Rental Vacancy Rates Create Opportunities
According to the most recent rental market information released by the Canada Mortgage and Housing Corporation (CHMC), rental vacancy rates have fallen across the country creating new opportunities for homeowners. At the same time, economists and government officials are predicting economic improvement, which in turn is expected to nudge up mortgage rates. Rental income may become a financial necessity for many households while also providing needed housing.
The average rental vacancy rate in Canada’s 35 major centres decreased slightly to 2.6 per cent in October 2010, from 2.8 per cent in October 2009, according to a survey released CMHC. Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre, attributes the reduction in rental units to improvements in the economy, which allow more people to purchase and rent, and high levels of immigration.
These housing market shifts create opportunities for homeowners, particularly those in communities with the lowest vacancy rates: Winnipeg (0.8 per cent), Regina, Kingston and Québec (1.0 per cent each). At a provincial level, the survey found that Manitoba, Newfoundland and Labrador posted the lowest vacancy rates at 1.0 per cent or less. These tight rental markets make it much more attractive for homeowners to convert part of their home into secondary suite or add a garden suite. A rental unit can also allow prospective homebuyers qualify for a mortgage when their regular incomes would not be adequate. As a guideline, the rent on a two-bedroom apartment in Canada was $860 in 2010 compared to $836 the previous year.
On the other hand, homeowners in Windsor, Abbotsford, Saint John and London are least likely to benefit from adding a rental suite. These Canadian cities have the highest vacancy rates: Windsor (10.9 per cent), Abbotsford (6.5 per cent), Saint John (5.1 per cent), and London (5.0 per cent). At the provincial level, the highest vacancy rates were in Alberta (4.6 per cent) and New Brunswick (4.5 per cent).
Regardless of statistics, many homeowners will continue to add secondary and garden suites for personal reasons. A suite can allow ageing parents to be part of the family and enjoy extra care and assistance when needed. Illness or accident can also create the need for wheelchair accessible housing for family members. The federal government provides some financial compensation for this type of construction (http://www.cmhc-schl.gc.ca/en/co/prfinas/). Another common reason for adding a suite is simply to accommodate a growing family. Building an addition in the form of a suite creates space for a child or children now and perhaps a renter in the future.
Investing in a self-contained rental suite can be an expensive and time-consuming endeavour so it is wise to build for the long-term. Quality materials and design will add to the comfort and longevity of the unit and may justify higher than average rent. Lighting, flooring and layout are key considerations. Since many suites are constructed in basements or rooms that are partially below ground, proper drainage and a good subfloor structure can avoid flooding and uncomfortably cold floors. Adequate insulation, particularly in the ceiling and common walls, will give both parties privacy.
Aside from appearance and comfort, homeowners need to consider municipal guidelines for secondary and garden suites. Meeting these guidelines can help to avoid bylaw infractions and also allow homeowners to market their suite as a “legal suite”, which is generally more appealing to renters. Insurance companies should also be informed of the rental unit to avoid costly coverage lapses in the event of a flood, fire or other type of accident.
These important tips will help to protect the financial and physical health of both renters and owners:
· The height of the rooms should meet provincial building codes regulations
· If there are bars on the windows for security, these must be able to be removed or opened from the inside without tools or special knowledge in event of a fire
· Handrails and guards are needed on stairways as outlined in provincial building codes
· There must be at least one exit leading directly to the outdoors
· Occupants of secondary suites must be able to control the temperature of their unit
· A furnace must be separated from the rental unit with a wall
· There must be one smoke detector for each 300 square feet of space (this varies by municipality)
· Carbon monoxide detectors are necessary in suites with fireplaces or those heated by wood-burning stoves or gas furnaces
· Landlords should provide tenants with instructions on testing smoke detectors and carbon monoxide detectors
· The walkways to the suite should be well light and kept clear of snow or other hazards
Once a secondary or garden suite is constructed or renovated, it can provide many years of extra income for relatively little effort. Quality materials and design can help to ensure that the suite remains rented even as vacancy rates fluctuate. A unit in a neighbourhood close to amenities, work centres or a college or university will almost always be in demand.