Housing costs crippling major Canadian cities


In Canada’s metropolises, people are unable to find and keep affordable housing.

Some have given up altogether – moving to smaller communities.

New data from Statistics Canada shows more Canadians are renting as homeownership rates fall. Census data from 2011 to 2021 shows that the number of renter households increased by 21.5 percent, more than double the 8.4 percent increase in homeowner households. Millennials (aged 25 to 40) now make up the largest proportion of renters, making up nearly 33 percent of the market.

In the past, housing supply has not kept pace with population growth in Canada’s largest urban centers, driving up house and rental prices. As Canadian paychecks can’t keep up with rising house and rent costs, many are turning to smaller cities with even fewer housing supplies.

WHERE ARE YOU MOVING?

Another report released earlier this year by Statistics Canada offers a glimpse of which communities may be attracting people who are increasingly finding living in big cities unaffordable.

According to data released in February, many of Canada’s fastest-growing communities were smaller communities near large urban areas.

At the top of that list was East Gwillimbury, Ontario, a small city in the greater Toronto area that saw its population grow 44.4 percent between 2016 and 2021.

Second on the list was The Blue Mountains, Ontario, another rural Georgian Bay community on Lake Huron. It grew 33.7 percent and is nowhere near a Census Metropolitan Area (CMA).

In BC, Langford on Vancouver Island near the city of Victoria had a large population increase of 31.8 percent. Among the top 10, the Southern Gulf Islands, an archipelago off Vancouver Island, grew 28.9 percent.

Saint-Apollinaire, Que., grew 30.4 percent. Four other Quebec cities, Bromont, Carignan, Saint-Zotique and Mirabel, were among the top 20 fastest growing communities.

Three Manitoba cities, including Niverville, outside of Winnipeg, grew 29 percent from 2016 to 2021. The cities of West St. Paul and Neepawa grew 24.5 percent and 23.3 percent, respectively.

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StatCan found that cheaper housing, changing homework patterns due to the COVID-19 pandemic, and a desire to be closer to nature were among the factors that have driven population growth in these communities, even as populations in larger cities continue to do so did grow between 2016 and 2021.


EVEN TENANTS, NOT JUST BUYERS, MOVE

As home ownership remains out of reach for many Canadians, more are left in the rental market, which lacks adequate supply, according to Aled ab Iorwerth, deputy chief economist for the Canadian Mortgage and Housing Corporation (CMHC).

“The solution for us is to build more rentals, so we need a dramatic increase in the supply of rentals,” he told CTVNews.ca on Thursday. “Actually, it takes time to go through all the approval processes.”

When the Bank of Canada raised interest rates to curb inflation, it cooled housing markets across the country. August 2022 was the quietest for listings in three and a half years, according to an RBC report on resale activity. The National Composite Multiple Listing Service (MLS) Home Price Index has seen units down 7.4 percent since February.

Higher mortgage rates and worries about the future of the housing market helped boost demand in the rental market. The average rent in Canada for all properties rose more than 10 percent year-on-year in July, according to a National Rent Report released in August. The highest rent increases have been in cities like Vancouver and Toronto, which may have pushed some tenants out of those markets.

HOW DID WE GET HERE?

House prices skyrocketed during the COVID-19 pandemic, reaching a tipping point in February 2022 when house prices rose 31.1 percent year-on-year, according to an RBC breakdown.

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As inflation continued to rise in Canada and around the world – fueled by supply chain issues, the ongoing pandemic and Russia’s invasion of Ukraine – the Bank of Canada initiated a series of rate hikes amid fears of a looming recession.

The subsequent rise in mortgage rates forced many buyers to pause. This cooling tactic by the Bank of Canada has since brought home prices down, but the core problem remains.

Ab Iorwerth said there were trade-offs to the increased interest rates.

“I would generally look at it as a more short-term problem,” he said. “As market interest rates will have a greater impact, it will become more difficult to buy a house. Even though house prices have gone down, it’s getting harder to buy a home because mortgage rates have gone up.”

Those unable to buy their own home are turning to the rental market, which has its challenges.

“Everyone is starting to worry about high housing costs. It eats up the regular budget for groceries, travel (and) leisure,” said ab Iorwerth. “If you’ve managed to rent an apartment and it’s under rent control, I think you’re reluctant to move now because the rent will likely be slightly higher in a new location.”

WHAT EXPERTS SAY MUST BE DONE

Experts point to the need for a significant increase in housing across the country to keep Canadians’ cost of living manageable.

One of the problems, Ab Iorwerth said, is the lack of rental housing being built in both large and small communities. In June, CMHC released a timeline for when rental units must come online in a bid to contain the deepening crisis.

The report, titled “Canada’s Housing Supply Shortage,” follows a 2018 report that found Canadian cities were unresponsive to demand for affordable rental housing. Municipalities tasked with creating and building affordable units often do not have the resources or funding to address such an issue and remain lobbied for upper government support, the report said.

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The 2022 CMHC report estimates how much additional housing supply will be needed to restore housing affordability by 2030.

“If current housing rates continue, we forecast that the housing stock will increase by 2.3 million units between 2021 and 2030. This will reach nearly 19 million housing units by 2030,” the report said.

“To restore affordability, an additional 3.5 million affordable housing units will be needed by 2030.”


Canada defines affordability as housing that requires 30 percent or less of a household’s annual income.

2021 census data says one in five families in Canada spends more than 30 percent on housing, and the numbers are skyrocketing in many cities in Ontario and British Columbia.

Households in BC will spend an average of 58.3 percent of their income on housing in 2021, according to CMHC data. In Ontario, the average is 56.4 percent.

To address the concerns of housing advocates, provinces and municipalities across Canada have adopted inclusion zoning (IZ), a city-level ordinance that forces developers to build affordable units in certain areas. Montreal, Toronto and Vancouver passed versions of the policy along with smaller communities in Mississauga, Ontario, Langford and Richmond BC, and Edmonton, Alta.

When it comes to solutions for renters, some provinces have introduced rent price controls. In Ontario, the progressive Conservative government has forced operators of rental properties built before 2018 to increase rents only by a percentage that the government mandates annually, up to a maximum of 2.5 percent. In Quebec, Ab Iorweth said, the province has a larger rental sector but doesn’t apply rental rate control to the majority of units, allowing landlords to dictate prices.



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