Experts say battles over rental houses are a ripple effect of the sky-high pandemic real estate market
While the price to rent a condo in some major cities may have gone down during the pandemic, high sales prices in the housing market appear to be having a ripple effect on single-family rental homes in Ontario.
The situation has prompted bidding wars some experts suggest may be part of the landscape for the foreseeable future.
“I’ve never seen it like this before,” said Sue Heddle, a real estate agent with nearly 15 years of experience in the Greater Toronto Area cities of Mississauga, Oakville and Burlington.
Heddle said she is routinely seeing tenants go above a rental’s list price, as well as offer months of advance payments. One of her clients recently listed a house that rented for $700 more a month than what was posted.
“Every run-of-the-mill place has a bidding war,” she said.
Real estate agents and other experts say a shortage of rental houses has become particularly acute in some areas of Ontario, which, like much of Canada, is dealing with housing affordability issues. And they fear the problem will get worse as new families are created or arrive through immigration.
Afshin Livar got into multiple bidding wars while looking for a rental house for his family of five last month in Richmond Hill, a suburb north of Toronto.
“I felt extremely devastated and desperate,” said Livar. “You could continue bidding and bidding and bidding, and just come back unsuccessful. So that makes it extremely stressful.”
A tricky problem to track
There is no comprehensive data source that tracks prices for rental houses, never mind statistics that track bidding wars.
But Dana Senagama, an economist with Canada Mortgage and Housing Corporation (CMHC), says bidding wars over rental houses are a byproduct of hot housing prices.
“Traditionally, whenever there’s a very heated ownership market,” she said, “it almost duplicates itself in the rental market.”
CBC News interviewed a dozen real estate agents and tenants who described bidding wars on rental houses.
The fact is there just aren’t many houses available for rent right now. According to CMHC data, just over 90 per cent of detached homes in Canada are owner-occupied, leaving less than 10 per cent either vacant or potential rentals.
CMHC data also shows average rents for all housing types in the Ontario cities of Ottawa, Toronto, Hamilton, London and Windsor went up between 4.7 and 8.4 per cent in 2020 — even as vacancies increased in nearly all those cities. (Hamilton was the exception.)
The Canadian Real Estate Association (CREA), which operates Realtor.ca, says it doesn’t track data for rental houses because they’re such a small part of its listings.
Ralph Ciancio has been selling houses for more than a decade in Markham and other areas northeast of Toronto.
In the past, he said, only highly attractive rental houses would net offers over the listed price. Now bidding wars are common as people battle for the few listings in his area.
“The bidding war that’s taking place now is coming from a position of necessity on behalf of the tenants,” he said.
Agents and renters in the Ottawa area interviewed by CBC News also described a desperate shortage of rental houses, with some encountering bidding wars. The situation is also playing out in smaller Ontario cities.
Renting house as stressful as buying one
For his part, Livar was so worried about finding a rental home for his family that he said he was literally pulling out some of his hair.
He moved to Canada from Hong Kong in 2019 and still has a business there. His wife has a job here, but the family’s savings are being stretched, he said.
Seizing on a hot housing market, his landlord recently sold the five-bedroom Richmond Hill house where he, his wife and his three kids were living, paying $3,500 a month.
While searching for a new place, Livar said he applied for one home listed at $3,800 a month. It went for $4,600.
After looking at dozens of listings, changing real estate agents and losing eight bidding wars where he offered above the listed rent, his ninth offer was accepted.
The family’s new rental is smaller, older and, at $3,900 a month, costs $400 more than what they had previously paid. On top of offering extra money, Livar also paid four months’ rent in advance to seal the deal.
The process he faced is similar to the blind bidding process common in real estate, though the practice has come under scrutiny for potentially fanning the flames of an already red-hot market driven by desperate buyers.
Livar said his experience made him wonder if some rental bidding wars are manufactured by landlords and agents, because “they know the situation they are playing with.”
Candice Sheedy, an entrepreneur and single parent to three boys, also had a very hard time finding a rental house.
Sheedy was paying $3,000 a month for a three-bedroom home in Oakville, Ont., but felt forced to leave after a dispute with her landlord.
She says she applied for 20 homes over a few months and lost more than a dozen bidding wars, even when offering $400 a month extra and six months’ advance rent. She says she has a strong credit score, steady income and savings.
“None of it made sense,” said Sheedy.
The combination of bidding wars and rejections was “extremely stressful, especially since you compound that with it being a pandemic,” she said.
Sheedy just moved into a house she found on Kijiji without a bidding war, but it’s smaller, in a less desirable area and still almost $500 more per month than her former rental.
The pandemic premium on space
Murtaza Haider, who teaches real estate management at Ryerson University in Toronto, says the pandemic put a premium on space, and that added to Canada’s housing affordability crisis.
For many, he says, COVID-19-related public health measures turned a home into more than a place where you sleep and eat; our homes are now our offices, schools, gyms and churches as well.
He sees rental-based bidding wars as the result of the pandemic exposing the importance of extra space that houses can offer to both owners and renters.
“The home’s value — intrinsic value — has increased,” said Haider
He said the other part of the problem is that Canada has “years of under building” when it comes to detached, semi-detached and row houses — the ground-oriented homes highly desired by many families.
CMHC stats show that in Toronto, for example, 37.7 per cent of residential building project starts in 1990 were houses.
By 2020, houses fell to just 15.2 per cent of starts.
Over the same three-decade period, starts on condos and apartments went from 51.3 per cent to 72.7 per cent.
Could bidding wars over rental houses get worse?
Real estate agents and experts are concerned that rents for houses will just keep going up for the foreseeable future, potentially fuelling more bidding wars.
As Senagama predicts, single detached homes are going to be these “very rare commodities,” with pricing going higher and higher.
Ciancio is worried that as immigration ticks back up post-pandemic, there will be “a huge spike in the demand to purchase and also … in the demand for rental,” which will add to the problem.
Haider’s fear is that millennials who have children in the next decade will also drive significant demand for houses, because they won’t be “looking for one-bedroom or studio apartments.”
Big picture, Haider sees two solutions to the housing crisis: the government must create more affordable housing options, including ground-oriented homes, and it may also need to subsidize rents.
“Rent geared to income is something that the state and the society has to invest in to have an equitable place for all,” he said.