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Associations’ view of the pandemic’s impact on the rental housing industry

By David Gargaro

RHB Magazine spoke to several rental housing association leaders about the impact of COVID-19 on the rental housing industry. We discussed the situation in different parts of Canada, the impact of government programs, initiatives, and incentives, what associations would like to see the government do to help rental housing owners, and what they foresee for the industry.

Participants: •  David Hutniak, CEO, LandlordBC •  Cameron Choquette, CEO, Saskatchewan Landlord Association •  Tony Irwin, President and CEO, Federation of Rental-housing Providers of Ontario (FRPO) •  Kevin Russell, Executive Director, Investment Property Owners Association of Nova Scotia (IPOANS) RHB: What is the situation for rental housing owners one year into the pandemic? David Hutniak: The impacts were more

pronounced for smaller landlords, and they will continue to feel those impacts for some time. We weathered the pandemic better than anticipated, which is good news. Landlords must be vigilant, as we’ve had some nasty surprises, like the emerging insurance crisis, which adds to financial uncertainty for landlords. There is downward pressure on rents and vacancies have nudged up, particularly at the higher end of the market. Landlords are being innovative by offering a month or two of free rent and other incentives to retain and attract tenants. This is a short-term adjustment in the market, as there will be pressure

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on supply once foreign students return and immigration resumes.

Cameron Choquette: After an eviction

moratorium from April to August of 2020, rental housing providers are seeing stability around nonpayment, and are looking forward to a stable 2021. We are seeing movement from tenants who may be taking advantage of low interest rates to buy a home.

Tony Irwin: In Ontario, members are

experiencing an increase in vacancies, a decrease in average rents, and a decline in rent payments. Vacancies are up from 2 per cent in October 2019 to a projected 3 per cent In October 2020. Average rents are down 2 per cent and rent collection shortfalls have remained around 4 per cent each month. However, initial data appears to show the softening of the market is primarily an issue in urban cores. Downtown Toronto and surrounding areas have been hit the hardest, as residents no longer need to live near major employment areas with the uptake of remote work. Other parts of Ontario appear to be around near-term norms for vacancies and average rents. A challenge for many owners remains accounts receivable. Many operators have been helping residents stay in their homes by providing deferred payment plans. The challenge remains how much and over what period of time will residents be able to pay back past rents. This issue is challenging for smaller owners who may not have the balance sheet strength to continue to support residents in this manner.

Kevin Russell: The Nova Scotia market is

beginning to experience softness in vacancy rates due to lack of immigration, including international and out-of-province university students taking online classes from home. People who lost service industry jobs gave up apartments for alternative living arrangements. Purpose-built multi-unit residential buildings under construction are beginning to come onto market, with 4,800 units expected in the next 20 to 30 months.

RHB: How have government programs, initiatives or incentives helped or hindered rental housing to date? David Hutniak: The BC government helped

our sector navigate the crisis well. The Rent Supplement Program was a great response to help renters. The government was responsive in returning our sector to a state of normalcy quickly, and took a balanced approach to addressing rent arrears incurred during the COVID-19 period ending August 2020, with the Rent Repayment Plan. We were disappointed during the election, when the government extended the rent freeze through June 2021 but they deserve credit for supporting renters and our sector.

Cameron Choquette: There has been no

targeted industry support for rental housing providers in Saskatchewan, even after providers experienced spikes in rental arrears as a result of the eviction moratorium. However, the federal and provincial benefits for tenants have improved tenants’ ability to pay amidst job losses, reduction in hours, and increased costs.

Tony Irwin: In Ontario, many members have

bridged residents by providing deferred payment plans. Provincially, there have not been direct rent supports. The Canada Emergency Response Benefit (CERB), in combination with other income and employment supports, has a lot to do with why our rent collection shortfall has only been around 4 per cent. There have been positive improvements in relation to the Landlord and Tenant Board in 2020. The government passed Bill 184, Protecting Tenants and Strengthening Community Housing Act, last year, which addressed some challenges. The government increased the complement of adjudicators at the LTB by more than 50 per cent. However, the LTB was not operating at normal levels for most of last year due to the crisis, resulting in a continued backlog of cases.

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Kevin Russell: The Canada Emergency

Response Benefit kept apartment renters in place. CERB assisted landlords and tenants in working out rental arrears by agreeing to rent repayment schedules. Hearings for Residential Tenancies Applications to Director for non-payment of rent experienced a 37 per cent decrease from July until the end of November. In response to pressure from “renovictions” and rent renewal increases, the Nova Scotia Government introduced a 2 per cent temporary rent cap, through a November 25 Ministers State of Emergency Directive. The cap is scheduled to be in effect until February 2022 or when the state of emergency is lifted, whichever comes first. The 2 per cent cap was retroactive to September 1, and negatively impacted operations, cashflows, major capital upgrades and property transactions.

RHB: What would you like to see from the federal and provincial governments at this stage in the pandemic to help rental housing owners? David Hutniak: We’re concerned that the

federal government will continue to be less than responsive to our sector’s challenges, so LandlordBC’s main federal advocacy goal is to avoid potential damage from increased capital gains tax or other tax increases. Provincial advocacy dominates our focus. Cost increases impacting our sector is exceeding the maximum allowable annual increase permitted under the RTA. The impacts of accelerating cost increases, especially increases in the cost of insurance and impacts of the pandemic, are concerning. We need a cost inflation index aligned with the costs to deliver rental housing, rather than consumer prices. LandlordBC has advocated for portable housing benefits like BC’s Shelter Allowances for Elderly Renters (SAFER) and Rental Assistance Program (RAP). The pandemic has reinforced the belief more must be done to support renters. In fact, now is the time to make rent control more targeted. There is a significant group of higher income renter households who do not need access to rent-controlled housing. By targeting rent control, the subsidy that rent control gives renters could be delivered more effectively to those in need. This would allow our sector to provide people with low and moderate incomes with more access to more affordable market rental housing units, since better-off renters would move to newer, more expensive rental units or into home ownership, leaving more affordable units for the people who need them.

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Cameron Choquette: A relief program for

landlords who experienced rent arrears due to the eviction moratorium is crucial for small and medium-sized rental housing providers that are important to the housing continuum in Saskatchewan.

Tony Irwin: The best thing the government can do is help residents. Focus on income support programs, support economic recovery measures to reduce unemployment rates, and look for solutions to rent arrears so people can continue to live in their homes, especially those who live in units owned by small owners who may not be able to sustain deferred payments. Governments should look at investments in rental housing as a key driver for economic recovery. Rental housing is in short supply in Ontario, and there is no better time for the government to incent more investment into new construction. The industry has been calling for an expedited path for rental development, including unlocking the potential of infill development. A framework that enables more rental construction can support economic recovery post-COVID-19, and work toward decreasing the substantive supply shortage of rental housing in Ontario.

Kevin Russell: It would have been prudent if

the government enlisted industry input before implementing policies that impact the industry. Policy decisions were not evidence-based, made in haste, and ill-conceived and made without considering the long-term economic impact on the industry and renters.

RHB: What do you foresee happening in rental housing in the next 6 to 12 months? David Hutniak: While there are many

challenges, I remain optimistic about the sector. As foreign students return, and immigration ramps up again, our sector will continue to be called upon to provide the important housing we deliver. In many parts of BC, we have experienced persistently low vacancy rates and we are not building enough new supply of purpose-built rental to meet the demand. We are certainly seeing municipalities target new rental properties, and a pipeline of new projects is unfolding in many of them. Purchasing one’s own home, despite record low interest rates, will continue to be challenging for many folks; for many people, renting is the better option. We need to ensure we meet the demand and provide them with safe, secure, affordable rental housing for the long term.

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Cameron Choquette: I think the rental housing industry is going to continue to see movement as a result of tenants buying homes. I know our members in our university cities are also hoping for universities to resume in-person classes so that they can recapture students back into the marketplace.

Tony Irwin: As vaccines are administered to

Canadians, COVID-19 cases decline, and the economy recovers, we expect the rental market across Ontario to tighten rapidly. The federal government has announced an increase in immigration targets by 50,000 over each of the next three years. Ontario, specifically the Greater Toronto Area, has been the most attractive place to settle for new immigrants and we expect that to continue. International students and household reformation, driven by young professionals who have moved back home, should drive demand for rental housing. Collectively, these demand factors should drive down vacancies and take us back to a fundamental supply crunch that needs to be addressed. A recent report by Urbanation forecasts a 200,000 rental unit deficit over the upcoming decade in Ontario. Our industry will continue to call on governments to take action to address this underlying challenge that is the root cause for many issues that impact our sector.

Kevin Russell: The next six to twelve months

are going to be interesting for Nova Scotia’s apartment industry. The market will continue to experience softness until immigration picks up, and out-of-province students return to inperson classes. Operations will continue to be negatively impacted until the 2 per cent rent cap is lifted. Nova Scotia will have a new Premier after a leadership campaign ends in February. Two of the three leadership candidates are on record supporting rent caps. An Affordable Housing Commission to remedy the affordable housing crisis was created by the Minister’s State of Emergency Directive. The Commission is to release its report on May 31, impacting the Province’s affordable housing strategy moving forward. IPOANS is well represented on the commission. A bright spot alleviating some of the stress points being experienced, Nova Scotia’s employment numbers have surpassed prepandemic employment numbers.

RHB: Thank you for your input and participation.

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RHB Magazine January 2021 - Associations' View of the Pandemic's Impact  

RHB, RHB Magazine, LandlordBC, Saskatchewan Landlord Association, Federation of Rental Housing Providers of Ontario, FRPO, Investment Proper...

RHB Magazine January 2021 - Associations' View of the Pandemic's Impact  

RHB, RHB Magazine, LandlordBC, Saskatchewan Landlord Association, Federation of Rental Housing Providers of Ontario, FRPO, Investment Proper...