A new predicament has overtaken the housing market in Victoria. During the past few years, the cost of renting an apartment or purchasing a condo has soared.
That’s a reversal of the long-term trend in which detached-house prices climbed far more rapidly.
Between 2014 and the present, the average rent for a one-bedroom apartment in Greater Victoria rose from $826 per month to $1,188 — an increase of 44 per cent. Over the same period, the cost of buying a condo jumped from $299,000 to $479,000 — a whopping 60 per cent rise. House prices also climbed, but not by as much.
The effect of this increased demand can be seen in apartment vacancy rates, which stood at a healthy 3.4 per cent in 2013. Today, the vacancy rate is just 0.7 per cent.
Several factors are likely involved. The Office of the Superintendent of Financial Institutions, which regulates bank lending policies, has toughened the rules for mortgages. The objective is to avoid widespread defaults if interest rates suddenly rise.
Real-estate experts believe the new restrictions will make purchasing a house less feasible for some. So they rent an apartment or condo instead.
Then in February, the B.C. government raised the foreign-buyer tax rate to 20 per cent from 15 per cent. The tax increase takes effect in designated high-cost areas, Greater Victoria included.
While it applies to the purchase of all residential accommodation, the impact is obviously more severe on high-cost properties, which tend to be houses.
It’s likely this might steer at least some offshore buyers into renting an apartment or buying a condo, to avoid or minimize the tax bill.
The provincial government has also cracked down on what it considers unfair behaviour by landlords. Renters had complained about “renovictions,” where a landlord uses the excuse of renovating an apartment to evict the occupant.
In future, tenants must be given four months’ notice to vacate instead of two, when their apartment is being renovated or demolished. They will also have twice as long to dispute an eviction through the provincial Residential Tenancy Branch.
All of these policy changes, in themselves, make sense. OSFI staff are right to be concerned about a repeat of the 2008 housing crash in the U.S., when banks were too lenient in granting mortgages.
Also, it’s now accepted that foreign investors have used the housing market in B.C. for speculative purposes.
And renters do deserve better protection, particularly when vacancy rates are so low.
Yet these various schemes might well have produced an unintended consequence. Collectively, they either increase the demand for rental accommodation by pricing house ownership out of reach, or they decrease the supply by placing more burdens on landlords.
In either case, the probable outcome is an increase in the cost of renting an apartment or buying a condo.
No doubt there are other considerations. The population of Greater Victoria continues to grow, adding stress to the housing market.
And as the baby boomers reach retirement age, many find the upkeep of a house and garden too much for them. Life downtown in a condo or apartment becomes an attractive alternative.
Whatever the cause, it’s clear the huge run-up in rental costs demands attention. For years, government policies have aimed at mitigating ever-higher house prices.
That was understandable. Home ownership was once within the reach of middle-income earners. Now it is increasingly a luxury affordable only by wealthier families. That is a shame.
But at least renting had been, until now, a viable alternative. However, when a one-bedroom apartment costs an average of nearly $1,200 a month, and many approach the $2,000 mark, we have a crisis of a different kind.
Decent accommodation is a basic human necessity. We are well on the way to making it unachievable for some. That’s in part why we see homeless people camping out in parks.
One option, of course, is to expand the stock of rental units. And that is underway.
Victoria’s downtown area is the scene of unprecedented new construction. There are cranes on nearly every corner.
But do we want to turn our urban core into a maze of highrise buildings? Part of Victoria’s charm is that it has retained some of the beauty and simplicity of earlier days.
On the other hand, if we expand outward into the Saanich Peninsula or Langford and Metchosin, traffic gridlock will only worsen.
Two years ago, the provincial health officer, Dr. Perry Kendall, declared a public-health emergency to focus attention on opioid deaths. He believed the necessary tools were in place, but no one was co-ordinating their use.
We need a similar strategy here. Numerous public-sector agencies play a role the rental market, but there is no central direction. Some decisions, taken in isolation, might have been counterproductive.
Until all three levels of government change gears and act in unison, the rental meltdown will continue. And the place to start is by recognizing reality: We have a crisis on our hands that will not dissipate on its own.
