Discount offers hardly making Metro's rental market more affordable
Credit to Author: Joanne Lee-Young| Date: Fri, 21 Feb 2020 02:31:40 +0000
There is a new kind of real estate ad appearing in Vancouver, touting discounts or incentives at newly built rental buildings. They promise some kind of limited-time offer of a few hundred dollars off the monthly rate for signing a lease.
But the offers are unlikely to help with affordability in the city because they are mostly for higher-end units that rent for thousands of dollars a month.
For instance, English Bay Residences is advertising a “limited-time rental discount” of $250 off the monthly rent for the first year for its two-bedroom suites at 1668 Davie St., a new purpose-built rental building. Right now, you can sign for $2,770 per month, which is a discount from the initial ask of $3,020 a month.
The discounting at higher rent ranges is like a deal at a store full of Ferraris when most renters can only afford Hondas, said Andy Yan, director of the City Program at Simon Fraser University.
People who can afford a monthly rent of $2,500 make up a small segment of the market, requiring a household income of between $90,000 to $100,000, which represents the top five to 10 per cent of renters, said Yan.
“Your typical renter makes $50,000 a year,” he said.
In a market usually defined by tight vacancy rates and sharply rising rents, the ads underpin an interesting statistic that Yan found in his analysis of Canada Mortgage and Housing Corp.’s 2019 rental market survey.
In October 2019, the vacancy rate for two-bedroom, purpose-built rental units charging the highest level of rent at $1,750-plus in Vancouver was 1.9 per cent, compared to 0.9 per cent a year before. At lower rent levels, the changes were much more modest, at just a tenth of a per cent up or down.
“It’s an issue of adding really expensive rental when what most people need are more modest rents,” said Yan.
The phenomenon of increasing availability of higher-end condos may be a reflection of more investor-owners adding their units to the long-term rental pool instead of paying the various empty home and speculation taxes.
Another factor could be the construction of more rental stock. In Vancouver’s West End, for instance, there is the area on Davie Street between Bidwell and Cardero where several purpose-built rental buildings have recently been completed, and there are more towers in the pipeline that will add hundreds of more units.
“Rents have been softening for over a year. It’s definitely due to more units coming onto stream,” said David Hutniak, CEO of Landlord B.C., which represents owners and managers of rental housing.
He said that the ads touting various deals for renting in purpose-built buildings are a new phenomenon that “we haven’t seen in forever.”
The CMHC reports that the average asking rent for a vacant unit across Vancouver is nearly 20 per cent more than an occupied one, illustrating the difference in rent tenants face if they need to move. But in some areas such as Vancouver’s West End, the increases are more modest. The difference in rent for a two-bedroom in the West End is an 8.4-per-cent increase. And for bachelor suites, there is actually a 3.3-per-cent decrease.
Beau Jarvis, president of Wesgroup Properties and chair of the Urban Development Institute’s board, said there are also higher vacancy rates in some older buildings as “folks with financial capacity” move into newer buildings. He thinks policymakers should be “paying attention to the West End submarket as it may help inform new rental/affordable housing policy.”
Hutniak agreed it will take time to figure out what rent levels the market will bear, but said there is also the prospect of a new cohort of workers and executives who are expected to make higher salaries working at large technology companies and want “brand-new units and fresh, new construction.”
Nevertheless, Yan worries about not building enough rental “for people who are here now.”
He points out that at a household income of between $50,000 to $60,000, the split between renter and owner households in Vancouver is about even, with just over 10,000 each. However, at a household income of between $90,000 to $100,000, the number of owners rises to 5,890, compared to 3,255 renters. For household incomes between $125,000 to $150,000, the number of owners at 7,805 far dwarfs the number of renters at 1,980, according to CMHC numbers.
“At the higher incomes, there is more of a choice between home ownership or renting,” he said.