Going for broke
Regina’s rental housing market is in crisis – and there are no clear solutions
There’s a lot of public seating available in Henry Baker Hall. Between the city council, members of the municipal administration, members of the press, and the general public, the room can comfortably seat a couple of hundred people.
But by the time enough people are galvanized on a single issue to fill the hall, it might be hard to describe anybody in the room as comfortable.
The rent crisis in Regina is just such an issue. According to the most recent report from the Canadian Mortgage and Housing Corporation (CMHC), Regina is the only city major city in all of Canada to have a vacancy rate below one per cent, due in large part to a wave of apartment-to-condominium conversions that rocked the city’s rental market in the last few years. With the average rent subsequently hovering at nearly 150 per cent of 2006 levels, lower-income renters and families have found their housing situation increasingly threatened, and middle-income renters are starting to feel the squeeze, as well.
As the midwinter sun set on Monday, January 23, concerned citizens – including University of Regina professor Marc Spooner, members of the U of R Students’ Union executive, and local advocacy group representatives like Carmichael Outreach’s Shawn Fraser – made their way in from the cold Regina air and took nearly every one of Henry Baker Hall’s cushioned seats in order to watch city council try to address these dire conditions by adopting new, much-needed changes to the civic condo conversion policy.
“Only a select few can afford to live in this current situation,” Spooner told the Carillon in an interview. “The rest of the people have to double-up, or stay in places that are not as well-maintained as they could be.”
The centrepiece of the new policy, which the Regina Planning Commission based on a report from the U of R’s Business Centre for Management Development (BCMD), proposed a bylaw that would require the average vacancy rate for the city to be two per cent or greater in order for a conversion to be approved. Since 1996, the city has only seen vacancy rates that high a total of six times, in the period running from 2000 to 2006. Before the council got a crack at the proposal, procedure required them to cede the floor to members of the public. Over the course of forty minutes, five petitioners tore into the council’s existing policy and expressed mistrust regarding the timing and the effectiveness of the new policy.
“Often what we hear about is the price of what’s available … but our bigger issue is not people not being able to afford places,” Fraser explained to the council. “It’s that people come to us and there’s no place for them to afford.”
After hearing from the public (and after encouraging each member of the public to take their concerns to the provincial government as well), the council amended the new policy requiring both a two per cent vacancy average across a one-year period – October to October or April to April, encompassing three CMHC reports – and a two per cent vacancy rate in the CMHC-identified zone of the condo being converted.
But that may not be enough. Average rent in Regina has gone up roughly 43 per cent in the past five years, meaning that a two-bedroom apartment that cost $619 a month in 2006 now costs $913 a month. In addition, while the Canadian Mortgage and Housing Corporation reports that 194 rental units were built between October 2009 and October 2011, we lost 358 units in that period – meaning we’re currently facing a deficit of 164 apartments. The construction of that many units would bring us back to 2009 levels, considerably worse conditions even than those of 2006.
And that’s assuming that our city doesn’t grow – an unlikely proposition, given that between 2005 and 2010 our civic population increased by 13,000 people, and that City Hall’s lowest growth projections for the city have another 9,000 people living in the city by 2015.
URSU president, Kent Peterson, believes that the council is already too late. “This policy should have been in place well before there was a housing crisis,” he said. “And it should have been thought of, because we all know that when Regina started growing significantly, city council should have foreseen problems like this. They should have implemented the policy then, so they didn’t have to do it in the middle of a housing crisis when most of the damage has already been done”
Even if we were able to return to the supply level for housing as recent as four years ago, it wouldn’t be enough to sustain our growth.
Something’s got to give. The only question is when.
The high cost of rent in Regina is a textbook case of supply not matching demand. As recently as six years ago, however, supply and demand were comparatively healthy; from 2005 to 2006, the city saw a steady rate of approximately three per cent vacancy city-wide.
But due to a combination of factors, the time was right in the eyes of many of the city’s developers to apply for condo conversion. Between the previous regulations not requiring a sustained high vacancy rate, the vacancy rate as established in previous policy having not been reached for years, and a spike in the value of the local housing market, it was a perfect storm.
City Hall found itself faced with a glut of condo conversions, the bulk of which had been filed while they were still technically in line with municipal conversion requirements. Though it was within its rights to reject any of these applications, council approved all but one of the applications filed before City Hall placed a moratorium on new applications. With all of the approved properties being converted into condos at the same time, the number of available apartments began to dry up, leaving us with our current 164-apartment deficit.
Ironically, the vacuum created by the removal of rental units from the market wound up being filled disproportionately by the very condos that replaced them. According to the BCMD report, one in three condominium units in Regina is currently being rented out as an apartment; the report compares this number with Calgary’s, which is closer to one in four.
In other words, it was briefly more profitable for a developer to turn an apartment into a short-term condo sale than keep it as a long-term property – until it wasn’t. At that point, enterprising individuals were able to buy condos and inject them back into the rental market at a considerable profit, due to the rapidly rising rent. More importantly, these were until recently the only “new” units going on the market, filling a gap left by the lack of new apartment construction.
Astonishingly, the BCMD report actually sees this as a chain of events that act in condo conversion’s favor; its authors write that “new condominium properties add to the rental supply and probably help to buffer the loss of rental units due to conversions.”
The first instance of an Ouroboros appeared in the ancient Egyptian Book of the Dead. It’s a glyph of a snake eating its own tail, representing the cyclical nature of death and rebirth.
Apartments being converted to condos, then returning to the market as high-priced apartments – it sounds cyclical, all right. But unlike the Ouroboros, which could eat its own tail into infinity, Regina is slowly running out of apartments to convert. When we reach the end of our own tail, it could get messy.
Will the new policy be effective?
“No,” Peterson said bluntly. “I think what a number of other municipalities have done, and what a number of the presenters suggested, and what the CHMC suggests, that three per cent appears to be the appropriate percentage.”
They’ll stop condos from being converted, effectively stopping the bleeding of our apartment stock into condominium stock.
But while it’s a positive step there’s nothing to stop developers to continue building condos rather than apartments. And while Peterson outlines several things that could be done to encourage apartment development, it’s unclear if those incentives would do any good. Indeed, it’s worth pointing out that some incentives for apartment development already exist; as city administrators confirmed on Monday’s council meeting, five-year tax exemptions provided by the city and matched in dollar value by the province are already in place.
The real issue isn’t just the condo conversions. It’s the fact that the drastic number of conversions isn’t being ameliorated by the construction of new apartments. In fact, the loss of apartments to conversion is being compounded by the outright loss of apartments. The second contentious item on the city’s docket last Monday was a petition to stop the destruction of the apartments at 1755 Hamilton Street downtown, an action city council is powerless to stop. While Councillor Fred Clipsham called on the mayor to write a letter to the government endorsing the idea of rent control, that does nothing to alleviate the demand nor increase the supply. With the loss of the apartments at 1755 Hamilton St., vacancy rates downtown could push down to effectively 0.0 per cent.
You read that right – 0.0 per cent. As in, none.
Which poses serious problems for Regina’s future growth. As Councillor Louis Browne pointed out, young people moving to Regina may neither want nor have the money to purchase a home.
Spooner noted that this interferes with grad students applying to the University of Regina. “This is a huge problem,” he said. “The school has grad students who want to work here, who want to work with the various professors and research teams, and they are having second thoughts now because they don’t think they will be able to find a place to live.”
The problem with a bubble is not just the pricing in a bubble. Prices may be astronomically, even disproportionately high within a bubble economy, sure. The real problem is the economic impact when that bubble eventually bursts.
“Affordable housing is a key component to a healthy community,” Spooner added. “You have to have places for everybody, and just because you are a low income earner doesn’t mean that you are not valuable to a community.”