Despite an increase to a 1.7 per cent vacancy rate, Penticton is still seeing a rise in rental rates according to the Canada Mortgage and Housing Corporation (CMHC).
The vacancy rate in the city in 2017 was 0.9 per cent and two-bedroom units saw the biggest change, increasing from 0.5 per cent vacancy to 1.5 per cent. Two-bedroom units also saw the biggest price increase from $943 average cost last year to $1,059 this year.
According to Taylor Pardy, acting regional economist with CMHC, the vacancy increase is a result of new units being built in the area and “outward pressure” on the market. The city has been dealing with a housing crisis in recent years, unable to keep up with the demand for affordable units as the population continues to grow.
“A lot of the same fundamental drivers that have been contributing to rental demand in places like Kelowna and Vernon also apply to Penticton, particularly in migration into the area,” said Pardy. “This is both younger individuals and retirees or seniors, those have both been two key cohorts driving rental demand across the Okanagan.”
Pardy said when looking at the change in vacancy, ultimately “the supply outpaced the demand between last year and this year” in terms of rentals. He said a possible reason for the price of rent increasing could be “turnover in the market.”
“When units turnover, depending how long the tenant was in the unit, (the price) may jump from a lower rental amount to whatever the market going rate is,” said Pardy. “That contributes to our estimate of the percent change in average rent.”
Penticton Liberal MLA Dan Ashton believes the rising cost of rent is partially due to the Employer’s Health Tax, which the NDP government introduced on Feb. 20 and will be taking effect on Jan. 1, 2019. This payroll tax will be applicable to employers with annual B.C. payroll in excess of $500,000.
“The government said to the owners, ‘We’re going to allow you to increase four per cent this year’ or something like that, and I think they cut it back now to half of that,” said Ashton. “On the other side, all of these additional costs are being put onto the building owners. And I have sympathy for both sides of the equation, it’s getting more and more and more expensive these days for everything.”
Ashton said he believes the government should take the cost of living into account before implementing more taxes. He noted the closure of GM in Ontario and the downward turn of Alberta’s economy as signs that Canada’s economy, in general, is at a critical point in time.
“So private employers that are going to be hit with that health tax, where do they get it? They increase their productivity, which hopefully increases profit. Or they start looking at expenses, and in most cases the largest expense is employees,” said Ashton.
“Even with all this new construction and everything else happening, there is all this pressure on the rental market. And wages aren’t keeping up with this price increase so it means people have less and less disposable income.”
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