Are High Rents Driving People out of Mississauga?
The stunning increase in housing—and by extension, rental—prices have been top of mind for both established households and young people looking to enter the real estate market.
We recently learned that new low-rise housing builds in the GTA are starting at $1 million and over and that prices of detached re-sale homes in the 905 have also officially hit $1 million. Since homes—even traditionally more affordables ones such as condos and towns—are incredibly expensive and going up in price almost every month, many people are choosing to rent (sometimes indefinitely).
While renting is a great option for many people, rental rates are climbing right alongside housing prices. According to data recently released by Urbanation, a firm that studies and collects information on the Toronto and GTA condo markets, condo rents in the 905 (and Brampton definitely falls under that umbrella) are up six per cent.
The data shows that renters in the general 905 area are paying about $1,739 a month (or $2.22 per square foot in a 719 sq. ft. condo). In Toronto, the same size unit costs about $1,990 a month ($2.77 per square foot).
TREB recently announced that GTA realtors reported 5,717 condominium apartment rental transactions through TREB's MLS system during the last three months of 2016 - down 5.8 per cent compared to the same period in 2015.
Rental transactions weren't down because there aren't as many renters, but rather because of a lack of units available for rent.
TREB notes the number of condo apartments listed for rent during the fourth quarter of 2016 shrank by more than 14 per cent to 9,545.
"We have talked a lot over the past year about a lack of inventory for ownership housing. What is less well known is the fact that rental market conditions also tightened over the past year," said TREB president Larry Cerqua. "Competition between renters has increased, leading to very strong year-over year growth in average rents."
As for Mississauga in particular, Rentseeker.com suggests that the average rent for a one-bedroom apartment in the city is $1,210. Residents seeking a two-bedroom unit in a high-rise can expect to pay about $1,413 and those looking for a three-bedroom space could pay about $1,601. To compound the issue, a recent report confirms what TREB has been saying for some time—that vacancy rates in the city are low. At present, the vacancy rate is 1.6 per cent (an ideal one is three per cent).
Mississauga is also hurting for new affordable rental housing. In fact, a brand new Daniel’s development in Erin Mills is the first rental-only building in two decades and it’s a luxury property that boasts top-notch amenities. So while it’s certainly good for tenants looking for long-term leases, it’s not ideal for a low-income family or individual.
Escalating rental costs are a problem for many people, especially when they outpace average earnings.
According to the 2011 National Household Survey (NHS), the median household income in Mississauga is $75,784 (household meaning a dwelling that typically houses more than one person—not to be confused with individual earnings).
While that's not particularly low, it's important to note that increases in wages have not kept pace with escalations in rental rates (especially considering the fact that, according to Urbanation, condo rents just rose six per cent year-over-year in the 905).
When it comes to individuals, the NHS reports that the average worker in Mississauga has an average after-tax employment income of $35,104.
With rents climbing faster than earnings, it's safe to say some residents—especially young ones—are looking at a tough housing market that's been profoundly affected by persistently low inventory (realtors in Toronto and the GTA have noticed an uptick in actual bidding wars over desirable rental units).
In fact, skyrocketing rental rates (in Toronto, to be fair) recently prompted a 32-year-old CBC reporter to confess that she has been forced to couch surf. Interestingly enough, Another recent CBC article discussed the exodus of young people from Toronto—a demographic that simply cannot afford rent in the city. According to the article, young professionals are leaving the downtown core to set up homes in west end cities such as Burlington and Hamilton because they simply cannot afford to stay in the city.
While Mississauga's rental situation isn't quite the same as Toronto's, it's easy to see how someone with a salary of $35,000 might find it difficult to afford a one bedroom condo that's listed at $1,550 a month. As of now, the only truly affordable rental suits for singles with average incomes are basement apartments (which can still be rented for under $1,000, for the most part). Unfortunately, many basement units aren't registered (although the city is working to change that) and not everyone wants live in a secondary suite indefinitely.
With condos now costing GTA buyers up to $400,000, it stands to reason that investors aren't going to rent out units (even smaller ones) for less than $1,000 a month. With high prices and growing property taxes (Mississauga's are actually higher than Toronto's), it simply wouldn't make sense for a landlord to price his or her unit competitively (and if he or she did, multiple offers would drive the price up anyways).
So, what happens if Mississauga residents—and young professionals in particular—start looking for homes in Orangeville and Ancaster and Barrie?
Well, what's known as a "brain drain," for starters.
Paul Kershaw, a University of British Columbia professor who has studied the impact of high housing prices on youth, told the CBC that Toronto and the GTA should look at the Metro Vancouver Area as an example of what happens when young people cannot afford to stay in a city. Kershaw told the news outlet that the economic impact on cities is serious, as companies have a difficult time recruiting talent that isn't there.
“Metro Vancouver is becoming a generational ghost town,” Kershaw told the CBC. “If Toronto is not careful, it is not that far off now.”
Although home and rental prices won't decline any time soon, Mississauga is working to provide more affordable housing for people in need.
Fortunately for residents, new rental stock could be available as soon, as the city is set to welcome a host of new condo developments over the coming years.
But while new and proposed developments could add rental stock to the city, it's hard (if not impossible) to say that any units will be "affordable" for the average young professional or family. If prices continue to climb, prospective renters may be forced to remain in basement suites or move outside of the city.
That said, more robust rental inventory could temper rental rates, so perhaps it's best for governments and advocacy groups to work towards developing more units for prospective renters who are being squeezed out of their home cities by dramatic cost increases that the average salary simply cannot cover.