Winnipeg Free Press
December 14, 2007
By Murray McNeill
Soaring costs pushing up apartment rental rates
SOARING operating and maintenance costs are pushing up apartment rental rates well beyond the provincial guidelines, a new Canada Mortgage and Housing Corporation study shows.
The federal housing agency's annual Rental Market Survey shows the average monthly rent for a typical two-bedroom apartment in Winnipeg jumped by 4.4 per cent to $740 between October of last year and October of this year when the latest market survey was done.
That's nearly two full percentage points higher than the provincial rent control guideline of 2.5 per cent for 2007.
Provincial rent control regulations allow for rent increases above the provincial guideline if landlords make improvements to their properties or can show operating expenses have increased by more than that amount.
A spokesman for the Professional Property Managers Association of Manitoba said rising operating costs for things like water, electricity and building materials are the main reason rents are increasing by more than the guideline.
"Buildings are just getting so expensive to maintain because of the rising cost of utilities and maintenance," Avrom Charach, a past vice-president of the PPMA of Manitoba said in an interview.
He said a new roof that cost $90,000 12 to 18 months ago now costs between $130,000 and $140,000 because of the skyrocketing cost of tar and other building materials.
The CMHC survey shows Winnipeg's average rent increase exceeded the average increases in most eastern Canadian cities, including Ottawa (two per cent), Toronto (one per cent) and Montreal (2.3 per cent).
But it also paled in comparison to the hefty hikes seen in other western Canadian cities such as Edmonton (18.8 per cent), Calgary (15.3 per cent) and Saskatoon (13.5 per cent).
Jeff Powell, CMHC's senior market analyst for Winnipeg, said Western Canada's booming economy is the main reason for that. Eastern Canadians are flocking to places like Alberta and Saskatchewan for the jobs, and that's driving up vacancy rates and curbing rental increases in the eastern half of the country and having the opposite effect in the western half.
He attributed Winnipeg's above-the-guideline increases mainly to landlords investing more money to fix up their rental properties. He noted the rent control regulations also allow them to recover a portion of their capital improvement costs, and that's what many of them seem to be doing.
A spokesperson for the provincial Residential Tenancies Branch said branch officials have noticed that trend, as well.
"And that's a good thing," she added. "We want properties to be properly maintained."
However, she disputed Charach's claim that more than 50 per cent of Winnipeg's rental apartments saw rent increases above the guideline.
"That sounds high to me."
Charach argued the best thing the government could do is abolish rent controls. Although rental rates might balloon for a year or two after controls are lifted, he said, they'd eventually start coming back down, because developers would start building more new apartments and vacancy rates would rise.
Making sense of rent
HERE are some of the other highlights from Canada Mortgage and Housing Corporation's new Rental Market Survey report, which was released Thursday:
* Winnipeg's overall apartment vacancy rate increased to 1.5 per cent in October from 1.3 per cent a year earlier.
* Manitoba's overall vacancy rate (in Manitoba urban centres with populations of 10,000 or more) fell to 1.5 per cent from 1.6 per cent.
* Brandon had the lowest vacancy rate at 0.2 per cent. That's down from 0.9 per cent a year earlier.
* Thompson had the most dramatic drop in its vacancy rate -- down to 2.4 per cent from 8.2 per cent.
* The average monthly rent for a bachelor suite in Winnipeg in October was $451, a one-bedroom apartment was $578, a two-bedroom was $740 and a three bedroom was $874.
* Core-area apartments saw the biggest increase in rents, at 5.3 per cent.
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