Study says rents in most cities are unaffordable for lower income earners

The figure drops to three per cent of neighbourhoods when looking at the affordability of two-bedroom units. (File Photo: Adam Muise/Unsplash)

OTTAWA — A minimum-wage worker could afford to rent in just a few neighbourhoods in Canada, suggests a new analysis of the country’s rental market that also raises questions about a promised federal rent-supplement program.

The report being released Thursday by the Canadian Centre for Policy Alternatives says someone earning minimum wage would only be able to afford a one-bedroom rental in nine per cent of 795 neighbourhoods in Canadian cities in the study.

The figure drops to three per cent of neighbourhoods when looking at the affordability of two-bedroom units.

The federal Liberals’ decade-long national housing strategy includes programs to build more rental housing, hoping a boost in supply will drive down costs.

At the same time, negotiations with provinces are winding along on the design of a new rent supplement for low-income tenants that will average about $2,500 a year.

Study author David Macdonald said the benefit could provide some short-term help while the country awaits new rental units. But he said the benefit may not be enough for low-income renters to close the affordability gap.

The report defines “affordable” rent as 30 per cent or less of a renter’s pre-tax income, the same cut-off used by federal officials.

The new portable housing benefit is to roll out next year, which will be tied to a person rather than a unit — meaning the person can carry it with them through the housing market rather than losing the financial help when they move out of a government-supported dwelling. Its design will be tailored to each province.

Spending is set at $4 billion — split among federal and provincial governments — which will require tough decisions about who gets it, how much they can receive, and when it gets taken away.

“You really have to ration it based on some simple criteria, otherwise you blow through your (spending) cap,” said Macdonald, a senior economist at the centre.

“Second of all, it’s likely not generous enough to substantially reduce the rent for renters, particularly at the lower end of the income spectrum and particularly in big cities like Vancouver, Toronto, Victoria, Calgary, Ottawa.”

Roughly one-third of households, or 4.7 million, are renters and they are often low-income earners, or young adults, or newcomers to Canada.

Average rents, adjusted for inflation, have increased since the early 1990s as construction of traditional apartments declined in favour of homes and then condominiums, Macdonald said.

In the 1970s, he said, it wasn’t uncommon to see 100,000 new, purpose-built rental units being constructed each year, “which is an incredible amount of new rental housing being put into the market.”

While there has been some uptick in rental construction over the last decade — mostly in the luxury rental market, Macdonald said — the Liberals hope to use billions in federal funding to help finance more than 100,000 new rental units.

At the rate that money is being committed to projects, the study estimates most units won’t come open until the late 2020s. Combining provincial and federal commitments, the study projects an average of 15,400 new rental units annually, well below the number the country saw decades ago when the population was smaller.

“The Canada Housing Benefit is a good short-term solution as we wait 10 years for the rental housing market to build up and then hopefully increase vacancy rates and also stabilize rents,” Macdonald said.