Current rental arrears $600 million across Canada By John Dickie, CFAA President
CMHC issued the results of its October 2020 rental survey on January 28, 2021, including data on rental arrears. Having CMHC data on rental is welcome, but the data does not cover the secondary market, and it is out of date. CMHC reports rental arrears of $150 million for the 1,912,000 rental units in the purpose-built rental supply across Canada. Extrapolating that figure to the 4,100,000 rental units which make up the whole private rental market suggests total rent arrears of $320 million, at the beginning of October 2020. Since October, rental arrears have been building steadily. From industry reports, it is clear that most tenants who were behind on their rent in October continued to be behind every month since then. In Ontario, the arrears situation is worsening because of the second major lockdown. Other regions have also seen renewed lockdowns, with similar income disruptions as those which occurred during the March-April lockdown. By the time you read this, arrears will have built up for five months since October 1, while the October 1 figures reflect six months of income disruption. If the build up of arrears is consistent across the two periods, as reported by many rental housing providers, The arrears figure understates then by February 15, 2021, the total the impact of COVID-19 on rent arrears will amount to $587 rental housing providers. million, or $600 million in round numbers. When the CMHC survey was taken, many post-secondary students had Investors who rent out just one or broken their leases, leaving units two condos or single-family homes vacant and un-rentable from May are particularly hard hit, since they to August 2020. Those rental losses may be short half or all of their rent would have been classified as bad revenue, while their costs still have debts, rather than arrears. to be paid. As well, other tenants ended their CFAA has come together with other tenancies, and landlords were hardassociations and housing groups to pressed to re-rent the units. advocate a rent arrears program to $1 billion or $1.2 billion would be a address this important industry and more reasonable estimate of those tenant welfare issue. two impacts together with the rent For details, see the article on the arrears. next page.
rentalhousingbusiness.ca | 35
NATIONAL OUTLOOK COVID-19 Rental Arrears Response
To address the rent arrears problem, CFAA is working with housing associations and actors from across the housing continuum, including community organizations, other private sector associations, researchers, planners, data and policy experts. The group is known as the Canadian Housing Policy Roundtable.
The arguments advanced by the Roundtable As a result of COVID-19, previously precarious but steadily employed workers, such as restaurant workers and retail employees, became vulnerable and at risk for eviction due to non-payment of rent, particularly in higher rent communities like Toronto and Vancouver. Tenancy insecurity disproportionately affects those with low incomes, lone parent families, children, female headed households, single adults, Indigenous people, newcomers, racialized people, and those with mental health challenges. An eviction crisis due to the massive job losses was avoided by the swift federal roll out of the Canada Emergency Response Benefit (CERB). CERB was designed for simplicity and speed in order to sustain households and the economy, and as a result a flat rate delivery structure was a key feature of the program. As a result, while a national evictions crisis was averted, rent arrears have grown, especially in the communities with relatively high rents. For example, while the CERB was more than adequate in communities with relatively low rents such as Edmundston, Trois Rivieres and Prince George, it was grossly inadequate in areas with higher rents such as Toronto or Vancouver. The new Canadian Recovery Benefit (CRB), operates in largely the same fashion. One provincial response to hardship experienced by renters due to the global pandemic was the Government of British Columbia’s implementation of a temporary Rental Supplement Program, which provided between $300-$500 as a rent payment to eligible low-income households through a direct monthly transfer to landlords. The program was viewed as a crucial income support for both renters and landlords. However, the Ontario government did not adopt any specific assistance for rents and rent arrears, despite the rent levels in Toronto and other major Ontario centres, and the increased hardships many low-income people face.
CFAA and Roundtable recommendations Learning from the experience with CERB, and the need for income supports which account for cost of living, the Roundtable is recommending targeted intervention to assist the many tenants living in high rent areas who experienced a loss of income, and are facing rent arrears they are unable to pay. A refocused policy would prioritize targeted intervention and prevention to serve those who need the assistance the most. That would make the assistance cost-effective. Key design considerations are the following: Eligibility: The arrears program would be means-tested and available to low and moderate-income tenants who are experiencing financial hardship due to COVID-19. Ease of application: The longer someone can’t afford to pay their rent, the longer existing arrears will accumulate and lead to evictions. Given the need for a timely arrears intervention, applying to the recommended arrears program should be straightforward, with minimal requirements, and easily accessible to tenants. Payment processing times should be streamlined to prevent further arrears from accumulating. Tied to actual arrears amount: Funds dispersed through the arrears program should be allocated based on an individual’s rent owing. Targeting each individual’s rent amount will account for differing rent amounts and ensure people have enough money to pay their rent and address their arrears backlog, while also making good use of government funds. Funding to landlords: Having program payments go directly to landlords will support the timely cancellation of any eviction proceedings in progress, and ensure that landlords are paid outstanding rent amounts that can immediately be used to cover outstanding debts and mortgage payments. Making payments directly to landlords will also prevent the arrears payments from making tenants ineligible for
rentalhousingbusiness.ca | 37
JANUARY 2021 other forms of social assistance they receive based on their income. Such payments to landlords should be conditional on cancelling any residual obligation incurred during COVID-19 by those tenants, and on ceasing eviction processes that may be in progress for those arrears. Timeliness: It is imperative that the arrears problem be solved quickly before the impact of arrears is further compounded on tenants and the housing system. The new arrears program should make every effort to leverage existing delivery mechanisms to ensure speedy delivery. Secures tenure and eliminates tenant debt: To be effective this program must prevent evictions while also eliminating tenant debt. Arrears can threaten tenure, but outstanding rental debt can act as a barrier to finding future housing. This response is needed not only to mitigate the risk of evictions, but also to ensure arrears do not hinder a tenant’s ability to change their housing by choice. Tie in with the Canada Housing Benefit: The Canada Housing Benefit has been an important step forward in meeting affordable housing needs in Canada. As the CHB is being implemented, there is opportunity for it to be expanded and revised to be responsive to differential rent amounts across the country and across households. Expanding eligibility and tying benefit amount to actual rent would considerably diminish the risk of a future evictions crisis and prevent homelessness and bankruptcies. Connecting the delivery mechanism of the arrears program with an ongoing prevention program, would allow for seamless integration and save time, effort and money, on the part of the government(s), the tenants and the landlords.
Support for the Rent Arrears Proposal As this article goes to press, the Roundtable’s rent arrears recommendations have the explicit support of the following: Non-profit housing providers and antipoverty groups Ontario Non-Profit Housing Association (ONPHA) Habitat for Humanity Options for Homes Wellesley Institute United Way Centraide Canada United Way - Greater Toronto The Toronto Alliance to End Homelessness The Peel Alliance to End Homelessness 360ºkids Blue Door Support Services York Region Homelessness Community Advisory Board Housing researchers and data experts Centre for Urban Research and Education Nicholas Gazzard Consulting Priority Decision Data Community Data Program
For-profit rental housing providers Canadian Federation of Apartment Associations (CFAA) Federation of Rental-housing Providers of Ontario (FRPO) LandlordBC Investment Property Owners Association of Nova Scotia (IPOANS) Professional Property Managers Association – PPMA (of Manitoba) Waterloo Regional Property Management Association (WRAMA) Greater Toronto Apartment Association (GTAA) Calgary Residential Rental Association (CRRA). Eastern Ontario Landlord Organization (EOLO) Manufactured Home Park Owners Alliance (of British Columbia)
Conclusion The Roundtable expects to receive more endorsements and support from other housing and anti-poverty groups. With strong support across non-profit housing providers, for-profit housing providers, antipoverty groups and housing researchers, the Roundtable and CFAA look forward to pressing the federal government to take effective action to address rental arrears and long-term housing affordability for low and moderate-income tenants.
38 | January 2021
NATIONAL OUTLOOK Vacancies up in most centres across Canada
According to CMHC, the average rental vacancy rate in major centres across Canada increased from 2.0% in October 2019 to 3.2% in October 2020. According to CFAA’s members and CMHC, vacancy rates generally increased in the city centres and university towns, while staying flat or rising less in suburbs and in smaller centres which do not serve universities or colleges. See tables 1 and 2.
Table 1: Vacancy rates in Toronto Toronto
CMA City Central area Mississauga Richmond Hill Pickering/Ajax
1.5% 1.5% 2.9% 1.2% 1.2% 2.4%
3.4% 3.7% 7.3% 2.4% 2.0% 1.7%
1.1% 1.0% 1.3% 0.5% 1.2% 0.6%
2.6% 2.8% 6.3% 1.9% 1.6% 1.4%
Table 2: Vacancy rates in Vancouver Vancouver
CMA City Central area Richmond New Westminster Surrey
Despite the increase in vacancy rates due to COVID-19, there remains an underlying shortage of rental housing, especially in Greater Toronto and Greater Vancouver. Bob Dugan, Chief Economist, CMHC, says, “The vacancy rate for purpose-built rental apartments in Canada’s CMAs increased in 2020. The economic impact of the pandemic has significantly reduced rental demand. Lower international migration, fewer student renters and weaker employment conditions led to weaker inflows of new renters. While vacancy rates increased in many centres, we continue to see a need for more rental supply to ensure access to affordable housing.”
October 2020 vacancy rates in leading centres In Eastern Canada, St. John’s (7.5%), Charlottetown (2.7%), Moncton (2.8%) and Halifax (1.9%) saw their vacancy rate increase, while the rate remained stable in Saint John (3.1%). In the Province of Quebec, Montréal’s vacancy rate increased to 2.7%, while Quebec City’s rate sat at 2.7%. In Ontario, vacancy rates increased in Thunder Bay (4.1%), Ottawa (3.9%), Windsor (3.6%), Toronto (3.4%), London (3.4%), Kingston (3.2%), St. Catharines-Niagara (2.7%), Peterborough (2.6%) and Greater Sudbury (2.5%). In Belleville (3.0%), Oshawa (2.3%), Brantford (2.2%), Guelph (2.2%), and Kitchener-Cambridge-Waterloo (2.1%), vacancy rates were little changed. Vacancy rates decreased in Hamilton (3.5%) and Barrie (2.1%).
WANT TO STAY UP TO DATE WITH NATIONAL OUTLOOK? Sign-up for CFAA’s National Outlook e-newsletter to receive up-to-date news on what is happening across Canada, as well as industry insights and insider information on CFAA happenings. Email email@example.com to start receiving CFAA’s e-Newsletter today!
rentalhousingbusiness.ca | 39
rentalhousingbusiness.ca | |39 39 rentalhousingbusiness.ca
JANUARY 2021 In Alberta and Manitoba, vacancy rates increased in Edmonton (7.2%), Calgary (6.6%), Lethbridge (5.6%) and Winnipeg (3.8%). In Saskatchewan, Regina (7.5%) and Saskatoon (5.9%) saw slight decreases in vacancy rate. In British Columbia, vacancy rate increased in Vancouver (2.6%) and Victoria (2.2%) while Kelowna’s vacancy rate decreased to 2.1%.
Vacancies versus rent increases: a matter of time and location Despite the increases in vacancy rates, average rents increased in most centres, according to CMHC. That appears counter-intuitive, since rents usually moderate or fall when vacancies increase. One explanation may be that the vacancy rate is reported at one point in time, namely October 1 for this survey, whereas rents are set all year round. The first pandemic shutdown took place in mid-March 2020. By that time, most landlords would have given their 90 day notices of rent increases for rent increases to take effect in April, May, June or even July. In rent-controlled provinces, most of those notices went out to take guideline rent increases. Therefore, the October survey is picking up 9 or 10 months of rent increases set before the shutdowns occurred, and only two or three months after they occurred. Even for unit turnovers, with 60 day notices from vacating tenants, most landlords would have rented those units for April and May before the lockdown, so that the October survey is picking up 8 or 9 months of rent changes agreed to before the shutdowns occurred, and only three or four months agreed to after they occurred. In addition, since they relate to October, which is now five months past, the CMHC figures are out-of-date. Within the rental industry, there is a general understanding that over those last five months, rents have levelled off. In many cases, rents have fallen in areas with elevated vacancy rates. Urbanation is a leading condo and rental market research firm which collects Toronto rental data more frequently than CMHC and reports it more quickly. Urbanization’s January 2021 report, for Q4 2020, found vacancy rates similar to the CMHC findings for both the Toronto core and Toronto suburbs for October. Comparing units listed for rent in purpose-built rental buildings in Q4 2020 with those listed in Q4 2019, Urbanation also reported a decrease in asking average rents in the City of Toronto of 10 per cent, with a decrease in the suburban 905 belt of 2.2 per cent. According to Urbanation, the average asking rent for condo units in the City of Toronto for Q4 2020 was down 17.2 per cent from Q4 of 2019, while in the suburban 905 belt, the average was down 4.9 per cent.
CFAA Virtual Conference 2021
Because of COVID-19, CFAA will not be holding an in-person conference in Spring 2021. Instead, CFAA is planning CFAA Virtual Conference 2021, to offer education sessions, networking opportunities, the CFAA Awards presentations, and a tradeshow, all of it virtual. Networking To provide a top-quality virtual networking experience, CFAA expects to use a platform which includes a “table set up” for attendees. As an attendee, you will be able to move between tables of six or eight people as you please, to interact with CFAA members from across Canada, catch up with colleagues and friends, meet new colleagues and make new friends. Virtual Tradeshow and the CFAA Awards Tradeshow booths will provide an interactive experience to attendees, and CFAA Awards great value to exhibitors, through innovative technology. As an attendee entering the booth, you will see the booth almost as if you were standing in Application front of it. Each booth will have interactive “tags”, which you can click to get Deadline advanced more information. You can choose to watch an exhibitor’s “elevator pitch”, a to Tuesday, April 13. demonstration of a new product or service, endorsements, or other videos or links. The Tradeshow will run from 3 pm to 5 pm (Eastern time), on Tuesday, May 4, Wednesday, May 5 and Thursday, May 6.
40 | January 2021
NATIONAL OUTLOOK On May 4, CFAA will open the Tradeshow with the CFAA Awards for Rental Housing Provider of the Year, New Product or Service of the Year, Suppliers Council Member of the Year, and more. On May 5, CFAA will open the Tradeshow with the Awards for rental housing personnel. On May 6, CFAA will open the Tradeshow with the Awards for rental housing developments and renovations. Education Sessions CFAA Virtual Conference 2021 will lead off with Benjamin Tal’s Economic Update on April 22 at 3 pm EDT (= 12 noon PDT, 1 pm MDT and CST, 2 pm CDT, and 4 pm Bengamin Tal ADT). Networking will be available for 30 minutes before the presentation, and for an hour after it ends at 4 pm EDT. On the Thursday afternoons, May 13, May 27, June 3 and June 10, attendees can expect education sessions on topics such as: • Operations Roundtable, • Property Management Technology, • Insurance Cost Management, and • Sub-Metering. Visit www.CFAA-FCAPI.org for confirmation of the presentation dates, and the latest news on content and timing.
To sponsor or exhibit at CFAA Virtual Conference 2021, contact Andrea at firstname.lastname@example.org.
Register now! CFAA is looking forward to helping our members connect, learn, and explore new and better products and services in these difficult times. Register now for CFAA Virtual Conference 2021.
CFAA Rental Housing Compensation Survey 2019-2020 The only Canadian survey of rental housing employee compensation and benefits. Find out market compensation for all key positions in the sector, at the city or provincial level. To purchase the survey, e-mail email@example.com. MOBILE FRIENDLY
Visit www.cfaa-fcapi.org for more information.
rentalhousingbusiness.ca | 41
RHB, RHB Magazine, National Outlook, CFAA, Rental Arrears, Vacancies, CFAA Virtual Conference