Anyone hoping to rent a home in Vancouver or Toronto doesn’t need the Canadian Mortgage and Housing Corp. to tell them the market is tight.
The latest CMHC data, however, do underscore just how difficult the situation is. A rental-market vacancy rate of 3 per cent is considered balanced. In the Greater Toronto Area, the rate is 1.5 per cent. In the Vancouver region, it’s 1.1 per cent.
And in the GTA last year, the average rent surged 6.8 per cent, more than triple the rate of inflation. In Metro Vancouver, home to the highest rents in the country, average prices jumped 4.7 per cent.
While the latest raft of rental data from CMHC, published in mid-January, was disheartening, there was some good news. A series of public-policy moves to stoke the rental market in British Columbia, and particularly in Vancouver, appears to be having a positive impact.
CMHC’s numbers show that about 11,000 condos in the Vancouver region were added to the rental supply in 2019. Of the 11,000, more than half were in the City of Vancouver itself. In the Toronto area, in contrast, fewer than 8,300 condos became rentals in 2019.
That’s a striking difference, given Greater Toronto has more than 2½ times as many people as Metro Vancouver. It suggests that policies put in place in B.C. are helping to increase the size of the rental market.
Vancouver City Council made the first move in 2016. The city instituted an empty-homes tax of 1 per cent of a property’s assessed value. There were various exemptions but, essentially, if you owned a house or a condo and weren’t living in it, you either had to put it on the rental market, or pay the tax. The tab was $10,000 a year on a $1-million place.
Then the provincial government acted. In 2018, B.C. introduced what it calls a “speculation and vacancy” tax. The province says 99 per cent of homes are tax exempt, since the levy only applies to properties not occupied by owners or renters. The tax rate for Canadians is 0.5 per cent of a property’s value, and 2 per cent for foreign owners. In the city of Vancouver, empty homes faced both municipal and provincial taxes.
Since then, thousands of Vancouver condos have suddenly acquired “for rent” signs, in what CMHC describes as “an unprecedented shift.” It says that “it is likely that these policies contributed to the increase in the number of condos available on the long-term rental market.”
Encouraging investor-owners to rent out their condos is not the principal answer to the rental squeeze in Toronto and Vancouver. Renting a condo is an inherently precarious form of housing. Renters can be displaced at any time if the owner sells or wishes to move in.
But given the low level of new rental housing being built in Canada’s cities, condos have become the source of much of the country’s rental stock.
Over the past year, CMHC reports that fewer than 3,500 new rental apartment units were built in Toronto, versus more than 22,000 condo units. More than one-third of the Toronto area’s condos are on the rental market.
What Canada needs are a lot more purpose-built rentals, such as those the country built in the decades after the Second World War. These days, after decades of inaction, rental construction is rising, but much more is needed.
The shift in the Vancouver area, however, shows there are available options. New taxes are rarely popular but, in B.C., three of four people support the vacancy tax.
The City of Toronto should consider a similar tax. Mayor John Tory said this month he supported the idea “in principle.” The federal government could also act. The Liberals, during last fall’s election, promised a national tax on empty homes owned by non-Canadians. A 1-per-cent speculation and vacancy tax is on the Minister of Finance’s to-do list.
In Vancouver, the tax has raised $40-million so far, while B.C.’s measures have brought in $115-million. The money is useful, and little of it is being paid by Canadians, but the goal is not new revenue. Governments want people to avoid the tax, by renting out vacant properties.
Vacancy taxes and the like are not cure-alls for the rental shortage. The taxes pushed thousands of new units onto the Vancouver market, but rents still shot higher, and the vacancy rate didn’t budge.
But without those formerly empty condos, things would have been even worse.