The average profit margin for a Canadian landlord is 8 percent, the Commons human resources committee heard Thursday.
Attendees at the July 13 meeting struggled to agree on the best way to expand the national housing inventory, according to Blacklock’s Reporter.
John Dickie, president of the Canadian Federation of Apartment Associations, said that reality may come as a surprise to some.
“Some people picture all or most of the rent money going into the landlord’s pocket,” Mr. Dickie said in his testimony. “The truth is far from that.”
Mr. Dickie shared with the committee that landlord operating costs amounted to 19 percent of rental revenues. Property tax was paid by 14 percent of landlords, and tenant utilities were covered by 12 percent of landlords.
“That makes up 45 cents out of every dollar of rent leaving 55 cents as net operating income, but we’re not done with the expenses,” said Mr. Dickie.
“On average, another 36 cents goes to pay the mortgage and 11 cents goes to pay for major repairs and building modernization,” he said. “That leaves just eight cents out of every dollar of rent as the pre-tax return on each dollar of revenue.”
The committee is examining the “financialization” of the housing sector. Financialization refers to the increase in size and significance of a nation’s financial sector relative to its overall economy. Financialization has occurred as countries have shifted away from industrial capitalism. The term describes the growing presence of the market and financial sector in Canada, as well as the increasing diversity of transactions and the interaction between them and all aspects of society and economy.
“Good luck finding a $1,700 apartment in any urban centre in the country right now,” said Ray Sullivan, executive director of the Canadian Housing and Renewal Association.
“Absolutely, there is a role for the private sector,” he said. “What’s important as we talk about rapidly escalating housing starts and increasing the housing supply is that we are very aware and mindful a share of that needs to be non-market and community housing. We are not going to solve the housing crisis by adding 5 million $1-million homes or 5 million $3,000-a-month rents for one-bedroom apartments.”
Conservative MP Scott Aitchison, representing Parry Sound-Muskoka, Ontario, constituents, asked Mr. Sullivan to elaborate.
“What do you think the right mix should be?”
“We need to double the relative share of non-profit housing,” Mr. Sullivan responded. “We need to get up into the range of 8 to 9 percent.”
Michael Brooks, CEO of the Real Property Association of Canada, pointed to taxes and development charges being responsible for “up to 30 percent of the cost of a new unit” in most cities.
“In places like Toronto, the cost to build apartments is approaching $800 a square foot, and for condos, north of $1,200 a square foot,” he said.
While Mr. Brooks explained to the committee what was required to reach housing affordability for Canadians, he also acknowledged the scale of the challenge.
“We know Canada needs 3.5 million additional housing units by 2030 to restore affordability, according to Canada Mortgage and Housing Corporation [CMHC], but it sometimes takes up to five years to get housing approved in many cities in Canada,” he said. “As many new projects are potentially shelved, this will be a challenging target.”
CMHC stated in a Housing Market Information report released June 23 that current housing starts average 200,000 per year, far less than demand.
“To restore affordability we need 3,500,000 additional housing units beyond current projections” by 2030, said the federal insurer.
“We have a large task in front of us.”
