New city council can help investors increase rental supply
Mortgage and Housing Corporation (CMHC) listed Ottawa’s overall vacancy rate at 1.7 per cent but given current market conditions it’s likely sitting at or below one per cent today.
In addition to the low vacancy rates, property managers and investors are reporting that market rents are rising and that they have witnessed an increase in the number of multiple offer situations for rental units. This is very good news for investors because the market rents in Ottawa had been kind of stagnant the last few years.
Ottawa is definitely trending upwards and I’m pretty sure that city hall is aware that the demand for rental units and the lack of available inventory will only push market rents higher. This will leave tenants with few housing options.
How can the city help?
The municipal elections are set for next month and the new city council will be in position to help foster an environment that will entice developers to build new rental units, and make it easier for investors to renovate and repurpose existing properties so they can be used as rentals. For example:
• Provide incentives to developers who want to build rentals. One developer told me that lowering the cost of development fees and delaying the payments of other fees until the building is occupied would be a good start.
• Say no to landlord licensing. If the city imposes licensing, it will stunt the creation of new rental units and some of the “mom and pop investors” that provide roughly 80% of the rental inventory in the city will close up shop and look elsewhere to invest their money. This will lead to fewer rentals in the inventory and higher rents. This is the exact opposite of what needs to happen.
• Create a new program that offers grants or interest free loans to qualified people who want to convert their basements into SDU’s or their illegal apartments into legal SDU’s.
• Advertise and promote the city’s affordable housing programs to investors beginning with the Landlord Partnership Program (LPP). Many investors are unaware of the programs offered by the city.
• Allow investors to add third units, coach houses, and tiny homes to be built on properties where an SDU already exists. Sometimes investors need the extra unit and income to make the investment worthwhile.
• Amend the rooming house definition to allow landlords to rent four bedrooms to four individuals for compensation and whose occupancy is not a single housekeeping unit.
The REIN report also states that the city of Ottawa is “somewhat landlord friendly”. Given the current rental market conditions and predictions that Ottawa is heading into a boom phase, let’s hope that the new city council will work to improve this rating, and make it easier and less expensive for investors to create sufficient housing to meet the demand.