Higher rents and reducing vacancy rates, but more long-term rental units in Vancouver
There seems to be more long-term rental units on the market, thanks to a number of new government policies.
Residents in Metro Vancouver in search of housing specially built as rentals were faced with tight vacancy and rapidly increasing rents in 2019, according to a yearly study by the Canada Mortgage and Housing Corporation (CMHC).
But, there was one outstanding modification to Vancouver’s rental housing market that the CMHC is hoping to make findings on in better detail. For the first time since the CMHC has followed this information, the number of long-term rental condos added, at over 11,000, surpassed the number of new condo units added, at over 9,000.
This is an indication that the number of existing condos that were either being used as short-term rentals, occupied or left empty were converted to long-term rentals in the space of one year, said Eric Bond, a senior specialist of market analysis at CMHC, Vancouver.
Bond stated that this was mainly the case in the downtown Vancouver region known as the Burrard Peninsula zone where almost 3,000 units were “added to the long-term rental universe while only 318 new units were added.”
According to Bond, what will be interesting is to what number of the recently completed units will go to the long-term housing pool.
It’s a development that overlaps with a combination of policies, together with the city’s empty home tax, province’s speculation tax, and various other new rules for short-term rentals and empty homes, said Bond.
Liberal housing critic in B.C, Todd Stone stated that CMHC’s report revealed that vacancy rates in Vancouver “have remained virtually stagnant, despite assurances from the NDP that their faulty speculation tax and other tax measures would improve housing availability.”
In a prepared statement, Minister of Housing, Selina Robinson said “the old government stood by while renters were priced out of their communities.
“It’s clear our government’s efforts to reduce speculation and support new rental supply are starting to pay off and move things in the right direction.”
The director of The City Program at Simon Fraser University, Andy Yan, said it takes time for government policies to take effect. He said the adjustment to the long-term rental pool is something to note. “It shows a gathering of some traction.”
According to Bond’s report, while there has been a major increase in Metro Vancouver rents for purpose-built rentals, “the year-over-year change in rent for condos was relatively small and not statistically significant, potentially due to increased competition among landlords with more units being made available for rent.”
Rental rates for condos owned by investors are usually about 10% to 20% higher than those for purpose-built rental units having the same number of bedrooms, according to the CMHC.
The average, rental unit rate for purpose-built rentals increased 4.7% over the past year. This is a lot more than the 2.5% increase that property-owners are lawfully allowed to charge existing tenants.
Going with Bond’s report, this is a gap that has been increasing since 2015. He wrote, “Landlords, through turnover of long-term tenants, are able to increase rents to market levels that are higher.”
Presently, the average asking rent for vacant, purpose-built rental units is 20.8% higher than the overall average rent for occupied rents, said Bond. Landlords, developers and non-profit operators agree there is a need to be able to increase rents in order to meet up with operating costs, as well as invest in the construction of new purpose-built rental buildings.