New student housing model offers lifeline to rental market

“Look at Kijiji or Craigslist ads,” Professor Mike Moffatt told me in our Zoom-call interview. “When you start seeing ads for a second or third person to share a room, that’s usually a sign that the rental market is being stressed.”

Pointing to a chart he had posted on Twitter, he added: “You can see the stress by looking at when this 20% rise in rent for one-bedroom apartments occurred in London, Ontario, Canada, in 2022.

“It was right before September, right before the school year began at [the University of] Western [Ontario], just when all the international students showed up,” said Moffatt, who teaches in the business, economics and public policy group at the Ivey Business School, University of Western Ontario.

Moffatt’s focus on the impact of tens of thousands of international students on rental markets in Ontario is not, he emphasised, an anti-international student argument. Rather, his criticisms are aimed at the colleges and the governments of Ontario and Canada that have increased the number of international students in Ontario’s colleges – from 26,000 in 2015 to 99,000 in 2022 – without increasing the housing for these students.

In her report titled, Value-for-Money Audit: Public colleges oversight, issued in December 2021, Ontario’s Auditor General Bonnie Lysyk noted that, system-wide, international students made up some 30% of the students in the province’s 24 community colleges.

“We’ve had a substantial increase in international students, mostly at the community college level, though also at the university level, and we’ve built very little housing for this population. So what’s happened, naturally, as they need to live somewhere, is that it put stress on a number of markets, which has caused rents to rise, because there has been no offsetting increase in the size of the rental stock,” said Moffatt.

“International students are the biggest victims of our inability to plan. They are not the ones causing the problem. They are among the ones having to suffer because of the problem. They are the ones who have to double and sometimes triple up,” said Moffatt, who is also the senior director, policy and innovation at the Smart Prosperity Institute, a think tank devoted to producing environmentally conscious practical policies and market solutions for a stronger economy, housed at the University of Ottawa.

According to On Student Housing in Canada, a study produced by Unité de travail pour l’implantation de logement étudiant (UTILE), a not-for-profit organisation that builds and manages affordable student housing, the increased rents that owners can charge when multiple students live in a dwelling is considerable.

In Edmonton, Alberta, for example, for a three-bedroom house, the rent charged to a family is CA$1,389 (US$1,050) per month; rented to numerous students, the rent is 29.6% higher: CA$1,800. In Toronto, the cost to a family renting a three-bedroom house is CA$1,741; for students the rental price is 55% higher.

International students

In 2019, at both the college and university levels, Ontario hosted over 300,000 international students, 48% of the total across the nation.

The rise in the number of international students at the college level began in the middle 2010s when the provincial government, which had not increased the per-student grant from about CA$10,000 for years, told the colleges to seek revenue elsewhere.

In her report, Lysyk wrote: “The Auditor General’s report has shined a timely spotlight on the issue of inadequate financial support for the college sector in Ontario. At the heart of the issue of the growth of international enrolment is chronic and historical underfunding by the provincial government.”

International students pay significantly higher tuition and fees than do Ontario residents to attend college. According to the report, system-wide, international students’ tuition averaged just over CA$11,000 more than did the tuition payed by Ontario residents. At Seneca College in Toronto, the system’s largest with 36,940 students, 10,863 international students pay CA$14,260 compared to the CA$3,571 tuition for Ontario students.

In 2021 international students provided more than half of the total tuition paid to Ontario’s colleges. For 11 colleges, 70% of their tuition revenue came from international students, while for two, 90% of tuition revenue came from international students, said Lysyk’s report.

With 92% of its tuition dollars coming from international students – 99% of whom come from India – Northern College in Timmins, 700 kilometres north of Toronto, would almost certainly not exist without international students.

In 2020-21 international students accounted for 68% of total tuition fees collected by Ontario’s colleges and at CA$1.7 billion (US$1.3 billion) contributed more to the colleges than the government of Ontario, Canada’s richest and most populous province.

According to the Canadian government, in 2018 international students contributed between CA$18.4 billion and CA$22.4 billion to economic activities in Canada that produced as many as 218,500 jobs, 55% of which were in Ontario.

In an interview with University World News in 2021, Sarom Rho, who leads Migrant Students United, which is part of the Toronto-based Migrant Workers Alliance for Change, pointed her finger directly at the Ontario government for using international students as an ATM.

“The numbers in the [Auditor General’s] report are very clear and telling. What we see is a cash grab from the Global South,” said Rho.

Ripple effects

In 2022 Fanshawe College in London, Ontario, with a student base of more than 40,000, welcomed 26% more international students than it had the year before, for a total of 6,500 international students from India, Nepal, Nigeria and almost 90 other countries.

At the same time, the University of Western Ontario, with a student base of 43,000 students, enrolled 4,759 international students. Together, Fanshawe College and the University of Western Ontario brought more than 11,250 international students into London, a city of just over 400,000.

According to Moffatt, while the number of interprovincial students who move to London to go to college or university has remained relatively stable over the years, the international student population has increased to the point that students who live off campus are causing ripple effects through the housing system.

“We’re seeing a lot of single-family homes getting converted into student rentals. Previously, as in most communities with colleges and universities, there were kinds of informal boundaries between where the students live and the townies start. But now, the student area has been expanding out from many colleges by a block or two every year. So the catchment area where students live is growing, particularly along bus lines.

“The effect cascades through the entire housing system. What’s happening on the student side is causing shortages on family-sized homes because of those conversions into student rentals.”

The student-caused strain on housing is unfolding against a larger crisis of housing affordability across the country. Hardly a day goes by without a news report detailing the high cost of housing in Canada’s major cities and, especially, the lack of available houses to buy and-or rent.

In the election he won a year ago, Ontario’s premier, Doug Ford, promised to build 1.5 million new homes over the next decade. To spur construction of new homes, Ford’s government has given the mayors of 28 cities, including Toronto and the surrounding satellite cities, Ottawa and London, the power to push through new housing developments with support of only one-third of their city councils.

A problem of coordination

Efforts to provide affordable student housing that doesn’t skew a city’s general rental market are hampered by the way Canada accepts international students. The Canadian government does not set a maximum for the numbers of international students the country will accept. Rather, it establishes criteria, such as means of financial support and, most importantly, an acceptance letter from an accredited institution.

The provinces, which have legislative control over all post-secondary institutions, could limit the number of international students but leave that decision to colleges and universities, which allows the practice of colleges and universities using international students as cash cows.

This Rube-Goldberg system has an additional effect, notes Moffatt. It leaves out the municipal level of government which is nonetheless left holding the bag for day-to-day problems.

Moffatt said: “I’ve spoken with municipal politicians who have told me that they were totally blindsided when they learned that their local institution was going to bring in an additional 3,500 international students. It’s not just a housing dilemma, it’s a transit problem. Where are they supposed to get the buses? The municipal politicians are usually the last to know and the first to get blamed for the problems that manifest themselves.

“A lot of the problem comes down to the three levels of government not sitting down to plan these things and the infrastructure that is needed to support the growth of international students. If a local government cannot be ready for 5,000 new students, it may be that they can take only 2,000 this year and 3,000 next.

“It’s more of a coordination problem than a forecasting problem. If you get the planning right, then you don’t necessarily have to worry about the forecasting.”

A not-for-profit solution from Quebec

The student housing crisis in Quebec owes less to the high level of international students than to the Quebecers and other Canadians who move to the province’s cities for their post-secondary education. Still, “the situation is dire”, said Laurent Levesque, director general of
UTILE.

“The student body in Canada is concentrated in Vancouver, Toronto and Montreal. The first two are already among North America’s most expensive cities and Montreal is quickly playing catch-up to them. And now we are also seeing the same unavailability of apartments, explosive rents, hitting much smaller college towns and universities across the country.”

According to On Student Housing in Canada, student rents in small cities severely stretch student budgets. In Sherbrooke, Quebec, a hundred miles southeast of Montreal, students pay on average CA$405 per month. In Gatineau, across the Ottawa River from Ottawa, on average, rent costs students CA$747 per month.

Though he was speaking of Quebec, Levesque’s explanation for why student rents are high in his province applies to all cities, where student renters are gouged. The first is that every year there’s a new generation of students coming onto the rental market that has to access housing and, because they are always changing, they do not rent for long enough to come under rent control laws.

“The second is that they tend to use flat sharing as a strategy for affordability. But the irony here is that while if you bring three or four students into a larger apartment to reduce rents, over-densification becomes a problem. And the rent charged to students [in total] becomes much higher than a family can pay.”

The third factor, said Levesque, is that students are geographically constrained. “Campuses are very centralised spaces; they bring a lot of people into one space. And so they generate a lot of customers, rental, demand in their vicinity.” This high demand on what economists call an inelastic supply results in skyrocketing rents.

UTILE’s study included questions about students’ mental health as it is related to their housing. Forty-two percent of respondents who pay about 30% of their income said their mental health was either “strong” or “very strong”. By contrast, only 37% of respondents whose rent exceeds 70% of their income felt the same way, while 29% said their mental health was either “very fragile” or “fragile”.

“Many students find apartments that are much too expensive for their budget,” Levesque told University World News. “They survive and manage their studies. But they are living with the financial stress of having to cough up that very high rent month after month. To pay their rent, students are forced to take more jobs and that, of course, reduces the time they can focus on their studies.

An alternative model

Founded in 2013, UTILE presently runs seven projects totalling 797 student apartments (ranging from studios to three-bedroom places). Four of their projects are in Montreal and one each in Quebec City, Trois-Rivières and Sherbrooke. The total investment in these projects is CA$150 million. Another 2,000 units are under construction in Montreal, Quebec City, Trois-Rivières and Sherbrooke.

“What we’re developing is an alternative model of non-profit student housing that’s independent of colleges and universities [and] that is able to deliver thousands of units of affordable housing at a better price point. We build and operate the projects and charge students between 10% and 30% below market rates,” said Levesque.

UTILE receives funding from the City of Montreal and some of the other cities it operates in and has raised CA$6 million from student societies. The bulk, 75% to 80% of UTILE’s projects, are funded by private investors.

The interest paid to these investors is priced into the students’ rent.

“Obviously, we try to keep interest rates to a minimum. And right now, the direct lending by the Canada Mortgage and Housing Corporation [a crown corporation owned by the Government of Canada] is quite beneficial because they have below-market interest rates for affordable housing. They are a privileged lender for us.”

Though UTILE’s apartments are not available to the general public, they will, Levesque said, have a positive effect on the local area rental markets by lessening the competition for apartments, which should lower rental costs for regular renters.

“A lot of the support we’ve gotten for our projects stemmed from the argument that building more student housing will free up space for other households in the rental market. We need to capture that demand [student renters] and we can do so in a way that is very cheap for public funds. UTILE’s plans are less expensive than building social housing, for example – while still having a big impact on the rental market to bring it back to a point of balance for the benefit of everyone,” Levesque said.