There will always be the working poor in low-paying jobs; they shouldn’t be shut out of the rental market because investors are paying too much for apartment buildings
Sun
Sometimes putting two articles together, from different sections of The Vancouver Sun, can open our eyes to the full dimension of a growing societal problem.
I am referring to Tuesday’s front- page article, “B.C. has largest share of working poor,” and an article in the Business BC section, “Demand still high for Vancouver rentals.”
The first article stated: “More than 72,000 workers — almost one in 10 — live in poverty in Greater Vancouver, leaving the Lower Mainland with the greatest incidence of working poor of any major city in Canada, according to a federal government study.”
Notice that this is not a story about the problems of the homeless, or the disabled, or the unemployable, all of whom urgently deserve more help than we are giving them, based on what activists in the field are telling us.
No, this is a problem for people who are working, but whose income still falls below the poverty line. Greater Vancouver’s figure for working poor is almost twice the figure for second-place Toronto — 9.6 per cent compared to 5.3 per cent.
What is truly shocking in a city where signs of significant wealth — in upscale homes, cars and boats — are so apparent, is that in B.C. more than 10 per cent of the total workforce is made up of those classified as “working poor.”
An economist is quoted as saying, “It’s kind of an affront to our notion that people can do OK, or even well, simply by working hard.”
The article concludes with the question of how best to help the working poor, and surveys such answers as raising the minimum wage and giving additional tax credits and better job training programs.
But the sad fact is that there will always be the need for lower-paid jobs, and I believe that society has an obligation to treat better those who step forward to fill those jobs.
So how bizarre is it to read in the same day’s Business BC an article about how a local commercial realtor is commenting positively on a “new breed of investors … buying up older rental buildings to give them major upgrades and charge higher rents for the next tenants”?
The realtor claims that many tenants have high-paying jobs and can well afford higher rents. He points out that, with substantial upgrades, a one-bedroom apartment in Kitsilano or South Granville can rent for $1,200 after previously renting for $800.
The article quotes the realtor’s newsletter as arguing that this helps landlords to justify paying prices for rental buildings that increase anywhere from six per cent to 23 per cent in one year! The realtor points out in the article that multi-suite buildings are being snapped up by investors within 24 hours of being listed for sale.
I checked out the realtor’s newsletter, and I began to understand what is going on. Buyers of apartment buildings are being urged to pay high prices and accept “capitalization rates” (the percentage of net income to the purchase price) of only 3.5 per cent to four per cent, because the rental rates have “significant upside potential,” as one advertisement puts it.
Putting these two articles together, we begin to see the problem differently: The city in Canada that has the largest share of “working poor” has the quickest sales of rental buildings at prices that only make sense if the buyers charge significantly more for their “upgrades” than what would be justified by the renovation costs alone.
Why? Because they have to make up for buying the buildings at too high a price, at too low a capitalization rate.
Who suffers? The working poor, of course.
I contend that it is bad enough to have a city where hordes of people panhandle or pick through garbage for anything that can be resold. It is even worse when a person willing to do “honest” work falls below the poverty line. It is tragically worse when that person’s ability to obtain decent rental housing for himself or his/her family is decreasing every year.
Vancouver and British Columbia urgently need programs that create inducements for the private sector to channel its wealth and creativity — not into taking units out of the affordable rental range — but to create affordable rental units. These programs are in place in a wide variety of American states, and in Canadian provinces such as Ontario.
Programs that give inducements, such as per-unit forgivable loans to developers who obligate themselves to build and rent units below a certain rent and to rent them to working people who make below a certain income, are working elsewhere. I know, because my company is creating such units in Ontario.
I hope that thinking about these two newspaper articles, and what it means for our future here in Vancouver, will spur some demand that our local and provincial politicians will help to remedy this problem.
Howard Rotberg, president of the Rotberg Development Group, resides part of each month in Vancouver, and part in southern Ontario, where he develops rental buildings for working people with low incomes.
© The Vancouver Sun 2006
