Despite rise in Vancouver rental vacancies, affordability is still a distant dream
As the vacancy rate goes up in Vancouver, renters do have more options – unfortunately, those renters don't include lower-income households.
'We are still far from an abundance of affordability in our time, especially for those on living wage incomes,' said Andy Yan, associate professor of professional practice in urban studies at Simon Fraser University. 'We define that group as those households earning less than $50,000 a year. There is very little new housing for them.'
Prof. Yan was responding to a newly revised city of Vancouver report called the Housing Vancouver Progress Update 2024, which measures the city's proposed housing targets. Last year was a record year for rental apartment approvals, as the number of applications for rental buildings grew and the number of condos conversely, shrank since 2022.
By way of comparison, in 2018, when the condo market was strong, the number of condos approved was 4,511, and the number of purpose-built apartments approved was 1,018, according to the city report. In 2024, 832 condo units were approved, and 5,587 apartment units got the green light. A key reason behind the inversion from condo to rental unit is the market downturn. Because there is more rental supply coming onto the market, the rents for new apartments should come down. But because of the high cost of land, construction, insurance, financing and other costs, developers are more likely to hit pause than lower rents, said Prof. Yan.
One of the slides in the report showed that 73 per cent of approvals of market rental housing were for households making $90,000 to $200,000. Only 9 per cent of rentals approved were for those making $60,000 to $150,000 and 4 per cent of rentals were suitable for households earning $20,000 to $100,000, which are categories generally known as 'below market.' The report noted: 'Additional senior government partnerships are needed to deliver housing for low- to moderate-income households.'
'This is the biggest question: do market developers keep on building in the shadow of declining rents?' asked Prof. Yan. 'There are rental units coming into the pipeline at the high end, but if you look at the data from the city and a recent Canada Mortgage and Housing Corporation rental report, the units with rents over $1,750 have a 2.4 per cent vacancy rate. Any units with rents less than $1,000 a month have a vacancy rate of 0.9 per cent. When high-end rental markets reach a more balanced state, will the appetite for construction continue while lower-income tenants remain hungry?'
Just because a project gets approval doesn't mean it will get completed any time soon. David Hutniak, chief executive officer of Landlord BC, said the 'geopolitical environment' and economic uncertainty could curtail rental construction.
'My concern is that rental projects are being shelved because the numbers don't work,' said Mr. Hutniak. 'That has longer-term implications – none of them good – and that's why we need all levels of government to come to the table to eliminate the numerous barriers so that we can keep building new rental housing.'
The city's annual progress report summarizes what most Vancouverites already know: that a lot of expensive housing got built in the hot-market years before the pandemic, and not enough truly affordable housing got built. It states that 'rental demand remains strong for housing that serves low- to moderate-income households but slows for supply at higher rents.'
Opinion: High-rise towers not the answer to the housing affordability crisis in Vancouver, critics say
After so many years of policy aimed at delivering affordable housing, now that the city is finally approving rentals in record numbers, how is it that so much of it remains unaffordable? City councillor Pete Fry said the city analysis is missing the net loss of rental housing units and how they relate to household incomes.
'So, while development approvals are meeting targets for rental housing, the definitions of 'market' or 'below market' are mercurial and don't necessarily capture local needs, only what the market will bear,' said Mr. Fry.
'Unfortunately, amidst new policies, like the city leveraging public-owned land to build market [rental] instead of affordable housing, increasing calls from the development industry to reduce the amount of inclusionary zoning, and generally rising costs for everything including infrastructure and construction – we are heading in the wrong direction for affordable housing, and in my opinion, desperately need significant senior government intervention to reverse that trend.'
The federal and provincial caps on international students flowing into the province in 2024 had a significant impact on the current supply increase in Vancouver, according to the CMHC. But the CMHC also forecasted an increase, not a decrease, in rents.
The CMHC forecasts a vacancy rate of 2.1 per cent this year, which is higher than 1.6 per cent last year in Metro Vancouver. By 2026, the CMHC projects a vacancy rate of 2.4 per cent. But it also forecasts the average monthly rent for a two-bedroom to go up to $2,605 by 2026, higher than the estimated $2,461 average this year. And by 2027, the average rent for a two-bedroom in Greater Vancouver is projected to go up to $2,758.
Despite those projections, Mr. Hutniak said his members are telling him that the rental market has become more challenging.
'Many are experiencing increasing tenant turnover as tenants take advantage of the softening market, which has presented them with more choice and lower prices,' said Mr. Hutniak.
'For rental providers, the process to secure new tenants for vacated units is taking longer at lower asking rents, with negotiation likely an option for savvy renters who monitor the market.'
The City of Vancouver gets into the rental game
Landlords are trying to prevent turnover by offering free access to amenities, or free parking, or forgoing the 2025 allowable rent increase, he said.
'We know that there are a meaningful number of new rental buildings coming on-stream, which is going to further exacerbate the current situation.'
Craig E. Jones, associate director of Housing Assessment Resource Tools at University of B.C., said the overall vacancy rate of 1.6 per cent is low, and it has to get to 3 per cent to be considered healthy. But as a proponent of purpose-built rental housing stock, he said it's going in the right direction as more rental gets built, and although rents aren't coming down significantly, they are slowing down, said Mr. Jones. He looked at apartments by age and found that the many apartment buildings constructed between 1960 and 1979 only went up by 1.1 per cent from 2023 to 2024.
'I don't think it's about looking for average rents to actually come down. I think it's about seeing average rents increase at a more reasonable rate. We're not seeing those big 6 to 10 per cent increases year over year any more,' he said.
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