Minimum wage workers’ struggle to afford rent getting worse in Canada

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Vancouver and Toronto are ‘worst culprits’ when it comes to affordability

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It’s getting more difficult for minimum-wage workers to afford a one-bedroom rental in most parts of Canada, according to a new report, which urges governments to introduce stricter rent control policies across the country instead of just focusing on building more houses.

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The report by Ottawa-based think tank Canadian Centre for Policy Alternatives says minimum-wage workers can afford one-bedroom rentals in only three out of the 37 census metropolitan areas (CMAs) it looked at. Compared to 2018, things have gotten even less affordable for many.

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Rents have become even less affordable to minimum-wage workers, with average rents now consuming a larger number of working hours in most CMAs,” the report said. “The trend is worrisome.”

The only cities where renters can afford one-bedroom rentals are all in Quebec: Sherbrooke, Trois-Rivières and Saguenay. But even those areas are seeing a decline.

Vancouver and Toronto are described as the “worst culprits” when it comes to affordability. In those cities, even two full-time minimum-wage workers would struggle to afford rent on a one-bedroom unit without spending more than 30 per cent of their combined income.

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“In practice, this means that the higher minimum wages in these provinces don’t directly translate into better living conditions because landlords capture a larger share of those wages through high rents,” the report said.

Ricardo Tranjan, co-author of the report, said in an interview the findings raise a bigger question of how high rent and lack of affordable housing might impact the economy as a whole.

“When you read findings like this, we tend to think of individual tenant and tenant families and the hardships they may experience, because the expression goes, rent eats first,” he said.

“But when rent is taking up most of the money, there is less money going around in the local economy. At some point businesses are going to start to feel the pinch as well, and these are the same businesses that will feel the pressure to increase wages,” he added.

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When rent is taking up most of the money, there is less money going around in the local economy

Ricardo Tranjan

The Bank of Canada has raised interest rates aggressively since last year to tackle rising costs. Although the inflation rate has fallen to 2.8 per cent in June, off its peak of 8.1 per cent last summer, high prices of necessities persist. For example, mortgage interest costs and grocery prices rose by 30.1 per cent and 9.1 per cent, respectively, last month compared to a year earlier.

The study’s researchers said the findings shouldn’t be interpreted simply as a supply and demand issue. Rather, policy problems such as wage suppression, poorly regulated rental markets and “profit-making over housing security” also play a role.

“The mess in which we find ourselves is due to bosses keeping wages down with help from provincial governments that set the minimum wage and federal governments that control monetary policy,” the report said.

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“Additional supply is necessary but not sufficient,” it said. “Canada needs more purpose-built rental units. Canada needs a larger share of rental housing outside of the private, for-profit rental market. Canada needs regulation that prevents profiteering in the private rental market. More housing anywhere at any cost will simply enrich developers.”

The study is based on a term called “rental wage,” which is how much people need to earn to pay rent without spending too much of their income on it. The thresholds used in the report include a standard 40-hour workweek and a maximum 30 per cent of income spent on housing. Spending more than 30 per cent on rent was deemed as unaffordable by the researchers.

The 30 per cent rent-to-income threshold is a metric used by the Canada Mortgage and Housing Corp. to determine core housing need.

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