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

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Vancouver and Toronto are the “biggest offenders” when it comes to affordability

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Published on July 18, 2023 • 3 minutes reading time

A rental sign outside an apartment building in Edmonton. A rental sign outside an apartment building in Edmonton. Photo by David Bloom/Postmedia

Minimum-wage workers in most parts of Canada are finding it increasingly difficult to afford a one-bedroom apartment, according to a new report. It urges governments to introduce stricter rent controls across the country instead of just focusing on building more houses.

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According to the report by Ottawa-based think tank Canadian Center for Policy Alternatives, minimum-wage workers in only three of the 37 Census Metropolitan Areas (CMAs) surveyed can afford a one-bedroom apartment. Compared to 2018, it has become even more unaffordable for many.

“Rents have become even less affordable for minimum-wage workers as average rents in most CMAs now take up a greater number of work hours,” the report said. “The trend is worrying.”

The only cities where renters can afford a studio are all in Quebec: Sherbrooke, Trois-Rivières and Saguenay. However, there is also a decline in these areas.

Vancouver and Toronto are considered the “worst offenders” when it comes to affordability. In these cities, even two full-time minimum-wage workers would struggle to afford the rent for a one-bedroom apartment without spending more than 30 percent of their total income.

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“In practice, this means that higher minimum wages in these provinces do not translate directly into better living conditions, as landlords reap a larger share of those wages through high rents,” the report said.

Ricardo Tranjan, co-author of the report, said in an interview that the findings raise the bigger question of what impact high rents and a lack of affordable housing might have on the economy at large.

“When you read results like these, we tend to think more about individual tenants and tenant families and the hardships they may be going through because they say rent comes first,” he said.

“But when rent is eating up most of the money, there is less money circulating in the local economy. “Eventually, companies will feel the effects of the crisis, and those same companies will feel the pressure to raise wages,” he added.

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When rent eats up most of the money, there is less money circulating in the local economy

Ricardo Tranjan

The Bank of Canada has aggressively raised interest rates since last year to stem rising costs. Although the inflation rate fell to 2.8 percent in June (from a peak of 8.1 percent last summer), prices for essential goods remain high. For example, mortgage interest costs and food prices increased last month by 30.1 percent and 9.1 percent year-on-year, respectively.

The study’s researchers said the results shouldn’t be interpreted simply as a matter of supply and demand. Rather, political problems such as wage depression, poorly regulated rental markets and “profit striving instead of housing security” also play a role.

“The mess we’re in is because bosses keep wages low, with the help of provincial governments, which set the minimum wage, and the federal government, which controls monetary policy,” the report said.

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“Additional care 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 discourages greed in the private rental market. More living space at any price will simply enrich the developers.”

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The study is based on a term called “rent wages,” which indicates 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 normal 40-hour week and a maximum of 30 percent of income spent on housing. The researchers considered spending more than 30 percent on rent to be unaffordable.

The 30 percent rental income threshold is a metric used by the Canada Mortgage and Housing Corp. is used to determine the core need for living space.

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