Persistent challenges in Canada's rental market: What can be done?

Canada’s primary rental market is facing major challenges, as large demand continues to outpace available supply.

This has weakened affordability and caused record-low rental vacancy rates, as indicated in Canada Mortgage and Housing Corporation (CMHC)’s latest Rental Market Report (RMR).

“Young families are struggling to find places to live not just for ownership but also to rent”

Dean Artenosi, realtor, author and co-owner of Coldwell Banker The Real Estate Centre Brokerage in Newmarket, Ontario, reviewed the RMR, and what stands out most to him is the substantial increase in rental rates for turnover two-bedroom units.

“This is telling us that young families are especially struggling to find housing and are prepared to pay for larger rent increases, as high as 40 per cent in cities like Toronto. Young families are struggling to find places to live not just for ownership but also to rent. Smaller units are being developed in new sites is the norm.”

Artenosi explains that on one of his sites, units are as small as 365 square feet. “It costs more to build smaller units, more kitchens, bathrooms, etc., but the attractive part is the price point.”

What can government do?

Artenosi feels that governments need to start finding ways and providing incentives for developers to build large units.

“Perhaps it means lowering development charges to assist in bringing the price points down. Perhaps there are other tax incentives for two-bedroom units, like larger HST rebates.”

He says that governments should also find ways to speed up the development approval process, pointing out that often, a zoning submission involves various departments (engineering, traffic, environmental, etc.) making comments on a new development proposal and they “get tunnel vision on their part in the commentary process, often delaying approvals from going forward efficiently.”

Consider the big picture and compromise

These departments need to be mindful of the bigger picture, Artenosi maintains. He feels departments should work together for the common good of planning and development and providing more housing. 

“Traffic, engineering and landscape will always have challenges that can always be addressed with compromise.”

Artenosi suggests enforcing a time frame for each department to provide comments, so the approval process and departments have a sense of urgency.

Create a process with city planners in “a mindset of making things happen”

He points out that some municipalities create a central submission process to receive and address comments, usually through the city planner on file.

“Allow departments and developers to communicate directly, address comments immediately and obtain sign-off directly with the department so that matters can get addressed quickly instead of waiting for circulation through a central point of contact,” he suggests.

Artenosi believes the city planner on file for new redevelopment projects should be proactive in addressing matters by bringing departments and developers together and assisting in solutions with both parties. “They need to act as general managers and oversee an efficient approval process. It’s a mindset of making things happen.”

Realtors can do more

Artenosi is a firm believer in realtors playing a vital part in the affordability crisis. When he began his career, he specialized in turning renters into homeowners, often finding creative solutions for families to get into homes and afford to keep them.

“In 1996, if your home had an existing apartment prior to (a certain) date, then you could get the basement retrofitted by the fire marshal and legalize the apartment with retrofit fire codes. This would be known as a legal non-conforming use.

I took advantage of this opportunity for young families and not only sold homes with basement apartments in existence prior to the date, but I oversaw the legalization for these secondary units.” He dealt with the fire marshal, handled the inspections, oversaw the renovations and found new tenants for homeowners.

“Today, Bill 23 allows for three auxiliary units in detached homes. You have to obtain permits and often there are criteria to do so with the municipalities,” Artenosi explains. “Realtors should not just sell the idea but rather go one step further and assist clients in this process even after the sale.”

Other parties can do more

Furthermore, Artenosi thinks the CMHC, banks and appraisers should allow for auxiliary units and projected revenue that can be earned from these units to be counted in the approval process for new buyers.

“This will allow new potential purchasers to count forecasted (auxiliary unit) revenue towards their total debt servicing ratios and gross debt servicing ratios. Often, they aren’t permitted to count this because (the units) are deemed illegal or, if they’re legal they only allow for 50 per cent of the income to be permitted.

If the potential income from a basement dwelling or auxiliary unit covers 50 per cent of the mortgage payment, then why not allow 100 per cent of the forecasted income to count towards the qualification policies to obtain the mortgage?”

Opportunity for an improved Purchase Plus Improvements program

Artenosi also notes the CMHC’s program, Purchase Plus Improvements, which he utilized often in his earlier days of turning renters into homeowners. “The cost of any renovations can be added to the purchase price and the purchase plus the improvement amount can be financed together as one mortgage,” he explains.

Currently, secondary apartments aren’t allowed to be created through the program. But, he believes the CMHC should use the program to 1) allow for its scope to include creating additional auxiliary units in homes, and 2) allow the forecasted revenue to count for young families in their mortgage qualification criteria.

“It can be a condition of the program that the holdback for renovation monies will only be released if the municipality approves of the unit or an occupancy permit is provided for the additional unit.

Municipalities should not make the registrations or approval process cumbersome, lengthy or costly to allow new families to utilize what Bill 23 is intended to do — provide more housing for Ontarians and Canadians. CHMC’s mandate is to house Canadians.”