Driving through the freshly extruded suburbs in the Lower Mainland of British Columbia, with freshly painted (computer generated?) subdivision names on entrance street corners, I was struck by just how far we’ve fallen into the hands of the developer/realtor driven subdivision craze. Almost all of these single family houses and townhouse subdivisions still require an automobile trip to buy a loaf of bread or jug of milk.
There are notable exceptions to this pattern, but those developments that are within walking distance to local shops and services are usually condos, a pattern of living that is dominated by 1 and 2 bedroom units, making them difficult living spaces for larger families, or those more accustomed to, or a lifestyle that requires having more space.
With average home prices still climbing in the Lower Mainland, and the price of gas hovering around $1.30 a litre, (as well as predicted food price increases and likely interest rate rises) you’d think that there would be a gradual move away from expensive housing to cheaper. Around here it hasn’t come yet. South of the border, in America, the economic situation is less promising and housing has definitely lost it’s shine as an investment asset. As a result, demand for rent is playing against the trend of decreasing housing prices, showing in some reports up to 15% increase in rental cost since 2007.
In cities, the majority ofrental stock is often in townhouses and apartments, typically located closer to commercial centres and public transit. Perhaps part of the increase in rental cost is also a conflicting demand with a portion of home owners wanting to “move back to the city”, buying condos and other higher density properties, possibly putting pressure on rental stock.
When we were moving from Castlegar to Langley, we looked at apartment living as an option in an effort to reduce our transportation costs as a family. However, the fact that three bedroom units are scarce and before we take the step “down” to a two bedroom unit, we really need to downsize some of our “stuff”. As a result, we ended up in a beautiful three bedroom house in the suburbs, a twenty minute walk to work and the shops. I’ve come to accept that there are always compromises in where we live and what housing stock we can afford.
A survey of national American rental stats pulled up the following conclusion, seeing the biggest growth in rental prices in studio apartments and 5 bedroom houses…
“This is a telling trend which may indicate a growing demand for rental housing among first-time renters and larger families,” the company notes in the report.
Indeed, during this period national homeownership rates plummeted, and so did the cost of buying a home as many Americans remained hesitant about committing to property long term in the aftermath of the housing market’s collapse.
The downside to this trend is that consumers may not only see higher price tags for rentals, but an increase in competition as well, compared with the peak of the recession. As a result, it will become increasingly important to have a good credit report, and perhaps even to appeal to landlords by agreeing to move in earlier or pay more money upfront to land the apartment or home rental you really want.
The “traditional” perspective, that renting is for those who cannot own a house, is being challenged as demand increases. There are more people who don’t want to own a house, or have got out of home ownership seeing reduced housing values on the horizon, as well as those who have lost their hold on the real estate market due to foreclosure.
More Americans are renting instead of owning these days, with the national home ownership rate slipping to 66.4% in the first quarter of 2011 from a peak of 69.1% six years ago, according to the Census Bureau.
Of concern is affordability…
One in every four renters in the U.S., or about 10 million households, currently spends more than half of their income on rent and utilities, while another 26% of renters spend between 30%-50% of their income on rental costs, according to a report from the Harvard Joint Center for Housing Studies, and the situation will likely only continue to worsen in the near future.
Here’s a video taking a positive spin on this situation for those who are interested in investing in rental properties, as with every financial transaction, someone wins, the question is, by how much.
- What do you think the long-term outlook for rental housing is in Canada?
- Rent or own? What recommendation would you give to someone moving to your town?