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Housing costs cripple major Canadian cities


In metropolitan cities across Canada, people are struggling to find and keep affordable housing.

Some have given up completely – moving to smaller communities.

New data from Statistics Canada shows that more and more Canadians are renting as homeownership rates fall. Census data from 2011 to 2021 shows that the number of renter households increased by 21.5%, more than double the increase in owner households at 8.4%. The largest share of renters are now millennials (aged 25-40), who make up nearly 33% of the market.

Historically, as the population grew in Canada’s largest urban centers, housing supply could not keep up, driving up real estate prices and rents. As Canadians’ paychecks can’t keep up with rising house and rent costs, many are turning to smaller cities with even less housing supply.

WHERE DO THEY MOVE?

Another report released by Statistics Canada earlier this year provides insight into communities likely to attract people who find it increasingly unaffordable to live in big cities.

According to data released in February, many of Canada’s fastest growing municipalities were small communities near major urban centres.

Topping the list was East Gwillimbury, Ont., a small town in the Greater Toronto Area where the population grew by 44.4% between 2016 and 2021.

Second on the list was The Blue Mountains, Ontario, another rural township located on Georgian Bay along Lake Huron. It increased by 33.7% and is not close to a census metropolitan area (CMA).

In British Columbia, Langford on Vancouver Island, near the city of Victoria, saw a strong population increase of 31.8%. Among the top 10, the Southern Gulf Islands, a group of islands off Vancouver Island, rose 28.9%.

Saint-Apollinaire, Quebec, increased by 30.4%. Four other cities in Quebec, Bromont, Carignan, Saint-Zotique and Mirabel, were in the top 20 fastest growing municipalities.

Three Manitoba cities, including Niverville, outside of Winnipeg, grew 29% from 2016 to 2021. The cities of West St. Paul and Neepawa grew 24.5% and 23.3%, respectively. %.

Statistics Canada noted that cheaper housing, changing work-from-home patterns due to the COVID-19 pandemic, and a desire to be closer to nature were among the factors driving population growth in these communities, even if the population of large cities continued to grow between 2016 and 2021.


TENANTS, NOT JUST BUYERS, ARE ALSO MOVING

While home ownership continues to be out of reach for many Canadians, more remain in the rental market, which does not have an adequate supply, according to Aled ab Iorwerth, deputy chief economist at the Canadian Housing Corporation. mortgages and housing (CMHC).

“The solution for us is to build more rental housing, so we need a dramatic increase in the supply of rental properties,” he told CTVNews.ca on Thursday. “In fact, going through all the approval processes takes time.”

When the Bank of Canada raised interest rates in an effort to curb inflation, the move chilled real estate markets across the country. According to an RBC report on resale activity, August 2022 was the quietest month in three and a half years for listings. The Inter-Agency Service (SIA) National Composite House Price Index showed a 7.4% decline in the number of units since February.

Rising mortgage rates and concerns about the future of the housing market helped boost demand in the rental market. According to a national rent report released in August, the average rent in Canada for all properties rose more than 10% year-over-year in July. The highest rent increases have been seen in cities like Vancouver and Toronto, which may have pushed some tenants out of those markets.

HOW WE GOT HERE?

House prices have skyrocketed during the COVID-19 pandemic, reaching a tipping point in February 2022 when there was a 31.1% year-over-year increase in house prices, according to an RBC breakdown.

As inflation continued to rise in Canada and around the world, due to supply chain issues, the ongoing pandemic and Russia’s invasion of Ukraine, the Bank of Canada launched a series of interest rate hikes amid fears of an impending recession.

The subsequent rise in mortgage interest rates forced many buyers to pause. This chilling tactic by the Bank of Canada has since depressed house prices, but the basic problem has persisted.

Ab Iorwerth said there were trade-offs with rising interest rates.

“I would generally view this as a short-term problem,” he said. “Because market rates will have a greater impact, it will be more difficult to buy a house. Even though house prices have fallen, it will be harder to buy a home because mortgage rates have gone up.

Those who cannot buy a home are turning to the rental market, which has its challenges.

“Everyone is starting to worry about high housing costs. It eats into the ordinary budget for savings on food, travel (and) leisure,” said ab Iorwerth. “If you’ve managed to rent a place and it’s under rent control, I now think you’re very reluctant to move because the rent in any new location is likely to be a bit higher.”

WHAT THE EXPERTS SAY YOU NEED TO DO

Experts point to the need to dramatically increase the supply of housing across the country to keep the cost of living manageable for Canadians.

One of the problems, said ab Iorwerth, is the lack of rental housing under construction in large and small municipalities. In June, CMHC released a timetable indicating when rental units should come online to curb the worsening crisis.

The report titled “Canada’s Housing Shortage” builds on a 2018 report that found Canadian cities were not meeting the demand for affordable rental housing. Municipalities tasked with creating and building affordable units often do not have the tools or funding available to tackle such an issue and continue to advocate for support from senior government, the report said.

CMHC’s 2022 report estimated the supply of additional housing needed to restore housing affordability by 2030.

“If current rates of new construction continue, we expect the housing stock to grow by 2.3 million units between 2021 and 2030. It will reach almost 19 million housing units by 2030,” says The report.

“To restore accessibility, 3.5 million more affordable homes are needed by 2030.”


Canada defines affordability as housing that requires 30% or less of a household’s annual income.

Census data from 2021 indicates that one in five families in Canada spends more than 30% on housing, and in many cities in Ontario and British Columbia, the numbers are on the rise.

According to CMHC data, households in British Columbia will spend an average of 58.3% of their income on housing in 2021. In Ontario, the average is 56.4%.

To address the concerns of housing advocates, provinces and municipalities across Canada have implemented inclusionary zoning (IZ), a city-level regulation requiring developers to build affordable housing in certain areas. Montreal, Toronto and Vancouver have adopted versions of the policy with the smaller municipalities of Mississauga, Ont., Langford and Richmond BC, and Edmonton, Alta.

As for solutions for tenants, some provinces have put in place rent control policies. In Ontario, the Progressive Conservative government has required operators of all rental properties built before 2018 to only increase rent by a percentage the government dictates each year, up to a maximum of 2.5%. In Quebec, ab Iorweth said, the province has a larger rental sector but does not apply rent controls to the majority of units, leaving landlords to dictate prices.

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