This is the second installment of Priced Out, a three-part series looking at housing affordability challenges facing young people in Canada. Here’s part one: ‘Nowhere to go’: Canadian homebuyers without family help are running out of options
There is a standard piece of personal finance advice for those who can’t afford a home in Canada’s overheated housing market: if you can’t buy, rent.
But as the COVID-19 pandemic brings double-digit property appreciation to small towns in many parts of the country, some Canadians priced out of homeownership are feeling the squeeze in the rental market as well.
In Hamilton, Ont., Jessie Golem is hopeful she has finally found an apartment she’ll be able to rent for the long term. But that’s only because a close friend bought a home with a basement apartment that she’s renting at below-market rates.
“It’s the first time I’ve had an apartment that’s my own,” says Golem, a 32-year old photographer and piano teacher.
Before that, she says, she lived in seven places over the past decade, always with roommates. And occasionally, she’s had to couch surf.
“Moving so many times is incredibly stressful, really exhausting,” Golem says recalling the many possessions that were stolen, broken or misplaced through the repeated packing and unpacking.
Lately, she says, the situation has gotten worse, with landlords buying up pricey properties and then charging sky-high rents to help cover costs. A recent report by Oxford Economics that measured home prices against local median household incomes ranked Hamilton as the third least-affordable city in North America, ahead of cities like New York and Los Angeles.
And while national surveys in Canada show that rents have, on average, declined during the pandemic, a closer look at the numbers shows different trends.
In Toronto, the average rent for a vacant one-bedroom unit was nearly 15 per cent cheaper in May 2021 compared to May 2020, based on listings on Rentals.ca, which releases a monthly rental report.
But in Guelph, Ont., the average one-bedroom is renting for nearly 12 per cent more than it did a year ago. And in Halifax and Gatineau, Que., vacant one-bedroom apartments are listing for around 23 per cent more than a year ago, the data shows.
In Penticton, B.C., Global News recently spoke with a family of five who recently lost their long-time rental home after the landlord sold the property to cash in on the red-hot real estate market. Vikki Holmberg and her husband Don say amid low vacancies and rising rents, they haven’t been able to find another home and are currently living in an RV.
It's possible to rent and save money - depending on where you live
Some personal finance experts say there’s a cultural stigma against renting that must be re-examined.
“We’re much too obsessed with the idea of owning a home both as a milestone to adulthood and a financial accomplishment because it’s not necessary to own a home to achieve either of those things,” says Bridget Casey, founder of financial literacy website Money After Graduation, who is herself a long-term renter.
Renting can, in fact, be the faster road to wealth accumulation, Casey says. When paying the landlord is cheaper than the carrying costs of owning a home — which include costs like property taxes and maintenance and repairs, in addition to mortgage payments — renters can invest the difference, she notes.
But even when the math shows being a tenant is the lower-cost option, it’s not a viable solution if rent eats up so much of your income that you have nothing left to set aside by the end of the month, Casey warns.
“It is possible to rent and save money, but it’s largely location-dependent and it could be job-dependent,” she says.
If you can’t make the numbers work, you have to either get a higher income or move somewhere where rents are cheaper, she adds.
Casey, who lives in Calgary with her daughter, says that although she likely could get a lease term of more than a year she has chosen to keep renewing yearlong contracts.
“The advantage of that … for me in Alberta is that I can negotiate a lower rent when my lease comes up for renewal,” she says.
And while renters face the possibility of eviction and sudden rent increases, homeownership also has financial risks like unexpected repairs and the costs of selling your home and buying a new one if you were forced to relocate because of your job, Casey notes.
Still, her experience as a tenant and ability to secure long-term rental options improved considerably as her income grew, allowing her to live in higher-end properties, she says.
“I do find a lot of the hazards and inconsistencies, unfortunately, with landlords were for those lower-priced properties that I used to rent in university.”
How to protect tenants
The key to making renting a more attractive option is public policy, says Armine Yalnizyan, an economist and Atkinson Fellow on The Future Of Workers.
“If you don’t have tenant protections, then you are just saying you can rent for life, but you actually have no control over where you live,” she says.
But how exactly to strengthen those protections remains a contentious issue.
Rent controls, for one, are “almost uniformly around the world, batted back and forth as a political football,” Yalnizyan notes.
While some see capping rent increases as a way to ensure housing costs don’t outpace tenants’ incomes, others say rent controls make it less profitable for companies to build rental properties and discourage landlords from spending money on maintenance and upgrades.
“More activity will be diverted toward condo construction, a segment of the market that is much more immune to rent control as condo owners have multiple avenues to require a tenant to leave,” CIBC economist Benjamin Tal predicted in 2017, when the Liberal government of former Ontario premier Kathleen Wynne was about to re-introduce sweeping rent controls.
(The Conservative government of Premier Doug Ford has since rolled back the policy to exclude new buildings. although the province has also passed legislation to freeze rent at 2020 levels until the end of 2021.)
In the meantime, tenants are muddling through as best as they can. In Hamilton, Golem says her rent will help her friend pay for her hefty $500,000 mortgage.
She is eager to get set up in the new apartment and stay there for a while, she says.
“I’m hoping that this is the last time I move for a long time and I can just have a place and be able to unpack and settle down and have roots,” she says.
“I haven’t had that and the stress of it — it really eats away at you.”
— With reporting from Global News’ Shelby Thom
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