Unable to buy, more people turn to rent

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The fact that the number of renters in Ottawa is growing at a faster rate than the number of home owners is no surprise to Dean Tester.

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The millennial — he’s 35 and got married a year ago — realized after his nuptials that he and his wife couldn’t afford to buy a house, even though that had always been their plan.

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“I’m in that demographic and so is almost everyone I know,” he says. “It’s been really tough for millennials and anyone younger. Most of us grew up in single family homes and were taught if you work hard, you’ll one day own a home. I make a good living and I still can’t afford to buy.”

With skyrocketing home prices, buying homes hasn’t been a reality for many of its counterparts. Even though prices have been evening out since early 2022, inflation is also taking a toll on personal budgets.

The tester, who heads up an advocacy group called Make Housing Affordable, says what Ottawa lacks is the “missing middle” — low-rise buildings of five to six storeys with two units per floor.

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“The No. 1 thing we’re saying is that we need to build more homes,” Tester says. “I think there’s a universal agreement among experts [on that.]”

The tester, who rents in Barrhaven, notes that his salary has helped out given that rents are also rising with Ottawa’s shrinking vacancy rate.

“I’m bidding on apartment units against single mothers,” he says.

Meanwhile, Imran Syed, managing director of Brandenburg Private Wealth, says among his clients he’s starting to see more people open to renting.

“Sometimes people feel there’s a stigma to renting,” he says. “One trend I’m seeing now is with people being so mobile, they sometimes choose to rent in the city and buy a cottage property outside of town.”

He also sees more clients who would have rejected renting outright years ago who are now considering it for various reasons, one of which is the flexibility it offers.

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Our changing housing landscape

Home ownership rates in Canada have actually fallen over the past decade and Ottawa-Gatineau is no exception to that. It peaked in 2011 at 69 per cent nationally and since then, it’s decreased by 2.5 percentage points to 66.5 per cent. Similarly, in Ottawa-Gatineau, the rate was 65.4 per cent in 2021, a decline of 3.2 percentage points from its 2011 peak of 68.6 per cent.

“Although the home ownership rate has decreased, that’s not to say there are fewer home owners,” says Aaron Gorski, an analyst with Statistics Canada who speaks for the housing content in the 2021 census. “There’s actually been an increase in household owners. In Ottawa-Gatineau, the household owners have increased by 6.3 per cent since 2016.”

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The reason there’s a decline in the home-ownership rate is that the growth in renter households has outpaced it, Gorski says. Since 2016, the number of renter households in the region has grown by 14.3 per cent, or more than twice as fast as the change in household owners.

Gorski says a lot of this change in the distribution of owners and renters can be attributed to longer-term construction trends.

“In particular, there’s been a lot of development of condominiums both in Ottawa Gatineau, as well as elsewhere in the country,” he says. “Since 2016 in Ottawa Gatineau, the number of condominiums has increased by 17.6 per cent.”

But condos tend to be owned rather than rented, correct? Actually, no. In Ottawa-Gatineau in 2021, 38.9 per cent of condo units in the city were occupied by renters.

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“Whether that’s the supply meeting the demand for renters, or renters moving into the supply because it’s there — we can’t speak to that,” Gorksi said. “But I do think there is a correlation between the number of condominiums and the number of renters we’ve seen. And then this is seen in other cities around Canada as well.”

In the last five years, one in five new buildings was a condominium and 39.6 per cent of buildings built in the last five years were occupied by renters.

“I think it speaks to this intersection of housing needs for Canadians as well as Canadians making do with what they can get and what they have available for them, particularly with increases in housing prices,” Gorski says, adding that it’s hard to say as people’s ability to afford housing is more of a case-by-case situation.

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Counter-intuitive affordability statistics

Contrary to what Tester and many others posit in terms of how much affordable housing Canada has and needs, Gorski says people seemed to be in a better position in 2021 than 2016.

“A trend we’ve seen nationally that was somewhat surprising from what people were expecting is that the rate of households in unaffordable housing has actually gone down since 2016,” he says.

Of household owners in 2021 in the capital region, 10.9 per cent said they lived in unaffordable housing, down from 13.5 per cent in 2016. The renter story was the same, showing a decline from 40.6 per cent of renters in unaffordable housing in 2016 to 32.7 per cent in 2021.

There are several factors at play there, including that area incomes rose in those five years, Gorski says, though he added the caveat that CERB disbursements would be included in the census data and therefore could be affecting the affordability question as some people’s incomes actually rose with CERB.

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A landlord’s world

John Dickie, president of the Canadian Federation of Apartment Associations and a resident of the National Capital Region, said the growth in the rental rates is positive for his industry as it indicates rental units are in demand.

It does, however, put pressure on the rental market because a certain percentage of renters who traditionally move out because they buy a house aren’t doing that.

“The vacancy rate is quite low,” Dickie says. “That puts upward pressure on rents. And, yes, if everything else was equal, we would prefer higher rents to lower rents, but we would prefer steady increases in rents that people can afford over sharp increases that a number of people find difficult to cope with.”

Yet the rental stock is also growing, though maybe not at the rate it needs to be. Statistics from the Greater Ottawa Home Builders’ Association show that the total number of apartment starts in 2017 was 1,387, compared to 2,673 in 2021.