CHANGING RENTAL HOUSING DYNAMICS & THE PANDEMIC
Of Canada’s eight largest metro areas, average monthly purpose-built rents rose more slowly in six of them in 2020 versus 2019, with Montreal and Quebec City being the exceptions. In those two CMAs, rents rose faster: by 5.5% in 2020 versus 5.3% in 2019 in Montreal, and by 4.4% versus 3.0% in Quebec City. Edmonton experienced the most modest slowdown in average rent, with the 0.8% increase in 2020 compared to a 1.1% rise in 2019 (a slowdown of 0.3 percentage points). At the other end of the spectrum was Metro Vancouver, where the average rent in the purpose-built rental market rose by 2.7% in 2020, compared to 6.1% in 2019. This was the slowest increase in the region since 2013 and approximately half of the average annual increase of 6.0% seen over the preceding five years (2014 to 2019). As with changing vacancy rates over the past year, a number of factors contributed to this more muted average rent increase in 2020—not the least of which was the freezing of existing rents by British Columbia’s provincial government. First implemented on 18 March 2020, this edict has been extended until the end of 2021. Despite the change in provincial policy, the trend in rents within Metro Vancouver was somewhat varied. While almost all municipalities experienced higher rents in 2020 than in 2019 (West Vancouver and Port Coquitlam were the exceptions), rents actually rose faster in 2020 than in 2019 in eight of 18 municipalities. This was led by Delta and Surrey, where average purpose-built rents rose by 4.2 and 3.7 percentage points, respectively. At the other end of the spectrum, both the township of Langley and the city of Langley experienced the
most significant slowdown in rent growth, with rents increasing more slowly in 2020 than in 2019 by 10.2 percentage points in the township and by 10.3 percentage points in the city. In the city of Vancouver, which has more than half (52%) of the region’s purpose-built apartment stock, average rent rose by 1.9% in 2020; this was down by 4.2 percentage points from 2019 (when rent rose by 6.1%), and was well below the average annual increase of 5.9% from the preceding five years (2014 to 2019). (As noted in the introduction, the above purpose-built rental rates provided by CMHC are an aggregation of rents from buildings of all ages and conditions; they do not reflect “same-unit” rent changes.) A similar story unfolded in the secondary rental market, at least insofar as Metro Vancouver was concerned: the 1.1% increase in average monthly condo rent in 2020 was 0.9 percentage points lower than the 2.0% from 2019, and 3.1 percentage points below the 2014-to-2019 average increase of 4.2%. While this overview of changes in rental market conditions is cursory—many more pages could certainly be devoted to unravelling recent changes in the Metro Vancouver market alone—it serves to empirically establish the weakening of the rental market in 2020, per rising vacancy rates and relatively slowly- growing rents. Having outlined these “whats”, it is now useful to contemplate some of the “whys”.
03. FACTORS INFLUENCING THE RENTAL MARKET There are, of course, myriad factors impacting the rental market at any given time, be they demographic, economic, or policy-related in their origin. During periods of growth, for example, rental housing
Over the past year there has been much debate around the impact that the pandemic has had on both the ownership and the rental segments of the market, with there perhaps being more agreement about the drivers of the for-sale market than those of the rental market. Below, consideration is given to factors that we see as being more, and less, important to the evolution of the rental market here in Metro Vancouver. SLOWER POPULATION GROWTH The Covid-19 pandemic has had direct impacts, though transitory as they are expected to be, on Canada’s demography. With international borders mostly closed, Canada welcomed only 185,000 immigrants in 2020—approximately half of the pre-pandemic target
demand generated from rising in-migration may be complemented by an expanding jobs base and growing incomes; at the same time, the consequent downward pressure on vacancy rates and upward pressure on rents that this might exact could, in turn, elicit government policy responses that seek to restore balance into the rental market. Such policies might include limits being imposed on rent increases (or an expansion of the scope of existing rent controls), restrictions on evictions being introduced, or incentives to encourage the expansion of rental supply. During periods of slow (or no) growth, an opposing scenario might evolve.
APR I L 202 1 — P A G E 6
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