Rental costs climbing quickly in the area

New CMHC study shows rents increased by 7.2% last year in Waterloo Region

RENTS HAVE RISEN BY A whopping 7.2 per cent during the past year in Waterloo Region, vastly outstripping wage increases, a new report reveals.

The average two-bedroom unit now costs $1,658 a month, according to data from the Canada Mortgage and Housing Corporation.

The sum is at least $381 more than what is affordable to low-income families earning under $49,000 a year, the federal agency revealed in its 2024 Rental Market Report using 2023 data.

In 2020, the same apartment rented for $1,295 a month, which means the average cost rose by an eye-watering 28 per cent in just three years, CMHC figures also show.

Housing expert Dr. Dawn Parker, a professor at the University of Waterloo, told The Observer that a particular factor that is causing local rents to outstrip the average national annual wage rise of 4.4 per cent and inflation rate of 3.4 per cent is the trend of converting lower-cost units into higher-priced ones.

“It’s important to remember that construction costs for high-rise builds are two and a half times as expensive as low-rise,” said Dr. Parker, a School of Planning economist.

“So new high-rise condos and rentals are very expensive, and the higher proportion of those we have in the region, the higher will be average rents.

“Newer properties are also not subject to rent control, so again, increasing average rents.”

Parker also blamed soaring rent on higher mortgage payments, adding: “Increased interest rates make carrying costs higher for landlords who have a mortgage on the rental property.”

In Woolwich and Wellesley, there are far fewer rental properties than in the cities of Waterloo, Kitchener and Cambridge.

Also, the vast majority of rental homes in the two townships are three-bedroom units rather than two, and with relatively more houses than apartments available.

The average rent in the townships was $2,974 a month last year, according to different data provided by real estate agent Scott Miller of Conestogo-based Red and White Realty.

The list below shows the average monthly rent for all Woolwich and Wellesley communities where there are available figures:

1. Heidelberg/St Clements: $5,000

2. St Jacobs/Floradale/ West Montrose: $3,050

3. Breslau/Bloomingdale/Maryhill: $2,949

4. Wellesley/Bamberg/ Kingwood: $2,694

5. Elmira: $2,650

One potential bright spot in the latest CMHC report is that Waterloo Region’s vacancy rate – the proportion of rental properties that are available – has bucked an all-time national low of 1.5 per cent and actually risen in the region from 1.2 per cent in 2022 to 2.1 per cent in 2023.

The federal agency suggested this was thanks in part to an increase in supply in the area, including 1,481 new purpose-built rental apartments and 1,236 new condominiums added last year.

“The impact in supply has helped offset some of the impacts of increased demand from prospective homebuyers delaying purchases in an environment of rising interest rates and greater uncertainty,” states the CMHC report, which was published last week.

However, Parker suggested there were other important factors that may have caused the rental vacancy rate in Waterloo Region to rise.

“One possible reason is that current rentals are simply too expensive for many households,” she said.

“Households may alternatively be sharing too-small units, moving elsewhere, or even becoming homeless.

“Further, in an era of falling condo sales prices and high interest rates, investors who may be deciding to sell their rental properties might choose to keep the unit vacant, because it’s easier to sell a vacant unit than a unit with an established tenant.”

Among ideas to alleviate the housing crisis, Parker suggested building on parking lots.

“This could take many forms,” she explained. “One is small, modular, affordable units. Another is to subsidize multi-level parking to facilitate new housing on surface parking, or prevent surface parking on new developments.”