El Nino weakening doesn't mean cooler temperatures this summer, forecasters say
As Canadians brace themselves for summer temperatures, forecasters say a weakening El Nino cycle doesn’t mean relief from the heat.
In Canada’s metropolitan cities, people are failing to find and keep affordable housing.
Some have given up entirely – by moving to smaller communities.
New Statistics Canada data shows more Canadians are renting as home ownership rates decline. Census data from 2011 to 2021 show the number of renter households increased by 21.5 per cent, more than double the increase in homeowner households at 8.4 per cent. The largest share of renters are now millennials (aged 25 to 40), making up nearly 33 per cent of the market.
Historically, as population increased in Canada’s largest urban centres, housing supply could not keep up, driving up real estate and rental prices. As Canadians’ paychecks are unable to compete with the rising house and rent costs, many are turning towards smaller cities with even less housing supply.
Another report released by Statistics Canada earlier this year offers a glimpse into which communities may be attracting people who find it increasingly unaffordable to live in big cities.
According to data released in February, many of the fastest-growing Canadian municipalities were smaller communities near large urban areas.
Topping that list was East Gwillimbury, Ont., a small town in the Greater Toronto Area where population grew 44.4 per cent between 2016 and 2021.
Second on the list was The Blue Mountains, Ont., another rural township sitting on Georgian Bay along Lake Huron. It grew 33.7 per cent and is not close to a census metropolitan area (CMA).
In B.C., Langford on Vancouver Island near the City of Victoria had a large population increase of 31.8 per cent. Within the top 10, the Southern Gulf Islands, a grouping of islands off Vancouver Island, grew 28.9 per cent.
Saint-Apollinaire, Que., grew 30.4 per cent. Four other Quebec cities, Bromont, Carignan, Saint-Zotique and Mirabel, were in the top 20 of the fastest-growing municipalities.
Three Manitoba cities, including Niverville, outside of Winnipeg, grew 29 per cent from 2016 to 2021. Cities of West St. Paul and Neepawa grew 24.5 per cent and 23.3 per cent, respectively.
StatCan noted that cheaper housing, changing work-from-home patterns due to the COVID-19 pandemic, and the desire to be closer to nature were among the factors driving the population growth in those communities, even as the population of larger cities continued to grow between 2016 and 2021.
As home ownership continues to be out of reach for many Canadians, more are staying in the rental market, which does not have an adequate supply, according to Aled ab Iorwerth, deputy chief economist with Canadian Mortgage and Housing Corporation (CMHC).
“The solution for us is to build more rental, so we need a dramatic increase in the supply of rental properties,” he told CTVNews.ca on Thursday. “Actually getting through all the approval processes takes time.”
When the Bank of Canada increased interest rates in an effort to curb inflation, the move cooled down real estate markets across the country. According to an RBC report of resale activity, August 2022 was the quietest in three-and-a-half years for listings. The national composite multiple listing service (MLS) Home Price Index showed a 7.4 per cent decrease in units since February.
Higher mortgage rates and worries about the future of the housing market helped drive demand in the rental market. According to a National Rent Report released in August, average rent in Canada for all properties rose more than 10 per cent year-over-year in July. The highest rent increases were seen in cities like Vancouver and Toronto, which may have pushed some renters out of those markets.
Housing prices skyrocketed during the COVID-19 pandemic, reaching a tipping point in February 2022 when there was a 31.1 per cent increase in housing prices year-over-year, according to an RBC breakdown.
As inflation continued to rise in Canada and around the world – driven by supply chain issues, the ongoing pandemic and Russia’s invasion of Ukraine – the Bank of Canada initiated a series of interest rate hikes amid fears of a looming recession.
The subsequent rise in mortgage interest rates forced many buyers to hit pause. This cooling tactic by the Bank of Canada has since lowered housing prices but the core issue has persisted.
Ab Iorwerth said there are trade-offs to the increased interest rates.
“I would generally regard it as a shorter-term issue,” he said. “Given that the market rates will have a bigger impact, it will be more challenging to buy a home. Even though house prices have come down, it will be more challenging to buy a home because mortgage rates have gone up.”
Those unable to buy a home are turning to the rental market, which has its challenges.
“Everybody is starting to get concerned about high housing costs. It's eating into the regular budget on food, travel (and) leisure savings,” ab Iorwerth said. “If you've managed to rent a place, and it's under rent control, now I think you're very reluctant to move because the rent in any new location will probably be quite a bit higher.”
Experts point to the need for significant increases in housing supply across the country to keep the cost of living manageable for Canadians.
One of the issues, ab Iorwerth said, is the lack of rental housing being built in both large and small municipalities. In June CMHC released a timeline for when rental units must come online to curb the worsening crisis.
The report titled “Canada’s Housing Supply Shortage” piggybacks off a 2018 report that found Canadian cities did not respond to the demand for affordable rental units. Municipalities tasked with creating and building affordable units often don’t have the tools or funding available to tackle such an issue and continue to advocate for upper government support, the report said.
CMHC’s 2022 report estimated how much additional housing supply is needed to restore housing affordability by 2030.
“If the current rates of new construction continue, we project that the housing stock will increase by 2.3 million units between 2021 and 2030. This will reach close to 19 million housing units by 2030,” the report reads.
“To restore affordability, an additional 3.5M affordable housing units are needed by 2030.”
Canada defines affordability as housing that requires 30 per cent or less of a household's annual income.
Census data from 2021 says that one in five families in Canada is spending more than 30 per cent on housing, and in many cities in Ontario and British Columbia, the numbers are staggering upwards.
According to CMHC data, households in B.C on average use 58.3 per cent of their income on housing in 2021. In Ontario the average is 56.4 per cent.
To address the concerns of housing advocates, provinces and municipalities across Canada have implemented inclusionary zoning (IZ), a bylaw passed at the city level forcing developers to build affordable units in certain areas. Montreal, Toronto, and Vancouver passed versions of the policy along with smaller municipalities of Mississauga, Ont., Langford and Richmond B.C., and Edmonton, Alta.
When it comes to solutions for renters, some provinces have implemented rent control policies. In Ontario, the Progressive Conservative government has forced operators of any rental properties built before 2018 to only increase the rent by a percentage that the government dictates yearly, at a maximum of 2.5 per cent. In Quebec, ab Iorweth said, the province has a larger rental sector but does not apply rent control to the majority of units, leaving landlords to dictate the prices.
As Canadians brace themselves for summer temperatures, forecasters say a weakening El Nino cycle doesn’t mean relief from the heat.
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