Rental squeeze won’t let up without the help of feds: Experts
Federal government's departure from rental housing arena led to increase in homelessness, says UBC prof
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In any other Canadian city, Nazma Lee and her husband would likely be home owners.
But in Vancouver, the 38 year-old-lawyer and 39-year-old city planner have come to accept that they will continue to rent. With two children aged five and two, the couple is feeling “a little bit stuck” in their current rental, a two-bedroom condo in Olympic Village.
“The market has gone so crazy that we would actually be open to renting, but when we look at the rental market for something with three bedrooms…there are very, very few options in the rental market,” Lee said; any three bedroom rentals she has found are upwards of $3,000 a month.
This is the sixth story in a seven-part series looking at recommendations put forward by Generation Squeeze, an advocacy group headed by UBC professor Paul Kershaw. Through an initiative called Code Red, the group has put together a series of recommendations aimed at easing the housing squeeze experienced by younger Canadians.
Read the other stories in the series:
- Densifying Vancouver housing for the young generation
- The low interest rate trap: How cheap money fizzled as home prices soared
- Vancouver homeowners cool to idea of tax on real estate ‘lottery’
- Ageism in housing: Young people left out of housing policy say advocates
- People before profits: Flipping Vancouver’s real estate market on its head
Younger Canadians are less likely to become home owners now than in the past: home ownership rates for Canadians aged 35-44 have dropped over the past 30 years, from 72 per cent in 1976 to 65 per cent in 2012, according to Kershaw.
At the same time, Canada’s rental stock has shrunk as condominiums have overtaken rental as the development of choice for real estate developers.
And over the past two years in Metro Vancouver, the situation for renters has become dire: tenants evicted to make way for new development are facing an almost impossible search for a new place.
The situation won’t improve without help from the federal government, said Penny Gurstein, director of the School of Community and Regional Planning at UBC and David Hutniak, CEO of LandlordBC. While the Liberal government has committed to get back into the housing game, municipal leaders have urged the feds to hurry up on providing leadership and funds.
“It’s been gradual, but since the mid-1990s the federal government involvement in housing has only been to encourage home ownership,” Gurstein said. “It has not really tried to address all of these other issues, and what has been created is this huge homelessness issue.”
It’s currently difficult to get condominium developers to take on a purpose-built rental project, Hutniak said.
“It’s the input costs: rental, you can’t finance 100 per cent of it. You go and presale a condo, you can finance 100 per cent of it,” Hutniak said, referring to the practice of selling all the units in a condo before breaking ground on a building.
In the 1970s, the federal government offered a tax incentive for people who invested in rental buildings; a more sophisticated version of that incentive could work today, Gurstein said. An ethical investment product offered by the federal government — essentially a government bond — could be another option.
Hutniak’s group, which represents landlords in B.C., is calling for 35-year construction loans that would be guaranteed by the federal government. Developers would pay back only the principal for the first 20 years of the loan, and pay back both the interest and principal in the final 15 years of the loan.
In return, developers would commit to keep the units they build at affordable rates — as determined by Canada Mortgage and Housing Corporation — for 20 years. Hutniak pointed out that most new rental projects in Metro Vancouver are currently rented at around double that affordable rate.
But Gurstein believes it’s important to guarantee affordable rental for longer than 20 years. Whistler’s housing authority could be another model, which includes both affordable rental as well as home ownership under a covenant that limits the resale to people who work in Whistler and ties price increases to the rate of inflation.
“What a lot of people are saying and the research is demonstrating is that you can’t generate the number of units that are needed at that secure market rental scale just by municipalities,” Gurstein said. “It has to have other levels of government involvement.”