00:00:00

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[Visual: In a studio, Mireille Thériault sits in an armchair next to a microphone on a stand. She has long, straight brown hair and wears a black blouse with olive-green pants.]

MIREILLE THÉRIAULT: Renting is no longer just a stepping stone for many Canadians. It's the only viable option.

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[Visual: In the studio, Aled Ab Iorwerth sits in an armchair next to a microphone on a stand. He has white hair and a white moustache, and he wears glasses, a white button-down shirt, a blue tie and black slacks.]

ALED AB IORWERTH: Homeownership has become so expensive in our large cities that rental will have to be a part of the solution.

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MIREILLE: What can we learn from other housing systems around the world?

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ALED: Given the scale of the challenge, private sector investment will be critical. Rent control is not the answer on its own.

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MIREILLE: So what needs to happen to truly accelerate rental construction?

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JOELLE HAMILTON: You're listening to In-House -Canada's Housing Podcast, where we share the latest on Canada's housing market.

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00:00:45

[Visual: Mireille sits in the studio. A box that reads, "Mireille Thériault, Specialist, Communications, CMHC" appears briefly.]

MIREILLE: Hi, everyone, and welcome back to In-House, the podcast that takes you behind the headlines of Canada's housing market. I'm your guest host, Mireille Thériault. Today, we're asking a big question. How do we increase rental housing supply in Canada without leaving renters behind?

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MIREILLE: I'm joined by Aled Ab Iorwerth, Deputy Chief Economist here at CMHC, who will help us explore what the data actually says about REITs, rent control, and rental affordability. Welcome back, Aled.

00:01:14

ALED: Thank you.

00:01:15

MIREILLE: CMHC has been raising the alarm for years. To restore affordability, we need millions more homes, and many of those need to be rental housing. Renting is no longer just a stepping stone. For many Canadians, it's the only viable option. Aled, can you talk about why it's so critical for us to increase housing supply?

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[A box that reads, "Aled Ab Iorwerth, Deputy Chief Economist, CMHC" appears briefly.]

ALED: Sure, well, affordability has become a major concern for everybody in Canada. Several years ago, we were concerned about Toronto and Vancouver, but now it's become a widespread issue in Quebec and Atlantic Canada, for example. And unfortunately, homeownership has become so expensive in our large cities that rental will have to be a part of the solution. It's just too expensive to get that down payment. We need more rental supply to help the middle class to get housing affordability. And it's all over the place. Given the scale of the challenge, private sector investment will be critical. The government has a role to play and has been playing a role through the National Housing Strategy, but the private sector really will have to finance a lot of the construction. And that's why we need an effective policy framework to promote more rental construction.

00:02:27

MIREILLE: There's often tension when we talk about private sector involvement in rental housing. What are the concerns?

00:02:33

ALED: There are concerns and they differ across the sector. On the one hand, we need the private sector to have the appropriate incentives to invest in new structures. They need to be able to make a profit. They need those incentives in order to build. But there is other concerns as well that the private sector may take advantage of tenants in some form, may evict them unnecessarily, may charge higher rents.

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ALED: So there are a lot of these concerns about the private sector. For example, some of the research that we've been looking at is what is going on with rents that REITs charge versus non-REITs. And what we found is that if you parse the data very carefully, if you control for everything that's going on, REITs don't really charge a rent higher than non-REITs. REITs may invest in buildings in nicer parts of town. They may have better quality buildings. They may include more items in their rents. So there's no clear evidence that REITs charge rents higher than non-REITs. And this is part of the picture I think that supports private sector investments in the rental sector and that concerns about their involvement have been exaggerated.

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MIREILLE: Rent control is often proposed as a solution to higher rent prices. What does the research say?

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ALED: What we've done in this area is to look at the experience of rent control around the world. It's a difficult issue to examine. You need sort of particular circumstances to understand what is going on. And that's why we've taken a look at dozens, if not hundreds of papers to understand what's going on. And what we found again is the need for a balance. Yes, rent control will lower or control the rents that current tenants face. However, rent control also limits how much housing supply, rental housing supply will be built. So there's a balance there. Rent control is not the answer on its own. First of all, rent control needs to be designed very carefully in order to continue to encourage housing supply. But there also need to be other policies such as tenant protection in order to ensure that tenants are protected appropriately while maintaining the incentive to invest.

00:04:57

MIREILLE: Let's talk about eviction risks. Are tenants in private rental housing more vulnerable?

00:05:02

ALED: Being evicted is obviously a very challenging time. It is something that we're obviously concerned about, and a lot of people across the country are concerned about evictions. What has been challenging is trying to quantify how much eviction is going on. And that's, again, what we're trying to do with new research. According to our best estimate, the rate of eviction is around 1%. And this has affected approximately 50,000 people across Canada. So it is a concern, but relative to the size of the entire rental sector, we think it's quite contained.

00:05:51

MIREILLE: What can we learn from other housing systems around the world?

00:05:55

ALED: Well, I think looking at housing systems around the world is quite critical because everybody's trying to tackle the challenge of affordability and we need to learn from everybody. And even a very simple example, in Japan, they don't have rent control, which some may be concerned about that, but they do have very strong tenant protection. So what we see in Japan is relatively low rents and people find it very easy to find a place to rent. Now you contrast that with a situation like Sweden, where they have very tight rent controls, but there are long wait lists for finding a place to rent. So rent controls are not always the solution, but clearly we need some form of tenant protection. And we see something a little bit similar in Canada, where there is no rent control, in fact, in places like Edmonton, and they have a very well-functioning rental system.

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ALED: But traditionally in Quebec, where there has been a form of rent control, you also have generally seen good outcomes, but that's because the rent control system in Quebec really try to encourage more rental supply at the same time.

00:07:08

MIREILLE: So what needs to happen to truly accelerate rental construction?

00:07:12

ALED: I think we need to ensure that the policy framework is effective and balances the need for more supply and giving incentives to the private sector to increase rental supply on the one hand, and then, on the other hand, ensure that tenants are protected. But those tenant protections need to extend throughout the rental system, including the secondary rental system. I think the bottom line is we need a lot more rental supply. We also need homeownership supply. We need all sorts of supply, and we need the incentives there to build a lot more housing.

00:07:47

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MIREILLE: Thanks so much, Aled, for helping us unpack this important and sometimes polarizing issue. To our listeners, if you want to dive deeper into CMHC's findings on rental supply, financialization and tenant protections, check out the full article linked in the show notes. Until next time, thanks for joining us In-House.

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JOELLE: Reach out, let us know what you think. Thanks for listening and see you next time.

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