rates, and remember, those increasing interest rates are a reaction to inflation that we're now, I think, facing a scenario where a population that used to, say, shift into homeownership that was already now stressed with high purchasing costs are

now staying as renters. It's interesting. It feels like even though this pattern has been happening for a long time, that renters have been staying as renters longer, that they're still kind of forgotten in the policy conversation. I don't know if you'd agree with this, that they're still sort of portrayed as on their way to buying a home. And so how do you think that factors into the crisis that we're in right now when it comes to unaffordable rents? Well, I think that it is a larger issue in housing policy. If anything, we have had a national housing policy for the last 40 years, and it was the idea of homeownership, that somehow everyone is on the pathway of

homeownership and that rental is this abnormality in terms of housing tenure. And I think that the consequence is a financial system that is tenure bias, that we have an economic system that is entirely biased towards homeowners. Say, whether it's access to credit or loans, that it is entirely based upon housing tenure, and particularly biased towards homeowners. Now, I think one of the big challenges when it comes to housing policy is actually having a much more tenure-neutral financial system. It's the fact that we haven't seen rental as really something people can do as a lifelong housing practice. We have countries around the world where rental is a way of life, and there isn't a sense of deprivation, that it is a means of security that you have people staying as renters. And yet at the same time, I think this

is one of the biggest challenges in Canada, even though with latest statistics is that, generally speaking, about a third of Canadians rent. It's really, I think, one of the big areas that is really missing in terms of public policy is actually the idea that part of the population can stay securely in terms of being a renter. What would that look like when you talk about a change system? What is that? It really focuses on the idea of security of tenure, that it is ensuring that we have a stock of rental housing that is secure, that is affordable, and is adequate. That the idea around a lot of rental is that it's predominantly around the

studio and one bedroom range, but that we need two bedrooms, we need three bedrooms. As renters get older and further establish their households, that they similarly need larger units. And yet the market system that we have right now is fairly reluctant to develop those two and three bedroom units, much less a system of security of tenure around the protection of tenant rights, that there is, I think, this fundamental, I think, reluctance in terms of the protection of rental, of tenants' rights, much less, I think, this understanding that really when we talk about rental housing, it's the provision of a service through which there is this responsibility on landlords to provide a level of adequate and safe housing. I just want to pick up on the first part of what you said first.

Is it fair for me to say, you know, when you talk about a lack of two-bedroom or three-bedroom apartments, like it's not just that it's a supply issue, it's a kind of supply issue. Would that be like a fair summary? I think that's a very fair summary, that it's the issue of going to whom you're trying to house and really going into details that we're not only talking about studios and one bedrooms, but then there is a need for a approach to housing that deals with housing adequacy, as opposed to just a unit count. Yeah. And then on the second part of what you're talking about, I don't know, like treating tenants better, I guess, if we could put that under a headline, is that fair? It's really one of the big – I think this is where I think that there is this kind of policy kind of sieve that we actually find that when we talk about tenant protections, that's really something that is along the responsibilities of the provinces as opposed to, say, the federal government. That the federal government has a sizable role in terms of, say, the finance of the development of rental housing. element of rental housing. But then at the same time, we also have, I think, this role of the provincial governments in terms of tenant protections, whether it comes into, well, rental stability, or it comes in towards, I think, really this discussion of rent control

or vacancy control. And I think that that is, I think, as we approach a society that is going to rent more, that are going to be renters either for life or for a much longer period in their lives, that we need this type of policy switch. So in Ontario, where I am, under Premier Ford, any new residential unit that was occupied for the first time as of 2018 is exempt from rent control. Meaning like a landlord could jack up the price as much as they want from year to year, even if it's the same tenant. And so, you know, talk to me about the kind of impact that you see that happening, because I know where you are in BC, there's is, I think, one of the kind of elements of really not only the kind of traditional understanding of rent control, but then the understanding of rent stability. And I think that within British Columbia, the push towards the idea of vacancy control is really the role of renovations that we've had any number of cases in particularly in in the city of vancouver whereby landlords evict their tenants upon the upon the the the issue of

renovations and then basically paint uh paint the apartment or or or really change the countertops in the kitchens and then white paint and i and an Ikea countertop goes a long way. Oh, exactly, exactly. And then suddenly, well, increase the rent by about, well, by about $500 or in certain cases, doubling the rent for these units. And I think that what's interesting is the implications of who that affects. And while it also really undermines the role of really the affordability of rents, it really affects the role of older renters. really kind of realize the consequences of not having this level of stability is really how much this has affected in terms of those who are at risk of homelessness. One of the demographics that is really the fastest growing in terms of being at threat of homelessness are actually

older women. As they get older and really face an income shock, what we call retirement, that they similarly have these challenges in terms of stabilizing their rental situation. This role has really had this kind of, I think, increase of precarity for their housing. I'll see you next time. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years. I've talked to millions of people, and I have some startling numbers to share with you. Did you know that of the people I speak to,

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They're playing a pretty big role. And it's really the treatment of tenants as basically rent batteries as they are really in this pursuit of a stream of income for their respective investors and as such, treating their tenants like rent batteries. Now, I think what happens with previous other types of landlords, there's actually a role of flexibility that when you have them, say the mom and pop landlords, and I think that this is what happens in a place like the city of Vancouver, where your typical purpose-built rental unit is actually under 10 units, that there was this type of informal system of negotiation that does occur through

which allowed a certain level of flexibility. But what's happened is that as you have this further consolidation within the rental market, there is this mechanistic relationshipistic kind of relationship that occurs between a landlord and tenant that really results in really this kind of, whether it's a sudden increase in rents, but then also just the kind of ruthlessness that occurs in terms of inflexibility towards payment. Right. When you're not a person, you're just a... You're just a transaction. You know, we talked about the importance of rent control. You know, we talked about supply and also the quality of supply or the kind of supply. What else do you think needs to be done here to help bring rents into the realm of affordability for the majority of tenants here?

Well, I mean, first, it's also interesting to note that that measure of affordability of 30% of your total pre-tax household income actually used to be 25%. Yeah. And then prior to that, it was actually 20%. And I actually felt so silly saying it. I feel like our listeners are going to be like, what a joke. Like people are paying 50% of their salary to rent or mortgage payment. Yeah. At the same time, their incomes have been flat. At the same time, their incomes have been this kind of sudden increase in terms of incomes.

But I think that that's largely due to a number of COVID-related issues. But then it's the fact that our overall trends and patterns when we talk about incomes in Canada is that it's been relatively flat. And I think that this has really increased the pressures and the struggles for a lot of renters is the fact that it isn't the fact that only rents are increasing, but it's the fact that their incomes have been generally staying flat for almost 20 years. And that doesn't help at all. So I think that it's how this all culminates into really this precarity that is occurring for renters in particular. And I think these are really talking about young and new Canadians that are really facing these types of challenges that we really need, I think, a new approach towards the development of rental housing.

Talking about the need for this new approach, I know before we discussed how this culture of renters has always been portrayed as people who are just like on a stepping stone to owning. But I wonder if you think there's a shift happening here as more and more younger people, like it's not that they've necessarily given up on homeownership, but they realize it's really hard and that they'll at least be renting for a long time. And like, do you see a scenario in which renters in Canada become a more powerful political force, demand more from politicians, demand this shift, and have the power to kind of influence policy, some of the policy that we're talking about today? Well, I think that it's really learning from other countries and really what has occurred in other countries in terms of how their renters are developing voice. United States and in Europe that is really, I think, becoming part of the kind of political voices that are there in terms of getting renters to vote. I think a lot of this is really

understanding that there is this, I think, reality of how people are now ending up to be renters, either for a protracted period of time or for their entire lives, and then as such, voting for policies that stabilize, if not expand, rental options. And I think that that is, I think, a point in terms of overall housing policy, just really reflecting the kind of changes in the economy, that I think that this is also a clarion call to the various levels of government that you have to have this changing view on housing, particularly when it comes to renting, that it is a state through which include people being lifelong

renters and the need for policies to really understand and to protect that reality. Andy, thank you for this. This was great. It was really nice talking to you. Oh, my total pleasure. Take care. All right, that's all for today.

I'm Jamie Poisson. Thanks so much for listening, and we will talk to you tomorrow. For more CBC Podcasts, go to cbc.ca slash podcasts.