Vancouver, Toronto rental markets face rising rents, extremely low vacancy: survey

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B.C. has among the tightest rental markets in the country, with smaller cities increasingly facing vacancy rates that are at or near zero, while rents are rising faster than the national average.

The Canada Mortgage and Housing Corp.'s annual rental market survey, released on Tuesday, shows the cost of rental apartments in Vancouver and Toronto remains the highest in the country, with a two-bedroom unit in a private rental building priced at an average of $1,550 in Vancouver and $1,400 in Toronto. An investor-owned condo cost an average of $2,300 for Toronto and almost $1,900 in Vancouver. Vacancy rates are less than 1 per cent in those two large metro areas.

But places such as Squamish, Nelson, Kelowna, Abbotsford, Campbell River and Penticton are seeing vacancy rates even lower than the 0.9 per cent in Vancouver.

In Squamish, a onetime mill town about an hour from downtown Vancouver, the vacancy rate was zero and average rent for a two-bedroom unit jumped 22.2 per cent to $1,161 in October from a year ago. In Nelson, vacancy was also zero and rent for a two-bedroom apartment increased by 7.5 per cent. And Kelowna saw its two-bedroom apartments increase by 8.6 per cent to $1,151.

The one pinpoint of light for observers was that vacancy rates improved slightly in some parts of the Lower Mainland and rate increases over the past year were not as high as the previous one. The average rent increases were still higher than the year's provincial cap on allowable increases for tenants who stay in the same units.

"I did not expect the vacancy rate to actually improve. I was expecting it to be worse," said David Hutniak, the chief executive of Landlord BC, a lobby group.

The statistics on those jumps come as local, provincial and federal governments are struggling to grapple with what many have called an out-of-control housing problem in hot spots around the country.

This week, Vancouver city council is debating a comprehensive new housing strategy that envisions incentives and tactics for reducing land speculation and increasing the stock of low-cost rentals. The city also just approved its second batch of temporary housing for homeless people, in spite of some community opposition.

City staff are exploring whether Vancouver could create rental-only zones, which they say could have a significant impact on land prices – and eventually rents.

The city is already moving steadily toward the first application of its new regulations and taxes for vacant homes and short-term rentals.

Victoria, where the vacancy rate is lower than in Vancouver, is also looking at restrictions on short-term vacation rentals.

The province has promised to introduce new measures to deal with speculation and investment in housing, after having already promised to fund 2,000 units of temporary housing throughout B.C.

And the federal government just announced a 10-year housing plan a couple of weeks ago, with promises to create 100,000 new low-cost homes. However, the situation remains anxiety-producing for Vancouver's many renters.

"We are in a house with a good relationship with our landlord, but it doesn't stop the concern," said Claire Beveridge, a 31-year-old digital-marketing consultant.

She and her partner pay $1,000 a month for the main floor of a house near Vancouver's Commercial Drive. But they worry about the future, especially since the property next door was sold and high-end townhouses are now under construction there.

When they scan the Craigslist ads, they see rents for units the same size as their current apartment ranging from $2,000 to $2,500.

That kind of gap between older apartments with long-term tenants, whose rent increases are capped at inflationary rates by the province, and newer units or ones that have just come on to the market means that recent arrivals in Vancouver end up paying much higher prices than the statistical average.

As well, it means tenants who have been in apartments a long time are reluctant to move.

Housing observers see hope in some of the new measures being rolled out.

Mr. Hutniak said a lot of new rental construction is in the pipeline. As well, he noted that the city's new policies on empty homes and short-term vacation rentals haven't come into effect yet.

Those could help alleviate the tight market, eventually, in the municipalities that are taking action, including Vancouver, Victoria, New Westminster and the City of North Vancouver.

But that won't come fast.

"We're in a big rental-housing hole," Vancouver housing-statistics analyst Jens von Bergmann said. "It's going to take a lot of digging to get out.

Comparing markets

Here's a look at rental markets (census metropolitan areas) across Canada for a two-bedroom apartment.

Vancouver

Average rent: $1,552

Change from last year: 6.2 per cent

Vacancy rate: 0.9 per cent

Kelowna, B.C.

Average rent: $1,151

Change from last year: 8.6

Vacancy rate: 0.2

Calgary

Average rent: $1,247

Change from last year: -1

Vacancy rate: 6.3

Toronto

Average rent: $1,404

Change from last year: 4.2

Vacancy rate: 1

Ottawa

Average rent: $1,232

Change from last year: 2

Vacancy rate: 1.7

Montreal

Average rent: $782

Change from last year: 2.1

Vacancy rate: 2.8

Source: Canada Mortgage and Housing Corp.