RENTER INCENTIVES
Oil price crash and COVID-19 pandemic have had a double impact on the sector
Market took a double hit
As the dual impacts of COVID-19 and the oil price crash hit Calgary’s residential rental market, analysts say renters can expect to see landlords offering some of the same perks and incentives they did during the height of the 2015-16 economic downturn.
“We’re not forecasting directly a reduction in rent, at this point. That will happen probably on a longer-term basis if the economic pain is sustained,” said Matthew Boukall, vice-president of product management at Altus Group, a Canadian real estate software and data company. “But it’s more like we’re going to see more short-term incentives being offered.”
When the Alberta economy plunged into recession in 2015 and rental vacancy rates nearly tripled from the year before, landlords came up with a variety of creative ways to entice tenants — including offers of free first month’s rent, free parking or cable, and even Visa gift cards on the signing of a lease.
Those incentives generally dried up as the vacancy rate slowly lowered. By 2019, rental market trends were pointing to a gradual economic recovery for Calgary. According to the Canada Mortgage and Housing Corp., Calgary’s rental vacancy rate sat at 3.9 per cent in October of 2019. The average monthly rental rate in the city last year was $1,181, up 1.7 per cent from $1,149 in 2018, said the CMHC.
However, any effects of COVID -19 and the latest oil price crash are not reflected in those statistics, which are the most up-todate that CMHC has available. And there are already early indications that Calgary’s rental vacancy rate may be on the rise again.
According to national rentals listing website Rentals.ca, rents for both one- and two-bedroom apartments in Calgary declined during the month of April. The average listed monthly rent for a one-bedroom apartment on the site was $1,156, down 2.6 per cent from March, while the average listed rent for a two-bedroom unit was $1,346, down 5.8 per cent.
Rentals.ca content director Paul Danison said site data also shows evidence of growing supply, with a number of what used to be shortterm or vacation rentals now listed as long-term rentals.
“We can’t say precisely what the numbers are on that, but when you start seeing a lot of furnished apartments coming up on our site as long-term rentals, those typically used to be short-term rentals. So you’re adding to the supply a lot,” he said.
In addition, there are a significant number of new, purpose-built rental units that have just entered or are about to enter the market. According to CMHC data, there have been 371 purpose-built rental unit completions thus far in 2020 and there are 2,655 under construction.
Danison said prior to the pandemic, all forecasters were calling for an economic recovery for Calgary in 2020. But he said now, it’s quite likely that some young renters have been forced to move back in with their parents due to job loss. The rental market will also be affected by lower in-migration as a result of travel restrictions and social distancing rules.
“Everyone was predicting bigger and better things for Calgary, but the combination of COVID -19 and the oil price crisis has completely turned it around,” Danison said. “The vacancy rate will be going up and rents will be going down.”
Gerry Baxter — executive director of the Calgary Residential Rental Association, which represents landlords and building managers — said many landlords have been
On average, our landlords are looking at a 23 per cent increase in property tax. Most will be facing increases in the thousands of dollars.
offering payment plans to tenants who have suffered job loss and been unable to pay rent due to the pandemic. He said in addition to the prospect of rising vacancy rates, many of these landlords are dealing with double-digit property tax increases this year as the City of Calgary moves to shift some of the tax burden from non-residential to residential properties.
“On average, our landlords are looking at a 23 per cent increase in property tax. Most will be facing increases in the thousands of dollars,” he said. “Even if they could raise rents, I don’t know how many would be able to do so, because tenants can’t afford it. So the question is, how does anyone manage to stay in business?”