Do you need motivation to buy and own your home? Well, read this.
I read an article recently about “renovictions” courtesy of Rentals.ca. (This is geared more for Ontario and BC residents.) This is a new word that you’ll be hearing more often, I’m sure.
Here’s my warning and words of advice… Attention renters: If you’re currently renting a condo or house with below market rents, you’ll want to read this.
And I’ll skip to the bottom line for a moment: If you’re renting, you should give serious consideration to buying and owning so that you have control over your place of residence.
Let’s do a quick test.
Does this sound like you? You’ve been renting a condo or townhouse for the last five years. You’ve got a great deal because your rent is way below today’s market rent. Maybe you’re paying $1,400/month for a two-bedroom condo in Toronto. You’re feeling good because your landlord could easily rent out your place for $2,500/month. This is a real example! But, there are rent control laws that limit your rent increase to no more than the rate of inflation. Fortunately for you, inflation has averaged less than 2% per year since 2000.
Congratulations, you got a great deal. Why would you want to give that up and buy? What could go wrong, right?!
And now for the bad news. Landlords have been applying to the Landlord and Tenant Board for eviction notices due to renovations being done on a rental unit. The landlord gives the tenant four months’ notice, evicts, renovates and then puts the unit back up for rent.
Technically, the landlord’s supposed to contact the tenant to see if they want to move back in… and the landlord is only supposed to increase the rent by 3%. But, realistically, by the time the renovations are complete, the tenant has already found a new place to live. And the landlord then relists the unit at current market rents.
The tenant can monitor and challenge this, but they rarely do. There is no real financial gain for the tenant. And we’re seeing landlords offering tenants some nominal cash incentives to just leave without issue.
Using the example above, where the tenant was paying $1,400/month, the landlord decided to do some renos. They evict the tenant with four months’ notice, and the renos are completed. The landlord relists the unit at current market rents and gets $2,500/month – an extra $1,100/month!
And this is happening a lot. Money is a big motivator.
There are also other ways that landlords can evict. For one, they can evict if they say they’re going to use the property for themselves or an immediate family member. They can also evict if they sell and the new owner opts for vacant possession.
TIP: Don’t get too comfortable if you’re paying below market rents. You may feel fortunate, but it’s important that you understand you’re at risk of renoviction.
SOLUTION: Why rent when you can own?
There has been so much talk about renting being cheaper than buying and, as a result, renting affords a better lifestyle. “You can get a better return in the stock market.” How many of us have heard that strategy? Tell that to anyone who has been evicted for renovations, a sale or a slew of other reason. This is little consolation when current market rents are 25% or 50% higher than what they’ve been used to paying.
The vacancy rate is sitting at an all-time low of less than 1%. Meanwhile, market rents are at an all-time high. In Toronto, average rent for a one-bedroom condo is above $1,900/month.
NEED A REASON TO BUY AND OWN? How about not having to worry about being asked to move out?
Here’s some math for you: It costs around $445/month for every $100,000 of mortgage. Why rent when you can buy?
Personally, I think the government should get rid of rent control laws. These laws reduce incentives for investors to build and supply rentals for fear of a capped and minimal return. A reduced rental supply ultimately leads to higher rents, as we’ve experienced over the past several years.
I’m convinced that if you take away rental control, we’ll see a flood of new rental properties hit the markets. This will increase supply levels, which, in turn, creates fair market rents. Stay out of the landlord business, government!!
Governments must address the renoviction trend
I spoke to Matt Danison, CEO of Rentals.ca, who believes governments at all levels need to take real steps to solve this crisis or they’ll have disgruntled seniors, students and renters with steep rent increases knocking on their doors.
“Government officials and politicians at the provincial and local levels need to sit down and meet with property owners and tenants’ rights groups to resolve the issues,” he says.
He also suggests governments could help property owners by waiving certain fees and requirements to allow the owners to do repairs and renovations at lower costs. There has to be some give and take on both sides to ease the hardship on tenants when buildings are renovated.
“Without this kind of collaboration, we’ll see more and more seniors, lower-income and fixed-income residents, and single parents on the streets or living in untenable situations,” Danison adds.
This issue will not be resolved on its own.
Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.
Steve Garganis: 416-224-0114; Steve@CanadaMortgageNew.ca genews.ca
As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.