Vancouver Rental Market Discussion

[GenWhy?]

I don't think anyone (besides maybe anti-capitalists) is saying rent control (as we have it here) alone is the solution to our housing crisis.

We've had "rent control" here for decades and we've never built more rental housing recently since the early 80s. Rents in the 70s were being jacked up between 10-20% before controls were put in place. Pretty sure this table is 95% accurate:
2023: 2.0%
2022: 1.5%
2021: 0%
2020: 0%
2019: 2.5%
2018: 4.0%
2017: 3.7%
2016: 2.9%
2015: 2.5%
2014: 2.2%
2013: 3.8%
2012: 4.3%
2011: 2.3%
2010: 3.2%
2009: 3.7%
2008: 3.7%
2007: 4.0%
2006: 4.0%
2005: 3.8%
2004: 4.6%
1984-1994: no rent control
1980-83: 10%
1977-79: 7%
1975-76: 11%
1974: 8.0%
1973: 9.0%

[WarrenC12]

Recent years remember after March 2020, the rest of the year was 0%. And 2021 was 0% as well (missing on your list).

[GenWhy?]

In fact, I think since 2000 we've built more rental housing than the period of 1980-1999. Many factors play into why rental does and does not get built.

[GenWhy?]

Originally Posted by WarrenC12

Recent years remember after March 2020, the rest of the year was 0%. And 2021 was 0% as well (missing on your list).

Correct! Changed!

[Changing City]

Originally Posted by GenWhy?

Agreed. Once this is tackled and vacancy rates rise, rental competition increases and potential homeowners are no longer "forced" into the rental market, putting downward pressure on folks who (in the near or long term) cannot own, then we (the Province) can likely loosen rent control laws. Once there is a competitive market, rental turnover increases which allows landlords to reset rents back to market rate when their tenants move out.

If it happens, that will take a long time though. While market rental housing starts are higher than past numbers, market starts are falling, and haven't risen in the last few years. [see BIV 2019]. And that seems to be continuing for now, as interest rates continue to be raised. "“Many of the developers who were gearing up for launches in the late summer, early fall, have decided to hold off,” said Jacky Chan, president of project marketing firm BakerWest Real Estate Inc. in Vancouver. “Anywhere from 50 to 75 per cent of the active, on-the-go developments have been affected one way or another.” [BIV 2022]

It looks like overall, (unless there's a big jump in the final quarter) we might see around 20,000 housing starts in greater Vancouver this year, which will be several thousand less than in each of the past five years.

And it has nothing to do with municipalities not approving housing, or not having zoning to allow new housing. There are tens of thousands of approved, but so far unbuilt, homes in Vancouver, Burnaby, Surrey and Coquitlam for example, Developers have submitted applications for over 50,000 more apartments in each of those municipalities, and the majority have already been approved. If developers wished to, and had the ability to actually build, an extra 10,000 units a year, there's nothing preventing that, except market conditions and the overall economy, and that's not in municipal or regional control.

[GenWhy?]

Yes a lot of condos are on hold as they await prices to get back to where they want them to be. They can burn in hell for all I care. I'll take their labour and materials!

[Changing City]

Originally Posted by GenWhy?

I don't think anyone (besides maybe anti-capitalists) is saying rent control (as we have it here) alone is the solution to our housing crisis.

We've had "rent control" here for decades and we've never built more rental housing recently since the early 80s. Rents in the 70s were being jacked up between 10-20% before controls were put in place.

The relationship between the approved annual rent increase for existing tenants ("rent control") and developers choosing to build more rental units is pretty much non-existent. For one thing, the rent increase percentage doesn't apply to units that become available when a tenant leaves and the unit is re-leased, and for another it doesn't apply to the first rents charged on new units.

Here's Metro Vancouver purpose-built rental starts (CMHC data) for the same period

2022 5,020 (7 months)
2021 6,120
2020 5,707
2019 6,727
2018 6,425
2017 4,591
2016 6,841
2015 3,810
2014 3,286
2013 3,149
2012 1,277
2011 1,755
2010 1,054
2009 447
2008 748
2007 615
2006 509
2005 586
2004 746

[GenWhy?]

Originally Posted by Changing City

The relationship between the approved annual rent increase for existing tenants ("rent control") and developers choosing to build more rental units is pretty much non-existent. For one thing, the rent increase percentage doesn't apply to units that become available when a tenant leaves and the unit is re-leased, and for another it doesn't apply to the first rents charged on new units.

Sorry, as a developer of rental housing, that was exactly the point I was trying to make.

[WarrenC12]

Originally Posted by GenWhy?

Sorry, as a developer of rental housing, that was exactly the point I was trying to make.

Up until very recently, we've had rent increase limits that include inflation plus 2%. That's decent stability for both rental property developers and tenants.

The NDP changed that to inflation only, now it's even less. Sustained rent freezes and near freezes always work out badly.

[chowhou]

Originally Posted by Changing City

You're continuing to 'compare' data that have very different contexts. The median rent in Melbourne for a house is lower than it would be here, but you're comparing the median across an area that's nearly 4 times that of Metro Vancouver. What is the median rent for a house in Metro Vancouver anyway? Until the 2021 census data comes out, there's no reliable data. CMHC only survey apartment data because rental properties in Canada are almost always apartments, but in Australia it's more common to live in a house, but they're not necessarily much bigger than an apartment, so data on the rent for a house there, and here, wouldn't be comparing similar accomodation.

I hate to appeal to common sense, but the average Melbourne house is not much different from the average Vancouver house, and everyone should know that renting an entire house in Metro Vancouver at current market rates will put you back several thousand a month. Regardless, it's fair to say they aren't fully comparable. We can drop Australia.

But your belief that somehow the lack of rent control makes things easier there isn't supported by their current affordability crisis there. 'Australia's Rental Market Hurtles Toward Disaster',
suggests a problem. 10% rent increases, and yet 40% fewer rental listings suggests things are far from ideal, and for renters are very difficult. And getting much worse. "Melbourne city and suburban renters are now being forced by their landlords to pay more or find a new place to live, with some reporting rental increases of more than 30 per cent."

Just because rents are increasing over there does not in any way imply that rent control would fix things. You're trying to imply that things are bad without rent control and if only there were rent control the issue would be fixed, which is absolutely a false dichotomy. Price fixing the Australian rental market may only exacerbate the situation. I would prescribe the exact same fix for Melbourne as I would for Vancouver, but let's drop Australia.

Originally Posted by Changing City

The relationship between the approved annual rent increase for existing tenants ("rent control") and developers choosing to build more rental units is pretty much non-existent. For one thing, the rent increase percentage doesn't apply to units that become available when a tenant leaves and the unit is re-leased, and for another it doesn't apply to the first rents charged on new units.

As we all know, construction of new rental properties in Metro Vancouver does not proceed without a city hall approval stamp (or conversely, must happen with a mandate). I would expect the relationship to be extremely skewed due to the highly distorted construction approval process. Data without context is just numbers.

And it has nothing to do with municipalities not approving housing, or not having zoning to allow new housing. There are tens of thousands of approved, but so far unbuilt, homes in Vancouver, Burnaby, Surrey and Coquitlam for example, Developers have submitted applications for over 50,000 more apartments in each of those municipalities, and the majority have already been approved. If developers wished to, and had the ability to actually build, an extra 10,000 units a year, there's nothing preventing that, except market conditions and the overall economy, and that's not in municipal or regional control.

I'd take construction ability in the past couple years with a grain of salt. If these numbers go back 10 years I'd be willing to retract, but market conditions were a little special in recent memory.

approved annual rent increase for existing tenants ("rent control")

It's rent control. It's not nearly as bad as vacancy control, but it's still a drain on society and we shouldn't sugar coat it.

Originally Posted by WarrenC12

Up until very recently, we've had rent increase limits that include inflation plus 2%. That's decent stability for both rental property developers and tenants.

The NDP changed that to inflation only, now it's even less. Sustained rent freezes and near freezes always work out badly.

Cheers to this. In the current economic situation inflation-wise, we don't even have a rent freeze, we have a forced real-rent reduction.

[whatnext]

Originally Posted by Changing City

The relationship between the approved annual rent increase for existing tenants ("rent control") and developers choosing to build more rental units is pretty much non-existent. For one thing, the rent increase percentage doesn't apply to units that become available when a tenant leaves and the unit is re-leased, and for another it doesn't apply to the first rents charged on new units....

Isn't that in and of itself an inflationary cost for future renters? Faced with a cap on their existing tenanted units, a landlord is going to have to really jack up the asking rent on a newly vacated unit to offset lost revenue.

[GenWhy?]

Originally Posted by whatnext

Isn't that in and of itself an inflationary cost for future renters? Faced with a cap on their existing tenanted units, a landlord is going to have to really jack up the asking rent on a newly vacated unit to offset lost revenue.

They'll always charge market rates for a vacant unit. Rent caps on other units in the building or not.

[Changing City]

Originally Posted by whatnext

Isn't that in and of itself an inflationary cost for future renters? Faced with a cap on their existing tenanted units, a landlord is going to have to really jack up the asking rent on a newly vacated unit to offset lost revenue.

What makes you think landlords wouldn't set the rent for a newly vacated unit at whatever they think the market will sustain? If they jack it up by too much then they risk not leasing it - that's when they really lose revenue. With existing tenants, they're not losing actual revenue, just a small amount of theoretical additional revenue.

[chowhou]

Originally Posted by GenWhy?

They'll always charge market rates for a vacant unit. Rent caps on other units in the building or not.

I hate to agree with that guy, but the point being that for equal ROI, you require a higher market rate with rent control measures.

If someone owns something and wants to make $10000 renting it over 10 years, with no price controls they might only need to demand $800 a year at the start with a roughly 5% yearly increase.

If rent is frozen at 0% increases, to make the same ROI they need to rent at $1000.

Thus, for the same unit, for the same ROI, the market rate is 25% more initially.

This is an oversimplification since with no price controls you would typically try to match market rates and not have a flat increase over time, but the sentiment is the same. In an ideal world, rents only increase at the rate of inflation.

Originally Posted by Changing City

What makes you think landlords wouldn't set the rent for a newly vacated unit at whatever they think the market will sustain? If they jack it up by too much then they risk not leasing it - that's when they really lose revenue. With existing tenants, they're not losing actual revenue, just a small amount of theoretical additional revenue.

Point is that rent control means the market must sustain a higher market rate for the same ROI.

[GenWhy?]

If you're renting a unit out and folks are signing a lease for that amount that is the market rate for that unit. If there are no takers and it's on the market for too long and the landlord / building manager lowers the rent and finally gets a taker, then that amount is the market rent.

[GenWhy?]

The issue is a fundamental lack of rental housing and a condo market that is out of reach for many, who then end up renting, etc.

[chowhou]

Originally Posted by GenWhy?

If you're renting a unit out and folks are signing a lease for that amount that is the market rate for that unit. If there are no takers and it's on the market for too long and the landlord / building manager lowers the rent and finally gets a taker, then that amount is the market rent.

Yes, but supply and demand always trend towards an equilibrium price. If rents fall too far below expected ROI, landlords are better off selling rental properties which reduces supply until rents reach equilibrium.

Originally Posted by GenWhy?

The issue is a fundamental lack of rental housing and a condo market that is out of reach for many, who then end up renting, etc.

Exactly, the demand is there and thus for the "expected" ROI, market rates increase under rent control.

[WarrenC12]

Landlords will typically set their rent at the market rate. It doesn't matter what their costs are relative to this rate. This is the same for developers selling condos, something people also get confused on.

As a result of this policy, landlords will:

1) Consider selling their rental property.
2) Cut all maintenance costs possible.
3) Find loopholes or force renovictions. Legal or illegal.

Here's a quote from reddit that is pretty realistic:

I predict lots of illegal evictions. Here’s some math.

Before I bought my house, I had a pet-friendly 2 bedroom with parking in Victoria that I moved into in 2015 and was paying $1000 / month.

With allowable rent increases, that unit would be $1208 in 2023. Current market value is, conservatively, $2500. It’s probably a bit more, but I’ll use $2500 cause it’s a nice round number.

Let’s put ourselves in the mindset of a landlord. If I keep renting my unit out to my current tenant, I’ll make $14,496.

If I evict my tenant illegally and re-rent my unit at $2500, I’ll make $30,000. If my old tenant files a complaint with the RTB and I have to pay 12 months of rent out to my evicted tenant at $14,496, I’ll still be ahead for the year netting $15,504. The following year I’ll be making market rent.

Why wouldn’t I illegally evict my tenant? It’s a no brainer.

[GenWhy?]

Agreed, everyone would and does want to maximize a return on their rental unit. Which is why our new buildings charge the highest rents we can. We started supplying things that used to be only in condos. We've noticed a bit of rent stabilization over the last 3 years for the maximum we can charge due to.. well the rent ceiling is real.

[WarrenC12]

Originally Posted by GenWhy?

The issue is a fundamental lack of rental housing and a condo market that is out of reach for many, who then end up renting, etc.

It's a lack of housing supply, period. It doesn't need to be rental vs. condo.

Rents don't cover the carrying costs of a typical new condo. That's the reason those very same renters can't buy the condo they are living in. Landlords are subsidizing this in the hopes they make the money back on appreciation.

More supply fixes this. If market condos are the easiest to plan and build, we should be doing that by the thousands, while also helping lower income people on the side.