December 21, 2018
Recently, The Record reporter, James Jackson interviewed YW Kitchener-Waterloo CEO, Elizabeth Clarke to discuss the rising cost of rent in Waterloo Region – increasing more than 20 per cent since 2012. The full article is below.
THE RISING COST OF RENT IN WATERLOO REGION
The average rent in the region has increased more than 20 per cent since 2012.
WATERLOO REGION — There’s been a steep rise in rent rates across Waterloo Region over the past five years, adding hundreds of dollars to the average cost of living each year.
An analysis of the primary rental market in Waterloo Region from 2012 to 2017 found average rent increased by about 20 per cent over that time — well above the provincial guideline for rent increases, also known as rent control.
While rent control limited the total increase to about 11.5 per cent over that same five-year period, it mostly applied to units built before Nov. 1, 1991. And in a rapidly developing region like Waterloo that means there have been steep increases in rent.
The Canadian Mortgage and Housing Corp. defines the primary rental market as purpose-built rental structures with three or more units. This region saw average rent increase from about $870 per month in 2012 to $1,042 in 2017 — a troubling trend for those working to make housing more affordable in the region.
“Affordable rental housing is disappearing everywhere,” said Elizabeth Clarke, chief executive officer of YWCA Kitchener-Waterloo and a regional councillor representing Kitchener.
The Record’s analysis only examined the primary rental market. The secondary market — including rented houses or townhomes, rented condominiums, and apartments within private dwellings — was not included. The CMHC does not track these numbers as robustly as it does the primary market.
The federal agency said rent for one-bedroom units increased 18.4 per cent from 2012 to 2017; for two-bedroom units it increased 19.4 per cent; and for three-plus bedroom units it climbed 22 per cent.
In Waterloo, the average rent increased 21 per cent between 2012 to 2017; in Kitchener, it rose 18.8 per cent; in Cambridge, it increased 17.4 per cent; and in the townships of Woolwich, Wilmot and North Dumfries it increased 16.6 per cent. Wellesley Township was not included due to a lack of data.
Dawn Parker, a professor in the school of planning at the University of Waterloo, said while the analysis is missing relevant data for secondary rental units, the trend of higher rental costs in the region holds true.
“Certainly rentals are becoming less affordable,” she said, adding the increase in rent has mirrored the overall price increases in the housing market.
Increases were highest in the urban cores. Between 2012 to 2017, uptown Waterloo saw rent climb nearly 26 per cent; in central Kitchener, rents increased 25.3 per cent; and in the area just outside the Preston core in Cambridge they increased 25.5 per cent.
The total number of primary market rental units available in the region increased by 15 per cent over that period, from 31,226 in 2012 to 35,936 in 2017, making this the fifth largest rental market in the province after Toronto, Ottawa, London and Hamilton, and the ninth most expensive.
The director of housing services for the Region of Waterloo says the local rental market is so competitive that tenants are willing to pay higher prices just to ensure they have a roof over their head.
“And landlords know that, so it’s an opportunity to maximize their rental revenue,” said Deb Schlichter.
Rent control in Ontario
Also called the provincial rent increase guideline, rent control is the maximum a landlord can increase rent for most tenants during a year. It does not apply to vacant residential units, social housing, nursing homes or commercial properties, and it is calculated each year using the Consumer Price Index.
Between 1997 and 2017, however, only units that were built or occupied before Nov. 1, 1991 were subject to rent control. Last spring, the provincial Liberals expanded the legislation and closed the so-called 1991 loophole by making almost all rental units in the province subject to rent control.
“In the face of dramatic rent increases and unfair practices, our government is answering the call to bring fairness and predictability to Ontario’s rental housing system,” said former Liberal MPP and housing minister Chris Ballard last year.
Not everyone was in favour of the change. Landlords and developers have argued rent control is the wrong tool to make housing more affordable, and a 2013 article from the Federation of Rental-Housing Providers of Ontario argued that “rent controls lead to a shortage of housing when the price is artificially suppressed, curtailing new supply and stoking demand.”
Earlier this year, the newly elected PC government rolled back some of the Liberal changes, ending rent control for all newly built or newly converted units as of Nov. 15, 2018.
“Exempting new units from rent control will encourage large developers and small landlords to create more housing,” said Housing Minister Steve Clark.
In most cases, rent can be increased once every 12 months, but it’s capped at 2.5 per cent and a tenant must be given written notice of an increase at least 90 days before it takes effect. The provincial rent increase guideline for 2019 is 1.8 per cent, or about $18 per month ($216 per year) on rent that is currently $1,000.
Landlords can also appeal to the Landlord and Tenant Board to request an increase above the provincial rent control guideline.
Eligible requests include:
- If there has been an extraordinary increase in the cost for municipal taxes or charges;
- Eligible capital expenses, such as an extraordinary or significant renovation, repair, replacement or new addition;
- To cover operating costs related to security services for the first time, or if those costs have increased.
“A very desirable place to live”
Andrew Macallum, president of the Waterloo Region Apartment Management Association, said the increase in rent in recent years is an indication that people view this region as a viable alternative to areas closer to Toronto, where the housing costs are higher.
“We live in a market economy, and I think what the rental increases reflect is that the Region of Waterloo is a very desirable place to live,” he said.
New CMHC stats show rent and vacancy rates across Waterloo Region varied in 2018, depending on the size of the unit:
- bachelor units: 2.5 per cent vacancy, $796 average rent;
- one-bedroom units: 2.9 per cent vacancy, $1,021 average rent;
- two-bedroom units: 3.1 per cent vacancy, $1,210 average rent;
- three-bedroom units or larger: 1.7 per cent vacancy, $1,254 average rent.
The overall vacancy rate in Waterloo Region increased from 1.9 per cent to 2.9 per cent over the past year, according to the CMHC, mainly due to an increase in overall supply that outpaced the growth in demand. More than 1,600 new rental units were built in the region in 2018.
Macallum said his association’s members — about 350 landlords in Waterloo Region and Guelph, representing about 15,000 total rental units — supported the decision to end rent control on new units.
He said landlords need to balance charging enough for rent to make a living and pay expenses but not raise their rent so high that it forces tenants out of the unit and it sits empty.
“I would suggest that yes, seeing rent control lifted was positively seen by our membership, but I want to stress it was not a celebration, ‘yes, I can finally charge whatever I want,'” he said.
Critics see the rent control rollback differently.
“This will only make affordability more difficult,” said Waterloo NDP MPP Catherine Fife, adding the government needs to step in to not only keep rent affordable but to encourage the construction of more affordable units.
“The market does not build affordable units; the profit margin just isn’t there,” she said.
Another factor in increased rent is the high local tenant turnover rate, which was 18.8 per cent in Waterloo Region this past October — the fourth highest turnover rate in Ontario after Kingston, London and Ottawa.
Since vacant units are exempt from rent control, a high turnover rate “indicates that landlords could raise the rent of vacated units more frequently and is one factor to rising rents,” according to the CMHC.
Schlichter said once a unit is empty, a landlord is free to “charge what the market can bear.”
A lack of affordable rental housing
While the vacancy rate in Waterloo Region may be hovering around three per cent, it doesn’t tell the whole story, Clarke said.
The vacancy rate for affordable housing is “virtually nonexistent” she said, and the waiting list can be anywhere from three to eight years.
“The wait lists are so long that people are not even bothering to put their names down, which creates a list that isn’t really that meaningful,” Clarke said, adding local developers have very little interest in building affordable rental housing when they can maximize their profits by building high-end rental apartments or condos.
Affordable housing is defined as housing that doesn’t cost more than 30 per cent of yearly income or is at least 10 per cent below market rates.
Macallum said the expenses associated with designing and building purpose-built rental structures are high for developers, and the definition of affordable housing is a moving target. He’d like to see municipalities or other levels of government explore ways they can help curb some of the fees, taxes and other costs associated with new development.
A monthly federal housing allowance to help individuals or families pay for rising housing costs, similar to the Canadian Child Benefit, may also be worth considering, he said.
Waterloo Region already incentivizes developers to build affordable units, including subsidizing construction via capital grants to help offset the cost of building new affordable or supportive housing, but those initiatives have only been able to chip away at the problem in recent years.
These grants have helped create more than 1,500 new affordable rental units since 2001 (the year the provincial government under Mike Harris downloaded the administration of social housing to municipalities).
The region also offers:
- Rent supplement to landlords to help keep rent affordable;
- Regional development charge grants to offset development charges that are used to pay for new infrastructure associated with that development;
- Brownfield incentive grants to help cover the cost of cleaning up and redeveloping contaminated land at former industrial sites, closed gas stations or old factories.
The region has provided $4.8 million in grants to cover regional development charges and another $11.5 million in capital grants since 2001. The federal and provincial governments have provided $77.6 million.
Earlier this year, Waterloo Region announced it would provide up to $25,000 in forgivable loans to homeowners to create legal secondary apartments inside a home or on a property, under the stipulation that the unit must be rented out at below-average market rent, which starts at $589 for a bachelor apartment.
But all of this money hasn’t translated into much success on the ground. According to statistics provided by the region, only 132 subsidized units were built in Waterloo Region between 2012 and 2017 — or roughly 2.8 per cent of the 4,710 new rental apartments built over that same period.
Another 121 subsidized units were under construction in 2018.
Clarke said the problem goes beyond capital costs alone as the high price of land in the city cores can make building affordable units prohibitively expensive for nonprofits or agencies such as hers before they even get a shovel in the ground.
Moving outside the city core to find cheaper land isn’t an option for many either, as affordable units should be located close to transit and other amenities within the city core, she said.
The YWCA received more than $450,000 in federal and provincial funding to help build four additional four-bedroom units of affordable housing at 155 Lincoln Rd. in Waterloo in 2016. The total cost was an estimated $800,000, but that didn’t include surveys, permits, architectural work or legal bills, Clarke said.
The city of Waterloo also waived the development charges and parkland development fees for the building, valued at nearly $49,000, and the region agreed to provide a $64,500 grant equal to the regional development charges.
To really make a dent in the affordable housing wait list and to help bring down the overall cost of rental housing, private developers need to get on board, Clarke said, but that may be easier said than done.
“Developers can make a lot more money building condos,” she said. “The private sector is not at all interested in developing affordable rentals.”
For an interactive map detailing rent increases in Waterloo Region and across the province, go to the www.therecord.com.
A complete breakdown of all rental statistics for this region is available on the CMHC website, www.cmhc-schl.gc.ca.
Last year, the federal Liberals also unveiled a 10-year, $40-billion national housing strategy aimed at reducing homelessness and finding housing for low-income Canadians. The goal is to help 530,000 families over the next decade. For more information, go to www.placetocallhome.ca.