Rental Market Concerns
March 25, 2022
Canada as a whole has been wading deeper and deeper into a national housing crisis since the 1990’s, with Ontario being one of the hardest hit provinces, along with British Columbia. In the 1990’s, the responsibility of managing social housing was moved from the federal government to the provincial government, and with this shift came a significant loss of funding. Over time, this further shifted to municipal governments. Solid economic growth since the 90’s has led to rapid population growth, and exponentially rising housing prices as demand outstrips supply and surpasses inflation rates. Average household income has also been relatively stagnant, with wages growing exceedingly slow relative to the amount of much-needed new housing construction. Affordable housing, both for prospective homeowners and renters, is in very short supply across the province, with vacancy rates in major urban centres typically being lower than the recommended “healthy” rate of 3-5%.
There is some confusion around the term “affordable housing”, and it is often used interchangeably with social housing, supportive housing, and transitional housing. However, the generally accepted understanding of affordable housing is housing which the residents can afford using 30% or less of their pre-tax household income. For a household income of $50,000, for instance, a total monthly expense of $1,250 for rent and utilities would be considered the upper threshold of “affordable”. Typically, the gap between what is deemed “affordable” for a tenant and the market rent rate for the area is subsidized by the local municipality.
Affordable housing tends to have negative stigmas attached to it, which has made municipal planning for increasing stock a more difficult pitch to the public. Renting in general tends to be seen as a transitory housing option, with the end goal for all residents being homeownership. This standpoint is of course a holdover from previous generations, which were able to attain single-family homes with just a few years of savings, and is not at all realistic in Ontario’s current housing market. Households renting long term therefore carry an unfair stigma that they are less financially stable or are somehow lacking in character if they are unable to afford to buy a house or condo. Of course, realistically, there are many advantages to renting beyond the exorbitant costs of single-family homes that might sway someone to rent over owning, such as little to no personal responsibility for building and unit maintenance.
There is also a misplaced but common concern that the presence of affordable housing in a community will lower property values and/or increase crime rates in the area. Public perception of affordable housing will require some massaging in the next few years to ensure new units can be harmoniously introduced to mixed-income communities and allowed to thrive.
Further, many assume that subsidizing the required housing units (several hundred thousand affordable units are needed just in Toronto alone) will be far too expensive for municipalities to shoulder. However, analyses produced by the City of Toronto and the Canadian Mortgage Housing Corporation have demonstrated that the monthly cost of subsidizing an affordable unit is a fraction of the cost of maintaining a shelter bed and the required services provided at a shelter on a monthly basis ($306 compared to $2,250).
In addition to these faulty assumptions that cast negative stigmas on affordable housing renters, a number of municipal and landlord practices have made the affordable housing crisis even more difficult for renters, as they increase the instability inherent to renting. Firstly, in terms of acquiring the property necessary to increase housing stock, there are zoning bylaws in place in Toronto and elsewhere in Ontario which make it difficult to transition land with single-family homes to multifamily residential use. While it can be relatively straightforward to expand a single-family home, it is not possible to split a single-family home into multiple units without a lengthy rezoning process. One option that Toronto has undertaken that could be a great way to mitigate this issue across Ontario municipalities is to repurpose municipal corporate land, replacing old midrise office buildings with high rise affordable housing buildings. Especially in the wake of the COVID-19 pandemic, with countless organizations moving their workforces remote instead of returning to the office, this could be a very effective option to repurpose largely unused office buildings.
There has been a significant rise in the number of no-fault evictions in Ontario, where the landlord claims “Own Use” or initiates a “Renoviction”. Own Use claims occur when a landlord evicts a tenant in order to use the unit for their personal use, or for the personal use of a family member. As the landlord does own the unit, they have the right to use the unit assuming they follow the proper legal eviction process with the current tenant. Renovictions occur when a landlord evicts a tenant on the grounds that they need to extensively renovate the unit, and it will not be fit for tenants to live in while the work is done. A unit’s incremental annual rent increases do not need to be maintained when one tenant is evicted and a new household is moved in – meaning that while the landlord typically has to follow the annual rent increase guidelines for an existing tenant (typically 1-3% annually), a landlord could drastically increase the monthly rent charges for a unit once a new household moves in. This unfortunately incentivizes landlords to increase tenant turnover, putting renters in the awful position of having little affordable options to choose from, increased risk of evictions, and a potential drastic increase in rent upon moving to a new unit.
Housing has been recognized internationally as a basic human right, and governments at all levels have begun to institute policies and working groups to plan effective housing strategies with this core idea in mind. Moreover, adopting a Housing First mindset and approach will be vital to improving public perception on this topic, and ensuring that the best possible outcomes are achieved for tenants. Housing First means that stable housing is understood to be first step in improving the health of individuals and their communities and ensuring that all residents can access the services they require and can participate in their communities. Stable housing has been cited as a vital basic requirement to improve mental health, physical health, food security, and more by Canada, the United States, and the United Kingdom, among other countries.
Land slated for residential development in Ontario is more often sold to private developers for condominium development over being used for growing the local supply of affordable housing, and condos tend to be rented at significantly higher rent rates than the affordable rent amounts seen in social housing. Regulating secondary markets and protecting public land for non-profit development over selling it for private development would be a great first step to ensure the planned increase in housing stock in the coming years is kept affordable for residents, rather than further pricing them out of their local market. Funding eviction prevention services and strategies would also go a long way to improving the plight of Ontario renters as they seek stable housing.
The development of mixed-income communities is also a pivotal step in developing a more equitable rental experience for all residents, by improving the funding, facilities management, amenities, service accessibility, and overall quality of life of low-income and marginalized renters. In these models, a fraction of tenants in a building typically pay market rate rent, decreasing the burden of subsidies on municipalities, and freeing up funding for other vital services, such as building maintenance, community safety, and tenancy supports available to all tenants. Reducing the
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