Sticker shock: Shelter costs in B.C.
An earlier blog examined the rising price of consumer goods and services in B.C. and how consumer prices have changed between January 2019, a year prior to the COVID-19 pandemic, and July 2024. Another blog in this series looked at food prices. This blog looks more closely at shelter, which makes up around one-third (32%) of consumer spending.
Shelter and food makes up about half (49%) of the B.C. consumer price index (CPI) basket (i.e., half of all spending for the average consumer). Respectively, food and shelter prices have risen by 27% and 29% over the period, well above the rate of total CPI inflation (21%).
Shelter inflation
Shelter costs in B.C. have risen by 29% since January 2019, even higher than food inflation. There are three main types of shelter costs tracked in the CPI: owned accommodation costs; rental accommodation costs; and utilities (Figure 1). Owned accommodation costs have risen by 29% between January 2019 and July 2024 (Figure 2). There have been spectacular increases in home and mortgage insurance costs (49%) and property taxes (33%).[1]
Increases for homeowner’s replacement costs (17%) and maintenance and repair costs (17%) are close to the overall CPI increase (21%). Had these price increases tracked the Bank of Canada’s 2% per annum inflation target, they would have risen by only 12% over the period.
Figure 1
Figure 2
Rental accommodation costs have soared by 27% since January 2019 – at the fastest pace of rental inflation in 41 years (Figure 3). It follows the federal government’s decision to ramp up the level of immigration to around 1.3 million per annum, which is roughly triple the pre-pandemic level in 2019 and quintuple (five times) the 2010-15 average level. If sustained, this is equivalent to Canada adding another B.C. to its population every 4½ years.
The federal government has also radically shifted the composition of immigration toward temporary workers and students. Non-permanent residents now make up an unprecedented two-thirds (65%) of the annual immigration intake. This is more than double the average share during 2016-2019 (28% of the annual immigration intake), and septuple (seven times) the average share during 2010-2015 (9% of the annual immigration intake.) Consequently, the share of temporary residents in Canada’s population has jumped from about one-in-thirty people (3.4%) in 2021Q3 to about one-in-fifteen people (6.8%) in 2024Q2.
When considering that around 80% of temporary residents are renters (Statistics Canada, 2023), it seems clear that federal policy changes have led to a sudden and large increase in demand for rental housing. This has contributed to the fastest pace of rental inflation nationally since the generalised inflation outbreak of the early 1980s (Figure 4). The contrast is that during previous rental inflation outbreaks, rental inflation was less than overall CPI inflation. That is not the case today. Rental inflation is much higher than overall inflation and is pushing overall CPI inflation higher.
A related point is the link to food inflation and visits to food banks as discussed in our previous blog. Nationally, around 27% of food bank visits in 2023 were from immigrants who have lived in Canada for less than 10 years. This share has doubled since 2016 when it was only around 13%. The situation is described by Food Bank Canada (2024) as follows:
Recent newcomers are more likely to be working poor than people who are not recent newcomers—they are more likely to have unstable jobs, unpredictable work hours, and fewer benefits such as drug and dental insurance. Recent newcomers are also more likely to be renters, which means they are likely paying higher median shelter costs and more than 30 per cent of their income on housing. The combination of these factors leaves them particularly vulnerable to the impacts of rapid inflation.
Figure 3
Figure 4
Finally, utility costs are up 22% since January 2019 (Figure 5), which is higher than total CPI inflation (21%). The main contributors are fuel oil and other fuels (51%), natural gas (39%) and water (22%). Electricity inflation has been modest (9%) and below what it would have been had it grown at 2% per annum (12%, dotted grey line).
Figure 5
Conclusion
Inflation has a very real human toll. Food and shelter are the necessities of life. Together, they make up about half of the B.C. CPI basket. Respectively, food and shelter prices have risen by 27% and 29% since January 2019, well above total CPI inflation (21%). Had prices tracked the Bank of Canada’s CPI inflation target, they would only be 12% higher. This means British Columbians have faced “excess” inflation of around 16% for food and 17% for shelter.
Renters, especially temporary immigrants, have faced considerable cost of living challenges amid the fastest rent inflation nationally and provincially in 41 years. Market renters, children, people living on government supports, single people, and immigrants living in Canada for less than 10 years are overrepresented at visits to food banks (relative to their population weights). As discussed in our previous blogs, parties preparing their election platforms should be mindful that their proposals do not add to the already serious cost-of-living challenges faced by British Columbians.
[1] Mortgage interest costs have soared nationally, but data is not available at the provincial level.