Victoria rental housing market bracing for impact of post secondary students’ return

James MacDonald

Ally Wyllie completed her first-year coursework at UVic while living in her mom’s basement in Kelowna to save costs.

This year, in anticipation of fall classes being offered in person, Wyllie started looking in May for an apartment in Victoria to move into with her boyfriend come September. Even after combing through over 100 listings, the couple has yet to find a home.

“A lot of landlords that I have messaged haven't responded, because there are a lot of people that are trying to get a house right now. Some other things that I've heard is that they want [people who have] more renting experience,” said Wyllie. “But a lot of the apartments I've contacted, actually told me that they suggest I apply when I have a secure job on the island, which unfortunately, is a little bit hard to do because nobody in Victoria is going to hire you when they see that you live in Kelowna.”

Wyllie has no problem showing proof of income, and she has a student loan to pay for expenses. But with vacancy rates dropping again, landlords can use a proof of employment to filter out applicants if they so choose.

During the COVID-19 pandemic, with university courses being offered online, students who normally would have found a place to live in Victoria were able to study from other parts of the world. This was likely a contributing factor to the rental market vacancy rate rising to 2.2% in 2020—up from 1% in 2019 and the first time rental vacancy rates in Greater Victoria have surpassed 2% since 2013.

This data was released by the Canada Mortgage and Housing Corporation (CMHC) in January 2021, and there is no official estimate of what vacancy rates are like now, eight months into this year.

Vacancy rates could be below 1% already

Local developer Luke Mari, a partner at Aryze Developments, says his own estimates come from information provided to him by an asset management company that holds over 6,000 rental units in Greater Victoria (i.e. around 20% of the total rental stock). As of the end of June this year, just 27 of those units remained unoccupied, representing a vacancy rate of about 0.45%.

“From what we can see from private holders of real estate, [the vacancy rate] is down again, back to what it was in 2018, and the students haven't moved here yet,” Mari told Capital Daily. “So with [thousands of] students moving back this fall, this problem is going to get way, way worse.”

The City of Victoria reported a total inventory of 17,182 purpose-built rental units as of 2018. Assuming a vacancy rate of about 1% this month, that leaves around 172 units still on the market.

This fall, 23,000 students are expected to return to campus at UVic alone, and on-campus housing can only accommodate 2,100 of them. The average household is occupied by 1.8 people, according to 2016 census data, meaning, at that rate, around 10,000 apartments would be needed to accommodate the students who don’t take on-campus housing. Other post-secondary students will further add to the pressure.

“That's when they start shacking up and just living seven to a house or something. It’s definitely not enough housing to provide for the average home occupation rates,” Mari said.

With a dearth of options, students are also likely to end up renting from a secondary market of basement suites or owner-leased houses that often are not up to code.

Wyllie herself has already expanded the scope of her search for housing to include basement suites as well as apartment units. Cost is also quickly becoming a barrier, she says, with some one-bedroom units going for as much as $1,800 a month, plus utilities.

While these units fill a need, Mari says they are the most precarious form of housing on the market especially for tenants because “landlord use of the home is the strongest tool for eviction.”

He argues that purpose-built rental housing is needed because a landlord will not be able to occupy their own unit in order to force a tenant to move out—something they could easily do when renting out a suite or room in their own home.

The CRD Housing Needs Assessment report released in October 2020 found that 38% of renters in Victoria relied on secondary units like basement suites, as there were only enough purpose-built rental homes to serve a fraction of the tenant population.

But in Oak Bay, up to 750 secondary suites exist without regulations as the municipality remains the only one in the region that does not consider them legal. The city may be coming around to them, however; the results of a 2014 survey included in Oak Bay’s official community plan showed 78% of respondents were in favour of allowing secondary suites.

The municipality created a new survey to collect community feedback on how regulations should apply to these suites earlier this year. The results, released last week, showed the majority of respondents—65%—were proponents of applying regulations to both existing and new secondary rental units. A little over half of all respondents accepted the idea of allowing secondary suites in all lots zoned for single family homes.

Overall, however, nearly 59% said they would not support a pilot program that involves site-specific zoning for secondary suites.

How we got here

Census data and information collected by various organizations show that a scarcity of rental housing is not a new problem in the City of Victoria or in Canada.

Rental vacancy rates in Victoria have stayed below 2.5% for the last 15 years “with little development of new primary rental market units,” according to the CRD Housing Needs Assessment report. While the number of renter households in Victoria grew by 12% from 2006 to 2016, the total number of purpose-built rental units in the city only rose by 6% between 2005 and 2019.

“If you go back 70 years ago, the vacancy rate got above 4% once, in 1996,” Mari said. “Every other year we've been below 4%, which is what's considered to be a healthy vacancy rate. It’s a cold hard fact that we haven't been building enough housing.”

A housing report from Scotiabank found that Canada as a whole may not be doing much better; the country has the lowest number of housing units per 1,000 residents out of any G7 country.

However Mari says the biggest challenge for developers wanting to build more rental units is the municipal permitting process, which can take years to go through. The problem, for developers, of long processes is just as pronounced in Saanich as it is in Victoria, with one Aryze project to erect a low-income housing building in limbo for four years without approval to start construction.

In 2018, the provincial government created a new legislation—the Residential Rental Tenure Zoning amendment—to allow municipalities to create zoning specifically for rental unit construction and preservation. But even that has not helped expedite city processes.

“All [the new zoning is] being used for is municipalities rezoning existing rental housing to protect it from redevelopment in the future,” Mari said. “I’m not saying existing rental housing shouldn't be protected—it’s that this tool wasn’t created for that. The province intended this to allow municipalities to fast-track construction of rental housing.”

The way out?

Some jurisdictions have adopted policies and approaches that Mari says are progressive and incentivize the creation of rental units.

North Vancouver, for example, offers developers the ability to double the density of their residential buildings if they build rental units.

In Langford, Mari says the rezoning process takes “three months, not three years.” This means unlike Victoria, where the majority of city lots can only be occupied by single-family dwellings, construction of rental units in the Westshore is experiencing a boom.

Not all of those units spell good news, however. Records obtained by Capital Daily last month showed that the construction of Danbrook One—Langford’s tallest and perhaps emptiest residential building—was rushed, and ended up with compromised structural integrity, making it dangerous to live in.

The CMHC’s rental market report for 2020 found that overall rental supply in Greater Victoria expanded by 5%, with the vast majority of that growth being driven by completion of new units in the Westshore.

Source: CMHC

New developments are often slowed by opposition from neighbourhood groups, who rally around fears about increased traffic and use of amenities, loss of trees, or changing neighbourhood character.

Victoria councillor Geoff Young says the question of how to ensure enough rental properties are available to meet the city’s growing demands is a complicated one, and fast- tracking development is not the solution.

“The fact is that... a lot of the people who want to move here, want to move here because of the way it is,” Young told Capital Daily. “Simply saying, ‘well, we're not going to have zoning, we're going to let people build whatever they want,’ would provide some new housing but we’d quickly find out that a lot of the quality of life that people want here might be affected, which is, of course, why we have official community plans.”

Mari is no stranger to that opposition. He recently pushed through the Rhodo development on Fairfield Road in the face of a lawsuit from neighbours, and has other developments in the works that are facing their own hurdles. He says in Victoria, community members are often opposed to new buildings popping up near them—a problem he believes the Westshore does not face, as housing is mostly constructed on newly-cleared forest land with no neighbours to oppose the projects.

Young also makes the argument that allowing higher densities for developments that will be primarily rental units serves to drive up land values. When the land gets more expensive, it becomes more difficult for governments to provide subsidized housing options.

Young adds that Victoria council asking developers to provide more rental housing, particularly units at low cost, may work against the provision of housing in the region overall because it puts a “profit squeeze” on developers. That is, if a builder is to afford a rental building, they have to pack more units in the space than they would for a single-family or condominium housing, “simply because it doesn't return as much revenue as those kinds of housing,” he said.

This point has also been made by UBC urban design professor Patrick Condon, who told Capital Daily that simply adding to the supply of rental units on the market will not address affordability unless there are permanent price caps required from the start.

For Mari, the problem remains about supply.

“There is no silver bullet,” he said. “The solutions before us are not actively being pursued by local municipalities ...with the same urgency that is required.”

But time is running out for Wyllie and students like her who are scrambling to find a place to live before the fall semester begins next month. With the absence of online class options, the choice is between being able to find a rental and deferring the semester.

“Part of me is super worried that I'm not going to get a place and that I'm not going to be able to continue my studies this year,” Wyllie said. “And the other part of me is like, you know what? Things pop up all the time. New places are going up every day. Sometimes, you know, miracles happen.”