Students looking for housing this academic year shouldn’t expect significant shifts in rent prices just yet.
While most first-year Queen’s students are housed on-campus in residence, they face the challenge of transitioning to off-campus housing after their first year with the added struggle of everchanging economic conditions.
This year, Queen’s welcomed close to 4,700 students to residence on move-in day. Unlike post-secondary institutions in the U.S. and parts of Europe, where students often live in purpose-built student accommodations (PBSA), Canadian schools like Queen’s typically house most students off-campus after their first year. This creates a higher demand for off-campus rentals, especially as second-year students transition out of residence and into the Kingston housing market.
Even as the cost of living increases, students often have little choice but to accept higher rent, as the competitive nature of the housing market in Kingston leaves them with limited affordable options.
The recent interest rate cut by the Bank of Canada (BoC) have sparked discussions on how the change may affect the student housing market, especially in university towns like Kingston, which have a high demand for off-campus rentals.
On Sept. 4, the BoC reduced the policy interest rate by 25 basis points from 4.5 per cent to 4.25 per cent. This is the third cut happening this year.
According to the BoC, the interest rate has been at 5 percent since June 12 of last year until June 5 this year. An interest rate is the amount the bank charges for lending money to customers, and it is a percentage of the amount borrowed.
READ MORE: The Bank of Canada cut the interest rate. What does that mean for the Kingston rental market?
The BoC interest rate cut is a monetary policy that lowers the interest rates charged on loans and mortgages, aiming to stimulate economic growth by making borrowing cheaper.
“A 25 basis point cut means a 0.25 per cent drop in the Bank of Canada’s rate,” said Michael Trendota, an adjunct professor in the Smith School of Business and the School of Urban and Regional Planning (SURP) at Queen’s, in an interview with The Journal.
Interest rate cuts lower borrowing costs, meaning property owners who hold mortgages may see reduced payments. Although borrowing costs decrease, making it cheaper for developers to finance new construction projects, this isn’t an immediate effect, Trendota said, noting the immediate impact on student housing is more limited.
“Student rental rates are primarily driven by supply and demand, not interest rates,” Trendota added.
According to Trendota, Queen’s enrolment numbers largely dictate the demand for off-campus housing, and this is unlikely to change because of interest rates.
“If Queen’s increases its enrolment by a few hundred students, that will have a more immediate effect on demand for housing than a drop in [the BoC’s] interest rates. Until then, supply remains largely fixed, and students will continue to compete for the same number of rental units available near campus,” said Trendota.
“In the short term, we’re unlikely to see major changes in rent prices or housing availability, as the development cycle for new buildings typically takes several years.”
Trendota explained the broader implications for Kingston’s housing market are complex. While lower interest rates might make financing new developments easier, Kingston’s tight rental market may not experience significant relief unless more housing is built.
“A lower interest rate may push some developers who were on the fence into building, but this is contingent on labour availability, zoning issues, and the economic feasibility of these projects,” he said.
For Queen’s students navigating the housing market, Trendota’s advice is simple. Ignore the interest rate cuts in the short term and focus on rental availability. Start your housing search as early as possible to secure a place that meets your needs.
While the impact of the BoC’s monetary policy may take time to influence the housing market, staying proactive and informed will help students navigate these uncertain conditions.
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