HOW P.E.I. RENT INCREASES COMPARE TO INFLATION OVERALL
Rents were a major driver of the post-pandemic inflation surge on P.E.I., but a number-crunching exercise shows they may not yet have reached the point of being unreasonable — at least compared to how much it costs landlords to own the buildings being rented out.
P.E.I.’s consumer price index rose 17.7 per cent from 2020 to 2023. A look at where the consumer price index breaks down to rent specifically shows an increase over that same period of 22.7 per cent.
This led to complaints from groups representing tenants.
“We see the issue here as a conflict between housing as something that people need to survive, and housing as a financial investment,” said Cory Pater of the P.E.I. Fight for Affordable Housing.
The group believes rent controls on the Island have failed to bring balance to that conflict, and the scales are tilted toward landlords.
Landlords have a different view. Appearing before a legislative committee earlier this month, June Ellis, executive director of the Residential Rental Association of P.E.I., blamed rent controls for contributing to the Island’s housing crisis.
“Rental operators do not build more units because the industry is unsustainable,” Ellis said.
Home ownership costs versus rent
Let’s go back to the consumer price index. In addition to breaking down rent specifically, the CPI looks at the cost of home ownership, including mortgage and maintenance.
So we can compare the cost increases that landlords have faced to how much they have boosted rent.
For much of this century, inflation on rent and the cost of owning housing tracked pretty closely.
In the last two years, though, rents began to go up faster. The overall increase in rent on P.E.I. is now about four per cent higher than the overall increase in home ownership costs since 2001.
So, there you have it: Rents have gone up four per cent more than they need to.
That’s one way of looking at it, but it doesn’t take into account what has been going on with those two indexes through the whole of those 23 years.
While the two inflation rates did track very closely for 20 years, there were two extended periods — from 2004 to 2010 and from 2016 to 2019 — when rent came in a little below housing costs.
As it turns out, the cumulative comparative losses that landlords incurred during these two periods is almost exactly equal to what they have gained in the last two years.
So, over the course of the whole of this century, it’s a wash. Overall rent increases have been equal to overall home ownership increases.
It is worth noting that if rents stay where they are relative to home ownership costs, they will quickly tilt in favour of landlords.
More needed for low-income renters
None of this is to say that these rents are affordable.
Economists have known since the 1930s that the market cannot create affordable housing for everyone.
“For a subset of Canadians, particularly renters, low-income renters, they’re never going to be able to keep pace with where market prices are going,” said Scotiabank economist Rebekah Young.
She said the solution is social housing, and governments since the 1990s have been allowing social housing stocks to decline.
Prince Edward Island’s provincial housing strategy calls for at least 560 new social housing units in the next five years.
That would still put P.E.I. well below the OECD average for social housing stock, but Housing Minister Rob Lantz has said that commitment is a minimum, and the province is on track to provide more than that.
Story by: CBC News
