December 15, 2017
The root causes of Edmonton’s affordable housing crisis extend beyond supply and demand
A living wage of $17 per hour, or about $35,000 per year, might seem like enough for an Edmontonian to live on, until the rent comes due.
Considering a modest two-bedroom apartment can cost about $1,200 per month, that amount doesn’t leave much for other expenses. In fact, the City of Edmonton’s Affordable Housing Strategy says an income of almost $49,000 per year is required to truly afford a two-bedroom flat.
People in these earning brackets are “making choices between paying the rent and putting food on the table, or driving a car,” says Susan McGee, CEO of Homeward Trust, the non-profit that’s working on implementing Edmonton’s plan to end homelessness.
Edmonton’s challenge of providing affordable housing to those who need it has been the subject of various strategies, initiatives, programs and promises from all levels of government. Despite these efforts, and in spite of a recession that’s seen vacancy rates climb above seven per cent — the rate in a well-balanced rental market is three per cent — the picture remains far from rosy.
Edmonton Community Foundation’s latest Vital Signs report, an annual check-up on how our community is doing, notes there are nearly 5,000 households on the waiting list for Capital Region
Housing. About 20,000 households are classified as in extreme Core Housing Need — that is, an individual earns less than $20,000 a year and is in a household that spends more than 50 per cent of its income on rent. The Capital Region Housing-administered Direct Rent Supplement and Private Landlord Rent Supplement programs are oversubscribed, with no new subsidies available this year or next year.
Further illustrating the pressures on affordable housing is an economic peculiarity: according to the Vital Signs report, average rental rates only dropped about $30 a month from 2015 to 2016,
despite a vacancy rate increase of almost three per cent. It turns out the factors influencing Edmonton’s affordable housing scene are myriad, and more complex than the simple notion of supply and demand. One to consider is how a lagging economy impacts those with the lowest income, who tend to work in industries that reduce work hours in tough economic times.
“One of the challenges with the economy performing less than optimally is that it has a knock-on effect to people who are more vulnerable,” says Greg Dewling, CEO of Capital Region Housing.
His agency funds its efforts by earning income from rents that are based on 30 per cent of a renter’s income. Rental income has dropped five per cent in the last year, which impacts the agency’s
ability to help place people in affordable homes. “When the economy does poorly, the poor do more poorly,” he says.
Private landlords, another group of players in the affordable housing space, are also impacted by a struggling economy. These are individuals and companies that offer rental units at reduced rates, to help accommodate those in need. With current vacancy rates so high, some might wonder why landlords don’t lower rents to fill up their buildings.
David McIlveen, director of community development with Boardwalk Rental Communities, says rental rates actually have been drifting downward as the vacancy rate rises. Boardwalk owns and manages 10,500 of Edmonton’s nearly 60,000 rental units, and is considered a premier rental partner of Capital Region Housing. Boardwalk works with social agencies through various programs to provide affordable housing units in its buildings.
“We’ve always made available the required units that we’re asked for — we’ve never said no,” says McIlveen. “At this point, no more have been requested. I think it’s a function of the funding that Capital Region Housing has available to them through the province.”
McIlveen says Boardwalk reduces rental rates to below market value for the units it provides, amounting to an in-kind donation of $75,000 per month. Boardwalk’s market rents have gone down $100-$200 per month in Edmonton on average, as a function of supply and demand, says McIlveen, but there’s only so far landlords can go. Mortgage rates on the buildings are determined by weighing projected cash flow against expenses such as taxes, which don’t go down just because vacancy rates go up. Private companies are also responsible to their shareholders, and have a duty to turn a profit. “If we don’t turn a profit, the lights go out and there’s no housing for anybody,” McIlveen says.
Dewling acknowledges the balance landlords have to strike. “During the oil boom it actually cost a lot to build (the units we have now). Folks that are running multi-family rental buildings are challenged with being overcommitted. Mortgage rates are creeping up, so the ability for them to lower their rents is limited,” he says. “When the financial reality starts to tighten, you can only go so far.”
Going any farther risks having landlords exit the rental business. That occurred in the mid-2000s in Edmonton when scores of rentals were converted into condominiums. From 2006 to 2014, rental housing accounted for just seven per cent of housing starts.
“The reality is the multi-family rental sector doesn’t get you rich,” says Dewling.
Landlords are usually fairly willing to offer rate breaks, but Dewling says even a 10 per cent drop in rental rates isn’t enough to make a noticeable difference for tenants.
Projects such as Pine Creek Manor in Mill Woods are trying to address this challenge. The project is a joint venture between Capital Region Housing (CRH) and developer Curtis Way, and will offer 20 per cent of the building’s units at 20 per cent below market rates.
It’s a unique agreement that blends affordable housing into private sector development. Dewling suggests thinking of the affordable housing waiting list in thirds, with those in the greatest need according to the CRH points score at the top.
“We’re trying to build in each of those thirds something that will meet those needs,” he says.
But all players agree government support remains essential.
Alberta Seniors and Housing, which works with Capital Region Housing and other housing management bodies, is building more than 4,100 homes for seniors and low-income Albertans through a $1.2-billion investment in affordable housing, press secretary Jennifer Burgess said in an emailed statement. She also said housing management bodies’ operating funds and funding for rent supplements were increased last year.
McIlveen stresses government should devise targeted programs rather than broader market interventions such as capital funds to increase housing stock, or rent control. “Of course anyone renting
would like lower rent, or lower fuel costs, or less expensive groceries; but, in fact, rents are affordable for the vast majority of individuals and families. Help should be focused and given to those people who need it most.”
Dewling supports incentives. “The only time you’ve seen growth (in affordable housing) is when you see government incentives,” he says. “Any private developer would welcome them.”
McGee, of Homeward Trust, works with about 275 landlords, from small single-property owners to large portfolio holders, and sees alignment between both approaches. “There needs to be more capital programs to incentivize the development of affordable housing at a rate that’s actually affordable,” she says, adding that landlords would be keen to participate in more programs. But she doesn’t think they should be required to provide affordable housing unless it’s a commitment they’ve made as part of a development.
“Landlords run a business. We don’t have other businesses that are obligated to provide the third coffee free,” McGee says. McGee is eagerly anticipating the federal government’s promised national Housing Strategy, due by the end of this year.
As the numbers show, the need for more affordable housing in Edmonton is pressing. But advocates hope that sustained budgetary support from governments, as well as continued participation from the landlord community, will soon mean Edmonton families no longer have to choose between buying groceries and paying the rent.