Renters Bill Of Rights & Slowing Population Growth

[00:00:00] Welcome to the Canadian Real Estate Investor, where host Daniel Foch and Nick Hill navigate

[00:00:06] the market and provide the tools and insights to build your real estate portfolio.

[00:00:13] Welcome back to another episode of the Canadian Real Estate Investor podcast.

[00:00:16] My name is Nick Hill.

[00:00:18] I am a real estate investor, a mortgage broker and just a guy that loves real estate and

[00:00:25] loves working with other people that are trying to do real estate transactions across

[00:00:29] the country.

[00:00:30] So if you're interested, reach out to my co-host or myself and I'm joined today in every

[00:00:37] Tuesday by none other than Mr. Daniel Foch, then how are you doing today?

[00:00:42] I'm good.

[00:00:43] Yeah, it's whether it looks like it's supposed to be nice here on the GTA so they mean

[00:00:49] what other things would I possibly have to complain about since winter started when

[00:00:54] spring officially started here in the GTA.

[00:00:57] Yeah, but I'm excited we got to get an episode here today so today we're going to be talking

[00:01:01] about a bunch of different news that we feel you need to know as a real estate investor

[00:01:06] so what are we going to be looking at today Nick?

[00:01:08] Yeah, today we're going to start off by looking at Ontario's budget and the battle to balance

[00:01:14] it.

[00:01:15] I thought budgets balanced themselves in this country.

[00:01:18] You know what?

[00:01:19] I think a few people did and I really wish, I mean my personal budget, I really wish

[00:01:24] that balanced itself but apparently they do not.

[00:01:27] Yeah, so we're going to be looking at Ontario's budget and what it says about housing.

[00:01:32] We're also going to be looking at population projections and how much drop off we could

[00:01:36] potentially see in international students with the new imposed caps.

[00:01:39] Yeah, major drop offs and population seemingly around the corner.

[00:01:44] I'm sure we all remember hitting that 40 million mark in June of 2023.

[00:01:51] Less than a year later, we are officially at 41 million.

[00:01:56] So rapid growth but that rapid growth, that rapid rate of growth seems to be changing

[00:02:01] and then finally we're going to look at the federal government promising a renters bill

[00:02:08] of rights in its upcoming budget and what that means and some highlights from that proposed

[00:02:13] bill.

[00:02:14] Yeah, so let's just dive right into it.

[00:02:18] The first topic that we're covering today is a headline that says Ontario's deficit

[00:02:23] will triple as the economy weakens 2024 budget shows.

[00:02:27] The province pushes back balanced budget date to 2026.

[00:02:32] This comes from the CBC.

[00:02:34] Yeah, thanks Dan.

[00:02:35] Now before we get into this, it's important to remember how big Ontario is.

[00:02:42] There's just shy of 16 million people in the province.

[00:02:46] The province is home to Canada's largest city Toronto, its capital, Ottawa and it's generally

[00:02:53] used as a leading indicator for a number of reasons, one, the size but also just the fact

[00:02:59] that there's more data available here than anywhere else because things are tracked more

[00:03:04] heavily here.

[00:03:05] So that's why this first piece is covering Ontario's budget.

[00:03:09] We want to see what Ontario is doing, the challenges that Ontario is facing so that we can

[00:03:14] maybe look at those and apply them to the rest of Canada.

[00:03:17] Now we do have an episode coming out that is on all different levels of government across

[00:03:23] the country and what they plan to do to achieve housing and economic goals but this one

[00:03:31] is just about Ontario and that is my disclaimer as to why we've decided to focus on Ontario

[00:03:38] not to leave any other province out.

[00:03:41] Yeah, I think it's also interesting and worth observing Ontario simply because I think

[00:03:48] when policy can take place in a province that is as difficult of a political environment

[00:03:55] as Ontario, it kind of pays away for what you're seeing elsewhere in the province.

[00:04:00] I mean, we saw this with Bill 23 happening in Ontario where they up zone two or hypothetically

[00:04:05] up zone two, three units on a residential lot in the province and now there's kind of

[00:04:13] this political battle forming between Doug Ford and Bonnie Cromby.

[00:04:16] Bonnie Cromby saying we should go four plex across the board as of right in Ontario and

[00:04:21] Doug Ford kind of shouting back against that.

[00:04:25] And I think it's worth observing also being the larger portion of the dignity population.

[00:04:36] I guess just that gravitational pull of the center of the universe or whatever it is

[00:04:40] in Toronto, right?

[00:04:42] That tractor beam of hey come check this out and then a lot of people come here and realize

[00:04:49] that it's pretty damn expensive to live here and they migrate interpreventually elsewhere

[00:04:55] as we've done episodes on.

[00:04:56] But yeah, no, you're totally right Dan.

[00:04:59] It Ontario comes up a lot because one day and I both live here.

[00:05:04] Most of our listeners are here even though we have amazing listeners across the country

[00:05:08] but again, Ontario just seems to be either the leading or the laggy indicator when it comes

[00:05:13] everything so really great data points with all that being said Dan start walking me through

[00:05:19] what the, what some of the budget highlights we have here are.

[00:05:23] Yeah, so one of the things I think a lot of people dismiss when thinking about interest

[00:05:29] rates is that governments also pay interest and so high interest rates are taking a toll

[00:05:39] on most budgets right now with I think the government of Canada just hitting the highest

[00:05:44] interest expense they've ever paid and the highest percentage of their total budget

[00:05:49] in interest that they've ever paid.

[00:05:52] And you know, if you know much about politics and sovereign debt in Canada we are one

[00:05:59] of the most indebted governments in the world with Ontario having the largest I think

[00:06:05] one of the largest or like top 10 largest debt for an individual state, like not a country.

[00:06:13] And and so high interest rates obviously are going to take a toll on Ontario's economy

[00:06:19] this year is what the CBC article says and they mentioned this in their 2024 budget which

[00:06:24] included projections of weak economic growth and a ballooning deficit as a result of spending

[00:06:29] more and more money on interest.

[00:06:32] Obviously you'll hear like this concept of austerity which eventually needs to take place

[00:06:37] to start getting these budgets moving in the right direction which you know there's a reduction

[00:06:41] in government spending and social programs as a corrective measure to try and protect

[00:06:46] against future financial crises, big debt crises from a government level.

[00:06:52] I haven't we haven't seen anything like that come up yet but it would be worth paying attention

[00:06:58] to see if we start hearing about because that's like when you really get to like the

[00:07:01] depressive part of a recession, this is how all of these things interest rates climbing.

[00:07:08] Household debt being high but government debt being high, that's where you really start

[00:07:12] to feel the impact of how bad a recession can be when the government is in a state of

[00:07:17] financial crisis and they have to start peeling back social services just yesterday there

[00:07:24] was an article they came out in Bloomberg about how can social safety net is eroding which

[00:07:29] was an amazing article.

[00:07:31] I actually think we should probably cover it but they cover decades and decades of policy

[00:07:36] then how it's all compounded to hospital wait times and housing.

[00:07:40] Yeah, I was going to say even just that chart you posted this morning I know we're getting

[00:07:45] quite off top.

[00:07:46] I talked about hospital wait times.

[00:07:47] This is a real estate show but hey that all goes to to show the inner workings of

[00:07:54] the economic machine that we've built here right and if something as simple but is

[00:07:58] absolutely crucial as a hospital wait time has like what was that like tripled or quadrupled

[00:08:03] or something like that over less few decades.

[00:08:05] I mean, you know, I don't know.

[00:08:08] That's not good.

[00:08:09] Yeah, I think a lot of this is like because our birth rate is so low in order to sustain

[00:08:16] demand for real estate we're like exporting the importing of people right?

[00:08:21] We're exporting housing.

[00:08:22] You can't export housing.

[00:08:23] You can't ship houses to another country so you export like the living in Canada and

[00:08:30] if the reasons that people want to live here start to erode then it's plausible to believe

[00:08:37] that it could become less compelling for someone to want to live in Canada.

[00:08:41] Anyway, I definitely went off track there so let's get back on track and talk about this

[00:08:45] article.

[00:08:46] The minister tabled the government's $214 billion budget at Queen's Park saying it is investing

[00:08:53] in housing roads and public services during a time of uncertainty without raising taxes.

[00:08:57] So again, no more revenue coming in but they're going to spend a bunch more money.

[00:09:02] The 200-page document forecast on terrorist deficit will be more than triple from 3 billion

[00:09:06] last year to 9.8 billion in 2024 or 2025.

[00:09:09] Wow.

[00:09:10] It is funny right because we have like this left and right kind of political debate but

[00:09:16] like conservatives aren't even really like physically conservative anymore right?

[00:09:20] Like they definitely like to spend money just as much as everyone else.

[00:09:23] Who doesn't buddy order a Canadian at this point that's what we do best I guess.

[00:09:27] Well I mean the same thing happened in the states too right?

[00:09:30] You know you had the last election before where it was run that oh we're going to cut government

[00:09:36] spending and waste and whatever and it was that I think and the pandemic, you can't discount

[00:09:40] obviously the pandemic was a pretty expensive endeavor but it wasn't any different than

[00:09:46] that a government of the alternative side of the political spectrum.

[00:09:49] So anyway, the province doesn't expect to return to balance until 2026, 2027 which is

[00:09:54] I think probably pretty optimistic then that's the year of the next election what a $500

[00:09:58] million surplus is projected but I think that would only take place after the election.

[00:10:03] You have to elect them if you want the surplus.

[00:10:04] Of course of course have you ever even heard of politics before come on?

[00:10:07] Yeah.

[00:10:08] Now I mean I'm no mathematician here Dan you know out of the two of us you would be more

[00:10:14] the mathematician you might not be a mathematician here either but to go from 3 billion to 9.8

[00:10:19] billion to then suddenly a $500 million surplus I just don't see how that works out anyways

[00:10:28] the increase to the deficit again from going to 3 billion to almost 10 billion was largely

[00:10:36] caused by slowing economic growth projections leading to lower tax revenues and but also

[00:10:44] due to an expected drop in revenue caused by none other than the federal cap on international

[00:10:50] study permits.

[00:10:51] So international students is another way of saying that and we'll get to that because

[00:10:56] I know that's come up a lot on the show from a several from several different perspectives

[00:11:01] right Canada's growth kind of how screwed over some of these poor international students

[00:11:06] have been as they've come here and attended strip mall colleges and have kind of been left

[00:11:10] wanting and then of course from a real estate perspective was what that is going to do

[00:11:14] the housing market and specifically certain asset classes student rentals and other student

[00:11:20] accommodations in in college or university town so the outlook for economic growth has deteriorated

[00:11:28] significantly over the last year the government says with gross domestic product that's GDP

[00:11:34] expected to slow to 0.3% in 2024 down from the estimate of 1.2%.

[00:11:41] So that is brutal 1.2 down to 0.3 and now well GDP is expected to recover and guess what year

[00:11:50] election year potentially to 1.9 and 2.2 over the next two years those numbers are still

[00:11:58] below previous forecast and then this stuff is GDP and GDP per capita has come up a lot

[00:12:04] recently as we said we posted some pretty good charts on on social media about it and you

[00:12:11] know again numbers don't lie this stuff is getting the stuff is getting pretty bad.

[00:12:16] Yeah so it's interesting from my perspective like when you look at GDP and inflation.

[00:12:26] So the article goes on to talk about inflation and I'll read this and then I'm going to

[00:12:30] provide a little bit of opinion here so inflation is expected to slow from 3.8% in 2023

[00:12:35] to 2.6% in 2024 we're already almost there at 2.8% I think before returning to the target

[00:12:41] rate of 2% in 2025 according to projections from the finance ministry.

[00:12:45] So one of the interesting parts here is that all of these projected growths in GDP are currently

[00:12:53] below the rate of inflation of we know we're in the mid-toes and in 2025 they're saying 2.2%

[00:13:00] GDP growth which would be just above inflation so all of the if we get to that 2% yeah

[00:13:08] if we get to 2% then so basically your economy is actually experiencing no real growth right real

[00:13:14] meaning adjusted for inflation now also adjust this for population growth and the story gets even

[00:13:22] more grim so please don't do that. So if your GDP is growing at 2% nominally and your inflation

[00:13:30] is at 2% so your inflation is growing at 0% in real terms adjusted for inflation and your population

[00:13:37] is growing at even 1% then your GDP per capita is out growing your real GDP and so your real GDP

[00:13:46] is real GDP per capita is falling and we've seen it falling for 6.4% now NIC and I posted a chart

[00:13:55] that seems to have gotten a little bit of attention on Instagram which it just came from NBF national

[00:14:02] bank finance their their economic department is on fire right now not gonna lie yeah we should

[00:14:08] have them on the show sometime there's just well the economists are just beating up Canada right now

[00:14:13] they're just absolutely yeah they're probably looking at the numbers and being like this would look

[00:14:18] really good on a chart well even the Bank of Canada themselves actually if we're doing the news

[00:14:23] episode the Bank of Canada themselves um Carolyn Rogers the deputy governor who is incredibly

[00:14:29] good at pressers actually she came out and said that we're in an economic emergency right now our

[00:14:35] productivity growth is an economic emergency which is I mean you you never want to hear the word

[00:14:39] emergency from from a government especially when it comes to economics that I mean that was

[00:14:45] that's a pretty bold statement right that's pretty eye catching statement for sure for sure

[00:14:50] yeah so anyway let's get back to the article if you want to just read the little budget here

[00:14:56] yeah for sure so that it goes on to say the budget outlines a whole number of things that the

[00:15:00] government wishes to accomplish but this is a real estate show so we are going to chat about

[00:15:05] the real estate specific things which are the new funds for housing that portion of the budget so

[00:15:12] to support the province of Ontario's housing plans the government is investing

[00:15:17] more than 1.8 billion in two different funds that will help municipalities build

[00:15:24] housing enabling infrastructure so that includes things like roads and bridges

[00:15:31] wastewater stormwater drinking water all the infrastructure we need to support the things

[00:15:36] you can't just go put a house on a piece of land the house needs what's called servicing and the

[00:15:40] infrastructure around that so that is what some of that budget is going to be used for

[00:15:45] the province will also allow all single and upper tier municipalities to impose a tax on vacant homes

[00:15:53] now we did a whole episode on the underused tax for vacant homes and this has come up quite a bit

[00:15:59] now currently only Toronto auto and Hamilton have that authority to tax vacant homes so a new policy

[00:16:07] framework would encourage municipalities to set a higher rate for foreign owned vacant homes now

[00:16:13] that might move the needle a little bit but that is not really a solution and again we'll see how

[00:16:19] much of all of this just turns out to be talk versus versus action you know the part that I find

[00:16:26] interesting and you were just at the Ontario Home Builders Association of where I was on a panel

[00:16:31] there is this idea that like we have just such a disjointed tax structure so let's just like back up

[00:16:39] here because we just mentioned it on another episode about talking about development charges but

[00:16:44] it says to support the province of Ontario's housing plan the government is going to invest in

[00:16:49] funds that will help municipalities build infrastructure roads bridges and drinking water wastewater

[00:16:55] weren't we being told or aren't we being told by municipalities that development charges exist

[00:16:59] because growth pays for growth and you as a developer are paying for them you're paying into a fund

[00:17:05] for all of those things so now we have the federal government giving money to municipal governments

[00:17:10] for all of this infrastructure we have the municipal governments charging developers on an individualized

[00:17:15] basis for all of this infrastructure and now the provincial government is saying that they're also

[00:17:20] going to throw money at the problem and yet development charges are coming from developers

[00:17:26] pockets which ultimately ends up getting capitalized into the new cost structure of a brand new house

[00:17:31] we have three people throwing money at the development of infrastructure for new housing yet

[00:17:37] buyers are still expected to pay a fee for the infrastructure for new housing and we're wondering why

[00:17:43] we can't create affordable housing here so anyway it goes on to say that they've proposed some sort of

[00:17:50] solution which is that mean as municipalities will be allowed to lower their property taxes on

[00:17:55] new purposeful rental housing to encourage more construction of those units so let's just actually

[00:18:00] really unpack that like what would taxes be as a percentage of your total expenses right so when

[00:18:05] you when you look at this is a Canadian real estate investor podcast so let's actually talk about this

[00:18:09] you get your income you take you deduct your taxes maintenance and insurance right so taxes

[00:18:15] are going to be I mean if you're if you're you know a six unit building but I think I think as soon

[00:18:21] as you go commercial like over four the taxes get go up like way more on a per suite basis but we'll

[00:18:27] use that because of MLI select program the so taxes by comparison to like maintenance or insurance

[00:18:36] interest rates are pretty nominal right it's not a huge line item like I can't see

[00:18:41] the small reduction in tax rates really making a deal a pencil that's yeah that's not going to

[00:18:47] be the thing that makes deals that weren't working pencil out if taxes get lowered by a few

[00:18:51] I mean few points maybe maybe if it's like a 50% reduction in taxes on purposeful rental like

[00:18:57] sure yeah or yeah you know like that would that would move the needle enough to push a you know

[00:19:02] 1.18 debt service coverage ratio to a 1.2 debt service coverage ratio and now all of a sudden the

[00:19:08] deal pencils but to me and this is what I mentioned at the Ontario Home Builder's Association panel

[00:19:13] and by the way we're gonna have a bunch of people members and people from the the Home Builder's

[00:19:18] associations on the show over time because we we really like that that group of people but they

[00:19:23] what I'd mention at this event was why are we not discussing development charges so to go back

[00:19:28] to that tax structure the federal government has removed GST on purposeful rentals now the provincial

[00:19:34] government has now removed GST on purposeful rentals in the province of Ontario why are we not saying

[00:19:39] why isn't everybody looking at the municipalities and saying hey we did our part where's yours right

[00:19:45] because we know that development or that taxes and charges are 31% of the cost structure of housing

[00:19:51] so anyway before I get too crazy on tax policy and trying to publicly bully municipalities that

[00:19:56] making it cheaper to build purpose built housing but like the reality is these it's not that dolebers

[00:20:03] don't want to build housing it's that they can't because they don't want to build it they don't

[00:20:09] want to build it at a loss because that's not good business and it's not even like you're new

[00:20:15] yeah and it's not even like you're saying like when when it comes full circle it's the government

[00:20:19] who's also preventing them like who's underwriting these deals who's the one saying oh this deal doesn't

[00:20:24] pencil CMHC right CMHC says we're not going to ensure this loan because it doesn't emit or

[00:20:30] that meter debt service recovery coverage requirement or the construction cost is too expensive

[00:20:34] because of your development charges okay well so now all of a sudden if it comes full circle

[00:20:39] it ends up being like that spider man meme with everybody pointing at you know the other part

[00:20:43] of the government so anyway there were 89,000 housing starts in Ontario in 2023 with 87,000 projected

[00:20:51] for 2024 92,000 for 2025 94,000 for 2026 all are well below the pace of at least 150,000 per year

[00:21:00] needed to achieve the provinces goal yeah and that provinces goal is to build 1.5 million new homes

[00:21:05] by 2031 so you know we're we're minimum 50 to 60,000 homes less per year to hit that goal so compound

[00:21:16] that and you know we're hundreds of thousands of homes short by 2031 now earlier when we were

[00:21:22] discussing the Ontario budget I want to say disaster but the Ontario budget we we mentioned the

[00:21:29] increase in the deficit remember that went from three to almost 10 billion was caused by slowing

[00:21:35] economic growth projections leading to lower tax revenues but also one of the major things was

[00:21:40] an expected drop in revenue caused by the federal cap on international study permits so we obviously

[00:21:47] have spoken at length about population growth international students the strip mall college you know

[00:21:54] there's a lot of fraud going on student rentals and overall what this inflow of students is done to

[00:21:59] the economy and the housing market yeah so here is a quick refresher now we've done full episodes

[00:22:05] on this but this does pertain to exactly what we're talking about here so you guys can't see this

[00:22:10] because you are listening but Dan and I are looking at this chart that we've looked at it's actually

[00:22:14] more of an excel spreadsheet like really but it's basically each college their growth from 2014 to

[00:22:21] 2050 they're going from 2021 to 2022 the change represent is a percentage and the growth

[00:22:27] represented as a percentage there's about 20 so schools on here the average growth percentage is

[00:22:34] over 240 percent with some of the outliers hitting 1500 1700 4600 percent 3,990 percent so just

[00:22:45] absorbance amounts of growth in some of these colleges that literally flung open their doors and

[00:22:53] dissonant like Oprah style you get a student visa you get a student visa and just started to

[00:23:00] accept international students like it was nobody nobody's business so seeing a cap in this

[00:23:08] Ontario because most of these are in Ontario a lot of these colleges are in Ontario

[00:23:14] seeing a cap put on this is going to definitely have an effect and Dan you're gonna you're gonna walk

[00:23:19] me through some of the significant changes to international students that the Canadian government

[00:23:25] announced yeah so a couple of key points on it so the number of study permits will be capped for two

[00:23:30] years with a limit of about 36,000 set for 2024 representing a 35 percent reduction from 2023

[00:23:35] levels different quotas will be said and that's that's 360,000 not 36,000 oh my bad not

[00:23:42] too early too early for me to be reading numbers 360,000 yeah 36,000 would be catastrophic

[00:23:49] yeah that's like one school bait they basically right there yeah so there will be different quotas

[00:23:55] for different provinces so it'll end up being kind of shifted around with the objective of balancing

[00:24:00] things and balancing the impact on infrastructure with Ontario facing a reduction of 50 percent or more

[00:24:05] so this is gonna be a huge like this will be a noticeable impact in Ontario just like to be fair

[00:24:11] just like the impact of the growth was noticeable in Ontario and I think probably noticeable in a lot

[00:24:16] of places but the reduction will also be noticeable from my perspective new enrollments in the

[00:24:21] public private partnership college programs which is basically like where a lot of that fraud was

[00:24:26] taking place a lot of these strip mall groups existed will no longer be educated or so eligible for

[00:24:32] the postgraduate work permit so basically there was a post graduation work permit where you could

[00:24:37] finish a program you would get a work permit and a lot of colleges were exploiting this or a lot

[00:24:42] of institutions were popping up to exploit this realizing that what the international students wanted

[00:24:47] wasn't actually an education it was the work permit like they want to come and work and contribute

[00:24:52] to the Canadian economy get jobs so that was a big reduction spouses and column up partners

[00:24:57] of new international students will no longer be able to or be eligible for open work permits except

[00:25:01] for graduate master's to doctorates and professional degree granting programs to these changes obviously

[00:25:07] coupled with earlier policies and the reinstatement of a 20 hour per week work limit and the

[00:25:12] elimination of that postgraduate work permit extensions will definitely have a significant impact on

[00:25:19] on how this whole thing interacts with especially I would say rental demand in Canada.

[00:25:24] Yeah 100% I mean and again just to reiterate Ontario facing a 50% or more reduction so

[00:25:33] just like you know since we've started the show day and the numbers that we've said like most

[00:25:37] of these numbers aren't normal right something goes up 50 100 3 4 5 600% in the thousands of

[00:25:44] percent there's likely something wrong there that is a red flag to me just like if there's a reduction

[00:25:51] of 50% that is also a red flag and that needs to be taken into account so just like we saw

[00:25:58] like crazy changes on the way up we are going to see crazy changes on the way down

[00:26:02] now I'm just going to give a quick shout out here go follow exalon xe l an on twitter actual friend of

[00:26:11] the show Alex he put together this great thread also has actually on the note of you saying earlier

[00:26:17] that I was not a mathematician Alex actually is a mathematician he's actually a mathematician

[00:26:25] and he actually he has a paid sub stack I think he has it paywall now like he does some free

[00:26:29] articles and some paid ones but like one of the few researchers that I would gladly support I

[00:26:35] remember like a couple years ago he launched I think he paid one and I was like done immediately

[00:26:42] like it's just like a shout up and take my money kind of thing like and so he creates amazing

[00:26:46] value I would highly recommend checking out his research he actually supports me on the on the

[00:26:51] rare report as well yeah yeah you work with him on the rare report that we that we usually cover

[00:26:56] here again as you said killer newsletter puts it gets puts together a bunch of like what I would

[00:27:00] consider somewhat proprietary stuff or he'll take data similar to us and put it into into charts

[00:27:05] anyways he has the annual population growth in Canada on his ex formerly known as twitter feed

[00:27:13] dropping from about 1.2 million that we experienced that this year down to about 240,000 for the years

[00:27:21] between 2025 and 2027 he's got this this great chart here that goes back to 1992 all the way to

[00:27:27] 2026 that shows kind of population kind of steadily around the 400,000 mark from 90 1992 to about

[00:27:37] 2014 from 2016 to 2020 ish we see it jump just above 400 and then skyrocket up to the right at 1

[00:27:50] million in 2023 or 2022 ish 2023 1 million 1.2 million and then it drops substantially after that

[00:28:00] Dan anything I'm missing you are the chart master here yeah the only thing that I would say that

[00:28:05] is worth looking at on this chart is how in the next three years so 2025 six and seven you actually

[00:28:14] see so there's so there's two bars on this your immigration so that's people who are getting

[00:28:20] permanent residency and then there's non permanent residence so immigration is blue non permanent

[00:28:25] residence is green and you notice that the green bars are below zero in the next three years so they're

[00:28:32] actually anticipating a net outflow of non permanent residence so the idea is that that non

[00:28:39] permanent residence will actually be reduced from 6.2% to 5% of the total population so I'm going

[00:28:45] to explain I'm just going to read his assumptions from the actual article where Alex explains this so

[00:28:52] between July 1st so it says here are the assumptions used here between July 1st and July or sorry July

[00:28:57] 1st 2023 to 2024 net NPR grow has assumed at 700,000 immigration levels for 2024 to 2026 remain

[00:29:05] unchanged natural population increase and other components will remain around the same levels seen

[00:29:09] in recent years so those are the assumptions that used yeah and then he goes on to say why was my

[00:29:14] initial estimate significantly lower well for simplicity I calculated using a 40 million

[00:29:20] population well it's close to 41 million oh and actually correctionalics it just hit 41 million I

[00:29:27] believe yesterday or the day before which was even faster than most people expected because they

[00:29:32] were predicting sometime in early mid April this is Thursday March 28th that we are recording this so

[00:29:38] it happened sooner than everyone expected I used a 6.2% share of non permanent residence from

[00:29:45] the announcement of whoever by July of 2024 it should be closer to 7% so now it represents a larger

[00:29:51] decline so from 7% down to 5% and he goes on to say that the outflow of NPR is expected

[00:29:59] regardless so he's uncertain about the potential impact of it even if it were to be implemented

[00:30:06] in all to go as planned here so a few key takeaways I want to discuss here with you Dan before we move

[00:30:11] on to the final part here which is the renters bill of rights so stay tuned for that but quick quick

[00:30:18] little discussion here on on what this outflow and this cap and stuff is going to do

[00:30:24] to the housing market what does it mean for investors and specifically what does it mean for

[00:30:28] certain asset classes like student rentals because just in our not our last episode but a few episodes

[00:30:34] ago we covered that Royal Appage Report where it really broke down who invests in what and what

[00:30:40] about what age and all that kind of gets off and one of the key factors that stood out to me there was

[00:30:45] it seems like a ton of Canadian investors own investment properties that are likely student

[00:30:53] residents or student rental housing or at least in a student or like in like a college or university

[00:31:00] so when we see a massive cap on this stuff what do you think is going to happen to

[00:31:06] that specific part of the housing market yeah I mean my my perspective is like like this is really

[00:31:14] a big threat to those markets we saw like it basically since covid and interest rates went to zero

[00:31:23] and housing demand went crazy prices went so high and the only way you could really cash flow

[00:31:28] property at those purchase prices was through student rental and then and actually we just covered

[00:31:35] this in the that the Royal Appage Report right one in four investors want to buy a real estate 50%

[00:31:41] of them are thinking about being close to a school so 50% are already thinking about being student

[00:31:49] rental investors but one of the challenges here is so you think about all of those houses that

[00:31:54] were purchased in 2020 2021 that were too expensive and wouldn't a cash flow to long-term rentals

[00:31:59] so a lot of them were making into student rental pools there are a lot of investors were going

[00:32:03] that route to be able to cash flow and then prices came down but rates went up and so now if you're

[00:32:08] buying at current rates you still need to maximize your cash flow and still the way to do it even

[00:32:15] a lot of the people that we have in our course want to get into student rental investing we just say

[00:32:19] okay well make sure that you're aware of this table that we mentioned that Nick read some of the

[00:32:24] percentages off of in this in this episode earlier the reality is those markets are highly at risk

[00:32:30] for a bit of a correction doesn't mean they're not going to be investible in the fullness of time

[00:32:34] but in the in the short term there will be some definitely you will see some turbulence from

[00:32:40] rental demand where we're seeing a huge reduction in renters up to 50% based on what the provincial

[00:32:45] government cap just said or the federal government's cap just said and that that could have a huge

[00:32:51] impact if the market that you just or we're interested in investing in saw a six that or sorry

[00:32:58] 4,000% increase in the international student population and now you know so that's 4,000 more

[00:33:04] renters in that market and now all of a sudden that gets reduced by 2,000 and a bunch of people

[00:33:09] rushed into that market you know North Bay, Sue St. Marie being great examples people were

[00:33:13] rushing into those markets to get cash flow and now all of the sudden the tenant pool dries up

[00:33:19] and they're renting to long term you start seeing some people offload because they're distressed

[00:33:22] less people lining up to buy the assets and so there's some headwind from my perspective on both

[00:33:27] rents and prices in those markets yeah yeah totally I mean I'm gonna take a leap here and try to

[00:33:35] come up with a bit of an analogy so I mean Dan you and I talk a lot to a lot of office brokers

[00:33:39] cover the office space and you know we've seen a big shift in the office market right now right from

[00:33:45] class A which are like the sexy buildings right downtown all the way down to and we've done

[00:33:50] full episodes about this if you want to go back and take a reference on what we're actually talking

[00:33:54] about here but I think it's going to be the same thing right like class A buildings in in the office

[00:34:00] environment are still gonna be okay for the most part where we're really seeing the stress is when

[00:34:05] you kind of go down that trickle down effect you get to B and then you get to the C class office

[00:34:10] buildings and that's where people are like I don't why would I be here I'm getting better rates on

[00:34:16] A's and B's because they're more desperate well I can see something similar happening to some of

[00:34:22] these markets with student rentals right the renter pool shrinks but there is now there's still a

[00:34:29] whole bunch of options for these renters so where are they gonna go they're gonna go to the best

[00:34:33] asset so if you've got a really good student rental you should be okay but if you've kind of got a

[00:34:39] dumpy student rental and you're charging too much and the amenities aren't there well then I think

[00:34:45] you are in danger because just like with everything when there's when there's over when there's

[00:34:51] just so much demand people just take what they can get but when the demand inches back which is

[00:34:57] what this is we're exactly gonna see 50% reduction in Ontario alone well are people going to be

[00:35:04] fighting over the kind of bottom of the barrel rentals no they're gonna be looking at the medium

[00:35:10] too good the class B the class A stuff so you know using the class ABC from commercial as a commercial

[00:35:17] office as an example you know class A and class B should be fine class C stuff is very concerning

[00:35:23] across the board yeah it is interesting I don't know if I have the same sentiment like I would say

[00:35:29] that in a purely competitive market if price ends up being where landlords are competing then

[00:35:36] then yeah obviously people are gonna go towards the better stock if price is independent but I think

[00:35:40] that there's a unique ability for lower quality stuff to be priced lower because the the owner

[00:35:47] the purchaser paid less money for it or because they're like a slum lord and deferring maintenance

[00:35:52] and that's not financial advice don't do that but if if these like I think that affordability is

[00:35:58] such an important thing right now and so like I can almost see it and this is sort of what you're

[00:36:03] seeing in some of these office spaces is like the A's and the C's are succeeding because C's have

[00:36:11] future potential you can get them at a huge discount right cuz they're vacant cuz they're distressed

[00:36:15] and the A's are that's where all the tenants are moving anyone who's still kind of in this return

[00:36:19] to office thing and so the middle ends up being and it becomes this kind of like disparate market so

[00:36:27] anyway that makes that certainly interesting take I guess we'll yeah totally I guess we'll

[00:36:32] we'll see what happens I'm sure we'll have an episode on it in the next the next couple months

[00:36:36] yeah so let's start off by the final final piece here the renters bill of rights that was just

[00:36:41] announced so the bill was specifically geared to help younger people and they made it pretty clear

[00:36:45] in their in their presser from both Sean Fraser and Justin Trudeau that it is you know to help

[00:36:53] young people build credit in a lot of cases I mean it seems kind of like a little bit of

[00:36:58] they're trying to garner some votes here and which worked well for Olivia Chow's election campaign

[00:37:04] in the city of Toronto to be fair to to really push towards getting the renters vote the tenants vote

[00:37:11] and it seems pretty clear here that that's their objective I don't know if the policy is going to be

[00:37:15] as helpful for tenants as as they're hoping but anyway let's let's dive into it yes I mean you may

[00:37:21] be thinking another bill great my bills are already super expensive but it's not that kind of bill now

[00:37:27] this bill as dance to this actually aimed to help specifically young people that you know everyone

[00:37:34] realizes our suffering right now so a bill of rights is a list of the most important rights

[00:37:40] to the citizens of a country and since we are in a housing crisis here and a lot of young people

[00:37:45] are very mad about that this bill maybe one bill that we are actually happy to see

[00:37:52] yes so Ottawa will work with provinces and territories to develop a renters bill of rights

[00:37:57] that would introduce a national standard lease agreement and implement requirements for landlords

[00:38:02] to disclose apartments pricing history to allow tenants to negotiate their rent so this is funny

[00:38:07] because Nick you and I I actually for anyone who's listening has that the federal government

[00:38:14] that's going to be a difficult thing to execute but we we have this group that we they're going

[00:38:19] to come on the show eventually but the AI tool that we've been using in the course has they

[00:38:24] basically the reason that it works is because they have a huge backlog of rents they have

[00:38:28] to have rental history for the entire country and and so that like could potentially be a huge

[00:38:35] asset I would say for the policy like this to to exist the new measure will also include a

[00:38:40] 15 million dollar fund for provincial legal aid organizations that help tenants fight against

[00:38:45] renovations and landlord abuse yeah not nearly two thirds of younger Canadians rent their homes

[00:38:52] and with rapidly rising rents higher rates and super low vacancy rent has become a major pain point

[00:38:59] for a lot of young Canadians and I can tell you I am one of them so our most of my friends the new

[00:39:06] rules will require significant buy-in from the provinces which if we know anything about Canadian

[00:39:12] politics is definitely going to be a bit of a battle now the three main takeaways here

[00:39:19] from this proposed bill are on time rent payments will be added to your credit score in an effort

[00:39:24] to help build renters credit up however there is no mention of non payment of rent and and that

[00:39:33] have an negative effect on your credit score so bit of a bit of confusion there landlords as you

[00:39:40] just said Dan will need to provide a history of rent prices for that unit ideally allowing tenders

[00:39:46] to negotiate but again think some confusion there as well bit of a gray area and then of course

[00:39:52] the tenant protection fund to stop people from such things like batvade evictions renovations

[00:39:58] but Dan I wanted to turn this back over to you and maybe this is where we'll finish it off here

[00:40:03] is this government has made similar promises like this before with the what was it the home buyer

[00:40:10] spill of rights that we saw several years ago yeah and and that never really materialized did it so

[00:40:16] can you remind me what some of those other promises that we that we never got or and and maybe that

[00:40:22] were at risk of maybe kind of seeing a similar thing and this is just a big song in dance

[00:40:26] yeah it is I think from my perspective it does seem like a lot of these policies are selling

[00:40:29] the sizzle and not the stake so the home buyer's bill of rights promise to get rid of blind bidding

[00:40:34] establish a legal right to home inspection having realtors disclosing all participants to a transaction

[00:40:41] creating a beneficial ownership registry which we covered in depth on this podcast when we're

[00:40:47] talking about the underused housing tax which is actually coming up again for deadline I imagine

[00:40:51] we'll get pushed which will be funny a woman will cover it again and talk more about it but

[00:40:55] none of these things really happened in a meaningful way and so and that was promised in their last

[00:41:01] I think what I want to say was like there it wasn't it wasn't the most recent election I think it

[00:41:05] was two elections ago was their second term and so it's just hard for me to be to not be cynical

[00:41:13] about hearing things like this like I actually think that I think a tenant protection fund is great

[00:41:19] I think that bad faith evictions and bad landlords make our job as good landlords an incredibly

[00:41:25] difficult task and they also and they do it by jamming up the court systems which we've talked about

[00:41:32] in the province of Ontario has a record backlog even though they've hired more adjudicators

[00:41:37] and are processing more cases so I think a tenant protection fund from a legal aid perspective

[00:41:42] is not a bad idea by any means I think it might might end up getting like a lot of these conflicts become

[00:41:48] they could become question marks and so it's hard to it's hard to really like decipher what's

[00:41:53] worth spending that legal aid money on right and then but I think that the two other ones are

[00:41:58] very interesting from my perspective because they aren't that hard to execute if the government is

[00:42:04] actually serious about doing it so the on-time rent payments being added to your credit score because

[00:42:08] they did mention they would work with FinTechs and stuff like that frontlawby.com right they've

[00:42:13] reached out to us about this there's a couple of groups in the states as well but frontlawby.com

[00:42:18] is a group that already does this if you're a landlord you can go to that website you can

[00:42:22] do rent reporting credit building tenant screening and debt recovery and they have already

[00:42:27] have this system so if you quite literally it's a great day to be them when I'm sure that

[00:42:32] they were having a good time hearing this policy and the same thing landlords needing to provide

[00:42:37] a history of rent prices doorinsight.com right doorinsight has a history of rent prices in Canada

[00:42:43] I think that's that's quite literally what they do this they and appraisers use their rent database

[00:42:48] so if you're if you're a tenant and you want to get an idea of what a unit rented for

[00:42:53] I think a big thing I read a breakdown of this policy on a on an immigration website to CIC I think

[00:42:59] and the their perspective is really interesting because I hadn't thought about it this way but

[00:43:05] that could really eliminate the the risk for a newcomer to Canada being overcharged for a unit

[00:43:11] because they have no idea what it actually should be worth and they're just being told and they

[00:43:15] trust people because you know they're told it was a trustworthy place and so if you can see what

[00:43:20] it rented for before you know in a lot of cases you're going to be like oh it doesn't make me feel

[00:43:24] better that I'm paying 10% more but if you're just saying I'm only paying 10% more and so

[00:43:31] you know I'm comfortable with that or whatever I'm not paying 100% more than so it's I think it's

[00:43:35] designed to eliminate some of those negative externalities just like the home buyer's build rights

[00:43:38] blind bidding people over paying etc so I honestly think that this is done in in good faith I think

[00:43:45] that they they actually want to make an impact here I think that they want to do it so that they can

[00:43:49] get tenants and young people to vote but some of these things especially where it's the way

[00:43:54] they position the credit score thing is like you can build your credit score so you can get a mortgage

[00:43:59] like as if access to more debt is the solution here and it's just so on brand from my perspective with

[00:44:05] why we have this problem to begin with yeah of course we of course we want more debt right I mean

[00:44:10] we that are Ontario triple its debt and Canadians for every dollar we make were one dollar

[00:44:16] need two cents in debt and apparently that's not good enough yeah I think it's also I didn't

[00:44:21] I didn't really mention this I meant to but like it goes both ways with the credit score right and

[00:44:24] I found that I responded to both Justin Trudeau's and Sean Fraser's tweets because they both put

[00:44:30] out videos saying you know if you're paying your rent it it'll help you build credit but they but

[00:44:35] nobody mentioned whether or not if you don't pay your rent if it'll have an impact and to me that's

[00:44:40] that's basically like I was more of a support for landlords than tenants like I think that

[00:44:47] or or it's equal support and so I think that that's actually something that could really do great

[00:44:51] to balance the outcomes in the housing market it punishes tenants who are abusive of the system

[00:44:57] whenever rewards tenants who are not and this is where this is what we need we need the right

[00:45:01] incentives right and so I think that that actually is making it so that all tenants have credit

[00:45:06] scores is is a huge step in the right direction on a national level I really I really feel that

[00:45:12] way I think it is great for tenants who are who I think good tenants should be rewarded by getting

[00:45:16] it to show up on their credit credit but I also think that good landlords should have the ability to

[00:45:20] you know register if if they're not collecting and and that's what they're describing here right yeah

[00:45:27] 100% lots to lots to follow over the coming months as we see a lot of this stuff unfold so that's

[00:45:34] it for today's episode jam packed full of news Ontario's budget student rental caps budgets not

[00:45:41] balancing themselves and a new proposed renters bill of rights we will see how it all unfolds and you

[00:45:49] best bet that we will keep you updated on the show thanks so much for listening everybody go check

[00:45:54] out the links in the show notes on the course the community the upcoming events and all the other

[00:45:59] great stuff that Dan and I offer outside of just the show here and we hope to see you soon thanks so

[00:46:06] much for listening the Canadian real estate investor podcast is for entertainment purposes only and it

[00:46:12] is not financial advice Nick Hill is a mortgage agent with premier mortgage center and a partner in

[00:46:19] the G and H mortgage group license number 10317 agent license m21004037 deno foch is a real estate broker

[00:46:31] licensed with rare real estate a member of the Canadian Real Estate Association the Toronto Real Estate

[00:46:38] Board and the Ontario Real Estate Association