You had your best-laid plans and then COVID-19 came along and hammered the entire economy. But you’ve got this – if you have the right information. Join Rob Carrick and Roma Luciw on Stress Test, a podcast guiding you through one of the biggest challenges your finances will ever face.
ROB: Today, we’re talking about one of the most ignored groups in the personal finance world: renters.
If you’re one - you already know how unaffordable it’s getting, especially in big cities.
ROMA: So how are people dealing with the rising cost of rent?And what does it mean for their other financial goals - and for their life?
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ROB: Welcome to Stress Test, a podcast about personal finance for Gen Z and millennials. I’m Rob Carrick, personal finance columnist at The Globe and Mail.
ROMA: And I’m Roma Luciw, personal finance editor at The Globe.
ROMA: So Rob, much like home ownership, there was a period earlier in this pandemic where the situation was briefly better for renters. And how at that time, you could actually try negotiating with landlords for a better deal - cheaper rent or improvements to your rental unit. The current situation is nothing like that - so what’s changed?
ROB: Well, there was a period at the beginning of the pandemic when the renter finally had some leverage. Renters were moving out of their properties. Landlords were desperate to keep people in their units, and they were offering rent cuts in some situations, or at least no rent increase. And that’s over now. Landlords are back to having the upper hand, and all of a sudden the golden period for renting is now over back to the world where rents are rising and it’s getting increasingly unaffordable to rent.
ROMA: In order to find out what’s happening in the rental sphere, we did a call out. The response was huge and we basically invited the renters of Canada to talk to us, to share their experience, to tell us their stories. We had over 5,000 people respond to the poll that we put out, and that is separate from the hundreds of emails we got from happy and unhappy renters. Let’s go through some of the things that we found out during our callout.
ROB: One of the interesting things that I thought was that almost 40 per cent of people think they’re renting forever because they’ll never be able to afford to buy a house, and another close to 30 per cent just don’t know what the outlook is. They have no confidence that they’re going to be getting into a house. And then we asked people about their feelings about renting. So 55 per cent said renting has its upside, but they’d rather own, 22 per cent said they dislike it or hate it, and almost a quarter were like it or love it. So, you know, I think that we have to get out of the poor renter narrative. A lot of people are perfectly happy doing this.
ROMA: I thought the other interesting thing here was that almost 70 per cent of them were not too worried or not worried at all about being evicted or renovicted. And more than 40 per cent of the 5000 people that responded said that their rental unit was a two-bedroom or larger place. So what we tend to see is the single narrative about renting, you know, the tiny condo in the downtown core. We hear all about the bad landlords in the renovictions and all these things are happening with rentals. But in reality, the story’s much more varied. There are all kinds of rentals out there - multi bedroom apartments, entire houses. And there’s also a fair amount of positive rental stories we heard about from readers with people renting for decades with good landlords and with at least some of these renters taking advantage of some of the benefits that renting has to offer. So at least not everyone is miserable renting.
ROB: In today’s episode, we’re talking to three Canadians about their experiences renting. First up, we’ll hear from a renter who feels stuck in her situation and has dealt with some nightmare landlords. That’s up next.
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ROB: Being a renter means you’re dealing with landlords or rental companies. Many of them are fine but some can be difficult. For GenZ and Millennials who move out of their family home for school or work, renting is the go-to option. Our first guest is someone who’s lived in many rentals since moving back to Canada for school.
PAULA: Yeah, my name is Paula. I am a journalist currently in Kelowna. And I am a 25-year-old millennial. Trying to apply for places to live in Kelowna was more stressful than finding a job. I was stressed out beyond belief, and I think it was…it wasn’t until, I think, a few weeks before I was supposed to move here that I finally found a place.
ROB: Paula was born in Quebec and raised in Taiwan. In 2014, she moved to Kelowna for university at UBC’s Okanagan campus. She lived in student housing for the first two years and then off campus until graduation. Then, she moved to Toronto for her Master’s degree. Last July, Paula moved back to Kelowna for her first job out of school. Compared to rental prices from 2017, it’s so much more expensive this time around.
PAULA: At that time I have friends who are renting rooms for like $500 a month, like $600 a month. That was pretty standard at the time. And then that continued on until I think my fourth and fifth year of university, like that price point just kind of was like obviously increased a little, like a fair bit, but it was still you can still find rooms for 500, 600 easy in certain parts of the city. And then I left for two years to go to Toronto for school, and then when I came back, I was just like, whoa! Because one bedrooms are suddenly a $1500 a month a bedroom, like to rent a bedroom, it’s averaging like $900 even a $1000 now.
ROB: Paula lucked out finding her place. The rent is 1/3 of her income and that includes internet and utilities.
PAULA: For my place, $675 a month was considered a steal and I was just very shocked because I came back, I was just like, Wait, we’re not Toronto, nor Vancouver. I don’t remember the city being super glamorous. What happened? It was kind of a shock coming back two years later to see that the housing market has gone up so astronomically. It’s actually insane. I think people were talking about the housing market and how COVID will burst a bubble here in the Okanagan, but the reality is it did not. Because people are buying houses more than they’re selling here during COVID.
ROB: Because of Kelowna’s low vacancy rate, finding a place is super competitive. Landlords request a lot of documents from would-be renters like Paula.
PAULA: Oh boy. A lot of credit checks, which I was a bit hesitant giving, given that I’m a student and don’t really have much credit to my name. I also had people ask for employment letters, which is fine and dandy. I had people ask for pay stubs in which I was a student. I wasn’t working. I was a full time student, so I wasn’t really working. And even then, I didn’t really have a pay stub for the company in Kelowna because I hadn’t started at that point. People are also like oh, I want to see your bank statement. I’m like why do you want to see my bank statement? Why do you want to see what I spend in a month? It’s like, no, I just want to see how much you have in your bank. I’m like no, I just rather not give that information. You know, one of the things that I found is that they can choose to be picky like this just because there’s so many people applying at one time, right?
ROB: Kelowna’s a tourist town that booms in the summer. A lot of leases run from September to April and then apartments are converted to short term rentals, like Airbnbs. So why isn’t there more rental supply to follow that demand?
PAULA: There’s been a boom of new developments in Kelowna in the past two or three years, but they’re not affordable. They’re very expensive. So unfortunately, when you have an affordable place come up, people just apply and the competition is fierce. And the reality is Kelowna is growing, but we don’t have any more land to grow out. So unfortunately, we had to build up, but that means changing zoning laws, bylaws and that needs to go through council, and that takes forever. Right? So I think there’s a multitude of factors here and it just compounds into this massive problem. And it’s a housing crisis really in the city.
ROB: As a long time renter, Paula has met her share of difficult landlords.
PAULA: Troubles is really putting it lightly. I mean, unfortunately, my previous landlords have not been too amicable to work with, mostly because it mostly because at the end of the my lease, all the landlords have been like, we’re not giving you back your deposit and I’m like, OK what happened because I obviously have not damaged the apartment to a considerable degree. And they’re like, well, we found some holes. I’m like that was not here when I left. So I don’t know what happened.
ROB: A lot of people consider renting a pit stop along the way to homeownership. And while Paula wants to own one day, she can’t afford it right now. As frustrating as her experiences have been, Paula doesn’t quite have a solution for others. She’s decided to accept all the stuff that comes with not owning.
PAULA: I kind of put up with it. Well, maybe that’s not the right term. I think that, you know - in this point of my life, like renting is just my reality because I’m still young, I’m still moving. I’m actually moving to Calgary quite soon. That just means that renting is just going to be part of my life because if I’m moving a lot, especially this, like early in my journalism career, I’m inevitably going to be moving places and I can’t do that if I’m tied down to a property, right? And it’s not like I can afford property anyway.
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ROMA: Paula’s story is an important reminder that it’s not just renters in big cities that are feeling the squeeze. Rents are also rising in smaller communities. The rise of remote work has sent a flood of buyers or new renters into these places, so it’s making it tougher for everyone.
After the break, we’ll hear from a couple with two young kids who are currently renters. And have very different opinions about their scenario.
ROMA: There is a lot to consider as parents when you’re renting. From the amount of space you need and access to things like playgrounds, schools and community centres. We spoke with a millennial couple with two young kids that have been renting in Markham, Ontario.
FATEMA: Hi, my name is Fatema and I’m a 27 year old. I’m a stay at home mom. I have a two kids. One is a two year old and the other is nine months old.
MURTAZA: I’m Murtaza, I came here after getting married to Fatema, I lived in Pakistan, my background, my hometown is Pakistan.
ROMA: Fatema grew up in a rental basement unit with her mum and sisters in Markham. Their landlord lived upstairs and became a close family friend. Murtaza, on the other hand, grew up in Pakistan. His family owned their home. So their personal housing history has shaped their outlook on renting versus buying.
MURTAZA: To be honest, for me, buying a house or principal applicant is very important for a long term investment. If you look at it as a temporary…on a like five to 10 years of time, it won’t be a successful investment. But if you look at it as a long term investment for your kids or for your maybe for your retirement plan. I know that there are a lot of people like they say oh renting versus buying, you end up paying more if you are buying a house or whatever a mortgage payment or anything like that. So I agree, but on a bigger scale on a larger picture, if you have a house, it keeps on increasing in value.
ROMA: The family lives in a $1400 a month basement apartment unit. It has two bedrooms, a large kitchen, one bathroom, a living room and a play area for their kids. They also have parking. They have a great relationship with their landlord - an older couple who lives upstairs. And Fatema’s happy with the way things are. She doesn’t feel like she’s missing out because they don’t own.
FATEMA: I don’t know, like I’m just really glad to have a space on my own. It didn’t matter where it was. My priorities were more so like having grocery stores nearby, having a pharmacy at a walking distance, having five minutes to the hospital. So these were my priorities and then we wanted to have space for our kids to have to be able to live it, have their own room, have their toys and whatever it is.
ROMA: The family has been renting here for almost three years. Their rent just went up by $100 dollars, but for Fatema, that still works for their budget.
FATEMA: I mean, $1400 was a little bit like, oh man, another $1200 for the year is gone up, considering if I were to, like, be like, oh, you’re raising the rent, I’m going to move out. I’d have to pay a lot more to move out to a new place. It’s a lot easier for me to just be like, all right, $100 a month, we’ll budget a little bit more.
ROMA: Fatema and Murtaza often talk about whether to own or rent. Right now, they can’t afford a place in the big city so Murtaza is considering homes further from the Greater Toronto Area.
MURTAZA: So the housing market due to COVID has skyrocketed crazy right? I think if I were to move on to buying a house, I would rather go to a further place not in the GTA. But outside of GTA. Towards the Oshawa side or towards north, towards Barrie. That’s my goal, and that’s where I am looking to buy a house. Because I want to invest in something to get a value as well. I don’t want to buy a house in just the one room and you are living in…it’s the same as the price you are getting a house in Whitby.
ROMA: But what does Fatema think?
FATEMA: And a lot of my times my husband’s like, oh, let’s move out, let’s go somewhere else. And then I’m like, no, I don’t want to, because I’m like a perfect location where I’m living a happy place, where my mom’s 10 minutes away and everything else is also like a minute or 10 minutes away from me and I don’t want to leave it. Because when he thinks about renting, he thinks of it as like I’m giving my money away to somebody else, which is not necessary. I can use that money for like investment in my own property or anything that’s mine. For me, it’s not like that. It’s more so like, oh, I’m using this space, so I am giving money for it. Like nothing comes free, but I’m not paying…and plus, I don’t have enough that I’m like, I would like to purchase, and I don’t want to do like loans and all that stuff, because that’s a lot more stressful because I don’t know, I’d rather just rent because it’s easier. And if I ever want to leave, it’s a lot easier. It can be like, OK, I’m going to pack up just go if I ever had to. It’s not like a permanency where I’m just stuck in space.
ROMA: For Fatema, renting is less stressful than owning a home. And she’s sticking to that opinion.
FATEMA: Honestly, owning a place would be a lot more difficult because that’s like another child. Because if anything goes wrong with your own property or a house, you are the sole responsible person to get it fixed. Like, you have to go find - if your fence breaks down. You have to go find a contractor and get that fixed and get quotes. Then you know, if your heater breaks, if your heating in your house has issues, then you have to do everything by yourself. So that is a lot more of a task for me. I prefer something where somebody else takes care of all that. So if something does go wrong in my house, like if I have an issue with an electrical or if I have an issue with my oven or anything like that, I can just be like, hey, can you get it fixed? And I know they will get it fixed right away.
ROMA: Murtaza has big dreams of buying a house. But with only one of them working right now and a family to raise, it’s a challenge to save.
FATEMA: Savings a little hard because it’s not just the rent, but everything else like we have like a car, we have kids. So, you know, by end of the month, we try to budget, but it always goes kind of over-under like depending. So we’re kind of living, sort of barely saving I would say. So whatever we make is kind of whatever we spend.
MURTAZA: So right now I’m working and putting in more work and doing some overtime as well to just cater the costs. And then the saving costs. I want to get 20 per cent - I’m trying from back home as well where I can get some money. And if I have put in 20 per cent and then every year, when you get time to put in more money to just lower down the mortgage cost and whatever the percentage.
ROMA: So when Murtaza can afford to buy his dream home, what would it look like?
MURTAZA: I’m looking for a three bed housing and also something with the backyard. Where I can grow some vegetables, fruits in the summers. And also a finished basement with maybe where I can have some hangovers and parties with my friends. And maybe a pool in a corner. Just to enjoy. Or maybe a sauna!
ROB: You know, I think this is a really interesting story because this couple is living the debate buying versus owning, and they’re articulating positive points about both, and it highlights just the fact that there’s no right one true perfect way to live. There’s great things about renting and there’s great things about owning. And I think people, as housing gets more expensive, will have to give consideration to both points of view.
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ROB: For those with a goal of homeownership, renting lets them save for a downpayment. Well, that’s if they can find an affordable rental where they can have monthly savings. So what are renters doing to battle high costs? And will these prices keep rising? At the end of December 2021, I spoke with Shane Dingman, a Globe and Mail colleague who covers real estate. Here’s part of our conversation.
ROB: Shane, what’s the mood out there among renters? I see increasing frustration, anger and even despair among people who are hoping to find an affordable rental that will let them save a down payment for a house.
SHANE: Yeah, it’s actually really interesting time because for the last two years, things have not been that bad for some renters right now. We should make a distinction when you’re talking about the rental market, there are people in the sort of affordable band. People who are looking for a below market rent. That has not been an easy place to live for, like a couple of decades now. Governments have gotten out of the business of building affordable rental. They’re starting to get back into that, but it’s still taking a long time to deliver new units. And so for those folks, it’s always been a bit of a challenge to find a rent that allows them to not pay like 50 per cent of their wages to rent. For everybody else, though. People who are not so sensitive to sort of cost of living stuff, you know you’ve got condo rents in the big cities have typically been higher than average rents overall, and those renters are often young professionals who have good salaries. They have had a pretty decent year, the two years, really, because throughout 2020, a lot of those folks saw their rents fall in the major centres. If they were staying there and if they were one of those people who left the big cities to go to somewhere else, they were moving into markets that had traditionally lower rents. Maybe those rents went up a little bit while they were there, but not in the same sort of velocity you saw elsewhere. So only in the sort of latter half of 2021 have we seen rent start to pick up again nationally and in the big cities. It’s been an interesting couple of years for renters. It was not terrible. And in fact, good for some, but it’s getting a little bit more expensive again.
ROB: Shane, what are some things you see renters doing to cope with expensive rents?
SHANE: Well, one of the things we haven’t really talked about too much that is totally a thing that happened over the pandemic was people moved out of the big, expensive cities and they found rentals in other parts of the country and they were able to work remotely. You know, I know people who moved to like New Brunswick, not just to buy, but to rent! You know, like if you could find a rental in New Brunswick, the rates would be so much lower than you were paying in Montreal or Toronto or Vancouver. You know, so like, there’s lots of markets where rental rates are not as bad and you kind of have to get outside of like the bedroom community of the big cities to find those really, really, really cheap rents. But they’re available. And now that work is more remote, that’s possible. You know, that continues to be possible. I don’t see people rushing back to the office yet. I think if you’re hoping to have a creative solution and live in a studio apartment in a big city, I’m not sure there’s much option for you. Those are going to be expensive. Those are the most desirable units, oftentimes, right? So it’s going to be tough.
ROB: Shane, what trends do you see in rents for 2022? Onward and upward? Are we going to see increases across all fronts?
SHANE: Yeah, there’s no question. Well, I mean, again, I should not predict bad to be in the prediction business, but, barring another major resurgence in pandemic restrictions and pandemic travel and sort of economic shutdown, like those kind of things can still happen. So-called exogenous events, right? We’ve just had the mother of all exogenous events over the last couple of years. Those can continue to happen. Those will shake things up if they do. But yeah, if things are on their current trend, more expensive, more more expensive. But the other thing that we haven’t really talked about is that like if you compare rental costs to ownership costs, it can be pretty competitive, right? Because I’m sure you’ve discussed this many times. The down payment requirements are so huge now to get into the ownership market and then the carrying cost can also be quite high once you get into that ownership market. But sometimes when you do those calculations about what would make rental - what were my carry and cost if I lived in, if I bought this condo instead of just rented it? And oftentimes it’s higher than the rent. There are still lots of condos, for example, that are rented out that are renting for less than the cost of owning them. And the owners in those cases are betting that the price appreciation of that unit will eventually make it all work. But if you wanted to be that owner, you’d be paying those higher costs than the renters. So there’s still a better deal out there for somebody who doesn’t have a big down payment and who’s looking at the cost of living. It’s probably still cheaper for a lot of those people to rent than to try to own.
ROB: Yeah, I think what we really need to alleviate the stress of renters is purpose built, corporate owned rental buildings because we haven’t really talked about the, you know, the big downside of all that rental condos stock, which is renovictions. People saying, you know what, I think my nephew is going to be moving in there. I want to jack up the rent. And, you know, if you ask around people what they dislike about renting, that manhandling by landlords is the number one by far. Fowl living conditions, coupled with landlords who don’t care and landlords who renovict. And when you’re in the purpose-built old fashioned high-rise rental, which no one seems to talk about. And yet there’s dozens of these buildings in every city. I lived in a couple of them myself in my earlier years, great places to live, owned by corporations, you know, rent controlled rents. But we did talk about how there is so much stock in condos and there is this renovation problem. What can we do about that?
SHANE: When we’re talking about those purpose built rentals again and right now, it’s a luxury ones, things like that. What we’re sort of not mentioning is in the 60s and the 70s, there was much more generous tax benefits for building a purpose built rental from the federal government and from provincial governments, and those went away. And that’s what really slowed a lot of that building down. And you know, if you want to look at like, where do you get more rental from - putting back some tax benefit to building purpose built rental and affordable rental will be a good idea if you want that social good to be created. Also, we’re not talking about things like co-op or government owned units like, you know, sort of affordable housing from like from the cities and things like that. Those are also areas where there are more investment could be done. We’re spending billions of dollars on pandemic relief. You know, maybe you can say spare a billion or two for some of these programmes to build some more units for people that might help.
ROB: Shane, can you give me one or two helpful takeaways for renters who feel under stress. They’re having trouble finding affordable rental. They’re wondering if anybody cares about their situation. And they need a place to sort of live for few years while they can build up a down payment, at least take a try at home ownership.
SHANE: Well, I think the age old, you know, sort of renter strategy for saving is to get roommates, you know? There’s obviously a services that do this. You know, there’s all sorts of places that try to hook you up with good roommates and things like that.Sharing costs is a smart way to go. I know a lot of people, you know, who are in the ownership market at some point or another had help from parents, either by living with their parents while they were saving. That’s not an option for everybody, right? If you can’t rely on the bank of mom and dad, maybe try to work with friends. There is also a lot of more co-buying going on out there. And again, you know, if you’re a renter and you’re thinking about, maybe I’d like to do with some co-buying I can buy with my friend we’ll go in together on a house, maybe rent together too, save your costs together.
ROB: One thing that strikes me as I look at housing in 2022 is that we have to get our heads out of this space where we regard renting as a transitional phase and that everybody who rents will eventually make their way into home ownership. I don’t see how the numbers work with prices rising like they are. What about you?
ROMA: Agreed. I think it’s important to note that not all renters are homeowners in waiting. The financial industry has to also get on board in terms of providing better advice for these people, because right now what we’re seeing is a lot of advice, a lot of messaging. Everything’s geared towards the dream of buying a home. One of our missions on stress test is to dispel this belief that renters are financially second class citizens, that this is a second class option. Renting your whole life is not going to be a fairytale, but it’s not going to be a disaster. It can work for you, and the sooner we make that switch, the sooner we’re going to get in line with some of the changes that are already happening.
ROB: I’m going to go back to the survey we did on renting. And one of the numbers that really jumped out at me. Thirty four per cent of people say they feel judged as renters, judged by their families, judged by their friends. It’s time to stop doing that. Renting is a rational way to live when you can’t afford a house, we just have to accept that.
ROMA: Here are three takeaways for renters. One. If you’re a renter, you have to be an aggressive saver and a disciplined investor. If you want to end up with close to as much money as a homeowner. But it is possible, don’t let anyone tell you otherwise. Two. Renting has its benefits. It gives you the flexibility to do things like jump on a job, offer in a different location, or try living in a new city or town. And when those expensive repairs show up, it’s your landlord on the hook, not you. Three. Renting is still cheaper than owning, but not as dramatically as it once was. With rents getting more expensive, it will take you longer to save for financial goals like a house down payment, a trip or for retirement. So keep that in mind.
ROB: Thanks for listening to Stress Test. This show was produced by Amy Chyan and Zahra Khozema. Audio engineering and editing by Kyle Fulton. Our executive producer is Kiran Rana.
Thank you to guests Paula, Fatema, Murtaza and Shane. In our next episode, we’re looking at GenZ and Millennials who are supporting their parents and family financially.
ROMA: If you like what you heard, give us a five star rating and review on Apple Podcasts.
You can find Stress Test at Apple Podcasts, Google Play, Spotify or your favourite podcast app.
And find us at the Globe and Mail.com, where we cover all things financial.
Thanks for listening!