Landlords facing ‘grim’ times as Calgary vacancy rate rises
Rent incentives being offered; tenants with dogs accepted
Close to 40 per cent of Calgary’s available rental listings are unoccupied, according to a local property management company which says the weak market has become a major source of financial stress for small, private landlords.
Hope Street Real Estate Corporation, which directly manages the tenancies of 3,600 landlords in Alberta, released a report this week based on data from its own operations as well as Internet listing sites such as Kijiji and RentFaster. According to its report, 37 per cent of the advertised rental properties in Calgary do not currently have a tenant living in them, and the average property spends 59 days on the market before being rented.
There are 8,102 rental properties currently advertised for rent in Calgary, it said, up from 5,233 one year ago and 2,377 in the fall of 2011. The average rental list price is $1,467 per month.
“I have never seen it this grim before,” said Shamon Kureshi, president and CEO of Hope Street Real Estate Corporation. “I have never seen this level of difficulty for landlords trying to find a tenant.”
While large residential landlords have certainly felt the impact of the declining price of oil and rising unemployment rates — Boardwalk REIT is forecasting a vacancy rate in Alberta of five per cent in 2016 for its properties, up from 2.5 per cent in 2015 — Kureshi said big companies are far better positioned to manage the declining market conditions than “mom and pop” landlords.
“We’re talking about the people who are renting out their basement suite to make ends meet or the family who has maybe invested in a second house that they’re renting out for the purpose of retirement savings,” he said. “I’m probably getting two, three, sometimes five calls a day from these people saying, ‘I can’t carry this anymore. Should I sell?’”
A quick glance at Kijiji shows the incentives landlords are willing to offer just to get somebody in their suites. “December rent free,” “Price already reduced by $300 a month,” “1 month free utilities,” the ads declare.
Kureshi said some landlords are reducing the amount of damage deposit they require or accepting tenants they never would have dreamed of accepting (owners of large dogs, for example).
Rebecca Yarmoloy — who with her husband bought her first rental suite in 2013 and now owns a total of four properties in Calgary — said the past year has been challenging, with each of the suites vacant at times, occasionally for up to three months in a row. She said they now allow pets in their suites, something they never would have considered before but have been doing to make their properties more appealing to renters.
“When we first bought we were getting top dollar for all of our suites,” Yarmoloy said. “We’ve definitely taken a big pay cut on all of them, as well as struggled to find tenants. We’ve had to reduce all of our rents substantially, and we’ve also just had trouble finding good people.”
Hope Street’s report primarily focused on rental data for private landlords — people who own one to three residential rental properties which may include some portion of their primary residence such as a laneway suite or basement rental apartment, and who treat their real estate investing as a part-time pursuit. That makes Hope Street’s data different from that compiled by the Canada Mortgage and Housing Corporation. CMHC conducts one survey of investor-owned condo apartments and another of “purpose-built” rental stock (apartments and highrises usually owned and managed by large companies and REITs), but it doesn’t look at other forms of rental properties such as basement suites and single-family homes.
According to the CMHC, the apartment vacancy rate in Calgary’s purpose-built rental market was 5.3 per cent in 2015, up from 1.4 per cent in October 2014.
CMHC analyst Richard Cho said official 2016 numbers won’t be available until the Crown corporation releases its annual report next week, but added CMHC’s early forecast suggests Calgary’s purpose-built vacancy rate will rise to approximately eight per cent in 2016, well above the average of three per cent.
“It’s definitely the highest you’ve seen in, safe to say, 25 years,” Cho said.
We’ve had to reduce all of our rents substantially, and we’ve also just had trouble finding good people.