How Canadian rental prices spiralled out of control

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Jordan Heath-Rawlings The last time I rented an apartment was about eight years ago. It was in downtown Toronto. It was in one of the nicest buildings in the city. Steps away from everything, but also tucked away and quiet, and it was one bedroom plus den. And it was 1000 square feet, and here is the part that’s really gonna hurt you if you’re a renter right now. It cost us a little under $1,700 per month, and that was after our rent was raised once I just checked this morning. And a similar apartment in that same building right now goes for $3,150. That is more than my monthly mortgage. I don’t understand how renters can do this. The percentage of Canadians who are renting is growing as it stands. The number of places they can rent is not. So it’s not rocket science to see why prices are through the roof, but understanding why doesn’t fix a problem, and this is a problem that actually goes back decades. The best way to explain how we got. Might be this when we were living in that beautiful, affordable downtown apartment with plenty of room for us and lots of amenities and everything else that made it such a great deal. Do you know what people asked us? So when are you planning to buy? Are you saving up for a down payment? I am Jordan Heath-Rawlings. This is The Big Story. Brad Badelt is a freelance print and audio journalist. He’s based in Vancouver, but he wrote about rental problems that exist across the country and potential solutions in the walrus. Hello, Brad.

Brad Badelt Good morning. Why don’t we start with the situation on the ground right now.

Jordan Heath-Rawlings You know how many Canadians, uh, rent their homes or apartments and predominantly where do those Canadians live?

Brad Badelt Yeah, roughly, uh, a third of adults in Canada rent and two-thirds buy. That percentage of renters is much higher in urban centres like Vancouver and Toronto and lower in smaller communities or rural areas. Most people own.

Jordan Heath-Rawlings And how has that been trending either over the past, you know, several years or even over the past, uh, handful of decades?

Brad Badelt Well, over the last decade or so since 2011, according to stats, can, uh, renters have been growing rapidly? The portion of renters has grown at roughly twice the rate as the portion of owners in Canada, but that’s a big shift. So prior to 2011, there had been a slow, steady increase in home ownership going back to the forties, I believe so, uh, definitely a shift about 10 years ago. One of the reasons that, uh, I wanted to talk to you about this issue is that you know, your piece tackles obviously, um, the numbers and the situation that that renters face, but also sort of how it’s perceived in this country.

Jordan Heath-Rawlings And you write in the piece about renting despite being, you know, a third of adult Canadians, as you say, being seen as a temporary situation. What do you mean by that? And can you gimme some examples?

Brad Badelt Yeah, I, I, I, renting is still seen as, as a stepping stone to ownership that it, it’s not a destination unto itself. And I think there are still perceptions that, uh, renters are, are young people, people who are maybe just starting in their career.

Jordan Heath-Rawlings Mm-hmm.

Brad Badelt One of the housing experts I spoke to for the story referred to the cult of home ownership here in Canada. And I think in my experience that, that’s pretty true. It, it’s, it’s very common to be asked, you know, are you looking to buy? When are you going to buy? Yeah, a sense that renting is, is, is almost a purgatory to put a bit of a, a, a dramatic spin on it. But rather than an, an, an endpoint unto itself, there’s a number of examples of that I would say. One is that trying to find a rental suite for a family, a three bedroom rental suite or even a four bedroom, is really difficult.

Jordan Heath-Rawlings You know, rental suites tend to be studio apartments or one bedrooms, right?

Brad Badelt Uh, and I think that’s an indication or maybe a relic of what, uh, renting maybe was at some point in time, but certainly isn’t today.

Jordan Heath-Rawlings For how long has that perception been around? Was it, you know, in the sixties, seventies and eighties, was it still seen as like a stepping stone to home ownership or, you know, did people settle down, and, and live in those three bedroom rentals for, you know, until they retired?

Brad Badelt Yeah, I mean, the, certainly in the, the fifties, sixties, even through the seventies, there was a lot more purpose-built, rental construction happening, so buildings that were built specifically to rent to people. But through that time, there was a steady shift to encouraging, incentivizing, enabling home ownership. It was a real goal that, you know, most Canadians would, would own their home. Uh, and what happened through that is, is through the eighties and nineties we saw less purpose-built rentals. We saw more condos being built in urban centers, uh, and we saw rentals shifting to more of a private. Arrangement, uh, where you’re renting the basement suite, you’re renting an extra bedroom right off of, off of a homeowner, and that, that’s an important shift. I think it’s a real difference between living in a purpose-built rental building and living in someone’s basement. Uh, you know, that that could be renovated, that could be sold, uh, on fairly short notice.

Jordan Heath-Rawlings Why did we stop building that purpose-built, uh, rental housing, especially the bigger units?

Brad Badelt Yeah, it’s a good question. I think there’s a few reasons for that. One, through the eighties and nineties, there was a lot of kind of austerity measures at the government level, so spending on affordable housing, spending on rental buildings really dried up.

Jordan Heath-Rawlings Hmm.

Brad Badelt At the same time, I think there was a real awareness that home ownership can be an economic driver for the country. And so what started out as things like insured mortgages, which are a great thing, tilted more toward tax incentives and other programs to really encourage home ownership and kind of by default then draw away from, from the rental side.

Jordan Heath-Rawlings Well, let’s talk about the 33%, uh, of the country that rents right now. You know, we’ve covered, uh, extensively on this show, the housing crisis, the unaffordability, uh, of homes for young people are people starting families. But, but what’s the situation in the rental market? What is it like out there, uh, across the country in terms of availability and price and how’s it been?

Brad Badelt Yeah, it’s interesting over the last year or so where we’ve seen interest rates going up and housing prices starting to to to level off, rental prices haven’t followed that trend. So rental prices have continued to increase sharply. The latest numbers I saw, uh, showed in Vancouver and Toronto, year over year rent increased by. On the order of 20%, which is a huge increase in a year.

Jordan Heath-Rawlings Wow.

Brad Badelt Yeah. And it’s not just a, a big city thing. The community of Kitchen or Waterloo stands out to me. They had, they had increases of, well over 20%. There were a number of smaller, maybe mid-size communities in the list that saw similar spikes. And it’s tied certainly here in Vancouver, and I believe Toronto as well. The, the vacancy for rent right now is, is hovering around 1%.

Jordan Heath-Rawlings You know, supply is very low, demand is high, and uh, and you’re seeing that huge increase in rents, the gradual rise of rents, um, is not a recent phenomenon, but you know, to your point, it not levelling off, uh, as the housing market does. Is a little surprising to me, I guess, what’s happening, uh, in the market to squeeze renters like that?

Brad Badelt Yeah. I think one of the things you’re seeing now is, is that increase in the number of renters there, there is certainly a, a generation of people who have not been able to get into the housing market, and as housing prices went up through the pandemic, so steeply. I think as I put it in the story, the train has left the station, like they are not getting into the housing ownership market. And so it’s creating this squeeze where there’s more and more people now that are looking to rent, but the supply really hasn’t kept up. And that’s changing. There is more rental being built in, in, in the big cities, uh, at the moment, but it’s, it’s certainly lagging behind, uh, that demand.

Jordan Heath-Rawlings When you talk about, uh, those rentals that are being built, are those purpose-built rentals or are they more, I just look at the skyline in downtown Toronto and I see, uh, a ton of those studio apartments, one bedroom condos.

Brad Badelt Mm-hmm.

Jordan Heath-Rawlings Um, is that changing at all or no?

Brad Badelt Yeah, it’s, it’s changing, but I would say quite recently. So purpose-built rentals, you’re seeing in certainly the urban centers, again, cities are starting to encourage, even incentivize, purpose-built rental buildings. Uh, and that’s been a fairly recent trend, but you are seeing more of that construction now and a little less of the condominium construction, which really dominated cities throughout the, the nineties, two thousands for, for, for decades. Uh, but that, that is shifting now, I would say.

Jordan Heath-Rawlings How long does it take for that shift to actually start impacting people who are looking, uh, for housing, whether it’s, uh, rental or ownership? Right now we see these things going. What’s the typical turnaround until there’s enough meaningful supply on the market to make a difference?

Brad Badelt Well, that’s a, that’s a tricky question to answer. I mean, a project from kind of its conception through all the permitting to being built to someone living in it is, is several years. Many years in some cases. So this, this is not a ship that’s gonna turn around quickly. I wouldn’t say. But it’s really hard to speculate, you know, that this is, uh, the population in, in the bigger cities in particular is continuing to grow as well. So it’s not just increasing supply, it’s, it’s increasing supply above and beyond, uh, the growth in, in, in our cities. So, houses too expensive to buy. Um, people need to turn to rentals. There’s not enough purpose-built rentals. Rent is rising very quickly. No easy way to put this.

Jordan Heath-Rawlings How screwed are people?

Brad Badelt Well, it’s an interesting question. I, I think at this very moment, if you are a renter, it, it’s a difficult situation trying to find stable, affordable, long-term rent. Uh, and I don’t think that’s gonna turn around in a matter of, of months or quickly. But there are some encouraging signs. So there are more purpose-built rental buildings being built across the country. Right now it’s in the national housing strategy. There are indications that cities are pushing for more two bedroom, three bedroom, even four bedroom units to be constructed. And, and you know that that’s a bit of a, a battle. There’s certainly less market for those units, but there is a need for them. So those things are happening right now. Rental protections are coming into place across the country, or strengthening across the country. So they’re certainly encouraging trends. It’s just a question of, uh, how quickly can these shifts make up for the kind of booming demand for these units.

Jordan Heath-Rawlings Let’s talk a little bit about what it could look like, because your piece in the walrus asks, you know, what would it take to make Canada a nation of renters? And you look around the globe, can you point us to some places where, you know, renting is sustainable even for a family and seen as like a stable way to live rather than transitional? And what are those places doing, uh, that we aren’t?

Brad Badelt The one that stood out to me, and I, I, I speak to it in the story is, is Germany. So Germany has, uh, a really high portion of renters. It’s over half of adults in Germany rent. But what really struck me is when I spoke to a housing expert from Germany, he indicated that home ownership is not really a big deal there. It’s not a, you know, a, uh, a conversation on Friday night. When are you gonna buy? Do you buy or do you own? They’re really seen as fairly, it, it’s a choice whether you choose to own, whether you choose to buy. There’s a few reasons for that. One is that Germany followed quite a different path than Canada Post World War ii, Germany. Uh, if you buy a home and then sell a home, you’ll pay tax on that. Profits made on it. That capital gain, some of the homeowner incentives that we have here, the first time home buyers’ credit, other benefit fits like that. Germany does not have that, there’s really no, I would say there’s no favoritism towards home ownership over renters. The other piece that stood out is, They really have a culture of renting there. They, I think the average tendency is 11 years quite common for people to work with their landlord to make some tweaks, renovations to the apartment to suit. A lot of apartments actually don’t come with kitchen cabinets, which strikes me as very odd, but it’s, uh, people, people bring in, people install their own kitchen cabinets as a, as a personal piece in the apartment.

Jordan Heath-Rawlings So it really struck me as how different that is from, from here in Canada in terms of the culture and approach to it. What would it take to shift that culture? You mentioned some positive things that are happening, um, at the government level in terms of building incentives and renter protections.

Brad Badelt Mm-hmm.

Jordan Heath-Rawlings How do you even start to shift that culture away from sort of home ownership being seen as like the crown jewel?

Brad Badelt Yeah, I think it’s, I think it’s tricky because two thirds of voters right now are homeowners. Right? Uh, and I think it’s gonna be really difficult to shift some of those benefits away from home, home ownership and, and to put more support into, into renting, you know, as, as we’re seeing right now with, with interest rates, uh, going up and the pushback that’s starting to come from that. I think there’s a, a, a limit to how much you can shift support to renting here in this country right now. Where I do think that’s gonna change though is, is the number of renters is growing, the number of people who rent and vote is growing. And I think that’s gonna start to shift the, the conversation around, you know, how we support and enable renters in this country. I think as it grows from one third upwards, that conversation’s naturally going to evolve. And another piece that I’m interested to see is even in popular media, how much popular culture, how much we start to renting reflected, whether that’s in tv, movies, what not. Uh, to kind of normalize this, this trend that we’re seeing, is it just inevitable, like a pendulum that it kind of swings this way, um, spent decades swinging towards home ownership. There’s no more homes left to buy at affordable prices in many places in the country.

Jordan Heath-Rawlings And so, like, people’s living situation then dictates, uh, the policy as people try to win elections? Hmm.

Brad Badelt I mean, I, I’m not sure it’s inevitable. But I mean, as space gets tighter and we see more and more density, particularly in our cities, and I think as people move more, that’s an important piece that people don’t, you know, typically buy their home at 21 as maybe they did, uh, in the 1950s and live in that home for the rest of their lives. People move from city to city quite commonly now, and not just in their twenties, but throughout their life at times, uh, as their career demands. And that’s where renting probably plays a bigger role. So I think, I think there will continue to be a shift towards renting. How much so, uh, I, I think it’s difficult to guess at this point.

Jordan Heath-Rawlings You mentioned some of the protections that are coming online now and the incentives. What are you watching for in the next few months? What do we know about, uh, what we might see over the next, I don’t know, six months, a year?

Brad Badelt Yeah, I mean, protections are, are actually pretty decent here in British Columbia, where, where I am, and I believe they’re pretty strong in Ontario as well, in terms of, if you are in a unit, a landlord can, can’t arbitrarily just raise the rent 20%, right? But it’s fraught with loopholes and I think they’re tricky loopholes to plug. Uh, the classic one is the rent eviction. If a landlord wants to renovate, they can evict the tenants, uh, with appropriate notice, uh, and then reopen the suite at a time in the future at a much higher rent.

Jordan Heath-Rawlings I mean, that’s a legitimate reason.

Brad Badelt Sometimes people wanna renovate, but it’s definitely has been abused and, and probably still is. So in terms of tenant protection, we’ll continue to see governments try to fill those loopholes and strengthen tenant protection. I am curious with, with kind of the uptick in, in rental housing happening. I certainly see it here in Vancouver and I know it’s happening in Toronto as well, how that starts to hopefully level off. Uh, rental prices. But I’m really interested in seeing how the culture starts to shift as we see more and more people living in these, uh, rental buildings, uh, especially in our cities. Uh, Vancouver right now is, it’s 50-50 in terms of rentals. Renters and owners in Toronto is similar. Uh, what happens when that tips to, to 60-40 when renters are actually the dominant population in some of these, these cities?

Jordan Heath-Rawlings It will be fascinating to watch as, uh, the market evolves. Brad, thank you so much for walking us through this.

Brad Badelt Thanks for, uh, talking with me.

Jordan Heath-Rawlings Brad Badelt writing in the Walrus. That was the big story. For more, you can head to the big story podcast.ca. Of course, you can find us on Twitter at the big story fpn, and you can email us at hello at the big story podcast.ca. This podcast is available in your favorite podcast player in your least favorite podcast player and in middling podcast players everywhere. You can also ask a smart speaker to play the Big Story podcast. Thanks for listening. I’m Jordan Heath-Rawlings. We’ll talk tomorrow.