Bullying has elbowed its way in to the Toronto rental market.
As soaring purchase prices, tighter lending conditions and gruesome bidding wars continue to dampen the enthusiasm of many buyers looking to enter the real estate ownership market, competition in the rental housing industry continues to heat up in ways we have not quite seen before.
In fact, multi-unit rental properties are in such demand that landlords are starting to entertain bully offers. Traditionally common in hot sellers’ markets like Toronto, bully offers come in before the deadline date set by the owner — and often boast a premium price that far surpasses market value.
Thanks to a sharp decline in available units for rent, Shaun Hildebrand from research firm Urbanation isn't surprised that bully offers on apartments are on the incline in the GTA.
“Supply in the ownership market has been declining and that has in turn restricted the rental market," he recently told CityNews. On top of that, "not as many renters are vacating their units, so it’s restricting supply and it’s creating increased competition amongst renters who are looking to get into the market."
With vacancy rates hovering in the mid-1 per cent range, competition for high-quality rental units is so intense that there’s now, literally, an app for that. Enter Biddwell, an app that allows prospective tenants to create online profiles that landlords can view and vet. This "renter resume" can also be accompanied by an offer based on what the prospect thinks the unit is worth — or what they want to pay.
The app has received its fair share of criticism, mainly from those who are concerned it will cause an uneven playing field and push prospective tenants who don't have as much to spend completely out of the picture. And this is a valid concern, particularly when there’s no cap on just how high the bidding can go.
Jordan Lewis, co-creator of Biddwell, told Global News that the app was born out of his own frustration of being continuously overlooked by landlords. By allowing users to essentially name their own price, Lewis hopes that it will give renters in competitive marketplaces like Toronto a much louder voice. Biddwell has also added measures that allow renters to report landlords who are deliberately encouraging bidding wars.
For tenants who have been stymied in the past by a credit rating that is in the process of being rebuilt — usually an automatic "no" from landlords when it comes to renting an apartment — bully offers and apps like Biddwell can give them another chance to make a good impression. Instead of focusing exclusively on one aspect of their profile, potential tenants can give landlords a bigger picture of themselves that goes beyond that Equifax report. And for some, offering more money than an apartment is worth might be all it takes to show they mean business.
In a rental market that is this competitive, deploying the use of bully offers certainly has its advantages. But, increasingly, it seems that it might be driving good, responsible renters to the sidelines while those with extra cash are the only ones who get to play.
So what happens when supply diminishes and demand continues to soar? Prices skyrocket, leaving renters no other choice but to leave the city. In the CBC’s No Fixed Address series, experts like Paul Kershaw, a University of British Columbia professor, point to the economic pressures faced by younger Canadians. With competition reaching critical heights, could Toronto’s inevitable exodus lead to a “generational ghost town”?
It’s not just a problem facing the city’s lower-income set. Jessica Simm, a communications specialist who recently hopped the pond from the UK, says, “In the past week, our agent has booked showings at 10 different properties, all of which were snapped up before we could view even one of them.” Referring to herself as “lucky” to have friends and family to crash with as the apartment hunt lingers on, Simm notes that she and her boyfriend, an account manager in the IT industry, came to Canada with savings, ready to make offers and take occupancy right away. “We knew that the market was competitive for buying, but we didn’t realize it would be so difficult to rent — let alone put in an offer.”
The pair has friends who have arrived at showings only to be met by rooms full of people with real estate agents — yes, real estate agents — advising their clients to offer at least $50 above-asking per month. One couple ultimately scored a place because their agent had “inside access” to the property and was able to secure a showing before the suite came on the market. Oh, and they offered more than the list price.
It remains to be seen how long this trend will last. After all, there are more than 6,000 rental units currently being built in Toronto. With an influx of available units in the next few years, the bully offer trend in rental industry might just be grounded before it ever really takes off. In the meantime, Simm has changed her search parameters to include smaller spaces so that she, too, can sweeten the pot and finally plant some roots.