July press review

This press review focuses on the new jump in the central bank's key interest rate and the unsanitary conditions faced by rental unit owners, who are forced to assume the associated costs.

By Corinne Laberge

Bank of Canada key interest rate hike

L’Express shared in this article that “On July 12, the Bank of Canada raised its key rate by a quarter of a percentage point, bringing it to 5%. Expect a significant impact on the housing market and housing starts, according to the Canada Mortgage and Housing Corporation (CMHC).”

Due to various factors, keeping inflation at 2%, the threshold targeted by the country's central bank, is "more or less easy", they explain. Thus, "The Bank of Canada expected to return to its 2% target at the end of 2024. In the report published on July 12, it postponed this forecast to the summer of 2025", informs CMHC deputy chief economist Kevin Hughes.

Rising interest rates have a direct impact on mortgage payments, particularly variable-rate ones. "According to a CORPIQ survey of its members, nearly 60% of them have a variable-rate mortgage, and nearly 80% of them have a mortgage that exceeds half the value of the property," reports the article.

CORPIQ points out that "the increase in the key rate will have a detrimental effect on the ability of owners of rental housing to invest in the maintenance of the rental stock and, above all, to stimulate the construction of new housing". CORPIQ also points out that "over 70% of housing units were built more than 40 years ago, and vacancy rates are below 3% throughout Quebec".

The pressure on the Quebec rental market poses significant challenges for both tenants and private housing managers. "Over the past 10 years, construction and renovation costs have soared by more than 54%, insurance costs are up 77%, and mortgage financing costs are now approaching 6%. With rising municipal and school property taxes, many rental property owners are finding themselves in a deficit situation, while current rent control mechanisms are ill-suited to integrating the effects of this economic situation”, notes CORPIQ Public Affairs Director Marc-André Plante. “Take the example of a $600,000 mortgage on a 6-unit plex. The additional annual bill will now exceed $20,000 for a rental owner. Unfortunately, it is the health of the buildings that will be most affected by under-investment in maintenance. Governments must quickly agree on a concerted strategy to protect the rental housing stock and stimulate housing creation.”

Mr. Plante also speaks for Noovo info on this subject. "In Quebec, there are 300,000 landlords, and in 7 out of 10 cases, they are landlords with 5 units or less. These small landlords, if discouraged, will hand over the maintenance of the rental stock to others. Others, however, will be more management and investment companies, people who are looking to make flips, i.e. short-term returns, and this automatically generates more renovations", he insists. Julia Posca, a researcher at the Institut de relations internationales et stratégiques, agrees. "Conversions of rental housing into condos is a phenomenon we've been seeing, and it's likely to continue. The same goes for the transformation of housing into short-term accommodation," she stresses, referring to the Airbnb platform. 

Finally, Radio-Canada Info also discusses the Bank of Canada's recent hike, the tenth since January 2022. "This is the highest key rate since April 2001," it notes.

“(...) consumption is very strong," explained economist Clément Gignac on ICI Première's L'heure du monde program. Even the real estate market has rebounded, and I think that surprised the Bank of Canada a lot, given that the real estate sector is normally the first to suffer from a rise in interest rates", the text quotes.

Further on, it states that "Although the pace of inflation has slowed considerably in recent months, the mortgage interest cost index jumped 29.9% in May compared to the same period in 2022. According to Statistics Canada, this was the highest increase ever recorded.      

July 1: rental landlords still foot the bill for unsanitary housing

Published by TVA Nouvelles on July 2, this article describes the case of a Quebec City apartment left in "an appalling state" by an ex-tenant. "I was completely shocked and stunned. I couldn't believe my eyes when I opened the apartment," says Alain Gingras, co-owner of the rental building since 2021. "I've seen things a bit like this before, but also worse than this," observes the man who has been a property manager for a dozen years.     

When he acquired the property, he points out that he had to enter the unit in question with a witness, as the tenant was not responding to his calls. "At the time, the dwelling was already in a deplorable state, but not nearly as bad (...)," claims Alain Gingras.

Following the subtitle "Landlords left to their own devices", we learn that Mr. Gingras and his partner intend to file a complaint with the Tribunal administratif du logement. However, they are not optimistic that the judgment will be enforced. "The tenant is probably not solvent. It's going to be complicated to get back the money we've lost," says Mr. Gingras, pointing out that such a situation is not covered by their insurance. "In the meantime, many hours of cleaning will be required to make the dwelling habitable again," concludes the text.

In another TVA Nouvelles report, a family "let their children live in an apartment filled with mold". This situation was reported to the Direction de la protection de la jeunesse (DPJ), which retained the reports.

"This extreme case of substandard housing in Montreal will cost the landlord $50,000 to renovate," The article explains. As reported, "The parents and their three young children recently left their apartment on the sly. They had lived in the apartment for about 4 years, at a cost of $725 a month. They paid their rent, but their lifestyle made the place miserable and uninhabitable. Neighboring units were invaded by the odor, and the neighborhood complained.

CORPIQ intervened in the text, denouncing clause G of the lease. "Today, we find ourselves faced with a landlord for whom it will take at least 20 years to find the beginning of the money he must invest in a dwelling for which the government and its rules will force him to re-rent it for $725 [...] clause G, since its introduction, has never made sense. It forces landlords between two tenants to re-let at the same price," argues Marc-André Plante, the company's director of public affairs.

For its part, the office of the Minister responsible for Housing points out that it is attentive to the concerns of rental landlords. "There will be a parliamentary commission this fall, and we will be listening to constructive solutions and proposals that groups, organizations and others may submit to us for discussion," it says.