Metro Vancouver's rental housing vacancies saw small improvement in 2020: CMHC

Jan 28 2021, 11:24 am

COVID-19 economic conditions and restrictions resulted in an uptick in Metro Vancouver’s rental housing vacancy rate in 2020, according to Canada Mortgage and Housing Corporation’s (CMHC) newly released annual rental market report.

Vacancies in the region for purpose-built rental housing increased from 1.1% in 2019 to 2.6% in 2020, which is still considered a low vacancy rate. This comes after six consecutive years of the regional vacancy rate hovering at 1% — well under the healthy vacancy rate range of between 3% and 5%.

Studio units saw a vacancy rate of 2.9% and an average rent of $1,258, one-bedroom units were at 2.5% and $1,415, two-bedroom units were at 2.7% and $1,792, and units with three bedrooms or more were at 3.6% and $2,206.

The average overall rent was $1,508, a 2% increase in price compared to 2019.

Generally, new structures in central areas of the region saw larger increases in vacancy rates, especially for larger high-rise towers. The demand shifted to suburban markets, where there are lower rents, causing the vacancy rates to fall in these areas.

The vacancy rate change in the University Endowment Lands was particularly immense, with the suspension of most in-class instruction at the University of British Columbia leading to a dramatic rise in purpose-built rental vacancy rates from 0.4% in 2019 to 13% in 2020.

As another indicator of market conditions at the tip of the Vancouver peninsula, at the start of the school year in September 2020, UBC reported an occupancy rate of just 44% for its on-campus student housing. There is typically a 6,000-person waitlist each year for the 12,000 student beds that are available.

Migration is responsible for most of the population growth in this region and new migrants usually form renter households, but with international borders closed due to the pandemic, migration into Metro Vancouver slowed significantly.

As well, lowered rental demand is attributed to employment losses, especially amongst younger people and workers in service-based industries, such as in retail, restaurants, and hospitality. These individuals, facing unemployment or a disruption in their incomes, may have chosen to combine households or relocate to lower-priced accommodation.

metro vancouver rental housing cmhc 2020

Monthly rent and carrying cost of ownership in Metro Vancouver. (CMHC)

Average rents across the region increased 2% overall, a decrease from the 4.7% increase experienced in 2019. More expensive areas in Vancouver saw a drop in rents, including a 2.4% decrease in the West End and 1.3% decrease in Kitsilano and West Point Grey.

Higher rents and vacancy rates were more common for newer homes compared to units of all ages. Average rents for new two-bedroom units reached $2,554 — above the average asking rent of $2,157 and occupied rent of $1,781 for two-bedroom units of all ages.

The vacancy rate for new structures was considerably higher at 9.1%.

The report also found the average asking rent for vacant units was 21.4% higher than the overall rent for occupied units.

“Provincial pandemic response measures limiting rent increases and increased competition between landlords contributed to the slower pace of rent increase,” reads the report.

“Average rents nonetheless increased by more than the provincially allowable increase , which suggests that landlords, through turnover of long-term tenants, are able to increase rents to market levels that are higher.”

Overall, affordability remains a major factor, with only 0.2% of the region’s purpose-built rental stock deemed affordable for renter households in the first 20% of the income distribution (under $25,000 annual income), while the first 40% of the income distribution (under $47,000 annual income) can afford only 24% of the rental homes on the market. Larger families with lower incomes have few options, as only 12% of the units have two or more bedrooms.

“While the overall rental market loosened somewhat in 2020, these results reinforce that significant imbalances and pressures remain, particularly for lower income renter households,” continues the report.

An increase in supply continues to be vital in order to help improve vacancy rates and drive rents further into improved affordability levels. The vacancy improved slightly in 2019, largely due to the first completions of a new wave in new supply.

In 2020, the number of purpose-built rental apartments increased by a net 2,388 units — the highest annual increase since at least 1990. About 5,300 purpose-built rental units were constructed in the region over the past two years, with about 2,200 units or 42% within Vancouver. No new units were constructed in West Vancouver, Richmond, Delta, nor the University Endowment Lands.

There are potential signs of a slowdown in completions, as rental starts over the first three quarters of 2020 were 23% lower compared to 2019 due to economic conditions.

While CMHC’s work focused on purpose-built rental homes, it acknowledged that the condominium market is a significant source of supply for rental housing. There was a 19% increase in the number of condominiums used for long-term rentals in 2019, and this increased by a further 10.2% in 2020 with 7,137 units, with investors repurposing their existing and newly completed properties.

The proportion of condominiums being rented long-term increased from 28% in 2019 to 29.6% in 2020.

metro vancouver rental housing cmhc 2020

Change in supply of rental condominium apartments i Metro Vancouver. (CMHC)

“Following several years of record condominium construction, a wave of new units is continuing to come online, many of which are investor-owned. Additionally, a combination of market forces and housing policies from different levels of government have led property owners to convert existing units from other uses to long-term rental, creating new rental supply,” reads the report.

“With lower demand for short-term vacation rentals due to less tourism in the pandemic environment, it is likely that some of these conversions are the result of investors now choosing to rent their units to long-term tenants.”

ADVERTISEMENT
ADVERTISEMENT