The Agenda with Steve Paikin (Audio) - Why Can't Students Find Housing?

Episode Date: September 13, 2024

A new report by Desjardins Economic Studies finds that not enough housing is being built for students. The Agenda interviews the co-author of the report to look at what's behind this housing shortage.See omnystudio.com/listener for privacy information.

Students looking to get a higher education in Canada may find it difficult to find a place to live. A new report by Desjardins says that while demand for a post-secondary education has surged, not nearly enough housing is being built for students. Joining us now to explain what's behind this housing shortage, we welcome Randall Bartlett, Senior Director of Canadian Economics with Desjardins. Good to have you in that chair. Nice to meet you. Good to be here. Can you just start by telling us, you've got a lot of things you could be interested in

at your organization. Why this? Well, we think this is a part of the housing affordability crisis in Canada that's very much gone unaddressed. And during a period of time when we have an influx of international students coming into the country and newcomers more broadly, we thought it was something that we should dig more deeply into. Is it really the case that only one in ten students can find a place to live who want to go to post-secondary? So one in ten, there is

one residence bed available for every ten students at Canadian post-secondary institutions. So there are folks living with their families, there are folks that are finding other accommodations, but certainly when we look at the number of residence beds per student, it's 1 in 10. It hasn't always been this bad, surely. No, it hasn't been. Back in the 1970s, there was a lot of building in terms of residences

across Canadian campuses. And there has also been more building in terms of off-campus residents as well. But we've seen just that sheer number of students that have been looking for housing has increased dramatically. And we just able to kept up building to meet that demand. It's probably not one thing, right?

There's a whole bunch of, there's a perfect storm of bad things all happening around the same time. Like what? Absolutely. There's a confluence of supply and demand forces that are coming together to create this crisis. And so when we look at just the demand side, we've seen a significant influx of newcomers into Canada who largely rent.

A big part of that are international students, and so they're looking for places around university campuses and in university towns that's been pushing up rents in the broader community. And so that's something that's having spillovers to the conversation we're having around housing affordability in Canada. But it's also a supply question. In the community, there's been a lot less off-campus building of student housing, but on campus, post-secondary institutions have not been investing in beds to the degree that they need to to keep up with that demand.

And so ultimately, it's a lot of supply, not a lot of demand, and that's pushing up prices and eroding affordability for students. Why have the institutions themselves not been building enough? It's an interesting question. I think that when you look at post-secondary institutions, when they send out acceptances, they don't necessarily guarantee that there are residence spots for those students,

not just in the first year but then in subsequent years as well. And so that is not necessarily always the the bailiwick of post-secondary institutions investing in housing stock. Instead, they tend to focus on obviously the academic side of things and student achievement versus necessarily building capital assets. And so when we look at universities that have been successful, they've been those that have worked with communities and municipalities in order to change zoning to make it more accommodative to building student housing. But also some universities have created their own investment vehicles that have allowed

them to build much more capacity in terms of student housing. Now from time immemorial students have been commuting to university, they haven't all always obviously lived on campus. Do you have any, you know, do you have any empirically provable facts that show that students prefer to live on campus in a dorm when they can as opposed to off campus? There's quite a bit of research out there, social research, that looks at what students prefer, but also what affects student outcomes.

And so when we look at what students prefer, particularly early on in their pursuit of post-secondary education, they do prefer to live on campus. They like to live nearby where they're gonna be learning. And also you have these network effects that happen on university campuses as well, where you have a lot of connections and friendships

and relationships that are made. But also, when you look at student outcomes in terms of the impact of commute times and potentially substandard housing that students have access to, given the erosion of affordability, it tends to increase debt levels of students upon graduation. It also erodes student outcomes, which ultimately,

poor academic outcomes lead to poor earning outcomes and productivity throughout life. But also in terms of health and mental health, when there's substandard living conditions, that tends to have negative impacts on that as well. So broadly speaking, not having access to affordable housing near university campuses tends to sort of erode all of these different factors

for students. Randall, I can imagine some people watching or listening to this saying, I'm not in a post-secondary institution. My kids are not in post-secondary institutions. There's a lot of things to care about in this world. And this just isn't one of them. Can you suggest to people why, if they don't have a direct connection to the post-secondary world,

they may be still ought to care about this. Well, I think there are spillovers to the broader community that people should really take into consideration. I mean, part of that is that when students are living and renting in the broader community off campus or outside of purpose-built student accommodation, then that's pushing up rents throughout the broader community and putting those students in places that other people would be renting. So ultimately, as rents go up in the broader community that has a

disproportionately negative impact on low-income households and young professionals who are starting out into their careers as well who are more likely to be renters than owners and so certainly that has a negative income spillover to the broader community. I think part of it as well is that as more students proliferate throughout the community, that changes the dynamics within communities. We've seen in some university towns where there have been conflicts between the municipality and non-student residents and then the students who are living in the broader community where

there have been issues of noise, issues of commotions and issues of garbage in the communities and that sort of thing. So there really needs to be, I think, more emphasis on the benefits that can happen by building more housing for students both on and off campus and what the positive effects can be for communities by ensuring these students are adequately housed. The feds cut way back in the number of foreign student visas that they are now going to allow. Will that solve the problem? Well, I think that's certainly going to be part of the solution. When we look at how much that reduction has been showing up in

the data so far, you know, they've promised a 35% reduction this year. Universities across Canada have come out and said it looks more like 45% and we've been hearing that anecdotally as well just because of the uncertainty of what the future of the program looks like. And so that reduction in demand is going to take some pressure off. There's no question. But ultimately, we need more supply. This doesn't just apply to student housing.

It's the solution to the broader housing affordability crisis that we have in Canada. And so to do that, post-secondary institutions need to get greater access to affordable financing to invest in student housing, but also an ability to better partner with the private sector, to be able to get access to that capital and those expertise in order to really accelerate

the pace of building beyond what we've seen recently. I think if the Minister of Colleges and Universities for the Province of Ontario were here with us, that person would say, you know what, we've heard this message and we are doing our part to ensure that there is a bigger uptake among developers to build on campus post-secondary accommodation. Are they doing enough? Well, I think it's more than just on campus.

So on campus is certainly part of it. There are a lot of lands that post-secondary institutions have access to that they can build on. But part of the story as well is in partnering with the private sector, there are a lot of costs that start going up for post-secondary institutions. So typically universities and colleges pay reduced property taxes and other fees

that are associated with building, including getting greater allowances from municipalities for zoning, zoning changes that they want to make. But once they start partnering with the private sector, then those costs start to go up. They don't get those same benefits from reduced property taxes, zoning becomes more complicated, it's treated like a private asset instead of a public asset, and so greater accommodation needs to be made by municipalities and the province to allow for those, you know, pseudo public-private needs to be made by municipalities and the province to allow for those

you know, pseudo public-private partnerships to be able to happen to accelerate that pace of building. Or should we just say no more of those private-public partnerships? Public sector do it on your own. Well, we could say public sector do it on your own but there are constraints that the post-secondary institutions are subject to, one of which is on the financing side. So there's that that part of it, their ability to borrow and go to markets to be able to borrow. They will need to partner with the private sector to some extent, they're certainly not going to be building

the assets themselves and the operating side, it can be challenging for them as well. But ultimately, a lot of the expertise are in the private sector in terms of building and operating these assets. And when it comes to colleges, they're in a very unique situation in the province of Ontario where they actually are required to go to the province of Ontario to borrow first as the first lender that they have access to.

And if the province of Ontario says, no, we're not going to be lending to you and you can't find a lower rate, then they're out of luck. They have to build new residences out of cash surpluses if they have them. And so there are certainly a lot of challenges that can be addressed pretty easily, I would argue, to reduce the barriers to getting financing to build these assets. Okay, where is the lowest hanging fruit that presents a more immediate solution to this? Well, I think the lowest hanging fruit is access to financing. So bringing down the cost of financing.

We've seen the federal government has given access to post-secondary institutions now to build student housing at reduced costs from loans from the CMHC. That's a step in the right direction. We think the province of Ontario allowing colleges to have access to greater lending facilities to be able to build these capital assets is important. And we think municipalities bringing down the costs of building these and operating these assets over the long term and working with post-secondary institutions when they

bring in private partners to keep the cost down for students as much as possible. As long as those assets remain in the hands of those public institutions, then there are really those barriers we think should be non-existent because it helps to support the broader community and bring down costs of living throughout the whole community. Now the Fed said many months ago, they'd take the HST off purpose-built rental.

Do you know whether that extends to on-campus construction as well? Yeah, I believe it does extend to on-campus construction as well, and it's something that's been matched by the province on their side of things, and And it's something that's been matched by the province on their side of things. And certainly, it's something that we've heard from our clients that is going to help level the playing

field between building more condos and building more purpose-built rentals. So it's helping to create arguably more incentives for building that type of housing. The interesting thing is, if you look at the market right now, there is no market for condo sales right now, but there is infinite demand for more spots both on campus for students and close to campus for students. So you would think that if the market's listening and if governments are listening, all hands

on deck, what's stopping it from happening? Absolutely. And I think that we are going to continue moving in that direction, certainly. And to your point on what's happening in the condo market and condo pre-sales, it's slumping in a very meaningful way, in a historically unprecedented way. So, we are going to be moving in that direction, but because these assets take time to build, it's something that can be a bit of a slow-moving train, and a lot of people invested heavily into condos, particularly at the peak of the pandemic,

when prices were very high. And so there's, I'm sure, a reluctance to necessarily make that adjustment in terms of price and listing at a lower price and taking a bit of a haircut on that. But we'll start to see, we think, as interest rates start to come down, we get more normalization in the Canadian housing market,

that a lot of that still lingering pandemic effect is going to start to come out in the wash. In, that a lot of that still lingering pandemic effect is going to start to come out in the wash. In our last 20 seconds here, tell me how long you think it will take to get the system to a place where you've got this covered. Yeah, we think that if the federal government is able to restrain the number of student permits

that they're going to be issuing to the level that they suggest, and we're able to get, we bring in some of these benefits that come from lower financing costs, that sort of thing, that by the end of the decade we should be in a place where we have a more balanced market for student housing specifically, which will help to support a more balanced market for the rental market. Gotcha. That's Randall Bartlett, Senior Director of Canadian Economics at Desjardins. We thank you for coming into TVO tonight. Oh, my pleasure. Thanks for having me.