The Commons human resources committee met on July 13 to discuss the challenges faced by Canadian landlords and the need to expand the national housing inventory. According to John Dickie, president of the Canadian Federation of Apartment Associations, the average profit margin for Canadian landlords is only 8 percent. This revelation came as a surprise to many, as there is a common misconception that landlords make significant profits from rent payments.
During the committee meeting, Mr. Dickie highlighted the various operating costs that landlords face. He mentioned that these costs amount to 19 percent of rental revenues. Additionally, 14 percent of landlords have to pay property taxes, and 12 percent cover tenant utilities. With all these expenses, Mr. Dickie emphasized that only 8 cents out of every dollar of rent is left as pre-tax return on revenue for landlords. The remaining 36 cents go towards paying the mortgage, while 11 cents are allocated for major repairs and building modernization.
The committee’s focus on the “financialization” of the housing sector reflects the increasing presence and significance of the market and financial sector in Canada’s economy. This shift away from industrial capitalism has resulted in the growing diversity of transactions and their interaction with all aspects of society and the economy. The committee recognizes the need to address the housing crisis in the country, particularly in urban centers where affordable apartments are becoming increasingly scarce.
Ray Sullivan, executive director of the Canadian Housing and Renewal Association, stressed the importance of a balanced approach involving both the private sector and non-market/community housing. He emphasized that escalating housing starts and increasing the housing supply should not solely consist of expensive homes or high-cost rentals. Instead, there should be an increase in the relative share of non-profit housing to address the housing crisis. Sullivan suggested doubling the current relative share to 8 or 9 percent.
Michael Brooks, CEO of the Real Property Association of Canada, pointed out that taxes and development charges contribute significantly to the cost of new units. In major cities like Toronto, the cost of building apartments and condos is becoming exorbitant. Brooks highlighted the need to address these costs to make housing more affordable for Canadians.
However, this task is not without its challenges. According to Canada Mortgage and Housing Corporation (CMHC), Canada needs an additional 3.5 million housing units by 2030 to restore affordability. However, it often takes up to five years to get housing projects approved in many Canadian cities, causing potential delays and shelving of new projects. The current housing starts average around 200,000 per year, which falls far short of the demand. CMHC acknowledges the magnitude of the task ahead and the need for swift action to restore affordability.
In conclusion, the committee meeting shed light on the realities faced by Canadian landlords and the challenges in expanding the national housing inventory. With a narrow profit margin and significant operating costs, landlords face financial constraints. Balancing the private sector with non-profit housing and addressing high costs associated with taxes and development charges will be crucial to providing affordable housing to Canadians. The target of adding 3.5 million housing units by 2030 is ambitious but necessary to restore affordability in the country.
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