Thank you.
Good morning. My name is Krish Vadivale, and I'm the vice-president of finance for Skyline Apartment REIT, which owns and operates over 22,000 apartment units and employs over 1,000 Canadians from coast to coast. Skyline is also a direct member of the Canadian Federation of Apartment Associations, or CFAA. I have been a member of that board since 2019, and in the most recent year, served as its chair.
I also happen to be the chair and president of Victoria Park Community Homes, one of Ontario's largest privately run, non-profit housing providers. It owns and manages over 3,000 affordable homes across Southern Ontario, and is currently endeavouring to build an additional 200-plus affordable homes in Hamilton, Ontario.
I would like to begin by addressing what, in my opinion, is a fundamental truth to the landscape of rental housing in Canada. The rate at which rents are increasing today is largely driven by demand for rental housing outpacing its supply.
Before contemplating solutions to this problem, I think one must first understand the causes.
On the demand side, you have a growing population, driven largely by immigration, dovetailed with stricter rules for mortgage qualification that came into force over the past decade. This makes home ownership less attainable to first-time buyers, so they rent.
On the supply side, which is where we operate, you have increasing costs of operation and increasing costs to build. You have a growing “not in my backyard” syndrome, or Nimbyism, with respect to new developments, especially those of the non-profit type. You also have increasingly hostile sounding political rhetoric aimed at the largest providers of rental housing.
To unpack these points further, with regard to operating costs, the breakdown of how $1 of rent is allocated by cost, as presented in the brief submitted to this committee by CFAA, is largely consistent with our own financial measurements. Additionally, over the past three years, we have seen double-digit percentage increases in insurance costs, increases in the cost of labour, and mortgage rates have almost doubled. In contrast, over those same three years, the maximum allowable rent increase for most units in Ontario has totalled just 4.3%.
These factors make building new rental housing projects less attractive, which results in less new rental supply. Over time, the lack of supply drives up market rent at all price points. If the goal is to increase supply, one must either incentivize new housing supply, or remove or reduce current disincentives, including the risk of negative outcomes like vacancy control, which would surely dry up supply.
I would like to conclude with four points.
First, I'll address the concept of financialization. Skyline investors currently receive a 4% yield on their investment. Some of our public market peers pay out less than this. By comparison, for the past few months, the five-year Government of Canada bond yield has hovered at just about 3.5%, which is a near risk-free investment.
Said more simply, rental housing providers are not more financialized than any other investment, especially when evaluated on the trade-off of risk for return. Moreover, if we truly were overearning in economic terms, the rental housing market would already be saturated to a point of economic equilibrium, which we clearly do not see today.
My second point is that at the end of our last fiscal year, Skyline's in-place average monthly rent across Canada was just $1,276 per unit, per month, which on an annualized basis would be just over $15,300. CMHC's definition of affordable housing is rent that costs less than 30% of a household's pre-tax income. This would mean that the average Skyline unit would be considered affordable to households earning a little more than $51,000 per year. According to StatsCan, the average renter household had an income of $54,800 in 2021, which would mean that many of Skyline's units are affordable to many renters today.
My third point is that at Skyline, we value our tenants. We do not conduct renovictions and we never have. Conversely, in recent years, Skyline has gone as far as to create a tenant relief program that provides rent relief to tenants in our portfolio who have fallen on hard times. In 2022 alone, our tenant relief program saved over 200 tenancies.
Finally, at 22,000 rental units across Canada, Skyline would qualify as one of Canada's largest landlords, yet of the five million rental units available in Canada today, we own only four-tenths of 1%. That's not four out of every 100 units, but four out of every 1,000.
If the end goal is to have a rental housing landscape that is dynamic and provides Canadians with choice, both in terms of location and amenities, but is also largely affordable, large operators like Skyline Apartment REIT should be part of that solution, and we want to be.
Thank you for your time.
