A rental shortage is occurring in major cities of Canada. Rents are rapidly increasing and candidates who are looking for a unit are struggling to find a rental. Besides the stress linked to the research of a dwelling, the share of the budget given to the rent increases and many candidates do not find affordable housing.
Where does this shortage come from? What are the consequences for you, landlords? What are the actions taken by municipalities? Discover how this shortage is affecting your rental market.
The origins of the housing crisis
The rental shortage provokes an increase of housing prices in Canada’s major cities and the research for an affordable dwelling becomes a struggle for candidates. Is there currently less rentals on the market than candidates? Several factors explain this shortage:
- Short-term rentals on collaborative platforms: landlords are withdrawing their properties from the regular rental market, renting to short-term tenants only.
- The price for buying a property has increased the previous years, pushing the inhabitants from major cities to delay their project of buying a property and therefore, remain tenants. In that way, units on the market are decreasing.
- Immigration and migration intensifies this housing crisis. The arrival of newcomers from outside of Canada or outside of major cities (foreign workers, permanent residents, students, etc.) contributes to the demand of rentals.
What do we mean by rental shortage?
On the rental market, we estimate that the equilibrium between the demand of rentals and the offer is reached when the unoccupied rentals rate is at 3%. This rate is the percentage of unrented dwellings on a given territory. The lower this rate is, the lower the number of available rentals is. If this rate goes below 3%, the rental research becomes complicated.
In Canada, the estimation of the national unoccupied dwellings rate is of 2,6%. What are the provinces and the cities that are the most affected?
- In British-Colombia, this rate remained low at 1,4% in 2018 compared to 1,3% in 2017. The lower rates are in Vancouver (1%), Abbotsford-Mission (1%) and Victoria (1,2%).
- In Ontario, Kingston has the lowest rate (0,6%) and Toronto reaches the second place with 1,1% of unoccupied rentals. These rates are close to the historical rates of the province.
- In Alberta, the rate is above the equilibrium with 5,5% of unoccupied rentals in 2018 (7,5% in 2017).
- Finally, Québec is the province that have seen its unoccupied rentals rate going below the equilibrium, from 3,4% in 2017 to 2,3% in 2018.
What measures to avoid this housing crisis?
Municipalities and provinces are taking measures to stop the unoccupied rentals rate from dropping. Between regulations against Airbnb or the tax on vacant rentals, what are the changes that will affect you on a daily basis?
- In Ontario
In Ontario, regulations against collaborative platforms aim to increase the rate and make the rentals more affordable, especially in Toronto. For every landlord who wishes to rent their unit short-term, he will need to register to the city prior to renting and will be limited to his principal dwelling only. Renting will therefore be allowed for a duration of 180 days maximum. Besides this regulation on short-term rentals, the Ontarian province voted in 2017 the application of a tax of 15% on foreign housing investment. Finally, cities can decide whether they would like to implement a tax on vacant dwellings or not.
- In Alberta
In Alberta, the regulation of short-term rentals via collaborative platforms is being discussed at the province’s parliament. The city of Calgary decided to ask landlords who wish to rent on Airbnb a professional license depending on the frequency of rentals, the number of days of which the unit is rented as well as a security inspection. The city also wants to educate inhabitants on short-term rentals.
- In British-Colombia
In Vancouver, the landlord renting his unit on Airbnb will have to possess a license which number has to be written on the platform. The landlord will be able to rent his main residence after paying a one-time fee of $56 and a yearly license fee of $49.
In Victoria, the law that will be voted suggests that the landlord who wishes to rent on collaborative platform will have to give proofs of main residency, pay license fees as well as giving proofs of conformity with the law.
British-Colombia also imposed a tax of 15% to foreign housing investors and a tax of 1% in Vancouver on vacant rentals.
- In Québec
In the province of Québec, a number of registration has to be indicated on collaborative platforms. This number can be obtained online and is given showing an acceptation letter from the landlord to rent short-term. Since 2017, each platform collects the Taxe sur l’Hébergement (TSH) for the province.
In addition to this provincial regulation, cities and neighborhoods such as the neighborhood of Ville-Marie in Montréal has limited short-term rentals to some streets. It is therefore forbidden by the municipality to rent a unit outside of these areas.
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Canada has a low unoccupied rentals rate, making it difficult for tenants to find affordable housing. Many Canadian cities suffer from the withdrawal of rentals from the regular market to rent short-term on collaborative platforms.