The Federation of Canadian Municipalities is calling on the federal government to give a boost to the stagnant rental housing market, which would create jobs and more affordable housing.

A report from the federation says the construction of more apartment buildings and other rental properties would help Canadians who are unable to buy homes.

"New rental construction would give cash-strapped young families, new immigrants, and an aging population housing options they can afford," says Berry Vrbanovic, president of the Federation of the Canadian Municipalities.

According to the Canadian Mortgage and Housing Corporation, apartment vacancies in Canada fell to 2.2 per cent in October 2011, down from 3.0 per cent in late 2009.

That decrease in supply has served to increase average rents in many cities across Canada, with rents up 2.2 per cent annually in October of last year.

One-third of Canadians are renters, yet rental properties only account for 10 per cent of new construction over the past 15 years.

In the recent housing boom, rental construction has been crowded out in favour of condo development, which provides developers a faster return on investment.

Many rental properties have been demolished or converted into condominiums, and the number of rental units across Canada actually decreased between 2001 and 2006.

The report says building more rental units would create jobs in the housing sector, which is producing 50,000 fewer jobs in construction since the pre-recession peak in 2007.

Recommendations to spur construction

The report gives three recommendations for all levels of government in order to spur the building of new rental properties.

  • The federal government should provide low-cost loans in order to help developers pay for new rental constructions.
  • Provide tax credits to discourage developers from demolishing or converting existing apartment buildings to make way for higher-priced condo developments.
  • Establish tax credits for making rental properties more energy efficient, which would reduce the cost of rentals and utilities.

Several cities across Canada have already set up programs to increase the supply of affordable housing, ranging from tax incentives to direct investment in the construction of rental properties.

"Municipalities are doing their part to increase and preserve the supply of rental and affordable housing," says Susan Fennell, the mayor of Brampton, Ont., "but we can't do it alone."