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Must halt the current rental crisis
Aug 20, 2010
Year-in and year-out, Winnipeg consistently has one of the lowest apartment vacancy rates in the country, hovering around one per cent over the last few  years. To no one’s surprise, Winnipeg recorded a one-per-cent vacancy rate in Canada Mortgage and Housing Corporation’s 2010 spring rental market survey which tracks Canada’s 35 major centres. 
Astoundingly, Brandon, Manitoba’s second largest urban centre, recorded a 0.2-per-cent vacancy rate in this same rental survey. Compare this to cities such as Calgary where the vacancy rate went up from 4.3 per cent in April 2009 to 5.3 per cent in 2010. It also saw a decrease in its average rent from $1,006 to $970.  
Alberta’s provincial vacancy rate sits at six per cent, while Manitoba and Newfoundland and Labrador posted the lowest rate at one per cent. 
Despite Regina having one of the lowest vacancy rates in the country at 0.8 per cent, due to a huge influx of new renters based on international immigration and in-migration from 
Alberta, Saskatchewan’s average 
vacancy rate went up from 1.7 per cent in April 2009 to 2.4 per cent in 2010. 
Saskatoon’s vacancy rate was 2.1 per cent. The increase was due in part to an increase in purpose-built rental units and growing competition from investor-owned condominiums. 
CMHC’s Saskatchewan market analyst Michael Fabiyi predicts Regina’s vacancy rate will climb back up from 1.5 to two per cent by year end and thus fall more in line with Saskatoon’s higher vacancy rate. This will occur because of the expectation that new purpose-built rental units will come on stream since market rents are climbing to help offset the higher cost of new construction. 
For some time now, part of Winnipeg’s rental shortage dilemma has been the refusal to increase units despite the large influx of new immigrants and lower out-migration flow. As reported in the a Winnipeg Free Press article by Murray McNeill on June 16, 2010, CMHC regional economist Lai Sing Louie said Winnipeg’s “ vacancy rates remain stubbornly low because Winnipeg continues to lose more rental units than it gains.” 
Between April 2009 and April 2010, the rental universe declined by 673 units to 53,233. These figures help to explain the increasing frustration of inviduals and newly-arrived immigrants who cannot secure rental housing.  
In CMHC’s June 8, 2010, Winnipeg market release, local CMHC senior market analyst Jeff Powell reported there were no apartment unit starts in May and only eight unit started in the past three months.  
Even as CMHC reported 644 multi-family housing starts in July 2010 (the majority of which are concentrated in one area), the number of purpose-built rental units is significantly lower at 320 units, representing a very modest addition to a distressed rental market. Other apartment units have been lost to demolition as older stock has not been maintained or refurbished. As well, there have been some apartments converted to condominiums, which has occurred over many years as owners seek to regain their investment in older apartment blocks by offering affordable condominium apartment units. Often misunderstood as the “bad guy” in the struggle to improve rental market conditions, condominiums offer affordable homeownership opportunities while opening up rental units that have been vacated by first-time buyers, making them available to others.
The reality is that over decades, Manitoba’s rent controls have artificially suppressed market rents, so apartment owners do not have the incentive to reinvest in their suites, therefore, and so seek other opportunities to maximize the return on their investment. 
Even with a 20-year exemption from rent controls on new construction, the majority of rental units in Winnipeg fall under rent control regulation. This serves to widen the gap between the higher cost per unit of new apartment construction compared to rent- controlled apartment units, and acts as a disincentive and deterrent to developers bringing new units onto the market. It is harder to justify charging a higher rent for a new unit when existing units are going for considerably less. Consequently, Winnipeg and Brandon’s vacancy rates are always among the lowest in the country.
Another side effect of acute rental shortages in Winnipeg, brought on by rent controls and the large influx of new immigrants due to a successful provincial nominee program, is heightened and sustained pressure on the existing resale market. This is especially evident in the lower price ranges in which most buyers can afford a home. Houses selling in Winnipeg in the $150,000 to $250,000 range frequently attract multiple offers and turn over quickly. If there was more balance — meaning a better supply of attractive and well-maintained rental units throughout the city — a number of people bidding on homes may instead opt to rent. So by default, the resale market is seeing higher price increases than normally expected based on the total lack of a good rental supply. 
 If Manitoba wants to retain skilled young workers and families, they need housing options to help them start out. Restoring balance in the resale market is of paramount importance to the future of this province.  
While home sellers benefit from a sellers’ market, many of them have no choice but to join in bidding wars when they go to buy their next home, so a balanced market is better for all concerned. And, a balanced market in the broader sense of a housing market is one where you have a good supply of resale, new and rental units — resulting in buyers and renters having a good selection of homes and rental units to choose from. Unfortunately, this does not exist in Winnipeg and has not for some time.
WinnipegREALTORS® has taken up many of these issues and is researching and exploring solutions for Winnipeg’s extremely tight rental market. Conversations have begun with people who have direct experience in all segments of the real estate market, including rental property owners in addition to housing experts such as Dr. Tom Carter of the University of Winnipeg, who has conducted extensive studies of housing issues in Manitoba. The goal of these talks is to gain a well-rounded understanding of how the rental market came to be in its present situation, and, more importantly, what we can do about it.
If there was one thing WinnipegREALTORS® is keenly interested in, it is finding a path forward so we can address these problems before they become more deeply ingrained and harder to fix. Looking at the possibilities of softer rent controls (such as the vacancy decontrol implemented in Ontario), that work for tenants and property owners alike, might be a good place to start.  Exploring the potential of portable housing allowances that help low-income tenants to afford market rents and increase investor confidence is another interesting idea that might help to turn our rental crisis around.  
Another big part of this picture would be to find ways to stimulate and create more rental housing through measures geared to attract greater investment in existing and new purpose-built rental units.  
All of these issues are just the start of a conversation overdue in this province.  As Manitobans, we need to come together to face our rental housing problems head-on. If we can demonstrate the will to co-operate with each other and be pro-active, we would be well on our way to addressing the current rental crisis.