Canada’s rental housing market is bad and getting worse. While there are some parts of the country that are more challenged than others, it is pretty much true that the rental housing market is the worst it has ever been. Some markets are especially bad — Halifax, Vancouver and K-W/Guelph. Aside from a couple of Prairie towns, Canada is starved for affordable housing, with vacancy rates tipping under 1%. Anyone looking in that sweet spot range from $1000 – $2000 is fighting against everyone else.
Some properties will receive over 100 applicants for a single unit! Properties rent faster than we can update our systems at times. We anticipate the rental market to remain difficult through to spring of 2023 in most areas. We are watching for signs that the prices will stabilize. We anticipate the increases will continue as long as inflation stays at record highs. We have some optimism that some markets are starting to cool a bit in terms of pricing, but not much. Inventory is low. Demand is high. Some developers are scaling back their new build construction which adds to the pressure. Many people in existing leases will stay where they are to enjoy the benefits of rent control.
Rental prices are also skyrocketing. Prices increased 25 – 30% in most Canadian cities year over last, and in many instances 5 – 10% month over month. Vacancy rates are also at record lows in most centres, 1 – 2% is the national norm.
Why is this tough on relocating transferees and mobility departments?
First, mobility departments that get market data on housing costs for their assignees to many Canadian cities will have out of date data. Companies like AIRINC and Mercer update their data quarterly, and right now that is not fast enough to keep up with the rental housing changes. Rental prices increased 25 – 30% in most Canadian cities year over last, and in many instances 5 – 10% month over month. Vacancy rates are also at record lows in most centres, 1 – 2% is the national norm. A company that is supporting someone’s housing in Canada should be asking their Destination Service Provider for frequently updated data. Other data sources cannot keep up with the change.
Properties are disappearing quickly. Let’s break this down. All Points, during the course of its destination services could, on a Wednesday, book 6 appointments to see properties in Vancouver or Toronto, for a Thursday. However, by the time Thursday rolls around as many as 5 of the 6 properties may have already been leased. That is how fast the market is moving. So we book another day, and the same thing happens. Remember, landlords will receive upwards of 50 applications, per unit! Transferees and assignees cannot be as choosy as they once were.
Assignees with higher budgets are less likely to find themselves impacted by the lowest of the vacancy rate problem. Most demand is for lower priced and median priced homes.
Now, in addition, landlords are finding newcomers less attractive than native Canadian tenants. Why? Newcomers do not have credit reports. While they have good jobs and can obtain a good employment letter from their employer, they can never get this credit report. And, as landlords see a long list of people interested in their properties, most of whom have credit reports, they by-pass the assignee who does not have one. Some landlords are asking for a number of month’s rent (we have seen 6 months and above) up front, or double the security deposit for those without credit scores. Companies have to decide how they are going to handle this as some employees may not be liquid for that many month’s rent at once, if a landlord is asking for it. (Just to be clear, landlords should not be asking for these many month’s of up-front rent, but they are able to do so in this desperate a marketplace.
How we are helping
Despite the challenges, we are successful in finding properties. From our first call with the assignee, our Destination Managers talk about the current market and how to navigate the challenges. We offer advice on alternative neighbourhoods and nearby cities with greater vacancy rates and lower price points. We provide useful tools so that the assignee can interact with us online where we present current property options so that their expectations are set before they even set foot in the country. The earlier we engage with the assignee, the easier it will be when they arrive to navigate the home search.
We also provide long term strategies, if this is an option. In a depleted marketplace sometimes the “best” option is to secure a house for the first year that is not perfect with a goal to find the best option when the market corrects. We are offering tools to assignees, including introductions to realtors and property managers where this applies, to assist them in finding a property longer term. This strategy works when the assignment is more than 2 years.
We recognize that relocating is stressful. We empathize with all assignees relocating during a time when the marketplace is so difficult. We emphasize the value that finding a community plays in a successful relocation. While the house may not be perfect, the community absolutely can be! Finding a home in a location where the assignee can thrive and find enjoyment while living in a new city takes on greater importance in a market when finding the perfect property is not tenable.
Another Challenge – temporary accommodation periods
Employees are often unable to find properties during their time in temporary accommodation. Because of all of the roadblocks noted above (properties disappearing from the marketplace and landlords rejecting applications in favour of those with credit reports), assignees who are legitimately working hard to find their permanent home, are unable to find one that is ready for them during the 30 days allotted to them by their employer. Extensions are regular now. Those on Relocation Allowances are running out of money, because they have to extend their temporary accommodations.
What we recommend
The standard practice in Canada is for a current tenant to give their landlord 60 days notice. Further, most new listings are released at the beginning of the month. We recommend a minimum stay of 45 days in temporary housing but up to 60 days may be required. Timing an arrival in Canada at the beginning of the month is a better approach to ensure the assignee has the opportunity to see new listings that come out on the market.